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5 BEFORE THE WYOMING STATE LEGISLATURE
6 JOINT REVENUE INTERIM COMMITTEE
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10 JOINT REVENUE INTERIM COMMITTEE PROCEEDINGS
11 October 30, 2001
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1 P R O C E E D I N G S
2 (Meeting proceedings commenced
3 8:30 a.m., October 30, 2001.)
4 (Overview presentation
5 by Mr. Sommers.)
6 CO-CHAIR NAGEL: Okay. The next item on
7 the agenda, Dave and Mary -- Dave Nelson, Mary Byrnes
8 about school finance.
9 MR. NELSON: Madam Chairman, we're here
10 today to follow up on some of your discussions you had at
11 your last meeting. And again, if you recall these involve
12 the implementation issues that were assigned to the
13 revenue committee by the Management Council resulting from
14 the July AG -- or MAP report on the implementation issues,
15 which were primarily district cash flow concerns and
16 issues, and again, briefly, the issues were the budget and
17 application cycle for school districts when they're
18 assembling their budgeting process and trying to plan
19 their needs throughout the year based upon local revenue
20 sources.
21 The other issue involved the local resources
22 proposal that's in the report in which the bill that I
23 mailed to you addresses primarily that issue, and it also
24 kind of gets into the budget application recommendations
25 of the MAP report.
3
1 The remaining two issues are not addressed in
2 your bill at your last meeting. You didn't take formal
3 action on them, but if they want to be addressed, they
4 could be easily put into the bill that was mailed to you.
5 Does everybody have a copy of the bill that was
6 mailed out with them? It's the local resource bill and
7 that number is 127.W3. If you don't, we have extra copies
8 here. And I also have extra copies of the implementation
9 issues report for anybody who may need one.
10 MR. QUINER: For the committee it's the
11 end of the packet. It was the last big thing I sent in
12 that pile. That's it.
13 MR. NELSON: It's 127.W3, school finance
14 local revenues, and that kind of brings us to the bill.
15 Madam Chairman, do you want to go through
16 this --
17 CO-CHAIR NAGEL: Uh-huh.
18 MR. NELSON: -- page by page?
19 CO-CHAIR NAGEL: I think it would be
20 helpful.
21 MR. NELSON: Okay. Great. Essentially as
22 I earlier stated, the bill addresses local revenues,
23 primarily, and thereby addresses the cash flow and the
24 budget cycle of the local school district. And,
25 essentially, what the bill does is follow the MAP report
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1 recommendations, to the extent we could, by providing for
2 local revenue collections ultimately to be paid to the
3 State, and the State then would pay out through the
4 foundation program payments to districts the amounts of
5 the foundation program amount without them having to rely
6 on local resources throughout the year, when they come in
7 sporadically, and reducing budget problems and estimation
8 problems and those sorts of things.
9 So essentially looking at the bill, we take
10 local revenues at each stage in there and we shift them
11 from the distribution directly to the district to
12 distribution, ultimately that goes to the State.
13 And a little bit as a summary, the bill
14 maintains what's called the county school fund, and this
15 is a collection or a fund that is maintained by the county
16 and into which a lot of these local revenue sources to
17 districts are dumped and paid out to the districts,
18 generally about on a monthly basis. And most of the local
19 resources go there currently, as we speak today.
20 What this bill does is for those revenues we
21 rely a lot on this county school fund, and then the State
22 or the County would then ship these revenues to the State
23 on a monthly basis. Again, maintaining records on each
24 district's apportionment of those revenues so that we
25 could perform the calculation at the state level.
5
1 So that's kind of the theory behind the bill.
2 There are a few modifications on just what I told you and
3 we'll go through those as we work the bill.
4 Beginning on page 2, and I also -- Mary might
5 distribute them. It might help you keep in your mind the
6 district local revenue sources, which is just enumeration
7 of the local revenues, and we will deal with each one of
8 these in the bill.
9 Going back to the bill, as we look at page 2,
10 the funds that we're dealing with here are the Taylor
11 Grazing Act funds, and essentially what we do with this is
12 these federal funds are a little bit unique in that the
13 counties -- we must rely on the counties for certain data
14 so that we know how much each district's entitled to. For
15 example, based upon Taylor Grazing Act for their portion
16 of the share of the lands that are under the Taylor
17 Grazing Act, and same thing with forest reserve funds
18 which appears on pages 4 and 5, so we need the counties to
19 make the computations for us so we do know how much each
20 district gets so when we perform our annual calculation of
21 how much revenues each districts do get throughout the
22 school year, we have a basis for that.
23 And maybe a little bit more in summary, too,
24 before we get into working the bill. The fact that we are
25 keeping a separate accounting at the state level of all
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1 district resources, because the bill states in there
2 several times that a district must be paid at least the
3 amount of money that we take in under the resources that
4 are currently dedicated to those school districts so that
5 the foundation program would, at minimum, pay that level.
6 And so we maintain this calculation at the state level for
7 that purpose, and also to compute recapture, because we
8 will have to have a basis on which to know how much monies
9 go back to -- or the district must rebate or retain at the
10 state level because of the recapture provision on local
11 resources. So on that basis, we will maintain books at
12 the state level on all of these local resources.
13 Again, back at the bill, pages 2 through 5 deal
14 with federal funds through the Taylor Grazing Act under
15 9-4-401, and the forest reserve funds under 9-4-503. And,
16 essentially, again, what we do is we have counties perform
17 the calculation of the amounts that they get from the feds
18 on their county proportionate share and how much would
19 accrue to the school districts. So they perform that
20 computation and also report that to the State, as well as
21 direct the -- or the allocation to the State.
22 In this case we really don't distribute any
23 money to the school districts. We maintain it at the
24 state level because the state treasurer is the receiving
25 body for those federal funds. And they go through and
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1 determine how much is distributed to each county and the
2 county would then determine how much each school district
3 would be entitled to.
4 Is that confusing or -- if there are no
5 questions I'll just kind of keep going.
6 CO-CHAIR NAGEL: Questions?
7 MR. NELSON: The second federal fund that
8 we address is the federal forest reserve funds. Those are
9 on pages 5 through 6. And again, we rely on the counties
10 to give us some information, and the county commissioners,
11 in this case, has to make a decision on how much they want
12 to allocate their respective distributions between county
13 roads and school districts, so they must make that
14 decision. And once that decision is made, then we know
15 how much to retain at the state level before forwarding
16 the county portion to them for county roads. So we
17 provide a process in there for the districts to report
18 that -- not the districts, but the counties to report that
19 information back to the State before we make the
20 distributions. And that language is on 4 through 5.
21 REPRESENTATIVE P. ANDERSON: Madam
22 Chairman?
23 CO-CHAIR NAGEL: Yes.
24 REPRESENTATIVE P. ANDERSON: Are there any
25 guidelines for what county commissioners can apportion to
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1 roads and to schools?
2 MR. NELSON: No, Mr. Chairman -- or
3 Madam Chairman.
4 REPRESENTATIVE P. ANDERSON: Why would
5 they apportion any to the schools if schools foundation's
6 going to be guaranteed that it's going take it off the
7 roads?
8 MR. NELSON: When they get those local
9 revenues, they make a decision at the local level how much
10 of that they want to go to the roads and the schools. And
11 in the law currently, we say not less than 5 percent of
12 those funds must go to one or to -- both of those sources
13 must receive at least 5 percent of those funds.
14 As to the other part of your question, that the
15 State would get them, we already get them indirectly now
16 in that they count against the determination of their
17 foundation program payment currently. It's just we're
18 kind of maneuvering how it's collected, so that's a local
19 decision on how much they would apportion between those
20 two sources, but as to the difference it would make,
21 wouldn't make that much in making that decision, because
22 one way or the other that amount is counted against them
23 in determining their guarantee right now. Is that clear
24 or does that answer your question?
25 REPRESENTATIVE P. ANDERSON: I'm sure it's
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1 clear, it's just not clear to me.
2 Joe, I think, has a question.
3 CO-CHAIR NAGEL: I see that. Thank you.
4 Would you respond to that?
5 MR. EVANS: Madam Chairman, Joe Evans with
6 the Wyoming County Commissioners Association.
7 The program that is being discussed is
8 contiguous federal reserve payments from the Forest
9 Service. 25 percent of all funds from the Forest Service
10 go directly to the county of origin. Under the state law,
11 minimum of 5 percent of the program must go to schools in
12 that county, a minimum of 5 percent must go to the county
13 roads. Those county commissioners can select of the other
14 90 percent which of the two it goes to. I think in
15 virtually all 23 counties, all the money goes to county
16 roads, because, of course, they're using those for
17 schools. And dictated, also, by federal law, it's used
18 for school and for county roads, there is an amount of
19 flexibility given the State and the State of Wyoming has
20 chosen to make it 5 percent, 5 percent and the 90 percent
21 chosen by the county commissioners. And, like I say, I
22 think virtually all counties use it strictly for county
23 roads.
24 MR. NELSON: Okay. Continuing with the
25 bill. On page 6, I brought in Section 9-4-1102 and did
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1 not amend it. I think that will be predicated upon what
2 the committee elects to do with this proposal, together
3 with the timing of the payments from the foundation
4 program account, but essentially what this provision is,
5 it caps the TRANS authority for the foundation program
6 account of 300 million. Depending on how the committee
7 may wish to direct foundation program payments under this
8 bill, that may need to be amended. We may need a greater
9 amount, depending on, as I said, the timing of the --
10 CO-CHAIR NAGEL: Would you explain the
11 TRANS authority, please?
12 MR. NELSON: I'll try. Mr. Sommers may
13 have to back me up.
14 But what that does is it gives the State the
15 ability to borrow in anticipation of revenues that are
16 coming into that account, so we can kind of borrow against
17 those revenues to make payments against the short term.
18 That's my quick and dirty, if that's sufficient.
19 SENATOR MOCKLER: Can I ask a question?
20 Maybe Steve does have to help me, but you're
21 implying maybe we would have to increase the TRANS note
22 authority because we have even less predictability or we
23 have even less up-front cash because we moved it all to
24 the State and taken it away from the school districts, but
25 we're going to manufacture even more debt to issue more
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1 TRANS notes?
2 MR. SOMMERS: Madam Chairman.
3 It's basically because we are now going to pay
4 the guaranteed amount instead of the entitlement amount.
5 It's a lot higher figure. Mary's got a lot of handouts on
6 it. When you want to talk about it in detail, we can, but
7 under the old system, system we're on right now,
8 entitlement payments for fiscal year '02 are like $367
9 million. If we were going to pay the guarantee, it would
10 be $687 million. We're paying out a lot more money and
11 the revenue streams are still pretty much the same as they
12 are right now with the exception of we would get the local
13 resources into the foundation program account, but most of
14 that's property tax, most of that's paid in two
15 installments, most of it comes in in December and in June
16 or November and May. So what we've done, we're going to
17 pay out a lot more money up front. We're still on the
18 same revenue stream. We had a lot larger deficit then --
19 that we have to cover somehow.
20 SENATOR MOCKLER: Madam Chairman.
21 CO-CHAIR NAGEL: Yes.
22 SENATOR MOCKLER: The way I thought the
23 TRANS note worked, we moved it so we didn't make the
24 payments until January so that we didn't have any money
25 coming in that first half of July to December so we could
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1 prove that we didn't have tax revenue to make that TRANS
2 note. If the property taxes come in in December or
3 November, we can't ever prove on paper we don't have that
4 money, can we?
5 MR. SOMMERS: We can.
6 SENATOR MOCKLER: We can?
7 MR. SOMMERS: Sure.
8 SENATOR MOCKLER: We'll just move it
9 ourselves.
10 MR. SOMMERS: Well, Madam Chairman.
11 Depending upon your payment schedule, but right
12 now the payment schedule pays one-third of the
13 entitlements in July and one-third in October -- August
14 and October. Okay? That's two-thirds of the entitlement.
15 If you stay with that same distribution schedule, only
16 you're paying two-thirds of the guarantee, you've got a
17 lot of money that you're paying out up front, and in those
18 months of October -- after that October payment, in
19 November and before the receipts come -- property tax
20 receipts come in December, you still have one heck of a
21 deficit there.
22 SENATOR MOCKLER: Madam Chairman.
23 But it isn't a full two TRANS notes, because one
24 of those half years has money in it, right?
25 MR. SOMMERS: Madam Chairman.
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1 It doesn't matter. As long as we can show the
2 deficit -- whatever deficit -- if we issue 200 million
3 TRANS, as long as we can show $200-million deficit for one
4 24-hour period any time in the first six months of that
5 fiscal year, we're there. That's all we have to do.
6 SENATOR MOCKLER: Okay.
7 CO-CHAIR NAGEL: Any other questions?
8 Yes.
9 REPRESENTATIVE HUCKFELDT: Madam Chairman.
10 Steve, what is the level that we need to be at?
11 300 million is not the level, we know that, but do you
12 have an estimate of where we should be on that so we can
13 take advantage of the TRANS?
14 MR. SOMMERS: Ms. Chairman.
15 I'm -- you know, taking advantage of the TRANS.
16 We're going to have to talk about that some, but I think
17 it depends on your payment schedule entirely. In other
18 words, if you stay with the same payment schedule that you
19 have right now, payment schedule to the districts,
20 one-third in August, one-third in October, I think, you
21 know, you're looking at, what, 350?
22 MS. BYRNES: 350.
23 MR. SOMMERS: 350,000 -- million TRANS
24 issues.
25 Now, when it comes to taking advantage of,
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1 that's where we need to have some discussion, but that's
2 whenever you want to take up that whole issue, so --
3 CO-CHAIR NAGEL: Any other questions?
4 Is that issue taken up, Steve, in the select
5 finance? Talk about that particular thing in the select
6 finance committee?
7 MR. SOMMERS: The TRANS issues?
8 CO-CHAIR NAGEL: And the time limit.
9 MR. SOMMERS: Madam Chairman, not in that
10 interim, no.
11 SENATOR MOCKLER: Madam Chairman.
12 CO-CHAIR NAGEL: Yes.
13 SENATOR MOCKLER: The Capital Finance
14 Committee just got what the TRANS issues were for the
15 last year for the State and for the school district, which
16 we didn't go into really what the returns were, and
17 whether that's a good return, whether it would be better
18 for the State to move the schedule, we haven't done any of
19 that. We just looked at, you know, sort of here on paper
20 how much we've issued in the last year.
21 CO-CHAIR NAGEL: All right. Go ahead.
22 MR. NELSON: Okay. Continuing, primarily
23 on pages 7 through 10 deal with the recapture issue. And
24 instead of -- under this proposal, since the State is
25 taking the local revenues, we're transferring those to the
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1 state level, we will not then require a payment of
2 recapture from the school districts, but what we do,
3 rather, is retain any excess over and above the guarantee
4 at the state level. And that's what these amendments
5 primarily do.
6 Subsection C just primarily deals with
7 constitutional limit and it's just bringing the language
8 up to snuff. Subsection E is repealed, primarily because
9 that's dealing with the payments of the recapture amounts
10 from the district to the State. And F and G are just
11 conforming amendments.
12 Subsection H on page 10 provides for the state
13 treasurer -- or the county treasurer to report to the
14 State the amounts of property taxes collected from the
15 districts so that we have an idea of the amount and -- per
16 district. They would then break up the district for our
17 records at the state level. And again, this is where they
18 are initially put in the county school fund and
19 transferred to the State to be deposited into the
20 foundation account.
21 On page 11, this is where we're talking about
22 the county tax, the county 6-mill levy. Again, same
23 procedure for the county tax as for the local property
24 tax, where we're transferring the amounts collected from
25 the county school fund to the foundation program account.
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1 And we're also requiring the county treasurers to report
2 the apportionment to the district for our statewide set of
3 books.
4 The bottom of page 12, that's dealing with the
5 fines, penalties and forfeitures which are given to the
6 county school fund. Same procedure, they're put in the
7 county school fund, shifted -- or transferred to the
8 foundation program account and then the treasurer reports
9 the breakdown between the districts within the county.
10 On page 13, Section 21-13-207, that is the
11 county school fund. That's the fund that we're using
12 to -- as the flow through. And that's just the conforming
13 language that requires the counties to transfer to the
14 foundation program on a monthly basis and to report the
15 breakdowns between the districts.
16 21-13-310, and that goes from pages 13
17 through -- it keeps going to about 20. That is the
18 enumeration of the local district revenues, and we're
19 going in there and we're shifting each one to the State.
20 The other feature that this allows us to do currently,
21 under existing law -- districts, when they put together
22 their initial foundation program application and get some
23 input on estimates for future foundation programs and to
24 try to tie down the local revenues, we always come across
25 this problem with tax code -- taxes, and so what they do
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1 is generally they estimate what they envision their
2 collections to be for that fiscal year and then we compare
3 the estimates to the actuals at the end of the year and we
4 do some adjusting there.
5 And this allows us to ignore that, for the most
6 part, in that we can pretty much concentrate on actual
7 revenues received during that school year, so in that
8 respect we're a little bit -- this offers that advantage
9 of being able to use actual revenues throughout the course
10 of the school year, as opposed to waiting at the end of
11 the year and then readjusting.
12 And again, that brought up the issues of cash
13 reserve balances and interest income, which we'll get into
14 a little bit later, but that has been the need to maintain
15 high levels -- or one of the arguments for a high-level
16 cash reserve is to offset estimated tax collections and to
17 also offset the uneven collections of those amounts during
18 the school year.
19 CO-CHAIR PECK: Madam Chairman.
20 Dave, we have out there in the world the Motor
21 Coach Association who intends to start a statewide
22 initiative to lower motor vehicle registration fees down
23 to a standard figure of, say, 40 bucks instead of whatever
24 they're paying now. Do you have an idea how much money is
25 now flowing to education from the motor vehicle
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1 registration fees?
2 MR. NELSON: Yes, we do. And Mary has
3 that on a sheet, the local revenue amounts. We have them
4 broken down by amount that flow into the districts,
5 specifically the car registration fees.
6 MS. BYRNES: Yes, we had that in a
7 previous mailing to them.
8 Did you bring spare copies of that?
9 MR. NELSON: I'm sure we did.
10 We can have that made for you.
11 MS. BYRNES: Okay. We can make copies.
12 MR. NELSON: Certainly we can give you an
13 idea of the magnitude of that amount and it's not great
14 compared to other --
15 MS. BYRNES: Just take your file.
16 MR. NELSON: Just take that.
17 But we can get that for you.
18 CO-CHAIR NAGEL: Never knew that, huh?
19 Go ahead, Dave.
20 MR. NELSON: Okay. Again, these go by
21 local revenue source, and page 14 deals with the tax
22 collections. Page 15 also deals with tax collections.
23 At the bottom of page 15 is the fines and forfeitures,
24 and that goes to the top of page 16. Under paragraph 6,
25 it's a forest reserves fund, we already touched a little
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1 bit on that. Paragraph 7 is Taylor Grazing Act funds.
2 Paragraph 8 is county motor vehicle fund, and that's what
3 Co-Chair Peck raised.
4 We treated tuition and other revenues a little
5 bit differently, and I'll get into that as we get there,
6 but, essentially, what we're doing with both of those
7 sources is requiring the districts to report that amount
8 at the end of the school year, and then to pay whatever
9 amount that they collected from those sources during the
10 school year to the state foundation program at the end of
11 the year. We felt this might be an easier method of doing
12 it. These are sporadic and districts vary greatly between
13 them and other local revenues. We require them to report
14 that -- and the magnitudes are very small, so these would
15 be very small amounts that we're required to keep a State
16 rein on in view of the equity issue.
17 Subsection B, on page 18, does just that, just
18 does what I tell you, it requires the districts that
19 report the tuition revenues and any other revenues that
20 aren't categorized in the preceding categories to the
21 State Department at the end of the year together with a
22 check.
23 And if you recall those -- paragraph 3 deals
24 with those other revenues that we do provide exemptions
25 from and we call those the popcorn amendments, or
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1 whatever, revenues we're not going to count or keep track
2 of at the state level. And they're pretty much enumerated
3 there on lines 21 through 24, over at the top of page 20.
4 And those are just kind of like ticket prices to activity
5 events at the school and rental fees, those sorts of
6 things that they access that we don't keep track of.
7 Subsection D deals with the -- oh, that's in
8 case there are any refunds, tax refunds, that are directed
9 from the State to go back to the taxpayers. What this
10 allows the State to make those -- any refunded amounts
11 that are due based upon any local property taxes. It
12 allows the states to pay that refund on behalf of the
13 districts.
14 And that pretty much deals with the local
15 resources at that statute, directing each specific source
16 and transferring that source to the state level to the
17 foundation program account.
18 Section 21-13-312, on page 22, that just
19 conforms language. It's dealing with prorating payments
20 should income to the account not be sufficient.
21 Page 23 and 24 are important sections. It's
22 under 21-13-313, which are dealing with distribution of
23 amounts from the foundation program account to the
24 districts. And the language under subsection C on the top
25 of page 24 deals with what Steve was talking about with
21
1 respect to your payment schedule, which will then impact
2 greatly how we need to come up with revenues at the state
3 level to make those payments.
4 Currently we pay -- we pretty much front load
5 the payments. One-third is due in August, one-third of
6 their total amount is due in October, and then we have a
7 spring payment, so we're paying 66 percent pretty much in
8 the first couple months of school operation during that
9 school year.
10 Questions?
11 The repealed section on pages 24 and 25,
12 subsection D, just deals with -- that is that statute, as
13 I alluded to earlier, where we used property tax estimates
14 and then we compare those estimates with actuals to make a
15 kind of end of the year adjustment to the -- each
16 district's foundation program amount, and that's that
17 language. It will not be necessary to continue with that
18 any more.
19 Subsection E, the amendments that we did
20 primarily conform that to the change in this bill,
21 although it does bring up the level of cash reserves and
22 that appears on page 25, line 20. Currently it's at
23 15 percent of their foundation program amount for the
24 preceding fiscal year. They're able to maintain a cash
25 reserve at that level without having that computed as a
22
1 local resource and subtracted from their foundation
2 program guarantee.
3 The other thing that we did was the stricken
4 language on lines 22 through 24, on page 25, at the top of
5 page 26, lines 1 through 3, eliminates some language that
6 allows the districts to carry forward the cash reserve
7 balances that existed at the time of 1997 School Reform
8 Legislation and this would stop that. This would make
9 them count that balance that they had existing at that
10 point in time.
11 There was discussion at the last committee
12 meeting about that concept and the magnitude of those
13 funds were presented at that time. I'm not sure that we
14 still have copies, but we could probably get those to you,
15 but based upon that discussion, that language is deleted.
16 We still allow for the phase-in that was
17 provided at the time of the School Reform Legislation, and
18 that appears on lines 3 through 10 on page 26. And that
19 over time holds certain revenues harmless and doesn't
20 allow them -- or doesn't require them to count any revenue
21 increases they got from School Finance Reform Legislation
22 back in 1997. And that continues through school year
23 '02-03 under the original 1997 law, and so that's
24 continued.
25 CO-CHAIR PECK: Madam Chairman.
23
1 CO-CHAIR NAGEL: Yes.
2 CO-CHAIR PECK: Would you clarify for me
3 the difference between 15 percent they're allowed to
4 retain and this which they're not allowed to?
5 MR. NELSON: The phase-in?
6 CO-CHAIR PECK: Right.
7 MR. NELSON: All right. The 15 percent
8 deals with the cash reserve balances that would exist at
9 the end of any school year so that when they figure their
10 entitlement payment for any school year, they would look
11 back at what their operating balances were at that point
12 in time.
13 This could tie in a little bit in that we
14 subtract out a certain percentage of any increase they
15 realized under the new school finance formula that went
16 into effect in '97. It would not be counted against them
17 at a reduced percentage rate over time. And it was over a
18 five-year period from '97 onward, so there would be
19 perhaps some overlap, but it would not be significant.
20 Is that a fair statement? That would be
21 considered somewhat in their 15 percent --
22 MS. BYRNES: Maybe Mr. Biggio from the
23 State Department of Education would have an idea how much
24 significance --
25 MR. NELSON: -- of any overlap?
24
1 MR. BIGGIO: Madam Chairman, maybe if I
2 start from the beginning. The current law -- my name is
3 Larry Biggio from the Department of Education.
4 The current law establishes almost a hold
5 harmless balance that was in effect back in '97, and that
6 hold harmless balance is excluded, in essence, from the
7 fund balance when making that computation. So when we
8 first look at the fund balance the district has available
9 or subtract from that this hold harmless balance, then we
10 compare that remaining amount to 15 percent of the prior
11 year's guarantee. And any excess over that -- of that 15
12 percent is considered a local resource in the sense it
13 counts against the district, but phased in, as Dave
14 mentioned, over a period of time, and it's 20 percent a
15 year over a 5-year period, until finally all the
16 difference between those pieces are considered local
17 resource.
18 And I don't remember the exact timing, but I
19 think we're into the 60 percent or 80 percent at that
20 point.
21 MR. NELSON: Critical -- the last year is
22 '02-03 of the phase-in, so that would be next year.
23 MR. BIGGIO: So next year, so probably
24 have 80 percent this year.
25 MR. NELSON: Yeah, this year.
25
1 Okay. Continuing the repeal of Section
2 35-11-424, subsection C is just the cleanup, and that
3 dealt with the transferring of fines and penalties that
4 was a specific statute under the land qualities statute
5 that directed that directly to the school districts. And
6 it's really an unnecessary statute, since it would already
7 be covered, so I just went ahead and repealed it.
8 The amendment to 39-13-111 is just a cleanup of
9 language. It makes clear that the districts' levies that
10 are collected are payable to the state superintendent on
11 behalf of the school districts.
12 And the last part of the bill is Section 3, and
13 that is a transition piece, primarily, with respect to the
14 estimates of property taxes and the figures that we used
15 during school year '01-02 in computing foundation program
16 payments during that school year, based upon estimates,
17 and so we're taking care of any amount that we may owe
18 them because of the way that we're set up now where they
19 would have to estimate revenues under this local tax
20 sources. This would just make sure that we take that into
21 account and pay them at the state level any amounts we may
22 have underpaid -- paid them due to the estimates of their
23 local property tax amounts.
24 CO-CHAIR NAGEL: Thank you, Dave.
25 Any questions?
26
1 REPRESENTATIVE BOSWELL: Yes.
2 Madam Chairman.
3 CO-CHAIR NAGEL: Excuse me.
4 REPRESENTATIVE BOSWELL: Couple questions.
5 Madam Chairman.
6 Just for my comfort level, can we get a
7 spreadsheet of the net effect of the change eliminating
8 the '97 language and what that would -- what that would do
9 for the next school year? I'm kind of wondering whether
10 we're talking 5 bucks a district or hundred thousand.
11 MR. NELSON: Sure. We can get that.
12 MS. BYRNES: We can get that.
13 REPRESENTATIVE BOSWELL: Secondly, I'm
14 trying to do the big picture thinking here, but after only
15 one cup of coffee, I'm a little behind you. When we talk
16 about cash flow, local districts get these -- these -- as
17 you described, sort of 60 percent and sort of up-front
18 payments. I presume they are then investing some part of
19 that money and able to generate the interest. On the
20 other hand, other -- those same districts are having to
21 issue local tax anticipation notes. Is there any --
22 because at some point through the school year they run out
23 of money and they need more before they get, supposedly,
24 their second or final payments, is there any way to get a
25 feel, a handle for the net of this proposed change in
27
1 terms of, first of all, reducing the opportunity for them
2 to invest up front, while at the same time eliminating,
3 hopefully, the need for local tax anticipation notes, is
4 that possible?
5 MR. NELSON: Yes.
6 Madam Chairman.
7 I think Mary has done a good deal of this, that
8 we'll pass out to you, giving you a feel for that based
9 upon under different payment scenarios, under if it goes
10 to this payment schedule as opposed to this payment
11 schedule, which will give you a little bit better feel for
12 the cash flow, exactly what it is, and which I think is
13 what you're trying to put together.
14 MS. BYRNES: Madam Chairman and
15 Representative Boswell, the big difference between this
16 bill paymentwise to the districts and the current law that
17 we have is right now we pay entitlements, but this would
18 be that you pay guarantee, so it may actually help the
19 districts if they're getting, what, 66 percent of their
20 money in the first 90 days of the school year under the
21 current payment process we have. I'm not sure they would
22 do better waiting for local receipts to come in.
23 SENATOR MOCKLER: Madam Chairman.
24 CO-CHAIR NAGEL: Senator Mockler.
25 SENATOR MOCKLER: Can I follow up in
28
1 asking how that cash flow analysis works? Does it also go
2 back to the State's side, which is why we issue the tax
3 anticipation notes? I mean, at some point you have to see
4 if there's -- if that's an overall gain with the State
5 issuing their tax anticipation notes under this schedule,
6 which, obviously, why we went from 11 payments to three
7 payments, so the State could issue the revenue notes, and
8 is there some way to factor into that, that the big
9 picture is would everybody be better off if we did 11?
10 Would everybody be better off if we did four? You know,
11 when in the past we issued how many revenues notes, that
12 kind of thing, is a better way to get better back, best
13 most efficient, as opposed to passing out tax anticipation
14 notes in general?
15 MS. BYRNES: Madam Chairman.
16 I have a series of different financial cash
17 flows for the school foundation program, various
18 components of this bill changing the payment scheme, going
19 from three payments a year to 11 payments or maybe doing
20 it in a different fashion, so it would be a large
21 presentation. If you are there yet, I don't know.
22 CO-CHAIR NAGEL: I think that there are
23 other general questions, but I think what we need is a
24 motion to consider this bill, other than that, that can be
25 considered in the context of the bill.
29
1 REPRESENTATIVE BOSWELL: I so move.
2 REPRESENTATIVE HUCKFELDT: Second.
3 CO-CHAIR NAGEL: All right. Now, it's
4 been moved and seconded. All those in favor of
5 consideration of draft 127.W3 say aye.
6 Aye.
7 CO-CHAIR NAGEL: Opposed?
8 Thank you very much. Let's just start through
9 the bill again until we get to particular recommendations
10 or components that we are interested in having changed.
11 The first section is the distribution of the
12 funds, federal funds, that are really sweeping all the
13 federal funds into the state. Are there any questions or
14 recommendations about any changes to that particular
15 portion, just on page 2 through 5?
16 On page 6, we're starting to talk about the
17 TRANS authority, and we really need to delay that
18 discussion of the limit of that until we talk early --
19 talk about the payment schedule.
20 Any suggestions on page 7 where we're talking
21 about recapture provisions?
22 REPRESENTATIVE P. ANDERSON: Madam
23 Chairman.
24 CO-CHAIR NAGEL: Yes.
25 REPRESENTATIVE P. ANDERSON: I have a
30
1 question on -- that's kind of nitpicking. They use the
2 term there on line 21 that average daily memberships from
3 the preceding fiscal year. I think maybe we ought to
4 identify that as a rolling average. I'm sure the schools
5 will not argue with it now until they start -- enrollment
6 starts going up and then they'll want the ones that was
7 last year's instead of the rolling average. That -- maybe
8 the board computed, or whatever, maybe it's self -- maybe
9 that's what it means, I'm not sure, but it says the
10 preceding year. It says that on page 7 and on page 11, as
11 well, and it looks to me like we better identify it as a
12 rolling average, if that's what we're going to use.
13 MR. NELSON: Madam Chairman.
14 CO-CHAIR NAGEL: Dave.
15 MR. NELSON: It is not the rolling average
16 that is currently used under law. What subsection C deals
17 with is that it's a special provision that affects
18 recaptured districts in that if they elect local bonded
19 indebtedness levy for that district, there is a provision
20 in here that if they do more of a local debt than the rest
21 of the state on average, then we give them credit for that
22 effort. And to my knowledge, this has never been used,
23 but I think it's looking at -- it's not the ADM that
24 you're referencing that is used in the cost-based model,
25 which is a 3-year rolling average. This is kind of a
31
1 separate computation. And all of the tax ones are, they
2 look at that point in time, and so the ADM is comparing
3 that district's ADM at that point in time with the
4 statewide average for either a distribution purpose, like
5 it is on page 11, or page 7, on this, in determining the
6 local bonding effort of a recaptured district.
7 MR. ANDERSON: I apologize for the
8 nitpicking.
9 MR. NELSON: No problem.
10 CO-CHAIR NAGEL: 8 or 9 we're talking
11 about basically the same thing. Any changes or questions
12 about pages 8 or 9, then?
13 Page 11, 12, petition of fines and forfeitures.
14 Page 13 is county school fund flow-through
15 provision and also enumeration of local revenues and
16 transfer to the State. 14 is the same.
17 Goes on over to 15, 16 just the possible
18 revision of 17, 18, 19, the way they report tuition, which
19 is -- would be now at the end of the year and then the --
20 what did you call those, popcorn funds?
21 MR. NELSON: Popcorn, yeah.
22 CO-CHAIR NAGEL: 20, 21, 22 prorating the
23 payments, and discussion, please, on page 23.
24 SENATOR MOCKLER: Madam Chairman.
25 CO-CHAIR NAGEL: Yes.
32
1 SENATOR MOCKLER: Before we get page 23,
2 can I ask a very broad question? I'm having tea, it
3 doesn't work any better.
4 Why did MAP recommend this? I mean, what's the
5 ultimate goal of putting all these things in the State
6 control? I mean -- and I think it comes right before the
7 distribution thing, because, you know, what's our ultimate
8 goal here, get all the money in the state pot, issue more
9 TRANS notes, 600 million, give money back to the State,
10 what is our ultimate purpose when we collect all this
11 revenue from the local school districts, sort of take it
12 out of their hands? Was there a general one sentence why
13 this is the best way to do this?
14 MR. NELSON: Madam Chairman.
15 CO-CHAIR NAGEL: Yes.
16 MR. NELSON: In the MAP report the
17 recommendation was based on the fact that due to the flows
18 of primary property taxes is the biggy, that a lot of
19 districts are having to borrow based upon those amounts
20 when they come in in the late fall, and then the next
21 winter or spring of the following school year, they have
22 these difficult cycles, to me, and so they get a big gob
23 of money here and a big gob of money here, and during the
24 interim they have to borrow to make -- to continue
25 operating the school district for that time, particularly
33
1 recapture districts.
2 And because they're not getting any amount from
3 the foundation program, and that was one example, but
4 there are examples with other nonrecaptured sort of
5 districts in that when they're putting their budgets
6 together at the beginning of a school year and trying to
7 get a foundation program application turned into the State
8 Department, at the time that's all that's necessary, they
9 don't -- they have a fuzzy picture of what's ahead in
10 terms of tax collections, so this gets that out of their
11 hands so that the State then guarantees them a flow of
12 money during that school year that they don't have to
13 worry about the local revenue coming in. It's, in effect,
14 evening that part out for them, trying to make it easier
15 in both putting together a budget and in operating that
16 district during the school year with a more even flow of
17 money.
18 SENATOR MOCKLER: Madam Chairman.
19 So when they borrow, is that when they're
20 issuing their TRANS notes, based on their balance that's
21 coming in, or they actually going to the bank and
22 borrowing?
23 MR. NELSON: I think they do both.
24 SENATOR MOCKLER: Because -- and if that's
25 true, I guess what I'm getting at, if you do these TRANS
34
1 notes, they're supposed to be the best thing in the world
2 for making money for the State while -- for the districts.
3 If a district's issuing TRANS notes, all we hear in other
4 communities is TRANS notes are making a lot of money, so
5 why wouldn't the district want to continue to issue their
6 own TRANS notes and make themselves a lot of money, which
7 is like interest which they get to keep entirely? I guess
8 that's kind of part of the shift I want to see is why
9 would it benefit them to issue -- have the State totally
10 issue those TRANS notes and where is that benefit? How do
11 we see -- and maybe Steve will have to help me out
12 again -- how do I see how much that TRANS note issue
13 benefits the State and where that money goes?
14 MR. SOMMERS: Madam Chairman, you know, we
15 can get into a lot of that whenever you're ready to talk
16 about all the details and all the different possibilities
17 for the TRANS.
18 CO-CHAIR NAGEL: I think we're close, but
19 I think one of your questions might be better answered by
20 some of the members of the audience.
21 SUPERINTENDENT HIGDON: Madam Chair, I can
22 try to answer that.
23 Mark Higdon, Campbell County School District.
24 And the terms entitlement and nonentitlement
25 districts, if you recapture district, you have a
35
1 foundation guarantee, but you don't receive any revenue
2 from the State at all during the year and so you need to
3 figure out how to handle your cash flow. In our business
4 it's tax anticipation notes, and we have to guarantee that
5 we're going to be in deficit for a period of time we issue
6 those notes. If we have other revenue that comes in, then
7 we're able to make some money, possibly, on the tax
8 anticipation notes, but if we go right into deficit after
9 you receive them, until we get our first tax payment in
10 December, it can cost us from 12 to $18,000 to borrow the
11 amount of money that we need to operate our budgets.
12 About $50 million -- we need 25 million --
13 actually, need a little more in the first part because you
14 buy most of your things, kind of budget to start the year,
15 and your personnel is equalized out over the year. I
16 think that this is going to be the big crux of this bill,
17 because it's been mentioned the impact on the State will
18 be the same.
19 If the State has to front end $375 million and
20 do tax anticipation notes, then distribute -- draw on
21 those notes to distribute money to districts in that same
22 amount, they won't have the gap where they've got the
23 money invested and they're paying interest on the money
24 they have to pay in lieu of that, you end up with a
25 balance, and if you don't have to draw on that balance,
36
1 you make money, but if you draw on that balance, you
2 don't.
3 And, to me, this is why I've asked this
4 committee to -- maybe we ought to look at this for a year,
5 because there's a lot of districts right now who are
6 entitlement districts who are getting a good shot of money
7 in August, and they are -- not many of them are seated
8 here, but if you change distribution schedule, which I
9 think you'll probably do on the advice of your staff so
10 that it doesn't cost the State a bunch of money, they're
11 going to have fewer dollars to operate and this is a big
12 impact on school cash flow.
13 Steve, you might want to speak from one of the
14 biggest entitlement districts, from Natrona County, the
15 impact it would have if they reduced the amount of money
16 that was put out at the beginning, that August 15th
17 payment, but the idea with tax anticipation notes is to be
18 able to guarantee your debt and to be able to cover it,
19 not draw on it, until the last minute, then you can
20 arbitrage some funds, but if you're not able to do that,
21 you're not going to make the funds.
22 SENATOR MOCKLER: Madam Chairman.
23 I guess this is a question about that. If we do
24 all this and you guys are ever short in a school district
25 in a period of time, you can't issue the tax anticipation
37
1 notes against the mill levy?
2 SUPERINTENDENT HIGDON: No, we cannot.
3 SENATOR MOCKLER: So we're taking away
4 your ability to average the loan payment then, and if you
5 get into trouble, what do you do then?
6 SUPERINTENDENT HIGDON: Well, we'll have
7 to go to the bank and borrow money.
8 SENATOR MOCKLER: Actually borrow money,
9 which costs?
10 SUPERINTENDENT HIGDON: And I'm not
11 opposed to helping maximize the ability to raise revenue
12 and meet cash flow needs in every district in the state,
13 whether that revenues accrues to the State, comes back to
14 the district or goes to the districts, to me it's not a
15 big issue, but I just want to make sure when we change
16 this landscape, that you got 35 or 40 school districts in
17 here saying we think it's a good idea, we think the
18 distribution schedule will work and we're behind this,
19 because if there's a way to economize and do a better job,
20 meet cash flow needs, let's do it, but I don't think we
21 have time to do it in this session. And we would benefit
22 from the most -- if you were to stay with the 30 percent
23 distribution or the 30 -- is it 33 --
24 MS. BYRNES: 33.
25 SUPERINTENDENT HIGDON: -- 33 percent, we
38
1 would get a shot in August of $13 million and that would
2 be wonderful, then we get another $15 million in October.
3 Now, do we need that to operate? Probably not.
4 If we had it, it would be great. Would we manage it well?
5 You bet we would, but, likewise, if you were to give us 10
6 percent of our budget in August, I'd rather be funding
7 ourselves because we have a lot more flexibility and we
8 have a lot more needs. That might not be enough, might
9 have to go borrow money somewhere else. That's why I'm
10 saying I'm not opposed to the concept. Some of the
11 changes in here I really have issues about, but the
12 overall concept about meeting cash flow and dealing with
13 different-sized needs of districts and the state to be
14 able to fund it, we'd be happy to work on that, but I'd
15 like to see us take a year to do it and do it right.
16 SENATOR MOCKLER: Madam Chairman.
17 CO-CHAIR NAGEL: Yes.
18 SENATOR MOCKLER: Do we have to do them
19 all the same? All the school districts and distributions,
20 does it have to be the same for Campbell County versus I
21 don't know what county, the other --
22 SUPERINTENDENT HIGDON: Currently we're
23 not. We're only paying of that third to districts who
24 have -- who don't have enough local revenue to equal their
25 foundation guarantee.
39
1 And, Steve, what is your first entitlement
2 payment in August with them?
3 MR. HOPKINS: About $20 million.
4 Steve Hopkins from Natrona County School
5 District.
6 We would represent opposite of what Mark has
7 described in Gillette. We're heavily dependent upon state
8 revenues. About 75 percent of the revenues come from the
9 State, 25 comes from local collections, so we would be one
10 of those districts that are currently benefiting from the
11 third, third early in the -- in about the first third of
12 the year. We do, as Mark indicated, we invest that money
13 wisely and generate interest on it, so obviously our
14 district has become accustomed to that level of funding
15 that we can generate from that interest.
16 The bigger concern for me is the ability to meet
17 the ongoing financial obligations of the school district,
18 so cash flow ultimately becomes the biggest concern for
19 me, so I would -- even though I'm the opposite of Mark in
20 terms of how the program currently works for us or how we
21 would lose or benefit under a change, cash flow is my
22 biggest concern and I would guess all of the business
23 managers can feel the same.
24 SENATOR MOCKLER: Madam Chairman.
25 I guess what my question really comes down to,
40
1 there's such a huge difference between school districts
2 still, do we -- can we just put one size fits all into
3 this bill and assume it will work for all?
4 REPRESENTATIVE HUCKFELDT: Madam Chairman.
5 Isn't the underlying issue here is the court
6 decisions says we can't use local resources, that's why
7 we're taking those local resources to the State and then
8 we have to get the distribution formula, however the
9 timing is and everything else, isn't that basically the
10 local resources can't be counted?
11 MR. NELSON: Madam Chairman.
12 Currently we do count them to equalize revenues
13 through comparing the guarantee to the local resources to
14 determine the amount of entitlement. So we are currently
15 considering them, even though we don't take them in at the
16 level, they are used in a balancing effect through the
17 foundation payment.
18 CO-CHAIR NAGEL: Steve, I think it's time
19 for you to --
20 MR. SOMMERS: Madam Chairman, Mary has
21 done quite a few different spreadsheets along the TRANS
22 line, and I don't know how she really wants to handle
23 this.
24 MS. BYRNES: I'm going to start with the
25 current way we do the payments and receipt the revenues.
41
1 And this chart will show FY02, school year '02, and it's
2 undated with the latest CREG projections, and it's -- I
3 put an X on it so it's the X chart. There's quite a few.
4 MR. SOMMERS: Madam Chairman, while Mary's
5 passing this out, if I might, there's not -- a lot of
6 numbers on here. Don't get scared by that. There's only
7 really a few you need to pay attention to. This is actual
8 flowchart -- cash flowchart that Mary uses -- the
9 department uses when they're projecting their cash flow
10 situation for purposes of issuing a TRANS, and also for
11 figuring out when they need to take general fund money, if
12 they need it, and for us to fit our fiscal profile for us,
13 as far as revenues necessary from the general fund to
14 augment the general foundation program, so Mary can
15 explain all these to you, but don't get too concerned
16 about all the figures.
17 MS. BYRNES: There are a lot of figures
18 and they're really little, so I apologize for that,
19 but you start in July, we have a starting balance of
20 $27 million. That's at the top left-hand corner of the
21 page. This is a monthly flowchart. You'll notice that
22 expenditures are based upon the entitlements that are
23 going to go out that year, so we anticipate that 33
24 percent in August -- on August 15th actually go out the
25 door, another 33 percent August 15 -- or October 15th
42
1 and the last payment February 15th. So you can see that
2 that is our draw on this account, it's essentially right
3 now.
4 And down below where you have that double bar,
5 it will show the same cash flow, but putting the TRANS
6 that we have out there right now, 195 million. If you
7 look -- going back to the -- before putting the TRANS in,
8 it says ending balance without TRANS. That's in the
9 middle of the page. If you'll look there, the largest
10 deficit there is in October. It's 174 million deficit for
11 that -- for this period, this fiscal year. We have a
12 TRANS issued $195 million, down below you can see how the
13 cash balance would look different.
14 The ending balance with the TRANS is the very
15 final line across. There is a cost to the TRANS money.
16 We have -- we borrow $195 million in the first part of
17 July, within 90 days of that fiscal year it has been sent
18 out to the school districts. Essentially this money is
19 pretty much gone. You can see in October you have a
20 balance of $21 million, but you have pretty much sent out
21 in the first 90 days of the school year the TRANS you
22 borrowed at 3 and a half percent.
23 You're paying that interest on the TRANS for the
24 entire year, 360 days, so the first 90 days it really is
25 gone out of our hands. We really don't have time to
43
1 invest that money, but it is shifted to the school
2 districts, so you will see a net cost at the very bottom
3 over here of 5 and a half million dollars for the $195
4 million TRANS. That includes the premium that we get from
5 the TRANS of 1.4 million when they first sell it. The
6 issuance cost of $100,000, and the interest cost to that
7 TRANS is $6.8 million. There are some interest earnings
8 up above in the top part of this flowchart. You will
9 see -- if you can look and see, it says Interest -
10 Wyoming, I think municipalities. This interest totals to
11 $1.3 million is a forecast for this. This is the money
12 that is held in the county treasurer's office before it's
13 remitted to the State for currently the money that comes
14 to the State, the property tax, the motor vehicle, you can
15 see them listed up above.
16 The other is the interest -- I believe the 3.2
17 million is essentially the interest earned on the school
18 foundation account itself. That typically has run about
19 $3 million in the past. And that still is pretty much the
20 same. That account -- that interest, I would suspect,
21 does pick up some drive from the TRANS being issued
22 because it does keep us with a positive balance all year,
23 so the -- what I'm trying to get to is the final cost that
24 is the total TRANS of $5.5 million as a cost to this
25 account, could be a little bit offset by the interest
44
1 earned on its own balance, which is found in the top part,
2 but we have not been able to identify what that is.
3 SENATOR MOCKLER: Madam Chairman.
4 CO-CHAIR NAGEL: Yes, Senator Mockler.
5 SENATOR MOCKLER: I apologize I keep
6 getting confused on TRANS note, because what state
7 preserve capital financing, they basically said we made $7
8 million off of the issuance of TRANS notes, and I -- I
9 mean, I've never been able to figure out where exactly we
10 make the money, and if this works the way you have it
11 here, and why this is -- I mean, I can understand keeping
12 a balance -- a cash flow balance above, but it isn't
13 something that is free to the State. It does cost us
14 money. And her interpretation is no, because we get such
15 a great rate of return, we're investing over such a long
16 period of time.
17 And, Steve, you might have to help me, and
18 somebody else on capital financing, because that's the
19 impression I got from the state treasurer's office, comes
20 back and says, no, they're giving an additional $7 million
21 to the school foundation program through the TRANS notes.
22 MR. SOMMERS: Madam Chairman.
23 This has been -- the TRANS issuance on
24 foundation program has been a concern of LSO staff for
25 quite a while, actually since we started doing it, because
45
1 we have gone in and changed the system of revenue received
2 and the payment schedules out to the district, we've
3 changed that statutorily. We don't have any flexibility.
4 We have to make those payments when we have to make them
5 and we get the revenue when the statute says we get the
6 revenue.
7 So what we've done is created a need to borrow
8 money that did not exist prior to changing those statutes.
9 Now, given that we have this need to borrow money now,
10 issuing a TRANS is a good deal for us because we can
11 borrow that money at a lower rate, but when you look at
12 the cash flow analysis that Mary's done right here, you
13 can see that we don't get to keep enough of the money out
14 of the proceeds of the TRANS issuance, nor do we get
15 enough of the revenue that that is replacing or
16 displacing, if you will, we're getting that revenue coming
17 in too late in the fiscal year to actually have enough
18 money to invest that we don't have to spend to more than
19 offset the cost of issuing a TRAN.
20 Madam Chairman, we just -- we haven't been able
21 to find where the additional money that we're making,
22 where it is. If you look at the amount of money that is
23 presented in the school foundation program, cash flow,
24 there's investment income there, and, as Mary said,
25 there's no question it's higher now, I think, than it was
46
1 in the past, because we have a greater cash balance, but
2 it's still not enough to offset the cost of the TRANS.
3 If you look at the investment income we project in the
4 CREG projection for common school income, it's actually
5 lower than what it has been for the last few years,
6 looking at the current mill trust fund to the general fund
7 and other general fund investment revenue from income,
8 it's lower than what we projected for the last couple
9 years, so the question is where is the money? And I think
10 it comes down to making a distinction between whether
11 we're actually making more money in investment than we
12 were before and whether we are simply lowering our
13 borrowing costs, making a little more money than we would
14 otherwise if we were not to issue the TRANS, so you have
15 to make that distinction.
16 I also think that the figures that have been
17 used by the treasurer's office in the past were based on
18 the assumption that a lot of the common school money could
19 be invested in equities and we're going to make 10 percent
20 a year on them. That's not happening. The other issue, I
21 think, is -- Dave, I think, basically said it here today,
22 when we up front them money that they don't need to spend,
23 they're receiving the economic advantage of issuing the
24 TRANS, they're hanging on to money that they don't have to
25 spend that they can invest. They're earning the interest
47
1 on it. We're just not seeing it at the state level.
2 SENATOR MOCKLER: Madam Chairman, can I
3 ask a second -- maybe Mark has to do it, maybe we need to
4 do some research, but in Bond Magazine a couple months
5 ago, it also pointed out the Internal Revenue was about to
6 go investigate everybody who manufactured a debt to issue
7 a TRANS note because of past exempt bonds, and do we know
8 where we stand with that? I mean, how fine a line are we
9 on when we go out and say we can do it another way, but
10 we'd like to issue TRANS authority, make more money?
11 Can we get kind of more legal -- how fine a line is it
12 we're --
13 MR. SOMMERS: Madam Chairman.
14 I believe a member of some committee -- actually
15 Bond Council, regarding TRANS issuance -- I think he
16 testified in front of the Finance Select Committee earlier
17 this year when giving an update where we were on current
18 issues and I think it would be -- you know, you really
19 need to talk to Bond Council about that.
20 SENATOR MOCKLER: And find that --
21 MR. SOMMERS: Madam Chairman.
22 I guess other things on all these different
23 scenarios Mary's presented to you here, the bottom line on
24 the very last column, the very last two numbers on the
25 page are what identifies the difference between different
48
1 payment schedules and where we are right now. So, you
2 know, if you want to work through some of the various
3 scenarios, you know, we're prepared to do that, but I
4 guess -- I guess our recommendation is that if you make
5 this decision, make it based on the merits that school
6 districts -- it will be an improvement in the way they can
7 budget, it will be improvement in the way they receive
8 their money, much more predictable, much more even flow,
9 make it -- make your decision based on that premises, not
10 on the belief that the bigger deficit we can issue at the
11 state level the more money the State is going to make,
12 because it's not happening.
13 CO-CHAIR NAGEL: Any other questions?
14 All right. '02 --
15 MS. BYRNES: Chart A. And A would reflect
16 what the bill does, so A brings in local resources. You
17 can see those lines are filled out up at the top. If you
18 compare that to the X chart I gave you earlier, you'll see
19 that the local revenues are now part of the school
20 foundation program.
21 The other big item down here would be under
22 expenditures. Instead of entitlement it is now guarantee,
23 so that number is $687 million. $687,190,000, that's the
24 program's guarantee for school year '02. The entitlement,
25 as I recall, on the previous chart was $367 million, so
49
1 it's a bit different. Of course, still you're going out
2 at 33 -- 33.4 percent, in three payments to the school
3 districts.
4 The other thing that I took away would be under
5 expenditures, the tax shortfall grants. There are none of
6 them in this chart. You should have that zeroed out. We
7 usually supplied $2 million for taxes that come into
8 shortage or maybe protest in such the State has a little
9 buttress that -- during the school year. That wouldn't be
10 required under this bill because you're paying the
11 guarantee. They don't need to rely on any shortfalls or
12 worry about shortfalls in their own local resources.
13 If you go down to the TRANS section place, you
14 could issue a TRANS for $346 million. That's your -- in
15 the first six months of the fiscal year, that is your
16 biggest deficit found in October. And using the same
17 assumptions we have for the current TRANS in '02, it's
18 going out at 3 and a half percent. Your interest that you
19 need to pay to service this would be $12 million, and that
20 is found in the -- in that TRANS section. It's a picking
21 up of premium of 2.4, $2.5 million, but the net cost in
22 this scenario is $9.7 million to service the debt for that
23 TRANS, but, again, I've held constant up above any
24 earnings off the balance of this so that would be
25 something we'd have to fine tune with additional cash
50
1 flows. I still don't think it's going to override the
2 deficit you have there of $9.7 million in the cost -- the
3 debt service for this TRANS.
4 MR. SOMMERS: So, Madam Chairman, I guess
5 the bottom line is if you just simply go to the guarantee
6 versus the entitlement and keep your one-third, one-third,
7 one-third payment schedule, it's costing you more money.
8 MS. BYRNES: Did you have any questions on
9 that chart A?
10 Here comes B, and B looks at quarterly payments.
11 It's just some other scenarios we ran just to take a look
12 to see how this -- the cash flow operates. This is a
13 front-loaded quarterly payment. 25 percent goes out in
14 July to school districts, again using a guarantee, and you
15 have a bit different debt service on the TRANS in this.
16 So now we have -- if you have any questions on
17 that quarterly payment schedule, here is the old payment
18 schedule we used to use, the 11 payments, 25 percent in
19 August, and 7 and a half percent for the remaining months
20 of the school year. This lowers your debt through
21 service -- your interest costs on the TRANS considerably,
22 so there's a lot of things we can do to take different
23 looks at this. This is -- B was the 25 percent only, this
24 is 25 percent in July -- excuse me, August, and 7.5
25 percent. These percentages are listed right by the
51
1 heading called expenditures.
2 No, we don't have the twice a month payments.
3 Madam Chair, we have other scenarios you
4 requested before remarking about the Campbell school
5 district. Mark Higdon proposed a couple ideas at the last
6 meeting and I ran those, also, if you want to see those.
7 This is the one payment scheme. I'll give this
8 to Mark. This is what we believe was talked about at that
9 meeting where you pay the guarantee in the first month of
10 the year, July. Local resources are held until the final
11 month of the year, so this might be your most extreme case
12 on cash flow, where you receive no money until the end of
13 the year from local resources, but you pay entire
14 guarantee in the first month, so your debt service on that
15 is nearly $20 million.
16 And then there was another proposal that was
17 faxed down to the State Department from Campbell County.
18 It has three payments a year and the locals hold all the
19 money. And that is chart F, I think. Yes. This is the
20 same scenario that all local resources are paid in June
21 and the guarantee is paid 23 percent in August --
22 actually, 38 and a half percent in October, 38 and a half
23 percent in February. That has a TRANS cost of about 9.9,
24 $10 million.
25 CO-CHAIR NAGEL: I'd like to -- are there
52
1 any questions on these? No questions?
2 SENATOR MOCKLER: Madam Chairman.
3 I don't -- you know, I never -- we're kind
4 hitting different subject statement, but so far I like C,
5 so assume we use chart C, because it seems to be the
6 cheapest, what does that do for the districts and how do
7 you find that out? If we gave them 25 percent in August,
8 7.5 throughout the rest of the year, how do we know what
9 that does to the entitlement versus nonentitlement? How
10 do we start rolling that in to see if it works for them?
11 Go back to maybe a mixed -- you know, half of them get one
12 formula distribution, half the other? I mean, how do we
13 know what this does to the district?
14 MS. BYRNES: Madam Chairman.
15 In this we're paying the guarantee, so I'm
16 thinking most everyone would have more money in July or
17 August with the 25 percent than they would under any
18 current way they're paid on entitlements.
19 But, Larry, do you have --
20 MR. BIGGIO: Madam Chairman, you might
21 want to ask the districts to provide you with some
22 information on cash flows on a monthly basis and use some
23 kind of composite or average across all the districts.
24 CO-CHAIR NAGEL: I'd like to -- excuse me.
25 I'd like to ask Steve Hopkins, when you said the cash flow
53
1 is one of the biggest interests to you, so would you
2 comment on C?
3 MR. HOPKINS: I'd be happy to. Thanks.
4 Madam Chair, item C is somewhat similar to what
5 we had before they made the changes; is that correct?
6 Okay. We were able to cash flow off of that in
7 the past, and so without doing a detailed analysis, my
8 first reaction is we would be able to meet our
9 obligations.
10 I'd like some time to be able to, obviously, go
11 back and prove that and I think there are a lot of other
12 districts whose circumstances can be quite different from
13 ours who would want the same opportunity.
14 The other request I would have is that whatever
15 scheme you undertake, there will be some impact to school
16 districts who currently make interest off of that, so I
17 would just request Mary's spreadsheets -- not these
18 spreadsheets, when she projects the district's revenue in
19 the future -- would take that into consideration, that the
20 local interest that we would make would be less and that
21 the spreadsheet would reflect that.
22 CO-CHAIR NAGEL: Any other questions?
23 Okay.
24 REPRESENTATIVE BOSWELL: Madam Chairman,
25 might I ask Mr. Higdon -- what's your gut reaction to
54
1 this --
2 SUPERINTENDENT HIGDON: To --
3 REPRESENTATIVE BOSWELL: -- scenario or
4 scheme C?
5 SUPERINTENDENT HIGDON: Let's start with
6 E. One thing I suggest is you don't use that one. That
7 doesn't -- doesn't look like a very good idea. Little did
8 I know my ramblings would turn into a profile, that I wish
9 they would have shared it with me the financial impact
10 before they presented it to committee, because I could
11 have told them to put it in another drawer.
12 Payment plan 3 was a plan that we did three
13 years ago to try to equalize between entitlement and
14 nonentitlement districts, and, obviously, there the cost
15 is a little bit higher, but the times were different, so
16 I'd ask you to put that one away, too, and that would need
17 a lot more work.
18 I think C is getting close to where you want to
19 be. You're going to have to have more than 50 percent of
20 the revenue in the first six months, because you have to
21 fix costs, and most districts that may be 10 percent of
22 the budget, part of that utilities, but a lot of it is
23 supplies and materials you're going to have to have, plus
24 half your salary for the year. That's going to be a
25 little more than 50 percent, but I think it's reasonable,
55
1 that I think people would agree that if the State's able
2 to maximize -- or minimize their cost to front these
3 expenses, there's certainly equity here, because, as was
4 mentioned, everybody gets treated equally, whether you
5 have tax revenue coming or you don't have any coming, you
6 all get a shot at state money at the same time,
7 proportionately with your guarantee.
8 And I think the number of scenarios you have and
9 the impact on state budget and what it would cost to buy
10 this kind of program would indicate to me that if we sit
11 down and study it for a while, work some of the other bugs
12 out, we can have a good plan to present a year from now,
13 but I think there's going to be a lot of arguments about
14 some of these issues, ones I haven't mentioned that are in
15 this bill, dealing with getting rid of recapture cash
16 reserve balances and moving some, assess the valuation
17 provisions that were excluded in other legislation out
18 that I think we could probably, if you were to direct the
19 bill coming back, that had some input from districts,
20 because we really haven't had a chance to have input -- I
21 mean, I sent a couple things to the State Department that
22 you've seen. Obviously, you know, that kind of input
23 didn't result in any kind of good work, because look at
24 the numbers on those figures.
25 So my sense is we're moving in the right
56
1 direction. I'd just like to have a little more time to
2 sit down across the table with the people writing the bill
3 to look at the other impacts, get the state's position,
4 and see how to work it out. And I don't think it's
5 critical that it be done this session. I think given the
6 impact, taking some time would benefit everybody. We've
7 learned how to operate in this current environment, so
8 that's my only concern. Little more time would make it
9 better for everyone, but don't go with those last two
10 plans.
11 CO-CHAIR NAGEL: Superintendent Clark, do
12 you have any questions?
13 SUPERINTENDENT CLARK: I do not.
14 SENATOR MOCKLER: Madam Chairman.
15 Just as sort of procedural issue, how would we
16 insert C into this bill? Just so we get it moving, people
17 get to see it and they have three months theoretically --
18 CO-CHAIR NAGEL: Would you like to make
19 that a motion?
20 SENATOR MOCKLER: Madam Chairman, I'd like
21 LSO to incorporate part C to the foundation program, as
22 far as it goes, and at least the next three months we have
23 time with the school districts and maybe it gets worked
24 out. If it doesn't, we'll know that, you know, in a
25 couple months of whether or not it really is an
57
1 equitable -- Mary can do flowcharts, spreadsheets or
2 whatever, but we'll have --
3 CO-CHAIR NAGEL: Just one this time.
4 MS. BYRNES: Just one.
5 CO-CHAIR NAGEL: Do we have a second?
6 REPRESENTATIVE BOSWELL: Second.
7 REPRESENTATIVE P. ANDERSON: Second.
8 CO-CHAIR NAGEL: Is that -- Mark, does
9 that make -- is it cleared up?
10 MR. QUINER: Crystal clear.
11 CO-CHAIR NAGEL: As clear as we ever make
12 it.
13 Mr. Nelson.
14 MR. NELSON: Yes, ma'am. I know where it
15 goes.
16 CO-CHAIR PECK: Madam Chair, did you say
17 chart 3?
18 SENATOR MOCKLER: C.
19 CO-CHAIR NAGEL: C.
20 If we need to raise the limit of the TRANS note,
21 do we need to raise the limit to -- where we can leave it
22 where it is, will that accommodate C?
23 MR. NELSON: Madam Chairman, under the
24 scenario, I think we're fine.
25 CO-CHAIR NAGEL: Okay. So it's an issue
58
1 of distribution and payment schedule. Okay. And --
2 SENATOR MOCKLER: Madam Chairman, oh, did
3 we vote?
4 CO-CHAIR NAGEL: No, we didn't. All in
5 favor of that -- thank you very much -- say aye.
6 Aye.
7 CO-CHAIR NAGEL: Opposed?
8 All right.
9 SENATOR MOCKLER: Madam Chairman, could I
10 ask when they do that spreadsheet analysis again, they
11 still kind of work on the issue of now we're back probably
12 in much better compliance with the law because we're not
13 manufacturing, we're trying as hard as we can to spread it
14 out, but is there some way someone can address sort of
15 that legal side of it, we spread it out equally, we know
16 we're not going out to do it just -- we can just issue the
17 notes, it's pretty obvious from here you have to issue one
18 now, we don't ever have any place -- I mean, we have a
19 debt somewhere all the way along, is there somebody -- or
20 do we need to impose upon Bond Council to come back?
21 MR. SOMMERS: Madam Chairman, I would
22 suggest we make the Treasurer's Office -- and Treasurer's
23 Office can respond or have the AG respond or talk to Bond
24 Council, which is, I suspect, what they would have done,
25 because that really is their job. That's why we hire
59
1 them, to make sure that we are in compliance with all the
2 rules, so, you know, their opinion, I think, is what you
3 need.
4 CO-CHAIR NAGEL: Okay. Okay. Moving
5 along.
6 CO-CHAIR PECK: Madam Chair, just to
7 protect the record, should we have a motion asking that
8 request go to the treasurer and Bond Council? If so, I so
9 move.
10 SENATOR MOCKLER: Second.
11 CO-CHAIR NAGEL: All those in favor say
12 aye.
13 Aye.
14 CO-CHAIR NAGEL: Always assumed we would
15 ask them directly when they came this afternoon.
16 Okay. Moving along. The next section for our
17 consideration is for the -- it's not a section, actually,
18 it's E of that on page 25 and 26, which talks about the
19 reserves and how reserves -- I'd like to ask, since that
20 was brought up earlier, I'd like to ask for any comments
21 from Superintendent Higdon or Steve regarding that
22 particular section, if there are objections to that.
23 SUPERINTENDENT HIGDON: Which -- I'm
24 sorry, Madam Chair.
25 CO-CHAIR NAGEL: I'm sorry. This is
60
1 reserves, deals with reserves, section E on page 25 and
2 26. Were there any questions or concerns about that?
3 SUPERINTENDENT HIGDON: No, Madam Chair.
4 I'd just like to review the statute to find out when that
5 amount disappears, I'm not sure what it is, but I know it
6 phases out, so it's not really an issue that should be
7 concerned. I do have an issue, I think, on page 14 or 15
8 that hasn't been brought to your attention. If you allow
9 me to discuss that for a minute?
10 CO-CHAIR NAGEL: Sure.
11 SUPERINTENDENT HIGDON: Line 18 on page 14
12 states regardless of year in assessment, and then in 1991
13 the system changed from a system where you estimated your
14 tax collection and pre-determined the amount of State
15 support you would get or the amount of recapture you would
16 pay, and there was no provision to make adjustments if you
17 received more tax revenue than you anticipated or you
18 received less. And the practice those days, prior to
19 1991, was to, if you had a big hit, you came to the
20 legislature and asked for it. If you got a little bit
21 more than you anticipated, you kept it. If you got a
22 little bit less than you anticipated, you just figured
23 maybe I'll make that up next year.
24 In 1991 legislation was entered into that said
25 that you would make the estimate, and then if you didn't
61
1 receive the revenue, the State would pay you what you
2 didn't receive. And if you received more than your
3 estimate, then you would rebate it to the State. But the
4 '91 legislation excluded any assessments prior to 1991
5 from being considered under the way we're currently
6 operating. And I think you should consider doing the same
7 thing, because what you will have is school districts
8 in -- I still think we have cases now with tax law from
9 prior 1991, battles between taxpayers and tax collectors
10 that are still being settled.
11 If this were to go in place, then you would
12 reach back to whenever it occurred, before '91, you reach
13 back to legislation that essentially would take money away
14 from school districts that never received it, never
15 received money from the State because of those tax issues.
16 And I just ask that you look at that little bit of
17 legislation.
18 The opposition is going to come up somewhere,
19 but I think are maybe not great, but I think maybe we had
20 one in Powell the last year, I don't know if it was
21 pre-'91, but I think part of it -- seems like a long time
22 ago, but I guess in the life of a tax dispute, ten years
23 is not a long time.
24 CO-CHAIR NAGEL: Thank you.
25 Dave and Mary, do you have any comment regarding
62
1 that section?
2 MR. NELSON: Madam Chairman, we discussed
3 that a little bit with Larry Biggio on those prior years
4 of taxes that Mr. Higdon pointed out. I guess it was our
5 feeling that the benefits of looking at a point in time
6 rather than keeping track of a lot of revenues, and again
7 we didn't anticipate a whole lot prior to '91, but the
8 place where we found that was in a different section, and
9 it was kind of dealing with the -- it was in that
10 subsection E, I think, that Mr. Higdon's referring to.
11 And that would have taken that into account, but -- and I
12 might defer to Larry. You know, we discussed that and
13 felt that it would be a minor thing, so --
14 MR. BIGGIO: Madam Chairman,
15 Larry Biggio, Department of Education. Two comments on
16 that.
17 We've seen some revenues come in and some can be
18 fairly substantial to districts for pre-'91 revenues,
19 notably in the tax situation of the minerals, but on the
20 other hand, you can take the argument that the model, if
21 it's funded properly, funding the districts for operations
22 on an annual basis, and that includes pre-'91 revenues,
23 revenues which were not anticipated in the model is in a
24 sense an extra funding piece for the districts.
25 I'd also ask Mark to think about a little bit
63
1 more about the issue on the cash balance piece and the
2 pre-'97 balances. I think that is significant and I think
3 it does have an impact on the district, so I'd suggest
4 districts look pretty hard at that one before they make
5 any comments on it.
6 CO-CHAIR NAGEL: Thank you. Any
7 recommendation?
8 SENATOR MOCKLER: Madam Chairman, and dumb
9 question, but if you actually went back and let them keep
10 the money from before '91 from any suit or whatever comes
11 in, can they pay debt off with that if they have bonded
12 indebtedness? I mean, in other words, it may not be an
13 actual ongoing cost of education, but would it help a
14 district pay down some of its debt if it had debt, say, up
15 in Powell?
16 MR. BIGGIO: Madam Chairman.
17 I don't remember any restrictions in the law
18 dealing with that. I can't remember anything that says
19 they have to spend it in any fashion, so as far as I'm
20 aware of, it's a local issue; however, their local board
21 or policies would dictate.
22 CO-CHAIR NAGEL: And wouldn't -- I mean,
23 if they have debt, it depends on the term of the bond,
24 whatever they pre-pay?
25 REPRESENTATIVE BOSWELL: And just for my
64
1 comfort level, Madam Chairman, that the counties for the
2 districts that do have preexisting debt and that are
3 paying that off with whatever methods they have, they may
4 have some place now, this does not factor that into their
5 local calculations, whether that doesn't change anything.
6 Thank you.
7 MR. NELSON: Madam Chairman.
8 Huh-uh.
9 REPRESENTATIVE BOSWELL: I'd like the
10 record to reflect they shook their heads no.
11 CO-CHAIR NAGEL: Mr. Nelson, I'm
12 interested in what are the other issues, the other
13 implementation issues that are not included in this bill
14 that we were assigned that could be included in the bill?
15 MR. NELSON: Madam Chairman, just what we
16 were talking about was your consideration of the 15
17 percent allowable percentage on the cash reserve, which is
18 on page 25. The other issue, which is not promoted into
19 the bill, is counting local interest as a revenue. And
20 that was taken off several years ago and was suggested by
21 MAP that it be brought in as a local resource, be counted
22 against the guarantee.
23 CO-CHAIR NAGEL: And that, for instance,
24 if we change the distribution formula, then that would be
25 less of an issue; is that not correct?
65
1 MR. NELSON: In theory, yes, in that it
2 shouldn't need to be out and invest monies to keep
3 operating. If we have a more favorable payment schedule
4 and we take the local resources off the table with respect
5 to end budgeting, the feeling was that neither the cash
6 balance needed to be so big, nor did the local interest
7 factor in, shouldn't be that much of an issue should the
8 State make the burden for budgeting the local resources.
9 CO-CHAIR NAGEL: What's the committee's
10 feeling about that? Do we want to include some specific
11 language to pull that in or do you want to continue to
12 leave that out or we do have the accurate amounts here?
13 MR. NELSON: Mary is passing out, give you
14 some idea of the magnitude of the interest by county for
15 2000, give you idea of the interest that is not counted as
16 local resource. We should be able to update this chart
17 for '01, this fall sometime.
18 REPRESENTATIVE DEEGAN: Madam Chairman, my
19 thought on this, we ought to leave it alone because if the
20 districts are unable to earn some interests, should they
21 have the opportunity to do so, it's going to lead to more
22 prudent practices in spending. And if they don't have
23 that incentive, the opposite might happen, we'll have
24 imprudent spending decisions being made.
25 CO-CHAIR NAGEL: Representative Cohee,
66
1 question?
2 REPRESENTATIVE COHEE: I did, Madam Chair.
3 The question was answered.
4 CO-CHAIR NAGEL: Any other comments?
5 Representative Huckfeldt?
6 REPRESENTATIVE HUCKFELDT: Madam Chairman,
7 you know, if supposedly we're funding the districts as the
8 State has dictated, and supposedly we're fully funding the
9 cost of schools, yet we have a disproportionate amount of
10 money from one district to another as far as their
11 interest, if they're not counting that, are we creating
12 some problems down the road? And I personally think we
13 should bring this back.
14 CO-CHAIR NAGEL: Any other comments?
15 Senator Mockler?
16 SENATOR MOCKLER: Madam Chairman, and I
17 know looking at disproportionate finance, if you pick my
18 school district, appears to have little interest to some
19 of the other ones, but that's also much of the reflection
20 of the fact we get $90 million, we are just dealing
21 with -- dealing with a bigger budget. If you look at per
22 capita, per student, this probability wouldn't be so
23 disproportionate. There's a lot of other things you
24 think, so Representative Deegan, you ruin the incentive to
25 go out there and make your payments and do your cash flow
67
1 and everything, if you take the interest away.
2 CO-CHAIR NAGEL: Any other comments?
3 I'd like to take a little poll before -- on who
4 would like to include the interest income. All right? I
5 think that that takes the temperature of the committee, so
6 that won't be included at this point.
7 Anything else regarding this bill? Any other
8 amendments, any other questions, concerns, any other last,
9 final testimony before we move this forward?
10 CO-CHAIR PECK: Madam Chair, I hate to ask
11 a dumb question. We're facing a situation of declining
12 average daily membership, namely in the amount of money
13 that a district gets, and if the money is -- what happens
14 when the kids aren't there and the guarantee is being paid
15 and then come fall, why, hundred kids have gone, what
16 happens to the guarantee at that time?
17 MR. NELSON: Madam Chairman.
18 ADM, it's a per pupil funding that would go
19 down, but remember, the bill does specify that a district
20 would never get less than the amount collected under the
21 local resources, so this bill shouldn't impact that.
22 CO-CHAIR NAGEL: Did we not -- did the MAP
23 folks not -- or education committee leave the average
24 daily rolling average of three-year rolling average so
25 we're always going to be operating under -- they left that
68
1 portion alone; is that correct?
2 MS. BYRNES: Madam Chair, the issue that
3 MAP reviewed, they suggested either going with one-year
4 average daily membership count or use a certain hold
5 harmless provision, but not -- to get away from the
6 three-year rolling average.
7 MR. NELSON: But, Madam Chairman, you're
8 right, the education committee did not accept that
9 recommendation. They did not forward it.
10 CO-CHAIR NAGEL: Okay. Thank you. Any
11 other --
12 REPRESENTATIVE DEEGAN: Madam Chair?
13 CO-CHAIR NAGEL: Yes.
14 REPRESENTATIVE DEEGAN: I have a very
15 simplistic question. Forgive me if you already answered
16 it. I think I understand what you're saying here, I'm not
17 sure. This bill would basically shift cash flow
18 management from the districts to the State, and if we
19 assume there's a cost -- net cost to cash flow management
20 no matter who's conducting it, what is -- whether you have
21 hard evidence or just by intuition, I'll take either kind
22 of answer, what is your sense, as comparison between cost
23 of State doing this or district doing this? This going to
24 cost public bodies more money if we shift this to the
25 State or is this a wash?
69
1 MR. NELSON: Do you want to answer that?
2 MS. BYRNES: Madam Chairman.
3 I'm not sure for the public -- do you --
4 MR. NELSON: No, no.
5 MS. BYRNES: Is it going to be less
6 expensive to operate it collecting all the local
7 resources? I don't know if it cuts back on the work of
8 anybody, but I think it gets down to the point where you
9 say there's a guarantee, that guarantee is paid in that
10 very same school year. Right now that doesn't happen.
11 The guarantee may be short, it might be long, depending on
12 what district you're in, given what tax issues they have.
13 So the guarantee, in essence, this bill will supply the
14 money that the guarantee says is due you that current
15 year, not a year later, not last year, that you have to --
16 you got too much last year, so you better have held it
17 over to pay this year's shortage. It doesn't work that
18 way. It gives you the dollar that the model would derive
19 in that same school year. It may be more efficient and
20 actually guarantee the guarantee.
21 REPRESENTATIVE DEEGAN: And I realize it
22 might be more efficient, but are we paying a high premium
23 for that degree of increased efficiency, is the taxpayer
24 in general?
25 MR. NELSON: Madam Chairman.
70
1 I think the argument from the implementation
2 issues report would be that it should work to the benefit
3 of the public as a whole in that, as Mary pointed out, it
4 should operate more efficiently, plus funds should be put
5 to a more efficient use in that the need to maintain large
6 amounts of public funds in reserves, and so forth, should
7 be negated. So I think that adopts a philosophy that
8 money in one spot as needed a little bit better and flows
9 would be evened out, so you wouldn't have the need for big
10 reserves, big borrowings, that sort of thing.
11 REPRESENTATIVE DEEGAN: Thank you.
12 CO-CHAIR NAGEL: Can you comment?
13 MR. SOMMERS: I was just going to add, I
14 think that what Representative Deegan is asking would take
15 a pretty sophisticated analysis on a district by district
16 basis to see whether or not the effects on the cost of
17 district for borrowing and cash flow and cost on State is
18 more or less than under the current system, but I think
19 that at any time that you more closely align the flow of
20 the money to the districts with their actual expenditure
21 needs, that it's going to be an improvement in overall
22 system.
23 I mean, there's no question that they need some
24 money up front, but if you look -- just looking at the
25 interest to Cheyenne, the reason they make so much income
71
1 on interest is they're getting 67 percent of their
2 entitlement in the first four months of operation, and
3 Cheyenne's probably a larger entitlement percentage
4 district than Casper is. We're probably 80, 85 percent of
5 monies received from entitlement, so to do the whole full-
6 blown analysis, you'd have to look at every district's
7 cash flow and realize, too, it's a dynamic situation.
8 Taxes are paid different levels different years for
9 different reasons. Mineral taxes are up one year, they're
10 down the next, so it's a dynamic situation. So it would
11 be extremely difficult, I think, to put a pencil to the
12 entire bottom line.
13 CO-CHAIR PECK: Madam Chair, I'd like to
14 pose a question to Superintendent Higdon.
15 If we were to move forward on this bill and you
16 had the power to look at it in light of the other records
17 we required districts to make during the year, do you feel
18 that would give you a sufficient time for a reasonable
19 analysis of the full effect of this?
20 SUPERINTENDENT HIGDON: Yes, sir, I do.
21 CO-CHAIR NAGEL: Thank you.
22 SUPERINTENDENT HIGDON: We'll go to work
23 and start looking at it right now to try to have it back
24 to you as input as soon as we can. That you're willing to
25 move ahead, we'll try to do so.
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1 CO-CHAIR NAGEL: We are -- oh,
2 Representative Huckfeldt?
3 REPRESENTATIVE HUCKFELDT: Madam Chairman,
4 I'd like to go back to the interest income effect just for
5 a minute.
6 CO-CHAIR NAGEL: Sure.
7 REPRESENTATIVE HUCKFELDT: We received the
8 report from our consultants on July 2nd and suggestions we
9 had today, we haven't really looked at all this, using
10 recommendations they made, and I was looking on page 13
11 and 14, of the Implementations Issues Report from MAP, and
12 that deals with interest income. And the more and more we
13 go into the school finance and what we're doing, we're
14 looking at basically a cost plus system right now in the
15 MAP format. We're paying for students who are not in the
16 seats, not in the classrooms, so they're receiving
17 additional funds. And then with the interest income, the
18 districts are receiving more than what the formula says,
19 and I guess what I'd like to do is, you know, they've
20 identified what's the problem, what the effect and what
21 the impact is, and, you know, looking on page 14, it says,
22 "The legislative intent was to reward districts who were
23 frugal and made wise investment choices. However, this
24 revenue is really state revenue as both the court and
25 Section 21-13-310 opined, and as such should be counted as
73
1 the local portion of the state's guaranteed foundation
2 amount."
3 And I guess question for staff, and the rest of
4 the committee, we spent all this money hiring the
5 consultants and are we just ignoring the reports that they
6 put out or is that something we should really look at?
7 CO-CHAIR NAGEL: One of the things is that
8 this recommendation is based upon the current distribution
9 and we are changing that. So theoretically that should
10 impact the interest income that they're allowed to use --
11 allowed to make, because they won't have that amount of
12 money to invest for certain period of time, theoretically.
13 Superintendent Higdon.
14 SUPERINTENDENT HIGDON: Madam Chair, I
15 hate to keep digressing, but the interest income -- the
16 consultant was not aware of the historical precedent for
17 the interest income when it, back in the '97 legislation,
18 it was 50-50, 50 percent to the State, 50 percent to the
19 district, which was an excellent plan. There was an
20 amendment in the House to reduce the class size --
21 essentially increase the class size in senior high in 1999
22 from 19, which was MAP's -- one of MAP's recommendations
23 for the class size to 21.
24 And, part of that amendment was to balance the
25 loss of funds to districts because of increasing class
74
1 size in the senior highs with allowing districts to keep
2 the other 50 percent of the interest income. And that's
3 history. That's why it's a hundred percent.
4 And, you know, when we talked earlier, I think
5 districts would be happy to discuss this in the future.
6 If there was a move to put that class size back where it
7 was before the formula was changed, because it wasn't a --
8 you know, it was kind of a trade-off and wasn't anything
9 that was asked for by districts, but before we lose the
10 interest income, people are living on it every day,
11 balancing their budgets on it, and the -- you know, it's a
12 critical part of each district.
13 I would agree with Madam Chair that if you
14 change the distribution formula, I think they're going to
15 see these interest levels drop because of the way money is
16 distributed to districts, and I ask you to wait a year or
17 two, monitor it, see what it looks like at that time.
18 Thank you.
19 CO-CHAIR NAGEL: Any other comments
20 regarding this?
21 REPRESENTATIVE COHEE: Only thing I do
22 agree, the interest levels will undoubtedly decrease, but
23 so does the expense to the State in the distribution
24 method on a monthly basis case will be reduced and in our
25 expense -- interest expense, so to the State it's somewhat
75
1 of a wash, in a funny way.
2 CO-CHAIR NAGEL: Any other comments?
3 Ready for the vote on the bill?
4 Mark?
5 MR. QUINER: Madam Chairman, I guess I'm
6 not sure what we're voting on.
7 CO-CHAIR NAGEL: To sponsor this as a
8 committee bill and send it out.
9 MR. QUINER: Okay.
10 CO-CHAIR NAGEL: As a committee bill is
11 that --
12 MR. QUINER: With the amendments that you
13 requested?
14 CO-CHAIR NAGEL: With the requests we
15 requested.
16 MR. QUINER: So this is not for
17 discussion, or is it? This discussion.
18 CO-CHAIR NAGEL: Actually it is for
19 discussion, because we may not --
20 MR. QUINER: Meet again?
21 CO-CHAIR NAGEL: -- consider this again
22 with the amendments, even though we haven't --
23 REPRESENTATIVE HUCKFELDT: I saw the file.
24 CO-CHAIR NAGEL: Actually, the way -- does
25 the Senate want to take this?
76
1 SENATOR MOCKLER: Chris wants it in the
2 House.
3 CO-CHAIR NAGEL: Yes, along with
4 everything else.
5 SENATOR MOCKLER: Madam Chair, a Senate
6 bill doesn't have any revenue raising, we're going to have
7 to split these up somewhere.
8 CO-CHAIR NAGEL: Okay. As a Senate file.
9 MR. QUINER: Okay. Erb?
10 SENATOR ERB: No.
11 MR. QUINER: Devin? Job?
12 SENATOR JOB: Aye.
13 MR. QUINER: Mockler?
14 SENATOR MOCKLER: Aye.
15 MR. QUINER: Anderson?
16 REPRESENTATIVE P. ANDERSON: Aye.
17 MR. QUINER: Boswell?
18 REPRESENTATIVE BOSWELL: Aye.
19 MR. QUINER: Cohee?
20 REPRESENTATIVE COHEE: Aye.
21 MR. QUINER: Deegan?
22 REPRESENTATIVE DEEGAN: No.
23 MR. QUINER: Huckfeldt?
24 REPRESENTATIVE HUCKFELDT: Aye.
25 MR. QUINER: Nicholas? Osborn?
77
1 Wastenburg? Peck?
2 CO-CHAIR PECK: Aye.
3 MR. QUINER: Madam Chair?
4 CO-CHAIR NAGEL: Aye.
5 All right. Thank you very much for your heroic
6 work on these.
7 MR. NELSON: I'll get a revised copy out
8 shortly so you can see it.
9 CO-CHAIR NAGEL: So we have -- I'm assured
10 we've taken care of everything that was assigned to us,
11 then, by the management council?
12 MR. NELSON: And Madam Chair. I'll also
13 put a little note to that effect in the management council
14 letting them know that you signed off on your assignment.
15 CO-CHAIR NAGEL: All right. Thanks.
16 Well, amazing enough, we're about an hour ahead
17 of schedule.
18 (Recorded portion of proceedings
19 recessed 11:03 a.m. to 1:35 p.m.)
20 CO-CHAIR NAGEL: All right. Ladies and
21 gentlemen, we'll call the meeting to order.
22 And the first item on the agenda is Treasurer
23 Lummis.
24 MS. LUMMIS: Thank you, Madam Chairman.
25 While these little handouts are being
78
1 distributed, Madam Chairman, I'd just like to remind the
2 committee of how Keith Curry came to be making
3 recommendations to the State on this subject.
4 For several years the State, through the five
5 elected officials, had been considering retaining a
6 financial adviser. We have an investment adviser that
7 helps us structure the investment of our state's permanent
8 funds, how to have a diversified portfolio, in what asset
9 classes and in what amount, but we have not had other
10 financial advice with regard to maximizing the efficiency
11 of the use of our money, including our cash and the way we
12 paid for capital outlays.
13 It became apparent to the five elected officials
14 that it may be helpful to them, and to the legislature, to
15 have that financial adviser on board after we saw the
16 February 23rd decision of the Supreme Court with the
17 specific time frames in it and the specific dollar amounts
18 in it.
19 So through an RFP process in the treasurer's
20 office, we did a competitive bidding process asking for
21 proposals from independent financial consultants, that's
22 financial advisers that are not associated with bond
23 underwriters or bond issuers. And pursuant to that
24 process, we interviewed a number of firms and retained
25 Public Financial Management and Keith Curry out of their
79
1 Newport Beach, California office.
2 We then asked Keith to review the Supreme Court
3 decision, to look at our cash flows. We gave him lots of
4 information on state budgets and the Golden Rod and the
5 CREG report and various other financial reports that are
6 put out primarily by your staff.
7 Keith also attended meetings of the Select
8 Educ -- the Education Committee, the Select Committee on
9 Capital Financing and Investments, the Select Committee on
10 School Capital Construction, and he met with several state
11 agencies who deal with capital construction, including the
12 State Building Commission staff at A&I, the Game & Fish,
13 cities and towns and counties. He met with State
14 Department of Education staff with regard to school cap
15 con, and legislative staff with regard to school cap con.
16 After having that input, he came up with some
17 recommendations that we would like to share with you
18 today. The recommendations were made for the Select
19 Committee on Capital Financing and Investments on how the
20 legislature might go about financing school capital
21 construction and other capital construction, if it chose
22 to go that route. Of course, we know you're looking at
23 other possibilities as well, but this is one that would
24 involve bond financing of capital construction.
25 So I'll turn it over to Keith, he can go through
80
1 the presentation, including some additional scenarios that
2 he worked up as a result of numbers that your LSO staff
3 worked on to determine what might be the more realistic
4 and more current number with regard to major maintenance
5 that has been completed since 1998, and which was included
6 in the February 23rd decision, but the decision on
7 rehearing recognized has already been spent.
8 So, Keith, if you'll go through it, we'll answer
9 any questions and hopefully entertain a discussion. Thank
10 you.
11 MR. CURRY: Thank you.
12 Madam Chairman, thank you.
13 CO-CHAIR NAGEL: Mr. Curry.
14 MR. CURRY: Members of the committee.
15 It's good to see some of you again for multiple times, and
16 those for the first time, it's a pleasure to be with you.
17 If you would turn to page 1, please, of the
18 presentation book, I'd like to walk you through some of
19 the process we went through and some of the issues we
20 tried to address in this proposal today.
21 As you know, the legislature is required by the
22 Campbell decision to come up with a plan by July 1st of
23 next year that reforms school financing structure or
24 capital construction and moves that state-based funding
25 source. In addition to that, according to the Campbell
81
1 decision gave the legislature some specific timetables and
2 some specific amounts that need to be allocated to school
3 capital construction. We need to have a plan that
4 responds to that allocation by the court.
5 As part of the overall review, we've also been
6 asked to look at how the state funds its capital
7 construction needs generally and see if we can find ideas
8 on how that might be done more efficiently. And in the
9 course of the process of this and coming up with this
10 specific recommendations, we saw two specific
11 opportunities, one of which was the ability to widen
12 highways and accelerate a highway widening program
13 throughout the state, and the other was to provide a
14 vehicle for some specific aeronautical needs at the
15 airports in the state. That -- we'll explain in a moment
16 why that's linked to the education package as we go
17 through this.
18 On page 2, that's to focus on specific needs --
19 or the specific requirements of the Campbell case, a plan
20 by July 1 to meet the State needs based on a statewide
21 funding source. And the court was specific in terms of
22 the schedule that they gave the legislature. Immediate
23 needs to be remedied within two years, total $164 million,
24 four-year needs were an additional $231 million, with the
25 balance bringing the program to 563 million.
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1 The State Department of Education has inflated
2 those numbers, they were originally 1998 numbers, to
3 today. And today that cost is $610 million. If you use
4 the schedule that the court gave you in the decision and
5 you project those costs out to when they are finally
6 completed in 2008, the ultimate cost would be $708
7 million.
8 Now, that's sort of the high-water mark. We'll
9 talk about how we're able to reduce that as we go through
10 the presentation, but that's the important number to keep
11 in mind. And that is a very significant number for this
12 state and for your budget and for other competing state
13 needs as we try to meet that requirement.
14 And, of course, the requirements of the decision
15 it must be a statewide equitable tax on all taxpayers and
16 did leave the type of the tax to the prerogative of the
17 legislature.
18 On the following page you get a sense as to how
19 this cash flow is built up. In the first column of the
20 base year you see $610-million estimate, which was
21 provided by the State Department of Education. And then
22 going forward you see, using a 3 percent inflation factor,
23 we simply projected out the cost in accordance with the
24 schedule that the court gave us. And since they gave two-
25 year numbers, we simply divided them in half, spent one
83
1 half in one year and one half in the next.
2 And, as you can see, what that requires is
3 increased to $98 million over the next two years for
4 school capital construction, jumping to $144 million in
5 '05-06 and $111 million in '07-08 to get to the total
6 708 million.
7 By way of comparison, if you turn to the next
8 page and look at the funding sources that have been
9 provided for school cap con, roughly $44 million in '01-02
10 from designated budget sources, plus additional $48
11 million -- $44 million that has been transferred to the
12 legislative royalty impact account, if you divide that
13 between the two, you see that you've been spending about
14 $66 million in school cap con over the last biennium, and
15 the projection is you need to spend 98 million or roughly
16 50 percent more to meet the court's mandate over the next
17 two years, jumping to more than twice that, a hundred
18 percent more in the two years following.
19 That is the issue that sort of confronts us
20 here. On the following page we took the $708 million and
21 said what would that translate to if you were to bond
22 finance over a 30-year period that entire amount? Of
23 course you wouldn't do it all one issue, you'd grant it up
24 as the expenditures withdrawn. We'll show you how we did
25 that, but the maximum debt service, once all of the bonds
84
1 were issued, would total $43 million. So to take that
2 $708 million and turn it into an annual cost based on
3 providing the funds on the schedule the court gave you,
4 and amortizing the cost over the life of the buildings and
5 the improvements that you made, we'd be looking at $43
6 million, or roughly an amount equivalent to all what's
7 been appropriated in the recent biennium on an annual
8 basis for school cap con. And that's the number we tried
9 to solve to so that we can provide you this plan.
10 The following page, page 6, shows you how we
11 sort of built up the number of $43 million. We financed
12 over -- in two-year increments. Debt service started at
13 $12 million, accrued to 29 and then 43. Keep in mind you
14 also have a mill levy subsidy for the existing outstanding
15 bonds issued by local districts that comes out of the same
16 source of funds that's currently $4.4 million and will
17 decline over time.
18 The following page shows a cash flow based on
19 the plan that we're going to present to you, which
20 involves an increase in the allocation of federal mineral
21 royalties to school cap con, taking them from
22 transportation and then backfilling transportation with an
23 increase in the gasoline tax, gas and diesel tax of a
24 nickel, that would provide an additional $48 million,
25 because we've staggered the transfer from the FMRs from
85
1 transportation over to education, because, as you saw, we
2 had that ramp-up period. This enables us to provide
3 additional money to transportation, but at the same time,
4 provide and put in place a funding force that allows you,
5 the legislature, to go to the Supreme Court and say we
6 have, number one, changed our school funding strategy.
7 It's now based on federal and state mineral royalties. It
8 is not based on local property tax and no longer has any
9 wealth differentiations between counties. That solves
10 issue number one.
11 Number two, you would have put in place a
12 revenue allocation strategy that provides enough funds for
13 the State to bond finance the complete requirement laid
14 down by the court. Now, in the rehearing decision, some
15 good things were provided, and one of them was a
16 recognition that the school districts may not be ready,
17 under that schedule, to spend that money, number one, and,
18 number two, a recognition that the State has already
19 allocated funds over the intervening time between 1997 and
20 today for school capital construction. And we'll talk
21 about how the allocation of those funds will change these
22 numbers as they go through here. This is sort of, again,
23 the high-water mark scenario that addresses the court's
24 decision as if you'd spent nothing since 1997, but having
25 the ability to solve for this plan I think gives you a
86
1 conclusive piece of evidence, if you will, to go to the
2 Supreme Court and say we have met our mandate under the
3 court.
4 Let me just ask you to go back, if you could, to
5 page 3 and look at that annual total number, because I
6 know the question would come up, it certainly would come
7 up to me, why can't we do this either on a pay-as-you-go
8 basis or why can't we do this without augmenting revenues,
9 can we do this? And I want everyone to look at that line,
10 annual total line, 98, 98, 144, 111, that would be the
11 requirement that would need to be raised to do this on a
12 pay-as-you-go basis without bonds or that would need to be
13 reallocated from other sources if we were to do this
14 without augmenting revenues. We think that -- and
15 certainly you perhaps know better than I, to try to meet
16 that cash flow would require some serious reductions in
17 other programs in state government.
18 Now, if I could, back to -- back to page 8. The
19 recommended strategy is to increase the gas and diesel tax
20 by a nickel, have those funds go to transportation. State
21 gas tax funds cannot be bonded against. They become a
22 pay-as-you-go funding source for transportation. Can't be
23 bonded for without an election. Redirect $32 million of
24 the federal mineral royalty payments going to
25 transportation and school capital construction.
87
1 Right now they're getting about $5 and a half
2 million. This 32 would increase that to about 38 million,
3 plus the 8 million that they're currently receiving from
4 state mineral royalties and would fund school capital
5 construction from state, federal mineral royalties, plus
6 the loan payments. Loan payments would peter out after
7 next year, so about $500,000 a year currently.
8 The future coal bonus payments will be used for
9 statewide capital expenditures. Let's take a minute and
10 talk about that. Coal bonus payments have been a $30
11 million revenue source. They are the primary source used
12 for school capital construction, but, as you know, the
13 ability to project amount beyond three or four, five years
14 is very difficult because of the nature of the leases and
15 the federal government's involvement in it.
16 In fact, if you look at the school cap con
17 forecast now, it will drop to 27 million and 3.7, $3.7
18 million going forward. And the nature of that source
19 makes it less suitable to be used to secure a debt than
20 the federal mineral royalties where you have a longer
21 history -- longer track record and simply a bigger pot to
22 work from. That's why we've taken that source and moved
23 it over and made it available to the legislature for
24 allocation for statewide capital needs on a pay-as-you-go
25 basis. That can include using it for capital
88
1 construction, it could include using it for any purpose
2 that you deem appropriate.
3 In implementing this plan, on page 9, we
4 would -- there's legislation obviously required proposing
5 to treat the Wyoming Capital Finance Authority and
6 authorize the issuance of revenue bonds. We believe
7 that's key element in going back to the court and saying
8 that we have created a mechanism to meet your schedule for
9 the expenditures that you've told us to make.
10 We would stop the mill levy subsidy and the
11 local bond guarantee programs for new financing by local
12 districts. Frankly, I would have proposed that we
13 disallow local financing altogether, but I believe in the
14 rehearing decision the court indicated that local
15 districts, in fact, would have the right to continue to
16 sell bonds, because the more local districts sell bonds,
17 the more you will create disequilibrium or inequity
18 between districts. So we believe it's no longer in the
19 state's interest to subsidize that process. And so the
20 mill levy subsidy and bond guarantee programs should be
21 terminated.
22 The State would provide bond proceeds or cash
23 grants for school construction. It's important to know
24 you're not obligated to issue those bonds. Those bonds
25 are on the schedule the court provided and if school
89
1 districts can work on that schedule, you have the capacity
2 to meet it. If they cannot or if there is an inadequate
3 construction capacity in the state, you're certainly not
4 obligated to issue the bonds on that schedule in that
5 amount.
6 Local school projects would be subject to School
7 Facilities Commission's decisions. We believe it's
8 important, since the State is now the full-funding partner
9 for school capital construction, the State have
10 construction oversight in terms of capital cost to these
11 projects in terms of the priority of what's allocated and
12 there be oversight on these plans that come forward. I
13 think that's very important to protect the interest of the
14 State and ensure money is properly and fairly allocated
15 and building costs are contained.
16 No local match or local tax is needed. That's
17 consistent with the court's direction to provide a
18 statewide funding scheme and to take away the inequities
19 between rich and poor counties.
20 The existing local school bond millage will roll
21 off as bonds mature. What's important to recognize here,
22 while this is a $32-million tax increase, it will result
23 in a $24-and-a-half-million tax reduction on property
24 taxes as the local school bond levies roll off. Now, that
25 will not be equitable statewide, it will apply to those
90
1 school districts that already have bonds in place, but
2 it's important to know it's a net $8-million increase in
3 taxes once these mill levies roll off, which is expected
4 to take place primarily between now and 2012.
5 School districts can, in fact, if they have a
6 vote of the people, enact additional mill levies after
7 that, but under the current status quo, $24 and a half
8 million would roll off.
9 Local districts would be set to provide for
10 their own tax and provide for construction cost review and
11 state project oversight.
12 The Capital Financing Authority would act as the
13 bond issuer. You would authorize the Authority to issue
14 revenue bonds secured by state and federal mineral
15 royalties and the State would allocate coal bonus revenues
16 to school and state capital projects in accordance with
17 the legislature direction.
18 You can also pledge those, if you would, as
19 additional funding source if you thought that was
20 valuable, but, again, the short-term nature of the federal
21 involvement, the inability to have a long-term forecast of
22 coal bonus payments make them suitable for cap --
23 pay-you-as-you-go capital construction.
24 Now, I recognize that recommending tax increases
25 is never a popular thing. I didn't perhaps know how
91
1 unpopular it was until, I'm told, the recent polls, but
2 let me tell you sort of the thinking about why this
3 particular approach is better than opposed to some others.
4 And we did look at increasing a -- you know, a 4-mill
5 increase in property tax rate would result in about $40
6 million, that would be an adequate amount of money. You
7 could have a half-cent increase in sales tax that could
8 raise about $34 million, so those are sort of the
9 comparative other taxes that were considered as part of
10 this.
11 And everyone has their own viewpoints as to
12 which are the easiest or most difficult to raise, but we
13 thought the gas tax was the most appropriate for a couple
14 reasons. The first is that currently it's among the
15 lowest in the nation at 14 cents, in aggregate. This
16 would bring it up to just under the national average.
17 It's a better funding source for transportation, thus
18 bringing up the federal mineral royalties for school
19 capital construction.
20 It's unusual, frankly, for states such as
21 Wyoming to have transportation funded from nonuser fee
22 revenues to the extent you do. This, if you will, aligns
23 transportation to a more user-fee-oriented type of
24 service, partially paid by out-of-state truckers and
25 tourists, and, of course, it does result in gradual
92
1 reduction of the property tax burden statewide.
2 You will also achieve budget savings by the
3 reduction of the mill levy subsidy, which is currently
4 $4.4 million. All of that is expected to roll off
5 primarily between now and 2009. It is a plan that will
6 meet the court mandate and will provide sufficient funding
7 to meet the court mandate at the maximum number the court
8 gave you. It meets the court criteria of being a
9 statewide funding mechanism.
10 The increase in the gas tax enhances DOT project
11 capacity. And the way that we proposed you stairstep the
12 transfer of the federal mineral royalties from
13 transportation to education, it's $32 million, 8 million
14 moves the first year, then 16 the second year, then 24 the
15 next year. So we're moving it over four years and by
16 doing that, we create an additional $48 million in years
17 2003 through '5 for transportation. That's important,
18 because, as you know, the federal government is going to
19 allocate the stimulus package, something on the order of
20 $60 million additional in the state of Wyoming. This
21 gives you money for local match, allows you to have the
22 ability to immediately leverage and utilize federal funds
23 for important statewide projects.
24 Again, on page 12, back to the coal bonus
25 payments, one of the issues that we were asked to look at
93
1 was the question of how do we fund statewide capital needs
2 that are across department lines. This program uses the
3 coal bonus payments for that, approximately $30 million a
4 year. We're proposing that on a pay-as-you-go basis, but
5 with maximum flexibility for the legislature for how you
6 can utilize those funds, either the backstop debt, put it
7 all in schools, if you want to fund schools more, to use
8 it for one-time building, you know, it fits with projects
9 such as the university's $14-and-a-half-million health
10 sciences center. We believe that that provides you a good
11 revenue source for ongoing State needs of going forward.
12 Transportation funding. We're also proposing
13 that the DOT, through the Transportation Commission, be
14 authorized to issue what are called GARVEE bonds. GARVEE
15 bonds -- GARVEE means Grant Anticipation --
16 THE REPORTER: I'm sorry. Can you repeat
17 that?
18 MR. CURRY: Grant Anticipation Revenue
19 Vehicle.
20 It's named after Jane Garvey. Jane Garvey was
21 the federal highway administrator in the Clinton
22 administration. She's now federal aviation administrator,
23 and she was one of the leaders in getting legislation
24 passed in T-21 that allows this to be done, so they worked
25 hard to get an acronym that worked with her name.
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1 These bonds are -- and I'm the state national --
2 actually state transportation director for our firm, so
3 we're very active with specific transportation funding
4 sources. Twelve states now have leveraged their federal
5 resources and this would only apply to your federal gas
6 tax resources to advance project delivery capacity secured
7 by future federal transportation dollars. We initially
8 did these back, frankly, in the mid-'90s, transit highways
9 authorized to do them in the last bill. And like I say,
10 12 states, most recently Michigan, where we were involved,
11 have done them.
12 We also increased by -- on a page-by-page basis
13 $48 million in the near-term transportation,
14 transportation as we aligned to be more dependent on user
15 fees as opposed to other state revenues.
16 The GARVEE authorization would allow the DOT to
17 implement up to a $600-million highway widening program
18 unconstrained by cash flows. What that means is they
19 could widen two-lane highways as fast as they can build
20 them, not be revenue strained.
21 In my discussions with DOT, I'm told that's a
22 20-year strategy, to eventually widen highways in the
23 state. And it may very well be as a policy matter that's
24 how you decide how you would like to do it, but it's
25 important to note that you would widen those highways, all
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1 of them that are federally eligible, as fast as you can
2 build them, which is probably on the order of five, six,
3 seven years, and you can pay off all the bonds in 15
4 years, not the 20 years that is currently thought as the
5 schedule that's going to be undertaken.
6 Now, why is this compelling and why is it in
7 here? 57 percent of traffic fatalities occur on two-lane
8 rural highways. I'm from California and that's a greater
9 percentage on a per capita basis than are on the
10 Los Angeles freeways. And I think that provides a
11 resource to the State to deal with -- as particularly in
12 light of the recent tragedies here in Wyoming -- a
13 pressing public policy issue. In today's market we say
14 here they can be paid off 4.25 over 15 years, actually we
15 did the Ohio bonds two weeks ago and the rates are even
16 lower.
17 We also provided the ability for the
18 Transportation Commission to leverage the remaining
19 federal mineral royalties that are going to transportation
20 for airport-related projects. Air transportation is a
21 very important element here in Wyoming. Also have the
22 ability to use those funds for security, for the highway
23 patrol and for similar functions.
24 Just to give you a sense of the capacity that
25 this provides transportation, $600 million, of course, is
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1 absolutely outside number, but the chart on page 14 shows
2 you using bonds anywhere from 9 to 15 years, relatively
3 short maturities, the leveraging capability of that
4 resource.
5 Now, if you would go behind tab 1, please. I'd
6 like to share with you -- and that is information that's
7 about a week old that came to us from LSO, which, as you
8 know -- let's think about $610-million number. That is
9 the number that assumes there have been no expenditures
10 made to date on this federal, if you will, account towards
11 the school capital construction requirement. And,
12 frankly, was very difficult, and I know LSO worked very
13 hard, to document what has been spent to date and match
14 those dollars that you've allocated over the last three,
15 four years to the list -- MGT list that was provided in
16 the court decision.
17 And you see, if you exclude the major
18 maintenance items, LSO calculates $610 million is reduced
19 to $542 million. And if you look on the far right-hand
20 side of the page, the $632 million compares with the 710
21 million, so it's a substantial reduction, based on this
22 particular assumption of expenditures that count to that.
23 And again, if you turn the page, we've given you
24 a cash flow so if you can compare to the full model, but
25 perhaps the most important cash flow is shown on page 4,
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1 we see the debt service would, instead of starting at 12
2 million would be 9 million, then jumping to 25 and then to
3 39. So instead of needing $43 and a half million, we
4 would need $39.3 million. That's not quite enough to
5 knock a penny, if you will, off that nickel increase, but
6 addressed with some other adjustments, that could be done.
7 It may also be appropriate to stagger the
8 increase of gasoline tax, so it's not all at one time
9 because we have that ramped-up schedule. Now, we've taken
10 some of the benefit from that and how it was done to
11 transfer to the transportation to education, but those
12 are -- we built this optionality in so you have those
13 issues to consider.
14 On the following page you see what happens if
15 we're able to include what are characterized as major
16 maintenance expenditures that have been made between 1997,
17 and, again, to compare them -- I'm on page 5 of the second
18 tab -- the 459 number of the base year, that compares to
19 the $610-million number, so you see that's been
20 substantially reduced.
21 And if you go across to the right-hand page,
22 $708 million is now $536 million. And so using this
23 schedule that counts those prior expenditures, we are
24 able, I believe, to knock a penny off the gas tax increase
25 and perhaps do some other things that would make it more
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1 palatable to address the issue.
2 Which of these should you use, the 708 million
3 or the 500 million or the 400 million -- 500 million or
4 the 600 million? Well, I would recommend that in count --
5 in consultation with the Attorney General, you discuss
6 which of them is the appropriate scenario to present to
7 the court in your response to their mandate.
8 Madam Chairman, that concludes my report. I'd
9 be happy to answer any questions. I appreciate your time
10 and attention today. Thank you.
11 CO-CHAIR NAGEL: Thank you very much,
12 Mr. Curry.
13 Questions from the committee?
14 Representative Deegan?
15 REPRESENTATIVE DEEGAN: Question,
16 Madam Chairman, for Mr. Curry or maybe the state
17 treasurer, and that is how does this bonding structure
18 butt up against the constitutional prohibition with regard
19 to the debt limit?
20 MS. LUMMIS: Madam Chairman.
21 The debt limit in the constitution, which is 1
22 percent of the assessed valuation, would apply if it were
23 a general obligation bond, but these are revenue bonds,
24 and revenue bonds have not been applicable to the cap in
25 the constitution.
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1 MR. CURRY: Madam Chairman, if I may also,
2 because we're using federal mineral royalties, those are
3 not, if you will, a tax, and because of that, they don't
4 require a voter approval, as is also required by Wyoming
5 law.
6 REPRESENTATIVE DEEGAN: Madam Chairman.
7 CO-CHAIR NAGEL: Yes.
8 REPRESENTATIVE DEEGAN: A question for the
9 treasurer.
10 Has that been established by Wyoming case law?
11 MS. LUMMIS: Madam Chairman.
12 The provision about the taxes not being
13 obligated or pledgeable without a vote of the people is
14 case law. That's the Witzenberger decision in -- I think
15 in 1978 or 1979. And there were three cases in a series
16 that clarified that. I think one of them was Herschler
17 versus -- I don't know. Herschler was the plaintiff -- or
18 the appellant. And then there was the Witzenberger
19 decision and then there was a third decision that
20 clarified the distinction between local governments and
21 state governments as to that component of this.
22 With regard to whether revenue bonds would apply
23 under the constitutional limit of 1 percent of assessed
24 valuation, as opposed to just general obligation bonds, I
25 don't know whether that is established by case law or not.
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1 Mark, do you know?
2 MR. QUINER: I don't. Sorry.
3 MR. CURRY: Madam Chairman, the advice
4 we've received from LSO during the course of this report
5 is that the bonds, as provided for in this proposal, are,
6 in fact, authorized under current Wyoming law or they
7 would be -- your legislation could authorize them without
8 running afoul of the debt limitation or requiring the
9 vote.
10 REPRESENTATIVE DEEGAN: The only reason I
11 raise it, Madam Chairman, is that the constitutional
12 provision is pretty plain and pretty expansive in
13 prohibiting incurring debt of this kind, the argument
14 could be made. It says in any manner to incur debt, so...
15 CO-CHAIR NAGEL: Representative Anderson.
16 REPRESENTATIVE P. ANDERSON: Madam
17 Chairman.
18 You indicated that increase in gas or diesel,
19 could that tax be a different one, say a half-cent sales
20 tax, then go ahead and redirect federal mineral royalty
21 from that?
22 MR. CURRY: Madam Chairman.
23 The answer is yes, a half-cent sales would
24 generate about 32 to $34 million. It's roughly equivalent
25 to the amount we're raising with the gas tax and a
101
1 political judgment as to whether sales tax or the gas tax
2 is a more appropriate vehicle for that.
3 As we talked to the people around the state,
4 we've been made aware of the dependence of local
5 government on the sales tax and we've been made aware of
6 the concerns of people, particularly in the north of the
7 state, next to states that don't have a sales tax, of
8 concerns about the big competitiveness if there were
9 increased sales tax.
10 Also tried to look at tax relative to the other
11 states in terms of relative impact to find one we thought
12 was the least painful. And certainly I would obviously
13 defer to your judgment as to that question.
14 CO-CHAIR NAGEL: Other questions?
15 SENATOR PECK: Madam Chair.
16 Would you care to comment on the court's removal
17 of the requirement of local match except for enhancement?
18 It seems like the ability to enhance is contrary to the
19 general intent of the whole litigation. Is that entirely
20 off base?
21 MR. CURRY: Madam Chairman.
22 My view was is that in the initial Campbell
23 decision -- I'm not a lawyer but my view was that the
24 court found every time a school district provided an
25 enhancement, it tipped the bar higher and created the
102
1 impetus for other school districts to ultimately claim
2 that they needed to have those same enhancements and would
3 ultimately become the state's responsibility to provide
4 them. And so on our initial discussions on this, we were
5 going to propose that you simply cut off local school
6 funding -- or local school bonding to do that.
7 The court's rehearing decision, I think, left
8 the door open, and that's the advice that we've received
9 from the state's lawyers, for local school enhancements,
10 and so I would presume that they're there. I don't know
11 that you can -- you may choose to test that issue and to
12 predict them, but we believe as long as they're going to
13 do that, that you, as a state, should not be in the
14 business of subsidizing that debt through the mill levy
15 subsidy or state bond guarantee. Frankly, I think you
16 should be discharging it. And given that, that's what we
17 proposed in our -- in our book -- or in our proposal.
18 I would be concerned, frankly, if after a period
19 of years there were substantial enhancements in richer
20 school districts that would, under the court's logic of
21 Campbell, set the bar higher and would ultimately require
22 the State to make others meet that standard.
23 MS. LUMMIS: Madam Chairman.
24 CO-CHAIR NAGEL: Yes.
25 MS. LUMMIS: I have distributed one page
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1 out of the new October Consensus Revenue Estimating Report
2 that deals with federal mineral royalties. For example,
3 if you were interested in the idea of bonding for school
4 capital construction, using federal mineral royalties as
5 the source of repayment, this chart tells you how that
6 money is distributed.
7 And I believe if you look at the projection for
8 years 2002 through 2006 at the bottom and go to the far
9 right column, which is totals, you have 300 -- starting in
10 2002, 311,700,000 through year 2006, which is 288,200,000.
11 I believe those monies are subject to the $200-million cap
12 and everything over the $200-million cap goes in
13 two-thirds into the budget reserve account and one-third
14 to the school foundation fund. So, you know, that could
15 be another potential source of repayment for bonds;
16 however, then you are cleaning out your future
17 contributions to the budget reserve account and taking
18 money from the school foundation program, which also has
19 formula funding obligations imposed by the courts.
20 So it's a -- the problem in front of you is a
21 difficult one, and the Supreme Court did specifically say
22 that the tax you chose is the prerogative of the
23 legislature.
24 CO-CHAIR NAGEL: Okay. Any other
25 questions?
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1 Senator Peck.
2 CO-CHAIR PECK: Madam Chair.
3 Considering the constitutional limitation on
4 debt, the prison bonds that are out there already sold,
5 they utilize part of that capacity, do they not?
6 MS. LUMMIS: Madam Chairman.
7 Those also are not general obligation bonds,
8 those are lease revenue bonds. And so the way that I
9 understand the constitution to be interpreted, those would
10 not apply to the cap either.
11 CO-CHAIR NAGEL: Representative Huckfeldt.
12 REPRESENTATIVE HUCKFELDT: Madam Chairman.
13 Going back and looking at the constitution, I
14 guess this is where I'm confused. Under Article 16,
15 Section A, it says no bond or evidence of indebtedness of
16 the State shall be valid unless the same shall have
17 endorser on certificate signed by the auditor and the
18 secretary of state. The bond or evidence of debt is
19 issued pursuant to law and is within the debt limit.
20 That's for the state, and it also goes on per cities,
21 towns and counties.
22 When we met last week, I asked how do we get
23 around these portions, and we were looking at LSO 200,
24 which all of us have here today, and basically on page 20
25 we were told that's how we'll get around. I'm still
105
1 confused. You know, the constitution, as I read it, is
2 pretty clear. It says State of Wyoming shall not in any
3 matter create any indebtedness exceeding 1 percent, and,
4 you know, I'm confused.
5 MS. LUMMIS: Madam Chairman.
6 CO-CHAIR NAGEL: Yes.
7 MS. LUMMIS: I'd suggest you ask for an
8 Attorney General's opinion or ask LSO to research that.
9 You know, we have issued almost 300 million in tax and
10 revenue anticipation notes and those are bonds. It's just
11 that they -- we issue them and they mature in the same
12 fiscal year. We issued them in July, we pay them back in
13 June. And we do it every year, and so that is well over
14 the constitutional limit that you're citing, that and if
15 you added up the prison bonds and other things, we're
16 already well over that. And I've already -- always been
17 under the impression that the constitutional provision
18 applied only to general obligation debt, so it would be
19 advisable for you to get an Attorney General's opinion or
20 ask LSO to research that.
21 CO-CHAIR NAGEL: Any other questions?
22 Senator Peck.
23 CO-CHAIR PECK: One other question.
24 You're satisfied that the interweaving of the
25 coal bonus bids money on the federal mineral royalties
106
1 still satisfies the court's order for statewide funding
2 source?
3 MR. CURRY: Madam Chairman.
4 We have developed this proposal in consultation
5 with LSO and in consultation with the State's Attorney and
6 treasurer's office and we believe it complies with the
7 law -- with the court's direction.
8 CO-CHAIR PECK: One final point, Madam
9 Chair.
10 I didn't -- you mentioned highways, in your
11 initial thing you mentioned aeronautics. Do you have
12 anything specific in mind as to how we're going to help
13 aeronautics through this whole scheme?
14 MR. CURRY: No.
15 Madam Chairman.
16 That has come to us from the Department of
17 Transportation as a priority they see to provide either
18 increased terminal space or runway maintenance or other
19 capital programs related to air service in the state. And
20 I frankly have not seen a detailed list what they have for
21 that.
22 SENATOR MOCKLER: Madam Chair.
23 CO-CHAIR NAGEL: Yes.
24 SENATOR MOCKLER: Can I ask sort of a
25 procedural question? Seems to be my favorite thing today.
107
1 We're just looking at what Capital Finance is
2 looking at so we have that same information, is that sort
3 of where we are today? We're not going to go through the
4 bill and say what parts we don't like, because otherwise
5 half of my committee disagrees with it anyway. It is my
6 impression, do you all know, because it has a tax in it
7 it's so specific and so many subjects together in this
8 bill, I'm assuming that Capital Financing will give it to
9 House Revenue.
10 CO-CHAIR NAGEL: That's right.
11 SENATOR MOCKLER: And that's what your
12 assumption is as well, this is going to House Revenue, not
13 going to come to Joint Revenue at our next meeting?
14 CO-CHAIR NAGEL: That's correct. That's
15 my assumption. With the speaker here, maybe we can --
16 MS. LUMMIS: Madam Chairman.
17 CO-CHAIR NAGEL: Yes.
18 MS. LUMMIS: The proposal was prepared by
19 Keith without worrying about the various legislative
20 committee jurisdictions. And because it has a domino
21 effect to it, you know, the gas tax permits the exchange
22 of the federal mineral royalties, permits the pledgeable
23 revenues against which a bonding for school capital
24 construction can occur. It covered the jurisdiction of
25 three or four different legislative committees. And I had
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1 e-mailed House and Senate leadership from both parties
2 early in October, seeing if I could get them together to
3 explain that it crossed committee lines. It was the --
4 the members of the leadership were unable to coordinate
5 schedules such that they could get together and understand
6 that, so we were instructed just to present it to the
7 legislative committees that are dealing with these various
8 subjects and -- and they complete the list of committees.
9 So now all the committees that are involved in some aspect
10 of this bill have been exposed to the concepts and can
11 begin editing at will.
12 SENATOR MOCKLER: Madam Chairman, just to
13 follow that.
14 Madam Treasurer, is it your intention when this
15 comes back to Capital Financing, Mr. Curry will come back
16 and ask for actual tear-apart questions, wanting to make
17 it better, make more bills instead of running the risk to
18 lose part of this bill because somebody hates one part of
19 it and kills whole thing, and breaking concepts up before
20 commission -- or financing commission, will you be back
21 before that other committee so we actually get experts as
22 opposed to us tearing it apart, not knowing what we're
23 doing?
24 MS. LUMMIS: Madam Chairman.
25 It's the legislature's decision about how to
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1 divide the bills. And the proposal is such that it's
2 pretty clear how they dovetail, but if the committee feels
3 that they want Mr. Curry to come back, we'll sure see if
4 his schedule will allow for that.
5 CO-CHAIR NAGEL: It was my understanding,
6 I think -- it was my understanding that at the next
7 capital finance meeting, that instead of the three bills
8 that we have now, that they -- there may be one or two,
9 and so they'll go through that and then we'll get it and
10 if we need to have Mr. Curry come back somewhere, we can
11 do that. That's fine.
12 SENATOR JOB: Madam Chairman.
13 I want to go back to the 1 percent limit on
14 debt. Do we, as a legislature, have anywhere information
15 on our total debt right now with that -- what that whole
16 picture looks like? And if we do have that, where would I
17 be able to get it?
18 MR. SOMMERS: Madam Chairman.
19 As far as the constitutional debt limit with
20 general obligation bonds, we don't have any debt. The
21 only bonds that we have issued in a state right now, about
22 $60 million in basically revenue bonds. Again by the
23 Capital Building Commission for state capital construction
24 project, that money was -- there was actually money
25 appropriated for building those and that money put in the
110
1 common school account and issued bonds in the same amount
2 to pay for the construction, so I don't think we have
3 anything that applies to that constitutional debt limit
4 right now.
5 SENATOR JOB: Madam Chairman, let me
6 clarify.
7 Whether it implies that or not, I'm
8 interested -- at this point, whether we're talking about
9 possibly bonding for $708 million, whatever we're going to
10 end up talking about here, I'm just interested in how much
11 debt the State is in right now across the board. And I
12 was wondering if we have any -- a total picture of that,
13 the revenue bonds and tax anticipation notes that we do on
14 a yearly basis.
15 CO-CHAIR NAGEL: Madam Treasurer, is that
16 some information that, together with LSO, that you could
17 get for --
18 MS. LUMMIS: Madam Chairman, we'll
19 contribute our part. We'll contribute the part the
20 treasurer's office knows about, State Loan and Investment
21 Board can contribute part it knows about, the, let's see,
22 Wyoming Building Corporation can contribute about the
23 prison bonds, and we'll try to identify all those. Plus
24 we know how many bonds have been issued by school
25 districts, but those would be issued specifically by
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1 school districts, not by the state.
2 CO-CHAIR NAGEL: You're interested in
3 state only; is that correct?
4 SENATOR JOB: Yes.
5 CO-CHAIR NAGEL: Okay.
6 CO-CHAIR PECK: Madam Chair.
7 Mr. Curry, in your devising this scheme of
8 financing is there anyplace for compromise of say half pay
9 as you go, half this bonding scheme?
10 MR. CURRY: Madam Chairman.
11 It's a proposal for you to, you know, deal with
12 as you see fit in your wisdom, particularly once you've
13 made a choice as to which of the scenarios representing
14 past expenditures that you want to provide to the court,
15 because as you can see, they're significantly different.
16 Once that's determined, as I said, for example, that
17 the nickel gas tax increase, if you had the second
18 scenario, could probably be reduced by a penny, which is a
19 25-percent reduction in that tax source.
20 If you wanted to apply the coal bonus money
21 differently, as opposed to putting it in state capital
22 construction, there may be other ways to deal with that.
23 I think one option certainly would be viable would be
24 stairstep the increase in the gas tax. You know, there's
25 a lot of options that could be applied if that were the
112
1 goal and we were asked to look at. We certainly would be
2 pleased to work with any of -- model any of those
3 alternatives.
4 SENATOR MOCKLER: Madam Chairman.
5 Perhaps just another informational piece. When
6 we met last time, and I was sort of curious what the -- I
7 mean, my problem with this whole thing is the hole in the
8 middle while we're paying off the 30-year bond for the
9 mistakes we made in education reform, we're obviously
10 going to have some more buildings that we're going to have
11 to build, new schools, we'll have a lot more buildings in
12 the state, we know we have Game & Fish, we have all that,
13 but we also have local government, who, I think, wants
14 $255 million for the county. How do we start rolling all
15 that into a long -- bigger picture, because we just took
16 this big -- took care of the capital construction, we
17 bonded out ourselves completely and we're a billion and a
18 half dollars in debt, without even knowing what years look
19 like to the next 30 years, when the bonds are paid. Is
20 that a list you had of what your needs and wants over the
21 next 20 years are for all these other agencies?
22 MR. CURRY: Madam Chairman.
23 I'm not sure any agency of the state has what
24 would be characterized as 20-year needs assessment, but we
25 did talk about Game & Fish and the university and did have
113
1 testimony from local government with their sort of cash
2 flow requirements. One of the reasons that we avoided
3 focusing on sales tax was because that has been the
4 primary local government source and we didn't want to
5 impede the ability of local governments to local options
6 or other issues relative to the sales tax.
7 If you look on the options -- thinking about
8 school capital construction first, back behind tab one,
9 and you look to what is page 6 and you see the sort of
10 dropout line at the bottom, this pay-as-you-go major
11 maintenance, which is about $9 million, and we'll be going
12 forward with once all the bonds are in place, that
13 provides for major maintenance, keeping in mind that
14 making this 536 in this case. $536 million major
15 expenditure for schools, I mean, represents almost more
16 than a doubling of what you're currently spending now.
17 So you will have substantially met needs -- they
18 will not stop having needs or continue to be needs, but
19 you will have caught up. And so one would think that what
20 you've been al -- what you've been appropriating so far is
21 going to be, if not reduced, certainly scaled back in
22 intervening time here, as revenues grow, as population
23 grows, to justify further expenditures.
24 As it relates to school -- or to statewide
25 capital needs, we did create sort of the designation of
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1 the coal bonus payments for schools. That's $30-million
2 source per year. At current levels, taking that from
3 school cap con, will that provide all that you need?
4 Probably not, but it will enable you to make priority
5 decisions on year-by-year basis for specific projects.
6 For example, the -- the education -- the health
7 science center at the university is about a
8 $14-and-a-half-million project. It would also enable you,
9 then, if you wanted to lease financing for state
10 facilities, which is how you done it -- how you've done
11 certain other facilities, to work that part of combination
12 as pay-as-you-go financing strategy, as you make your own
13 decisions about priorities for state capital needs.
14 As for Game & Fish and the desire to fund a --
15 an endowment, if you will, one year allocating the coal
16 bonus money into that endowment could be a strategy could
17 be applied to meet that need. Other one-time revenue, as
18 you see fluctuations in mineral prices, could be allocated
19 there.
20 And, of course, you have other trust funds that
21 you might want to consider legislatively to do that and we
22 didn't address these in this proposal, but those could be
23 some solutions that could come forward.
24 We did provide the ability to leverage your
25 transportation resources, because -- and they may not
115
1 choose to do that, but it provides the ability to move
2 forward on those projects unconstrained by revenues.
3 There are a lot of issues, and we've identified
4 a few of them, that permeate state government in trying to
5 solve those problems and we focused on those particular
6 ones and tried to give you greater tools and greater
7 legislative flexibility to deal with them going forward.
8 And maybe we got all of them, maybe we didn't, but we
9 tried to deal with them, focusing first on schools, in the
10 way we gave you, without making massive changes, the best
11 alternative we could.
12 MS. LUMMIS: Madam Chairman, there's
13 another feature about bonds that we utilize in the
14 treasurer's office all the time. We buy bonds that have
15 call features, and that is that the issuer of the bond can
16 buy them back at certain intervals and they're usually
17 fixed intervals. For example, we've been buying lately
18 lots of bonds that have three month and six -- they're
19 callable at three months, six months, nine months.
20 We've been doing that because we're -- we have a
21 heavy allocation to bonds right now, because the stock
22 market, we don't believe, has bottomed out yet. So we're
23 waiting to invest in stocks and transition more money into
24 the stock market until the stock market shows signs it's
25 going to recover.
116
1 It may reach -- begin to recover in six months
2 or nine months, we don't know, so we buy bonds that have
3 short calls, that we can -- and they're at an interest
4 rate that is so high that we're just almost certain, and
5 have never been wrong about this, that they're going to be
6 bought back.
7 So that way, when they're bought back, what
8 they're called, then we would be in a position to
9 transition money into equities if the market has recovered
10 or begun to show signs of recovery. If it is not, we'll
11 re-invest it in bonds, 30-year bonds, but that are
12 callable in another three months or another six months.
13 And that's the way that we can keep the terms of our bonds
14 fairly short, while having the long-term payout long.
15 And you can build call features into these
16 bonds. I -- if I were in your shoes, would not be
17 comfortable issuing all of these bonds as 30-year bonds
18 either. So you could issue them as 30-year, but have call
19 features in them so at certain points, after legislative
20 sessions, when you would find out whether you have $9 per
21 MCF gas that crops up in the future, you might want to
22 take that money and pay off some of these bonds early.
23 And so you can build those call features into
24 the bonds and usually it costs you a little bit, but we do
25 it all -- we buy them all the time in the treasurer's
117
1 office so we can stagger the duration of maturity of our
2 portfolio.
3 CO-CHAIR NAGEL: Senator Peck.
4 CO-CHAIR PECK: Madam Chair.
5 With the court no longer requiring local bonds,
6 except for allowing enhancement of schools, it would
7 appear that henceforth, the burden on property owners is
8 going to be less. Did you consider at all utilizing some
9 property tax increase as the underpinning for this bonding
10 scheme as well as the fuel tax?
11 MR. CURRY: Madam Chairman.
12 Your point is exactly correct. In fact, as I
13 said, about $24 and a half million of school levies will
14 roll off predominantly between now and 2012, so what we
15 propose is sort of net $8-million increase in taxes. Now
16 that affects different people different ways, but we did,
17 in fact, identify that property tax burden will be reduced
18 as a result of this change.
19 Yes, we looked at a 4-mill levy. Four mills
20 will represent about $40 million, based on the CREG
21 projections about $37 million, so it's a comparable
22 number. The issue to be concerned with here is that there
23 is significant volatility in assessed valuation in the
24 state because how minerals are taxed and the disparate --
25 some would say disparate impact on the mineral industry,
118
1 particularly by the use of the property tax, but certainly
2 that is an option that is available.
3 I would point out that as we talked earlier
4 about the constitutional requirements, if you were to
5 increase property taxes, mill levy, as a financing
6 mechanism for schools, that could not be bonded against
7 without an authorizing vote of the people. What you would
8 do is you would then use that money to backfill other
9 state functions and reallocate FMRs as a security source
10 for bond.
11 That would be just one particular point between
12 our proposal and what would happen if you had mill levy
13 subsidy. It's very similar to what we're doing with gas
14 tax. You couldn't issue bonds against gas tax either.
15 That's why we're giving that money to transportation and
16 using FMRs which are a viable source.
17 REPRESENTATIVE DEEGAN: Madam Chairman,
18 may I ask Steve a question?
19 CO-CHAIR NAGEL: Yes.
20 REPRESENTATIVE DEEGAN: Steve, what is a
21 penny of sales tax raised for state government if it's not
22 shared with the local?
23 MR. SOMMERS: Madam Chairman.
24 If you look at fiscal year '03, it's just
25 right -- sales and use, just right after, little better
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1 than hundred million bucks, one penny.
2 REPRESENTATIVE DEEGAN: Thank you.
3 CO-CHAIR NAGEL: Any other questions?
4 Senator Peck.
5 CO-CHAIR PECK: Madam Chair, this is a --
6 other committees have proposed imposing a 4-mill statewide
7 tax or offering that, but requiring it only going into
8 effect with vote of the people. Where would we be if that
9 were done, and the people turned it down, as regards
10 meeting the court's mandate for funding?
11 MR. CURRY: Madam Chairman, I'm not a
12 lawyer, so I'll defer to the Attorney General on that, but
13 I think it would be clearly not in compliance.
14 CO-CHAIR NAGEL: Any other questions?
15 Representative Boswell.
16 REPRESENTATIVE BOSWELL: Currently
17 property owners are paying off, if you will, bond issues
18 for schools. One of the proposals in front of these
19 various committees that we just mentioned, additional
20 mills, let's say there's a big taxpayer in Sweetwater
21 County that's already paying for the Green River High
22 School. By proposing mills, whether with a vote of the
23 people or not -- and I -- I don't know whether I'm asking
24 you or the treasurer or somebody with a law degree
25 somewhere out there, are we encouraging that large
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1 taxpayer to go to court on the argument that, wait a
2 minute, we're having to pay for Green River High School
3 and then we're going to be taxed again to fund schools
4 statewide, does that invite a lawsuit or am I not
5 really -- is that not really something to worry about?
6 MR. CURRY: Madam Chairman.
7 Refer on legal analysis invites a lawsuit or
8 not, one of the issues we thought was notable in Wyoming
9 is disparate nature of the mills from county to county,
10 district to district, they are significantly different
11 between jurisdictions and certainly a statewide mill levy
12 would impact more severely those areas that are currently
13 paying higher mill levies than others. And there is a
14 wide disparity between county and districts.
15 REPRESENTATIVE BOSWELL: Madam Chairman.
16 There's no secret that some of us are not very
17 happy with the way your information was generated about
18 what taxes would be appropriate, who would like them and
19 who wouldn't, because we spend a lot of time at meetings,
20 like yesterday and today, hearing from people that either
21 like or don't like our ideas, we have to get a lot of
22 public input into all that. And it's a difficult part of
23 the revenue committee and we have not had that aspect of
24 all this in your conversations, but let me ask you this,
25 if you read the Casper Star once in a while you hear a lot
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1 about gasoline prices in Wyoming. You looked and you
2 compared gasoline taxes, did you compare gasoline prices,
3 which is what the consumer pays at the pump, in
4 describing, hey, you've got fairly low, in your case,
5 taxes to consider, did you consider prices?
6 MR. CURRY: Madam Chairman.
7 We did not. Although I will tell you
8 anecdotally, when I was here a week ago I noticed that
9 premium was a buck 50 a gallon and in California it's
10 2.10, which is my basis of comparison. And it's probably
11 cheaper in other states, but Georgia, for example, I
12 believe, it has, on an absolute basis, the lowest gas tax.
13 REPRESENTATIVE BOSWELL: Madam Chairman.
14 Your discussion with us was in comparison with
15 states in the region --
16 MR. CURRY: Right.
17 REPRESENTATIVE BOSWELL: -- our taxes are
18 lower, why don't you raise gas taxes, here's the proposal.
19 I know you're not advocating, you're just suggesting it.
20 MR. CURRY: Uh-huh.
21 REPRESENTATIVE BOSWELL: My question is --
22 I guess you've answered that -- you have not compared
23 prices in the region, just taxes.
24 MR. CURRY: Madam Chairman.
25 That's correct. We compared the gasoline tax
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1 rate among the states in this region.
2 REPRESENTATIVE BOSWELL: Thank you.
3 CO-CHAIR NAGEL: Any other questions?
4 REPRESENTATIVE DEEGAN: Madam Chairman,
5 can I ask a question of Mrs. Burton, since she's here?
6 CO-CHAIR NAGEL: Please do.
7 REPRESENTATIVE DEEGAN: Mrs. Burton, I'm
8 sure you provided us this information before, but I don't
9 have it, and that is can you quote us sales tax rates in
10 Utah, Nebraska -- I know it's hard in Colorado because it
11 varies, I'm sure.
12 MS. BURTON: Madam Chairman.
13 I don't know that I have the numbers on the --
14 we are -- Nebraska's higher, and I believe Utah is, too,
15 but I can't quite tell you how much more. So sales tax,
16 we fit toward the bottom of the scale from the state
17 standpoint.
18 REPRESENTATIVE DEEGAN: Thank you.
19 MR. CURRY: If I could, Madam Chairman. I
20 believe the issue is with Montana and Idaho, and I believe
21 Montana either has no sale tax or low sales tax -- zero
22 sales tax, yeah.
23 CO-CHAIR NAGEL: Senator Peck.
24 CO-CHAIR PECK: Perhaps you told me this
25 and I didn't get it, the proposed nickel gas tax here, is
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1 that with traditional historic exemptions or is it, as we
2 had for a couple years, no exemptions, so we tax railroads
3 and off highway and mining, and all that sort, which
4 scenario is this based upon?
5 MS. LUMMIS: The exempt -- Madam Chairman.
6 The exempt entities would not be taxed under
7 this scenario. This produces, what, 6.2 or 6.4 million
8 per year when the exemptions are applied and it produces
9 almost 10 million when the -- when everyone pays the tax.
10 Everyone, including railroads and Ag in mind.
11 And, Madam Chairman, let me add, we gave Keith
12 information that he analyzed from his office in California
13 and he wasn't steered in a direction. He wasn't told, oh,
14 avoid this tax or don't look at that tax. He was just
15 given all kinds of information to look at in a -- from a
16 perspective of someone who's a thousand miles away. And
17 we admit, he is not -- he doesn't -- he's not going to be
18 here to take the heat.
19 The proposal is for you to consider right along
20 with all the other proposals that are offered by other
21 people, pay-as-you-go proposals, bond proposals, various
22 tax proposals or reduce the size of government proposals
23 that lay out more income for schools. Certainly all of
24 those things need to be considered, but I want to let you
25 know that this is somebody who just looked at our tax
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1 structure, looked at our needs, looked at the Supreme
2 Court decisions and made a recommendation, and this is the
3 best recommendation that a person under those
4 circumstances could make.
5 Could he have chosen property tax? Sure. Could
6 he have chosen sales tax? Sure. He still would have
7 found some other nontax source of revenue to pledge, so
8 there still would have been a transfer of revenues.
9 SENATOR MOCKLER: Madam Chair.
10 CO-CHAIR NAGEL: Yes.
11 SENATOR MOCKLER: Could I ask a question
12 of the Department of Transportation?
13 And, actually, it goes to the question of the
14 swap. And I know you guys are working with the
15 Department -- Transportation Committee, but it's always
16 been my impression you could use federal mineral royalties
17 you received on anything you wanted, you could bond with
18 them, you could fulfill other projects, you have a lot of
19 discretion over what you can use federal mineral royalties
20 for, you don't request gas tax to build roads, right?
21 So my question is if you take away and totally
22 ratchet -- even if we ratchet it and you may get little
23 more tax revenue money, do you have projects you have to
24 give us because we don't have federal mineral royalties
25 and is there some way to kind of quantify what we're not
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1 going to get to build or our entire system because we
2 don't have that flexibility anymore, what we lose, maybe?
3 MR. EITEL: Madam Chairman.
4 To answer the question, yes, Senator Mockler, we
5 have opportunity to use the federal mineral royalties in
6 other ways. That gas tax we don't have. We use
7 mineral -- federal mineral royalties to fund aviation,
8 highway patrol, ports of entry and administration and use
9 it for the matching funds for our federal money that comes
10 down to rebuild highways and improve the highways. We
11 cannot use gas tax for that. Gas tax goes strictly to the
12 highways. We can't use it for the matching funds or the
13 operation of aeronautics or ports or the other -- the
14 other entities that -- when they formed Department of
15 Transportation in '93, the Wyoming Highway Department
16 ended up with the aeronautics and the ports of entry and
17 the highway patrol and part of the revenue department that
18 has to be funded from mineral royalty money, rather than
19 fuel tax money.
20 SENATOR MOCKLER: Madam Chairman.
21 Is there a way of quantifying if any of that's
22 in danger, we have to give them general fund money to
23 supplement not being able to take those, if we take
24 federal mineral royalties and swap it with gas tax?
25 MR. EITEL: Right off the top of my head I
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1 can't quantify it, but I think we would have to be that
2 way. If we lose very much more of our federal mineral
3 royalty, we're going to have to come back to the
4 legislature for funding for like aeronautics and some of
5 the other entities that were put into the Department of
6 Transportation so that we can save whatever federal
7 mineral royalty money we have now for our matching funds
8 for the federal to keep our highway system that we have
9 today in place and in good shape.
10 CO-CHAIR NAGEL: I have a question. You
11 can use federal mineral royalties, federal funds to match
12 federal -- other federal funds that you're getting?
13 MR. EITEL: Yes, ma'am.
14 MR. CURRY: Madam Chairman, if I may make
15 an observation. We represent DOTs across the country in
16 49 other states the gasoline tax that's collected by the
17 state is used to match federal funds. I formerly worked
18 in the Reagan administration at the Department of
19 Transportation, so I happen to know that as a fact. I'm
20 frankly surprised that's actually the case here, that you
21 can't use your state gas tax funds to match federal funds.
22 Federal mineral royalties are, in fact, used for
23 your state patrol, ports of entries, aeronautics, that's
24 why we proposed debt capacity in that area that enables
25 those projects to move forward. And while we've provided
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1 an additional $48 million in the funds switched to
2 transportation to make sure that they can, in fact, match
3 this federal stimulus money that comes forward, so I will
4 just tell you, as a consultant, if it is, in fact, true
5 that you can't use your state gasoline tax to match
6 federal funds, that should be important legislative
7 priority.
8 SENATOR JOB: Madam Chairman, I want to go
9 back again to a comment that was made earlier.
10 Madam Treasurer, would you tell me what kind of
11 data you sent to Mr. Curry to -- that he would analyze in
12 his office and start on the proposal?
13 MS. LUMMIS: Madam Chairman.
14 We sent CREG reports, we sent Supreme Court
15 decisions, we sent -- I know that Mr. Curry visited with
16 the Department of Transportation several times to gather
17 information, probably Golden Rods, budgets.
18 Am I on the right track?
19 MR. CURRY: Madam Chairman.
20 Absolutely. We had a day of meetings with state
21 agencies, we met with many of the legislative committees,
22 we received information from LSO, we asked the specific
23 questions related to the historical funding patterns, we
24 specifically asked about what's been spent to date, which
25 took a lot of work by LSO to generate those numbers, we
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1 took a look at the outstanding school indebtedness and we
2 looked at sort of -- and I'll tell you the fairly
3 complicated way in which your federal mineral royalties
4 and state mineral royalties are allocated among the
5 services.
6 And we thought about how -- is there a way we
7 could sort of focus those a little bit more, rationalize
8 them a little bit better. And we also looked at all of
9 the competing state requirements, and I think the
10 senator's question earlier about did you look at this in
11 the context of everything that we need to do here in the
12 state was an important issue and we thought given
13 transportation's -- you know, there's three footnotes if
14 you look at the federal mineral royalty table on
15 transportation on highway funding, on how that money over
16 the years has been diverted for a couple years to schools,
17 been diverted here or backfilled here, and we thought by
18 giving them constitutionally protected highway funding
19 source, they would be, frankly, less vulnerable to have
20 those monies reallocated in times going forward in the
21 future.
22 There are three potential revenue sources here
23 that I think meet this need. First of all, we looked at
24 can we do it on a pay-as-you-go basis, and I think you
25 want to do this on a pay-as-you-go basis, there would have
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1 to be substantial reductions in state services. And
2 rather than recommend which services those might be,
3 though it's certainly your prerogative. We look at the
4 three likely sources, sales tax, mill levy and gasoline
5 tax. And we believe we could solve problems with the
6 least impact on the taxpayers. And we believe we could
7 solve more problems and we believe we could solve them
8 better by recommending the gasoline tax. That was my
9 judgment. Reasonable people can certainly disagree.
10 People by where they live or where their interests are
11 certainly will disagree, but that was my recommendation.
12 And that's what it is, a recommendation.
13 MS. LUMMIS: Madam Chairman.
14 CO-CHAIR NAGEL: Yes.
15 MS. LUMMIS: I'd also like to add this was
16 only one component of what Keith recommended, there were
17 other recommendations to address nonschool issues, in an
18 overall package, but we haven't discussed with the
19 legislature yet, and probably won't until the next
20 interim, because it's just too much to roll out before a
21 budget session, but there were some lease-purchase
22 provisions for buildings that freeze up some money.
23 There were some WCDA-type ways to buy down
24 housing costs in Wyoming, and there were a number of other
25 creative proposals that are used by other states that
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1 Keith brought to our attention, but to lay those out on
2 top of all this, would just be too much in light of the
3 substantial burden on the legislature to address school
4 cap con, but I'm hoping we'll have the opportunity to do
5 that sometime during calendar year 2003 -- or '2 after
6 your budget session.
7 CO-CHAIR NAGEL: I have a couple of
8 questions.
9 Did you obviously look at WCDA financing,
10 instead of expanding or adding Wyoming Capital Finance
11 Authority, putting the responsibilities for this under
12 WCDA in some way?
13 MS. LUMMIS: Madam Chairman, the answer's
14 yes. We talked to WCDA and we talked to the Wyoming
15 Building Corporation. We wondered out loud with Wyoming
16 Building Corporation about whether something that is a
17 creation of the legislature, but is essentially private,
18 could accept state funds as repayment. We think the
19 answer's yes, but we weren't sure. That would be an issue
20 that would need to be considered down the line, if you
21 decided you wanted to use the Wyoming Building Corporation
22 in lieu of a Capital Finance Authority.
23 I also talked to the WCDA board, because I'm on
24 that board and met in October, and I asked if they would
25 be willing to serve as the bond issuer and essentially
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1 pass through the proceeds to state entities. And they
2 said yes, but they wanted to make sure whatever additional
3 roles were -- they were asked to do wouldn't interfere
4 with their primary mission, which is affordable housing.
5 And based on that, we decided not to recommend WCDA,
6 although they expressed a willingness to do it if it were
7 asked of them.
8 And I -- is Rick still here? Rick Tempest? No?
9 He was also at the meeting where this was
10 discussed.
11 CO-CHAIR NAGEL: Now, let me -- just
12 because it's kind of a niggling question in my mind. I
13 know WCDA is a quasi-governmental authority, and so would
14 this -- would it be the same sort of thing as the Capital
15 Financing Group, because if it were formed in that way,
16 wouldn't that remove the debt limit -- or the issue,
17 because actually they are the ones that are taking on the
18 debt or not?
19 MS. LUMMIS: Madam Chairman, I don't think
20 it matters, because the issue is not whether it's a quasi-
21 governmental entity or governmental entity or non --
22 CO-CHAIR NAGEL: Pledge funds.
23 MS. LUMMIS: Yeah, whether it's a revenue
24 bond or general obligation bond, as I understand it.
25 And the issues that gave rise to that was WCDA.
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1 The Witzenberger decision was in regard to WCDA. The
2 legislature had chosen to, when it created WCDA, back up,
3 as a maybe even not a primary source of pledge, but
4 secondary source of pledge, some severance tax revenues.
5 That was challenged and Supreme Court said indeed the
6 legislature cannot use tax revenues to pledge for bonds.
7 I wish Dave Gruver was here. He has recently
8 read all three decisions and is better at explaining them.
9 CO-CHAIR NAGEL: Any other -- yes,
10 Representative Boswell.
11 REPRESENTATIVE BOSWELL: Madam Chairman.
12 Is it a safe assumption that basically the state
13 makes money by borrowing money?
14 MS. LUMMIS: Madam Chairman.
15 That is true with regard to the general fund tax
16 and revenue anticipation notes. That is not true as --
17 currently configured -- as currently distributed with the
18 TRANS that are issued on school foundation program. And
19 that's not true of all bonds. The only bond that is
20 actually a money-maker, that I know of, is the general
21 fund TRANS.
22 Now, there are some indirect ways to make money
23 and that is if the costs of construction are deferred
24 until the money is in hand and the costs of deferring it,
25 or the inflation costs of deferring construction, exceed
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1 the costs of bonding and the interest repayment, then
2 that's a real way to make money as well.
3 CO-CHAIR NAGEL: Any other questions?
4 REPRESENTATIVE DEEGAN: Yes.
5 CO-CHAIR NAGEL: Representative Deegan.
6 REPRESENTATIVE DEEGAN: Question, Madam
7 Chairman.
8 On page 7 of your presentation, if I read this
9 scenario correctly, under the numbers presented there, the
10 costs of the bonding initiative over the life of the
11 project would be $221 million?
12 MR. CURRY: Are we on the right -- which
13 page is that on?
14 REPRESENTATIVE DEEGAN: Page 7.
15 MR. CURRY: Front part?
16 REPRESENTATIVE DEEGAN: Yeah.
17 MR. CURRY: Those are -- I'm not sure
18 those are the 30-year totals, Madam Chairman.
19 I believe those point out through '09.
20 REPRESENTATIVE DEEGAN: Those are just the
21 totals?
22 MR. CURRY: Through 2009.
23 REPRESENTATIVE DEEGAN: Madam Chairman.
24 So over the course of eight years or so --
25 MR. CURRY: If you were to issue $708
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1 million in bonds, Madam Chairman, it would be at least 700
2 probably -- a billion dollars of interest over the whole
3 30-year period.
4 REPRESENTATIVE DEEGAN: Thank you.
5 MR. CURRY: Close to something in that
6 neighborhood.
7 CO-CHAIR PECK: Madam Chairman.
8 Could you take a minute and re-explain and
9 re-define the attributes of the GARVEE bond? That's a
10 term that's not been in my vocabulary.
11 MR. CURRY: Madam Chairman.
12 Until recently, the current transportation act
13 is called T-21 Transportation Act of 21st Century. That
14 act allowed states to issue debts secured by their future
15 federal formula transportation funds, both on the transit
16 side, which have been done by New Jersey Transit and by a
17 party in California, and also done them, frankly, a long
18 time ago in California for buses and for highways.
19 Now, the problem with federal transportation
20 dollars is that you -- they have a three- or four-year
21 federal appropriation or federal authorization and so when
22 the bill runs out, it needs to be re-authorized, but the
23 credit markets have become comfortable with the fact that
24 there has always been a federal formula assistance program
25 for highways, going back to the Interstate Highway Act in
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1 the Eisenhower administration. There's a strong track
2 record of receipt of those funds and credit markets have
3 been very willing to accept debt backed by the future
4 federal transportation allocation to states.
5 New Mexico and Arizona and Ohio were the first
6 to issue them. To date 12 states have issued them.
7 Colorado recently issued nearly a billion dollars worth of
8 them. The name GARVEE, Grant Anticipation Revenue
9 Vehicle, is designed to say that the security is the
10 federal grant that you -- formula grant. It's a revenue
11 vehicle meaning you pull the money up and they used
12 vehicle as opposed to bond, because they're trying to make
13 it rhyme with Jane Garvey's name. And I'll just tell you
14 anecdotally that when these were first done, the states
15 were backstopped with state transportation dollars and as
16 the transactions evolved, they no longer needed to
17 backstop, so they started calling those transactions naked
18 GARVEEs, much to Mrs. Garvey's consternation.
19 But they're now -- there's now probably 2 or $3
20 billion of them used and they're well regarded in the
21 market. And as you see here, they're relatively short-
22 term. They're only going out one or two re-authorization
23 cycles. We have nine-year scenarios and 15-year
24 scenarios, so they're relatively short in terms of debt,
25 but of the states that have used them, I think there's
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1 been great satisfaction in the ability to advance
2 projects.
3 Perhaps you're familiar with the T-Rex project
4 in the I-25 corridor in Denver, which is both transit and
5 highway project. There the State has issued those bonds
6 enabling that project to be presumed -- it be undertaken
7 under design/build contract and is well underway and that
8 funding is used to finance state portion of that project.
9 CO-CHAIR NAGEL: Representative Anderson.
10 REPRESENTATIVE P. ANDERSON: Madam
11 Chairman.
12 Would it take -- does it take statutory changes
13 to authorize the highway commission to use those GARVEE
14 bonds or they are able to do that now, if they so desire?
15 MR. CURRY: Madam Chairman.
16 My understanding is the department would need
17 legislative authorization to use those bonds -- to secure
18 the bonds that way.
19 CO-CHAIR NAGEL: Any other questions from
20 the committee?
21 Is there anything else you'd like to wrap up
22 with?
23 MR. CURRY: I thank you for your courtesy,
24 Madam Chairman.
25 MS. LUMMIS: Thank you, Ma'am Chairman.
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1 And for those of you who have heard this now
2 three times, thank you typically so.
3 CO-CHAIR NAGEL: Thank you very much. We
4 appreciate the presentation.
5 (Recorded portion of proceedings
6 concluded 2:55 p.m., October 30, 2001.)
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1 C E R T I F I C A T E
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3 I, KATHY J. MULLIVAN, a Registered Professional
4 Reporter, do hereby certify that I reported by machine
5 shorthand the meeting proceedings contained herein, and
6 that the foregoing 137 pages constitute a full, true and
7 correct transcript.
8 Dated this day of November, 2001.
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11 KATHY J. MULLIVAN
Registered Professional Reporter
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