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.