Legislature(2007 - 2008)CAPITOL 106
01/22/2008 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB305 | |
| HB313 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 305 | TELECONFERENCED | |
| *+ | HB 313 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 313-G.O. BONDS FOR CRIME LAB 9:03:12 AM CHAIR LYNN announced that the last order of business was HOUSE BILL NO. 313, "An Act providing for and relating to the issuance of general obligation bonds for the purpose of paying the cost of a scientific crime detection laboratory; and providing for an effective date." 9:03:32 AM JOHN GLASS, Deputy Commissioner, Office of the Commissioner, Department of Public Safety, presented HB 313 on behalf of the House Rules Committee, sponsor by request of the governor. He said he would explain the bill and the reason for it. Mr. Glass said the current 18,000 square foot crime lab was built in Anchorage, in 1986, and it serves six scientists and four support personnel. He offered his understanding that it was in 2006 that the legislature appropriated $4.9 million towards a study to create a new crime lab. The department has used the money thus far to hire an architectural firm in Anchorage [Livingstone Sloane, Inc.]. He noted that the Department of Transportation & Public Facilities (DOT&PF) is on board with the project. Mr. Glass used some visual displays set up in the committee room. He said the department examined 34 parcels of land in the Municipality of Anchorage on which to develop a new crime lab and has chosen one that is a 15.3 acre parcel on Tudor Road, 2.5 blocks to the West of the current lab. MR. GLASS relayed that the architect firm contracted with a firm and developed a plan for the size of crime lab needed, which is between 80,000-84,000 to conduct the current crime lab business. He noted that the crime lab services all the municipal and state agencies in the state, doing finger print and latent print examinations and crime scene investigation ballistics. MR. GLASS stated, "The governor has proposed this bill for one hundred million dollars." He noted that available to testify are representatives of the department, the architecture firm, an engineer at DOT, and a lab supervisor. Furthermore, he noted that Jerry Burnett was available to answer questions related to finance. MR. GLASS, in response to a question from Chair Lynn, said hopefully the old lab will be refurbished and made into office space for the rest of the department, perhaps housing the office that conducts sexual offender registration and the Alcohol Beverage Control Board, as well as a couple other entities. 9:07:08 AM REPRESENTATIVE ROSES suggested that the University of Alaska Anchorage has a need for lab space and the old crime lab could more easily be converted to that use. He asked Mr. Glass if it would cost the same amount of money to build more office space in the anticipated new building than to convert the old lab into office space. MR. GLASS said he does not know what the exact cost would be in comparison; however, he talked about the high cost of building laboratories, because of the type of equipment that is needed in them. REPRESENTATIVE ROSES said that is exactly why he would not want to see a lab that has already been built be turned into office space. 9:08:13 AM MR. GLASS, in response to questions from Representative Coghill, reiterated when the current crime lab was built and that it is the only lab in the state. He added that it was 1994 when the first DNA tests were processed in the laboratory. In response to a follow-up question from Representative Coghill, he said the laboratory is short on both lab space and storage space. He said the best term to use for a lab that was built for 16 people, but now houses 41, is "compressed." He described the small working space of each scientist and stressed the importance of a sterile environment. He said, "When they're working on their studies here, and then they have to move over here and use their computer that's sitting next to them to do that work, there is always the fear and danger of cross- contamination, which always creates a high risk when it comes time for court presentations." MR. GLASS apologized that, due to technical difficulties, he was unable to bring the 43 photos that were just e-mailed to him the day before to show the committee pictures of the overcrowded state of the lab; however, he said he could provide them later. [Those photos were subsequently included in the committee packet.] MR. GLASS, in response to a question from Representative Roses, confirmed that the lab does outsource its toxicology work to the state of Washington, and it hopes that the new laboratory will allow the department to do that work in house. In response to a follow-up question, he said he does not know what the percentage is of work being sent out of state. Currently, he estimated, the cost to send that work out is $180,000 annually. Additionally, the department pays travel and expenses for those scientists in Washington who come to Alaska to testify in court. 9:11:48 AM MR. GLASS, in response to a question from Representative Johnson, said the new building would be approximately 83,000 square feet in the hopes of avoiding compression 10 years from now. He said it is unknown what "new science" will come along in the next 20 years. For example, he said the current lab was built before scientist knew about DNA [testing]. REPRESENTATIVE JOHNSON asked if perhaps the department should consider a 90,000 square foot building, because he said he does not want the department to return with a request for an even larger building because it didn't ask for enough to begin with. He clarified that he is encouraging growth opportunity. CHAIR LYNN observed that with increased state population comes increased crime. 9:13:38 AM MR. GLASS assured the committee that there is room for expansion in the proposed laboratory; the current need is for approximately 50,000 square feet, and the building is designed at 83,000 square feet. Furthermore, he said the building will allow for additions to be made as needed in the future, whereas the current lab is not suited for additions and has no room to expand, even if it could. In response to a question from Representative Johnson, he said the $100 million needed for the facility includes all costs: laboratory, move-in costs, and new equipment. REPRESENTATIVE JOHNSON asked, "So, we're bonding for a move?" MR. GLASS reiterated that in the process of building the new laboratory, the present equipment will be moved into it. 9:15:14 AM MR. GLASS, in response to Representative Doll, confirmed that there is only one medical examiner in the state; however, he offered his understanding that that position is within the Department of Health & Social Services. In response to a follow-up question from Representative Doll, he said he does not think the department has asked for a lab in the past. He stated, "I think this is part of the process going back to 2006, when the initial appropriation for the study and the design ... was made, I think it's the only request." He said it is past time for the request. 9:16:12 AM REPRESENTATIVE COGHILL told Representative Johnson that the need is great in all areas, and expanding one area overloads others. He said, "The medical examiner is one example of those kind of bottlenecks in our system right now." He expressed his readiness to pass the bill out of committee. 9:17:12 AM CHAIR LYNN said he thinks "all of us" strongly support law enforcement. It does not do any good to arrest someone and not be able to prosecute him/her, and part of the process leading to a conviction is to have evidence that is fair to all parties. 9:17:32 AM REPRESENTATIVE JOHNSON stated that he is opposed to bonding; therefore, although he supports the project 100 percent, he does not want to "use a credit card when we could pay for it with cash." He stated: I understand that we've got a huge account that's making money, and everything gets rolled into the permanent fund or the constitutional budget reserve, and we save it there, and that's generating revenue. That doesn't cut it for me. Unless we specifically offset this hundred million dollars somewhere, that we can pay those bonds off at a reduced rate, then I'm not comfortable with bonding and indebting our future for a project that we could pay for today. 9:19:40 AM JERRY BURNETT, Director, Division of Administrative Services, Department of Revenue, answered questions during the hearing on HB 313. In response to Representative Johnson's remarks, he said that in the budget proposed this year by the governor, there are savings that total billions of dollars. He mentioned the transportation endowment and close to a billion dollars in additional direct deposits to the retirement funds. He noted that under the Internal Revenue Service (IRS) code, if [the state] specifically put a hundred [million] dollars into an account that earned more than the interest on the bonds, it would have to pay that difference to the IRS. MR. BURNETT continued: By putting the money in other savings accounts, we're able to borrow this money; the last [general obligation (GO)] debt that went in the State of Alaska in 2003, the money was borrowed at 3.84 percent. Today, if you were borrowing this money, it's somewhere in the 4.5 percent range. The savings accounts that are being proposed to have money added to them are for a different purpose than off-setting this directly, but they do have that effect. And those savings accounts - if you put money in the retirement fund since the history of [the Public Employees Retirement System (PERS)] and [the Teacher's Retirement System (TRS)] - they've earned over 9 percent. ... They earned 18.8 percent in the last fiscal year. Today they probably lost some money. But you have an indirect offset, and it's a matter of balancing through the entire spending plan: debt, savings, and general fund appropriations. And I think this actually does a very good job of that. REPRESENTATIVE JOHNSON said he understands; however, he stated that part of his concern is that "this should be in the capital budget." He continued: To stand up and say that the capital budget is cut when you're adding $250 million to it, to me is disingenuous and a little inaccurate. ... When we look at this, ... we should understand that we're adding $100 million to the capital budget. And ... that's my point. I understand the offset, and if your logic held true, we should put every penny in the bank and offset everything we do by generating that investment and just start a big fund that we run everything off of. So, it doesn't hold true all the way across the board. I know you're thinking it's maybe a good idea, and it may be, but ... I am not supportive of bonding our future away." REPRESENTATIVE JOHNSON said economic indicators show that the economy will most likely get worse, so he said there is gambling going on with money that the state has at present. In response to a question from the chair, he said he brings this point to the attention of the co-chairs of the House Finance Committee every chance he gets. 9:23:45 AM MR. BURNETT, in response to Representative Johnson's comment about gambling, noted that last year, the Department of Revenue, worked on the pension obligation bond legislation, which sets borrowing at approximately 5.5 percent, compared to the predicted borrowing range of 4.5 percent related to HB 313. During its work on the pension obligation bond legislation, he said, the department did "Monte Carlo simulations" - considering "every point since markets have existed, and up to about 6 percent interest there is a 99 percent confidence level that the state would not be gambling. He said, "It's not a matter of losing money; it's a matter of you making the responsible choice of actually putting the other money in savings. That's really the question here." 9:24:49 AM REPRESENTATIVE JOHNSON said he is intrigued by the fact that the analysis is called "Monte Carlo." He noted that slot machines in Las Vegas pay off at 99 percent, "and they don't build those chandeliers by people that win at slots." 9:25:13 AM REPRESENTATIVE ROSES expressed appreciation for Mr. Burnett's having brought up the issue of the obligation bond. He said this discussion does not differ so much from one that was held several years ago to prepare for an expected serious revenue shortfall. At the time, 50 Alaskans gathered together in Fairbanks to consider how to leverage the existing money, and that consideration was called, "percent of market value" (POM). He continued: And if there was some value to spending up to 5 percent of the earnings and leaving the 3 to ... 4 percent and not touching the corpus, this is actually doing it in the opposite way: we're taking the $100 million that we would have spent, and we're going to invest that at an average [return]. If you look at the 10-year average return, just from the [Alaska Retirement Management] (ARM) Board alone from when I sat on there, you're talking 8.25 percent over a 10- year average. And if you go even further out, and look at a 15-year average or more, we exceed that. And so, there's only been one period of time in which the 3-year average went below 8 percent and it was 5.75 [percent]. And so, it's a risk, but it's certainly a very minimal risk, and I think it's one that's worth taking, simply because you're going to be able to leverage some of the debt. REPRESENTATIVE ROSES asked what kind of penalty factor would be involved in trying to pay off a general obligation bond early if that bond was "floated" and the interest rates started to "go south." 9:26:47 AM MR. BURNETT, regarding GO bonds, said depending on the structure of the actual debt sale, the state has a number of opportunities to refund bonds. For example, the state could get a lower interest rate and sell new bonds. He said it is not necessary to get a new vote of the public in order to refund bonds. If the bonds are not "haulable" - they cannot be paid off early - the state would borrow the money, put it into an account, and do a "defeasement," which would have the advantage of a lower interest rate. 9:27:33 AM REPRESENTATIVE ROSES offered a translation from Mr. Burnett's finance language: You probably couldn't pay it off, but you could set money aside and use the earnings from that money then to pay off the debt, so that you're not upside down in terms of your earnings as opposed to your expenditures. MR. BURNETT responded that's correct. 9:28:32 AM MR. BURNETT, in response to a question from Representative Johnson regarding an appropriation shown on page 2, line 17, of the bill, explained that fiscal notes serve as information "or [an] appropriation vehicle that goes along with the budget, with the bill," whereas a specific appropriation does not need to be in a fiscal note. 9:28:56 AM REPRESENTATIVE ROSES moved to report HB 313 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 313 was reported out of the House State Affairs Standing Committee.
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