Summary of Proceedings

of the

Select Committee on Capital Financing and Investments

Capitol Building                                                                                                              January 3, 2001

Room 302                                                                                                               Cheyenne, Wyoming

PRESENT:      Representative Fred Parady, Chairman;

                        Senators Hank Coe, Keith Goodenough, Bill Hawks, April Brimmer Kunz, Curt Meier and Jayne Mockler;

                        Representatives  Chris Boswell, Roger Huckfeldt, Doug Osborn and Wayne Reese.

                        Legislative Service Office:  Mary Byrnes, Dave Gruver, Dave Nelson and Steve Sommers.

                        Others:  Please see Appendix 1.

ABSENT:        Representative Mike Baker

AGENDA:       Please see Appendix 2.

*  *  *  *  *  *  *  *  *  *

Chairman Parady called the meeting to order at 8:30 a.m.  Representative Osborn moved the minutes from the October meeting be approved.  The motion was seconded by Senator Coe and passed unanimously.

Investment earnings - spending policy recommendations

State Treasurer Lummis and Becky Gratsinger and Russell Kuhns of R.V. Kuhns and Associates (the state treasurer's investment advisor) addressed proposed changes to the spending policy for permanent mineral trust fund and common school permanent land fund earnings.  Ms. Gratsinger provided two written documents.  The first was an analysis of spending policies, reviewing various scenarios for modifying the statutorily established policy from a fixed dollar amount to a percentage of average market value of the corpus, stepping down the percentage at various rates.  (Appendix 3).  The second document reviewed the differences in spending dollars available under the current spending policy and different percentage step-downs based upon differing rates of return on the corpus investments.  (Appendix 4). 

The recommendations from the State Treasurer and the investment advisor were to change the spending policy in statute from a fixed dollar amount to a percentage of average market value of the corpus, beginning at eight percent for the permanent mineral trust fund and eight and two-tenths percent for the common school account and working down in .375% increments to five percent.  The five percent is seen as a sustainable spending policy amount. The starting point and step down amounts were determined in order not to dramatically affect dollars currently available under the spending policy and yet reach the five percent sustainable amount as quickly as possible. The reserve accounts for both the permanent mineral trust fund and common school account were recommended to be maintained at 75% of the spending policy amount.  A further recommendation was to repeal a second "inflation proofing" provision for the common school account within the permanent land fund.

Senator Coe moved the Committee consider 02LSO0128.W4 (appendix 5), addressing the above issues.  The motion was seconded by Senator Hawks.  The following action was taken:

Representative Reese moved amendment number 1 (appendix 6), dropping the spending policy in .25% increments.  The motion was seconded by Representative Huckfeldt and failed.

Senator Coe moved amendment number 2 (appendix 7)removing the reduction to the spending policy reserve accounts.  The amendment was seconded by Representative Osborn and passed.

Senator Mockler moved amendment number 3 (appendix 8) changing the spending policy amount to a percentage of market value of corpus, versus balance of the corpus, and changing the reduction rate of .5% per year to .375% per year.  The amendment was seconded by Senator Hawks and passed.

Senator Coe moved the Committee sponsor the bill as amended, beginning in the Senate.  Senator Mockler seconded and the motion passed unanimously.  Chairman Parady asked for a shorter explanation of the changes from the Treasurer's Office, using only one rate of return scenario.  Senator Goodenough asked that the assumptions be stated in a cover page explaining the effects of the bill. 

School capital construction and major maintenance requirements, consensus revenue estimating group

LSO staff Steve Sommers, addressed the Governor's budget recommendations, revenue projections and school capital construction.  He provided appendix 9, fiscal profiles of the various state accounts, including the school capital construction account.  Dave Nelson, LSO staff addressed actions of the school capital construction select committee.  He noted there are additional buildings on the immediate needs list which will need to be addressed by the legislature.  He outlined the approach that Committee's draft bills take in establishing a "water development office" like approach to school capital construction needs.

Keith Curry, consultant retained by the State Treasurer to advise on bonding possibilities, reviewed options to fund school capital construction.  He reviewed the initial Court mandated amount, noted adjustments for inflation and noted that amount has been reduced by major maintenance expenditures.  His earlier analysis did not consider the proposed annual spending on major maintenance of $40 million recommended by the school capcon committee, which is a major impact to the equation.  He presented an option to fund major maintenance, mill levy supplement and current "pipeline" projects through cash payments ($43.6 million) and debt financing ($48.5 million).  The proposal would leave the same major maintenance requirement plus a debt service requirement of approximately $3.3 million for the next year without funding additional school capital construction needs.  The state needs to either increase bondable revenues or reduce funding for major maintenance in order to fund school capital construction projects.

The Committee took public comment regarding proposals before the Committee.  Sleeter Dover, Director of the Department of Transportation, commented on bill drafts 02LSO0199.W4 and 02LSO0200.W4.  He was concerned with the fuel tax "swap" for highway FMRs in the bills, because fuel taxes cannot be used for all department operations under the Wyoming Constitution.  He cited aeronautics as an example.  He supported the GARVEE provisions as a potential tool, but did not foresee any immediate use of the bonding provisions.  He noted that if the proposals for the FMR swap went forward, he would recommend dropping the four lane road initiative currently being considered. 

Brent Taylor, Wyoming Trucking Association, opposed the shift of FMRs and increased gas tax, noting the burden would fall on the trucking industry.

Rick Miller, representing the University of Wyoming, discussed a proposed amendment which would implement the Governor's recommendations to bond for approximately $46 million in state capital construction projects.

The Committee discussed generally the two bonding bills before it. Representative Huckfeldt distributed information concerning fuel prices in Wyoming and surrounding states.  (Appendix 10).  He believed raising taxes would hurt merchants selling fuel in border communities.  State Treasurer Lummis spoke in favor of a separate commission, noting the number of boards the elected officials already serve on.  Secretary of State Meyer noted that there were also good arguments for having some state elected officials on the commission, perhaps the state treasurer.

After a straw poll, the Committee proceeded to consider 02LSO0200.W4.

Legislation - Capital construction financing.  02LSO0200.W4. (Appendix 11)

The Committee commenced with a discussion of the gas tax/FMR swap provisions in the draft.  A straw poll resulted in a vote to remove the provisions from the bill.  Representative Osborn moved and Representative Boswell seconded a motion to sponsor the bill as a Committee bill starting in the House.  The Committee took the following actions regarding prepared amendments:

Senator Coe moved, Senator Hawks seconded amendment number 1, (appendix 11) – (removing worker's compensation bonding provision from the bill) – passed.

Amendment number 2, relating to gas tax provisions was set aside.

Senator Mockler moved, Senator Hawks seconded amendment number 3, (appendix 12) – (providing a select water committee like process for capital construction projects) – passed.

Senator Coe moved, Representative Osborn seconded amendment number 4, (appendix 13) – (placing routine maintenance functions relating to state buildings directly with the department of administration and information) – passed.

Representative Huckfeldt moved, Senator Mockler seconded amendment number 5, (appendix 14) – (providing an appropriation and positions for the new commission) – passed.

Representative Osborn moved, Senator Hawks seconded amendment number 6, (appendix 15) – (addressing the bond guarantee program and mill levy supplement program and placing the bond guarantee program under the new commission) – the motion was divided as shown on appendix 15, with part A failing and part B passing.

Amendment 7 was set aside in favor of later discussion of amendment 6A to draft 199.W4.

The Committee took up amendments to 199.W4, as concept amendments to 200.W4, with staff directed to make changes to incorporate the concept into the draft as necessary. 

Senator Mockler moved, Senator Meier seconded amendment number 4, (appendix 16) – (removing GARVEE bonding provisions from the bill) – passed.

Senator Mockler moved, Senator Meier seconded amendment number 6A, (appendix 17) – (removing the gas tax, FMR swap provisions, taking $32 million "off the top" in FMRs for school capcon, authorizing up to $4 million "off the top" in FMRs for state capcon as authorized by the legislature, allowing specified portions of FMRs to "backup" school capcon, providing for security of existing bonds).  The amendment was amended to increase state capital construction bonding authority to $150 million.  (Moved by Mockler, seconded by Meier).  The amendment and main motion then passed.

Senator Meier moved, amendment 7, (appendix 18) (allowing all FMRs to support authorized bonding for school, state capital construction and highways, limits bonding authority by referencing a ratio of revenues authorized for bond repayment to the debt service amount and by a ratio of anticipated FMRs to all outstanding bonds pledging FMRs) - failed.

The Committee reviewed the bill and took the following actions:

Senator Mockler moved to change the commission to six members and the state treasurer or his designee, Representative Osborn seconded – passed.

Senator Kunz moved to delete page 5-lines 12-21, relating to reports by the commission – passed.

Representative Huckfeldt moved to change the maximum bond terms from 45 to 30 years – passed.

Senator Mockler moved to change the maximum school bonds from $708 to $500 million.  Senator Kunz' amendment to $532 was accepted – passed as amended.

Senator Mockler moved to delete the new state capital construction account created on page 11, line 19 – passed.

Senator Meier moved to restore the bonding authority for the city and county grant and loan program – passed.

Senator Meier moved page 15-line 16, strike "shall" insert "may" – passed.

Representative Osborn moved to delete page 49-line 33 to page 50-line 9, as staff noted the issues were being addressed by the select school capcon committee bill – passed.  Chairman Parady noted that eliminating unnecessary provisions would be looked upon favorably as staff made necessary conforming amendments.  He asked that the Committee take final action on the bill at this meeting. Senator Hawks asked for a summary of the bill before the session. Chairman Parady also requested that staff make the same changes to draft 199.W4 for his consideration. 

The main motion passed 10-0, with Senator Goodenough and Representative Baker excused.

Representative Reese asked for a summary of all outstanding revenue bonds.  Deputy Treasurer Garland provided appendix 19 in response.

Mill levy bills.

The Committee next discussed 02LSO0190.W1 (appendix 20) and 191.W3 (appendix 21), imposing state mill levies for school capital construction.  Senator Kunz explained that the people should have the ability to vote on a state mill levy if that is the Legislature's determination of how to address school capital construction.  Other Committee members addressed concerns that the bills were revenue bills.  Senator Kunz moved consideration of 191.W3 as a Committee bill, Representative Huckfeldt seconded.  Chairman Parady asked that the Committee address whether it wished to consider the bill, before discussing amendments.  The Committee on voice vote failed to take up the bill.  No action was taken on 190.W1.

Permanent fund investment earnings – 02LSO0129.W2 (appendix 22).

Senator Meier explained the resolution would provide a constitutional "inflation proofing" provision, as the Committee had done statutorily by establishing a spending policy.  Senator Meier moved the draft be considered as a Committee bill, Representative Huckfeldt seconded.  The Committee voted to take up the bill for possible sponsorship.  Senator Meier suggested the Committee might consider an amendment to change the bill to mirror constitutionally the statutory spending policy reserve account, by having earnings above 5% deposited in a constitutional budget reserve account for investment by the state treasurer. The amendment failed. The main motion failed 3-7 with Senators Kunz and Meier and Representative Huckfeldt voting "aye".  Senators Coe, Hawks and Mockler and Representatives Boswell, Osborn, Reese and Parady voting "no", Senator Goodenough and Representative Baker were excused.

Family college savings program – 02LSO0126.W2 (appendix 23).

Deputy Treasurer Garland explained the bill was to address the problem of having two mandatory penalties for nonqualified withdrawals as a result of federal legislation.  Senator Kunz moved the bill be sponsored as a Committee bill in the House.  Representative Osborn seconded.  Senator Mockler moved to delete section 4, stating legislative intent.  The amendment passed.  The main motion passed unanimously.

The Committee briefly discussed the issue of the select committee being made a standing committee.

GARVEE bonding.

Senator Mockler noted she had asked to have the GARVEE issue drafted as a separate bill and the Committee asked to have the bill copied for consideration.  Staff provided copies and reviewed 02LSO0232.L1, (appendix 24), which addressed all the GARVEE bonding provisions from the 02LSO0200.W4.  Senator Hawks moved the bill be considered as a Committee bill for sponsorship in the next session.  Senator Coe seconded.  The Committee took the following actions:

Senator Kunz moved the bill be limited to federal gas receipts only – passed.

Senator Kunz moved to delete aeronautics provisions – passed.

Senator Meier asked staff to consult with Mr. Curry and determine how the $400 million cap was reached and conform it as necessary to address federal limitations. 

Staff was instructed to make necessary conforming amendments to remove other revenue streams from supporting GARVEE bonding. 

Representative Osborn moved the transportation commission report annually on bonds issued and the select Committee have an oversight role in the issuance of GARVEE bonds – passed.

Senator Kunz moved the bill be a House bill.  The main motion passed unanimously.

Staff noted the Committee was to report on spending policy recommendations to the Legislature.  A one page report would be prepared for Chairman Parady's signature, referencing the Committee sponsored bill.

Chairman Parady announced he would like to have the Committee meet at the start of the session.

The meeting adjourned at approximately 5:00 p.m.

Respectfully submitted,

Representative Fred Parady

Chairman

All appendices referenced are on file at the Legislative Service Office.