Legislature(2007 - 2008)CAPITOL 106

01/22/2008 08:00 AM House STATE AFFAIRS


Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 305 CAMPAIGN FUND RAISING DURING SESSIONS TELECONFERENCED
Moved CSHB 305(STA) Out of Committee
*+ HB 313 G.O. BONDS FOR CRIME LAB TELECONFERENCED
Moved Out of Committee
+ Bills Previously Heard/Scheduled 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.                                                                                         

Document Name Date/Time Subjects