02/07/2008 09:00 AM Senate STATE AFFAIRS

                SB 223-G.O. BONDS FOR CRIME LAB                                                                             
                                                                                                                                
CHAIR  MCGUIRE announced  the consideration  of SB  223, and  she                                                               
said  Senator   Bunde  offered  an  amendment   during  the  last                                                               
discussion mandating the use of general fund dollars.                                                                           
                                                                                                                                
SENATOR BUNDE said  it is not legal to attach  a required deposit                                                               
to issuance of the bonds, so he will not offer the amendment.                                                                   
                                                                                                                                
9:12:25 AM                                                                                                                    
CHAIR MCGUIRE  said she had  considered a similar idea  and asked                                                               
that some  general fund  money come back  into the  discussion in                                                               
the finance  committee. The issue  surrounds timing, and  even if                                                               
the general  obligation bond  passes, there will  be a  period of                                                               
administrative work,  so perhaps  some general fund  dollars will                                                               
help move the project forward.                                                                                                  
                                                                                                                                
JOHN  GLASS, Deputy  Commissioner, Department  of Public  Safety,                                                               
said the $4.8  million allocated in 2006 for the  design and site                                                               
selection will run out by August if more money isn't provided.                                                                  
                                                                                                                                
9:13:38 AM                                                                                                                    
SENATOR GREEN suggested giving the  finance committee the ability                                                               
to rewrite the bill.                                                                                                            
                                                                                                                                
SENATOR BUNDE  asked if the crime  lab will be funded  by 30-year                                                               
tax-exempt bonds with  4 percent interest. It can  be financed by                                                               
putting money in long-term savings  that earn 8 percent. How much                                                               
money would  have to be  put into  long-term savings and  for how                                                               
long so that it would pay for the bonds?                                                                                        
                                                                                                                                
DEVON  MITCHELL, Debt  Manager,  Department of  Revenue, said  it                                                               
depends on  the assumptions about returns.  Generally the state's                                                               
portfolios for long-term horizons,  including the retirement fund                                                               
and  permanent fund,  are expected  to  be about  8 percent.  The                                                               
borrowing  market is  very  favorable. Treasuries  of  20 and  30                                                               
years have  been lower only  once, so  4 percent is  a reasonable                                                               
expectation. He said the state  would have to set aside something                                                               
less  than what  it would  borrow because  of the  expectation of                                                               
higher returns.  The borrowed money  will amortize so  there will                                                               
be  serial maturities  throughout the  20-year life  of the  bond                                                               
issue so  the outstanding  principle will  diminish. "If  you set                                                               
money aside, you  could spin out a portion of  the principle each                                                               
year as well,  and so you might start off  with a requirement for                                                               
$95 million,  and then that  would gradually  go down to  zero at                                                               
the same  time the bond  has matured."  He can put  a spreadsheet                                                               
together, but it is not simple, he said.                                                                                        
                                                                                                                                
9:17:18 AM                                                                                                                    
SENATOR BUNDE  said he might  not need more information,  but the                                                               
state  would have  to  set  aside $95  million  and  it could  be                                                               
reduced over the 20-year period.                                                                                                
                                                                                                                                
MR. MITCHELL  said yes,  or a  lower static  amount could  be set                                                               
aside for the entire time frame, and it can become cost neutral.                                                                
                                                                                                                                
CHAIR MCGUIRE  said voters may  be asking about bonding  when the                                                               
state has a surplus.                                                                                                            
                                                                                                                                
9:18:20 AM                                                                                                                    
SENATOR BUNDE said he will vote  against this bill even though he                                                               
is supportive of a new crime lab.  There is another way to get it                                                               
and that  is with cash.  If bonds are  used it will  cost another                                                               
$10 million in the time value  of money. He has heard from people                                                               
in his  district and not  a single one has  said they want  to go                                                               
into debt when  there is cash on  the table. This is  not the way                                                               
to  get the  crime lab.  Another bill  will be  another year  and                                                               
another $10 million  if the bond doesn't pass. If  SB 223 doesn't                                                               
pass, the  administration might  just pay for  it. He  has little                                                               
confidence that the  legislature will put aside  money in savings                                                               
to achieve  the arbitrage. In  a few years  the state will  be in                                                               
deficit. The  people trying to  balance the budget will  look for                                                               
ways to do that and take the money that was supposedly saved.                                                                   
                                                                                                                                
9:21:01 AM                                                                                                                    
CHAIR MCGUIRE  said she  agrees with much  of what  Senator Bunde                                                               
said,  and  she encourages  the  administration  to consider  the                                                               
general  funds. There  are times  when it  makes sense  to borrow                                                               
money, but one needs to have  the discipline to pay it off. There                                                               
is over $350 million in outstanding  G.O. debt now, and since the                                                               
state has a  surplus, it just shows how human  nature is. We want                                                               
what we want.  She will support the bill because  she believes in                                                               
the crime lab. It is critical for  the state to house the DNA and                                                               
other evidence of  very serious crimes. The current  crime lab is                                                               
a disaster waiting to happen, she opined.                                                                                       
                                                                                                                                
9:22:28 AM                                                                                                                    
SENATOR  STEVENS  moved SB  223  from  committee with  individual                                                               
recommendations and attached fiscal note(s).                                                                                    
                                                                                                                                
SENATOR BUNDE objected.                                                                                                         
                                                                                                                                
A  roll  call  vote  was called.  Senators  McGuire,  Green,  and                                                               
Stevens voted yes, and Senator  Bunde voted no. Therefore, SB 223                                                               
passed out of committee.