REPORT TITLE:
HHSC


DESCRIPTION:
Authorizes the Hawaii Health Systems Corporation to issue
hospital revenue bonds for $38,000,000.  Authorizes the
Department of Budget and Finance to guaranty the bonds.  (SB2873
HD2)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2873
THE SENATE                              S.B. NO.           S.D. 1
TWENTIETH LEGISLATURE, 2000                                H.D. 2
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO HAWAII HEALTH SYSTEMS CORPORATION.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  Section 323F-7, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  Notwithstanding any other law to the contrary, the
 
 4 corporation shall have and exercise the following duties and
 
 5 powers:
 
 6      (1)  Developing its own policies, procedures, and rules
 
 7           necessary or appropriate to plan, operate, manage, and
 
 8           control the system of public health facilities and
 
 9           services without regard to chapter 91;
 
10      (2)  Evaluating the need for health facilities and services;
 
11      (3)  Entering into and performing any contracts, leases,
 
12           cooperative agreements, or other transactions
 
13           whatsoever that may be necessary or appropriate in the
 
14           performance of its purposes and responsibilities, and
 
15           on terms it may deem appropriate, with either:
 
16           (A)  Any agency or instrumentality of the United
 
17                States, or with any state, territory, or
 
18                possession, or with any subdivision thereof; or 
 

 
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 1           (B)  Any person, firm, association, or corporation,
 
 2                whether operated on a for-profit or not-for-
 
 3                profit basis;
 
 4           provided that the transaction furthers the public
 
 5           interest;
 
 6      (4)  Conducting activities and entering into business
 
 7           relationships as the corporation board deems necessary
 
 8           or appropriate, including but not limited to:
 
 9           (A)  Creating nonprofit corporations, including but not
 
10                limited to charitable fund-raising foundations, to
 
11                be controlled wholly by the corporation or jointly
 
12                with others;
 
13           (B)  Establishing, subscribing to, and owning stock in
 
14                business corporations individually or jointly with
 
15                others; and
 
16           (C)  Entering into partnerships and other joint venture
 
17                arrangements, or participating in alliances,
 
18                purchasing consortia, health insurance pools, or
 
19                other cooperative arrangements, with any public or
 
20                private entity; provided that any corporation,
 
21                venture, or relationship entered into under this
 
22                section furthers the public interest; provided
 
23                further that this paragraph shall not be construed
 

 
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 1                to authorize the corporation to abrogate any
 
 2                responsibility or obligation under paragraph (15);
 
 3      (5)  Participating in and developing prepaid health care
 
 4           service and insurance programs and other alternative
 
 5           health care delivery programs, including programs
 
 6           involving the acceptance of capitated payments or
 
 7           premiums that include the assumption of financial and
 
 8           actuarial risk;
 
 9      (6)  Executing, in accordance with all applicable bylaws,
 
10           rules, and laws, all instruments necessary or
 
11           appropriate in the exercise of any of the corporation's
 
12           powers;
 
13      (7)  Preparing and executing all corporation budgets,
 
14           policies, and procedures;
 
15      (8)  Setting rates and charges for all services provided by
 
16           the corporation without regard to chapter 91;
 
17      (9)  Developing a corporation-wide hospital personnel system
 
18           that is subject to chapters 76, 77, and 89;
 
19     (10)  Developing the corporation's capital and strategic
 
20           plans;
 
21     (11)  Suing and being sued; provided that the corporation
 
22           shall enjoy the same sovereign immunity available to
 
23           the State;
 

 
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 1     (12)  Making and altering corporation board bylaws for its
 
 2           organization and management without regard to chapter
 
 3           91;
 
 4     (13)  Adopting rules, without regard to chapter 91, governing
 
 5           the exercise of its powers and the fulfillment of its
 
 6           purpose under this chapter;
 
 7     (14)  Entering into any contract or agreement whatsoever, not
 
 8           inconsistent with this chapter or the laws of this
 
 9           State, and authorizing the corporation chief executive
 
10           officer to enter into all contracts, execute all
 
11           instruments, and do all things necessary or appropriate
 
12           in the exercise of the powers granted in this chapter,
 
13           including securing the payment of bonds;
 
14     (15)  Issuing revenue bonds subject to the approval of the
 
15           legislature; provided that all revenue bonds shall be
 
16           issued pursuant to part III, chapter 39;
 
17     (16)  Reimbursing the state general fund for debt service on
 
18           general obligation bonds or reimbursable general
 
19           obligation bonds issued by the State for the purposes
 
20           of the corporation;
 
21     (17)  Pledging or assigning all or any part of the receipts
 
22           and revenues of the corporation for purposes of meeting
 
23           bond or health systems liabilities;
 

 
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 1     (18)  Owning, purchasing, leasing, exchanging, or otherwise
 
 2           acquiring property, whether real, personal or mixed,
 
 3           tangible or intangible, and of any interest therein, in
 
 4           the name of the corporation, which property is not
 
 5           owned or controlled by the State but is owned or
 
 6           controlled by the corporation;
 
 7     (19)  Maintaining, improving, pledging, mortgaging, selling,
 
 8           or otherwise holding or disposing of property, whether
 
 9           real, personal or mixed, tangible or intangible, and of
 
10           any interest therein, at any time and manner, in
 
11           furtherance of the purposes and mission of the
 
12           corporation; provided that the corporation legally
 
13           holds or controls the property in its own name; and
 
14           provided further that the corporation shall not sell,
 
15           assign, lease, hypothecate, mortgage, pledge, give, or
 
16           dispose of [a substantial portion] all or substantially
 
17           all of its property [of any nature];
 
18     (20)  Purchasing insurance and creating captive insurers in
 
19           any arrangement deemed in the best interest of the
 
20           corporation, including but not limited to funding and
 
21           payment of deductibles and purchase of reinsurance;
 
22     (21)  Acquiring by condemnation, pursuant to chapter 101, any
 
23           real property required by the corporation to carry out
 
24           the powers granted by this chapter;
 

 
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 1     (22)  Depositing any moneys of the corporation in any banking
 
 2           institution within or without the State, and
 
 3           appointing, for the purpose of making deposits, one or
 
 4           more persons to act as custodians of the moneys of the
 
 5           corporation;
 
 6     (23)  Contracting for and accepting any gifts, grants, and
 
 7           loans of funds, property, or any other aid in any form
 
 8           from the federal government, the State, any state
 
 9           agency, or any other source, or any combination
 
10           thereof, and complying, subject to this chapter, with
 
11           the terms and conditions thereof;
 
12     (24)  Providing health and medical services for the public
 
13           directly or by agreement or lease with any person,
 
14           firm, or private or public corporation or association
 
15           through or in the health facilities of the corporation
 
16           or otherwise;
 
17     (25)  Approving medical staff bylaws, rules, and medical
 
18           staff appointments and reappointments for all public
 
19           health facilities, including without limitation,
 
20           determining the conditions under which a health
 
21           professional may be extended the privilege of
 
22           practicing within a health facility, and adopting and
 
23           implementing reasonable rules, without regard to
 

 
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 1           chapter 91, for the credentialing and peer review of
 
 2           all persons and health professionals within the
 
 3           facility; 
 
 4      (26) (A)  Investing any funds not required for immediate
 
 5                disbursement in property or in securities that
 
 6                meet the standard for investments established in
 
 7                chapter 88 as provided by the corporation board;
 
 8                provided the investment assists the corporation in
 
 9                carrying out its public purposes; selling from
 
10                time to time securities thus purchased and held,
 
11                and depositing any securities in any bank or
 
12                financial institution within or without the State.
 
13                Any funds deposited in a banking institution or in
 
14                any depository authorized in this section shall be
 
15                secured in a manner and subject to terms and
 
16                conditions as the corporation board may determine,
 
17                with or without payment of any interest on the
 
18                deposit, including, without limitation, time
 
19                deposits evidenced by certificates of deposit. Any
 
20                bank or financial institution incorporated under
 
21                the laws of this State may act as depository of
 
22                any funds of the corporation and may issue
 
23                indemnity bonds or may pledge securities as may be
 
24                required by the corporation board.
 

 
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 1           (B)  Notwithstanding subparagraph (A), contracting with
 
 2                the holders of any of its notes or bonds as to the
 
 3                custody, collection, securing, investment, and
 
 4                payment of any moneys of the corporation and of
 
 5                any moneys held in trust or otherwise for the
 
 6                payment of notes or bonds and carrying out the
 
 7                contract. Moneys held in trust or otherwise for
 
 8                the payment of notes or bonds or in any way to
 
 9                secure notes or bonds, and deposits of such
 
10                moneys, may be secured in the same manner as
 
11                moneys of the corporation, and all banks and trust
 
12                companies are authorized to give security for the
 
13                deposits;
 
14     (27)  Entering into any agreement with the State including
 
15           but not limited to contracts for the provision of
 
16           goods, services, and facilities in support of the
 
17           corporation's programs, and contracting for the
 
18           provision of services to or on behalf of the State;
 
19     (28)  Having a seal and altering the same at pleasure;
 
20     (29)  Waiving, by means that the corporation deems
 
21           appropriate, the exemption from federal income taxation
 
22           of interest on the corporation's bonds, notes, or other
 
23           obligations provided by the Internal Revenue Code of
 

 
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 1           1986, as amended, or any other federal statute
 
 2           providing a similar exemption;
 
 3     (30)  Developing internal policies and procedures for the
 
 4           procurement of goods and services, consistent with the
 
 5           goals of public accountability and public procurement
 
 6           practices, but not subject to chapter 103D. However,
 
 7           where possible, the corporation is encouraged to use
 
 8           the provisions of chapter 103D; provided that the use
 
 9           of one or more provisions of chapter 103D shall not
 
10           constitute a waiver of the exemption from chapter 103D
 
11           and shall not subject the corporation to any other
 
12           provision of chapter 103D;
 
13     (31)  Authorizing and establishing positions;
 
14     (32)  Calling upon the attorney general for such legal
 
15           services as the corporation may require; and
 
16     (33)  Having and exercising all rights and powers necessary
 
17           or incidental to or implied from the specific powers
 
18           granted in this chapter, which specific powers shall
 
19           not be considered as a limitation upon any power
 
20           necessary or appropriate to carry out the purposes and
 
21           intent of this chapter."
 
22      SECTION 2.  Hawaii health systems corporation is authorized
 
23 to issue $38,000,000 in revenue bonds under the Supplemental
 

 
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 1 Appropriations Act of 2000.  The legislature finds that Hawaii
 
 2 health systems corporation is unable to issue the revenue bonds
 
 3 without those bonds being secured by a guaranty from the State.
 
 4      The legislature finds and declares that the issuance of bond
 
 5 guarantees under this Act is in the public interest and for the
 
 6 public health, safety, and general welfare of the State.
 
 7      SECTION 3.  (a)  The department of budget and finance,
 
 8 through its director, may guaranty payment of principal of and
 
 9 interest on bonds issued by Hawaii health systems corporation
 
10 under section 323F-7, Hawaii Revised Statutes, by guaranteeing
 
11 payment of principal of and interest on the bonds or by
 
12 guaranteeing the provider of any credit facility securing the
 
13 bonds to reimburse any amounts drawn on such credit facility to
 
14 pay principal of or interest on the bonds.  The amount of
 
15 liability under the guaranty shall not exceed $47,500,000.
 
16      (b)  The terms for the guaranty shall include a requirement
 
17 that the Hawaii health systems corporation deposit and maintain,
 
18 in a trust fund to be established and held by the department or
 
19 by a bank trustee on behalf of the department an amount equal to
 
20 the lesser of maximum annual debt service on, or one hundred
 
21 twenty-five per cent of average annual debt service on, or ten
 
22 per cent of the principal amount at issuance of, the bonds
 

 
 
 
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 1 guaranteed.  If the interest rate on the bonds is variable, an
 
 2 assumed interest rate or formula determined by the department
 
 3 shall be used in calculating the balance required to be
 
 4 maintained in the trust fund.  This deposit may be made from
 
 5 proceeds of the bonds or any other available funds of Hawaii
 
 6 health systems corporation.  Amounts in the trust fund shall be
 
 7 invested by the department in any securities in which proceeds of
 
 8 the bonds may be invested and shall be held in trust for the
 
 9 benefit of the State and pledged to payment of principal of and
 
10 interest on the bonds prior to any payment under the guaranty.
 
11 In the event of default by Hawaii health systems corporation in
 
12 payment of any amount in respect of debt service on guaranteed
 
13 bonds, the trustee for the guaranteed bonds shall notify the
 
14 department of the default and shall be entitled to any amounts in
 
15 the trust fund necessary to cure the default and, to the extent
 
16 such amounts are not sufficient, to take all steps necessary or
 
17 appropriate to collect the amounts necessary to cure the default
 
18 pursuant to the guaranty or any applicable credit facility (in
 
19 which case the credit provider shall be entitled to reimbursement
 
20 pursuant to the guaranty).  In the event of any transfer of
 
21 amounts in the trust fund to the trustee for the guaranteed bonds
 
22 (or to the credit facility provider) due to any deficiency in
 
23 payment from Hawaii health systems corporation, the department
 

 
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 1 shall seek an appropriation or appropriations from the
 
 2 legislature in such amounts and at such times as the department
 
 3 determines to be necessary or agrees pursuant to its guaranty in
 
 4 order to fund the guaranty or the trust fund.  Amounts remaining
 
 5 in the trust fund may be used for final payment of the bonds on
 
 6 maturity or early redemption or acceleration and to the extent
 
 7 not so used shall be returned to Hawaii health systems
 
 8 corporation after all guaranteed bonds have been paid.  Amounts
 
 9 in the trust fund in excess of the required balance, from time to
 
10 time, shall be returned to the Hawaii health systems corporation
 
11 subject to any other agreement with bondholders, credit
 
12 providers, or the department.  Appropriations received by the
 
13 department pursuant to this section may be added to the trust
 
14 fund or held by or on behalf of the department in a supplemental
 
15 trust fund in order to maintain the aggregate balance in the
 
16 trust fund or funds at the required amount.  To the extent not
 
17 used to make payments under the guaranty, such appropriations
 
18 (including any earnings thereon) shall be returned to the State
 
19 when the Hawaii health systems corporation returns the trust fund
 
20 to the required balance with its own funds or after all
 
21 guaranteed bonds have been paid in full.
 
22      (c)  The department may set additional terms and conditions
 
23 on the granting of the guaranty, which may include requiring
 

 
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 1 Hawaii health systems corporation (and in such event,
 
 2 notwithstanding any other provision of law, Hawaii health systems
 
 3 corporation is authorized) to pledge, mortgage, grant a security
 
 4 interest in, sell, assign, lease, or otherwise dispose of any or
 
 5 all property, whether real, personal, or mixed, tangible or
 
 6 intangible, and of any interest therein, to secure payment of
 
 7 principal of any interest on the bonds or reimbursement to the
 
 8 provider of any credit facility securing the bonds or
 
 9 reimbursement to the State, of any payments made pursuant to the
 
10 credit facility or the State guaranty, as the case may be.
 
11      SECTION 4.  Pursuant to article VII, section 13, clause 8,
 
12 of the state constitution that states:  "Bonds constituting
 
13 instruments of indebtedness under which the State or any
 
14 political subdivision incurs a contingent liability as a
 
15 guarantor, but only to the extent the principal amount of such
 
16 bonds does not exceed seven per cent of the principal amount of
 
17 outstanding general obligation bonds not otherwise excluded under
 
18 this section; provided that the State or political subdivision
 
19 shall establish and maintain a reserve in an amount in reasonable
 
20 proportion to the outstanding loans guaranteed by the State or
 
21 political subdivision as provided by law", the legislature finds
 
22 and declares that the moneys deposited into the trust fund or
 
23 funds, pursuant to section 3(b) of this Act, satisfies the
 
24 reasonable reserve requirement of the state constitution.
 

 
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 1      SECTION 5.  Declaration of findings with respect to the
 
 2 general obligation bonds authorized by this Act.  Pursuant to the
 
 3 clause in article VII, section 13 of the state constitution which
 
 4 states: "Effective July 1, 1980, the legislature shall include a
 
 5 declaration of findings in every general law authorizing the
 
 6 issuance of general obligation bonds that the total amount of
 
 7 principal and interest, estimated for such bonds and for all
 
 8 bonds authorized and unissued and calculated for all bonds issued
 
 9 and outstanding, will not cause the debt limit to be exceeded at
 
10 the time of issuance," the legislature finds and declares as
 
11 follows:
 
12      (1)  Limitation on general obligation debt.  The debt limit
 
13 of the State is set forth in article VII, section 13 of the state
 
14 constitution, which states in part: "General obligation bonds may
 
15 be issued by the State; provided that such bonds at the time of
 
16 issuance would not cause the total amount of principal and
 
17 interest payable in the current or any future fiscal year,
 
18 whichever is higher, on such bonds and on all outstanding general
 
19 obligation bonds to exceed: a sum equal to twenty per cent of the
 
20 average of the general fund revenues of the State in the three
 
21 fiscal years immediately preceding such issuance until June 30,
 
22 1982; and thereafter, a sum equal to eighteen and one-half per
 
23 cent of the average of the general fund revenues of the State in
 

 
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 1 the three fiscal years immediately preceding such issuance."
 
 2 Article VII, section 13 also provides that in determining the
 
 3 power of the State to issue general obligation bonds, certain
 
 4 bonds are excludable, including "reimbursable general obligation
 
 5 bonds issued for a public undertaking, improvement or system but
 
 6 only to the extent that reimbursements to the general fund are in
 
 7 fact made from the net revenue, or net user tax receipts, or
 
 8 combination of both, as determined for the immediately preceding
 
 9 fiscal year" and bonds constituting instruments of indebtedness
 
10 under which the State incurs a contingent liability as a
 
11 guarantor, but only to the extent the principal amount of such
 
12 bonds does not exceed seven per cent of the principal amount of
 
13 outstanding general obligation bonds not otherwise excluded under
 
14 said article VII, section 13.
 
15      (2)  Actual and estimated debt limits.  The limit on
 
16 principal and interest of general obligation bonds issued by the
 
17 State, actual for fiscal year 1999-2000 and estimated for each
 
18 fiscal year from 2000-2001 to 2002-2003, is as follows:
 
19          Fiscal           Net General          Debt Limit
 
20           Year           Fund Revenues
 
21        1996-1997         3,115,264,737
 
22        1997-1998         3,195,967,036
 
23        1998-1999         3,254,256,686
 

 
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 1        1999-2000         3,087,808,000      $589,871,788
 
 2        2000-2001         3,137,140,000       588,178,623
 
 3        2001-2002         3,153,478,000       584,550,956
 
 4        2002-2003         (not applicable)    578,336,270
 
 5 For fiscal years 1999-2000, 2000-2001, 2001-2002, and 2002-2003
 
 6 respectively, the debt limit is derived by multiplying the
 
 7 average of the net general fund revenues for the three preceding
 
 8 fiscal years by eighteen and one-half per cent.  The net general
 
 9 fund revenues for fiscal years 1996-1997, 1997-1998, and 1998-
 
10 1999 are actual, as certified by the director of finance in the
 
11 Statement of the Debt Limit of the State of Hawaii as of July 1,
 
12 1999, dated November 24, 1999.  The net general fund revenues for
 
13 fiscal years 1999-2000 to 2001-2002 are estimates, based on
 
14 general fund revenue estimates made as of September 3, 1999, by
 
15 the council on revenues, the body assigned by article VII,
 
16 section 7 of the state constitution to make such estimates, and
 
17 based on estimates made by the department of budget and finance
 
18 of those receipts which cannot be included as general fund
 
19 revenues for the purpose of calculating the debt limit, all of
 
20 which estimates the legislature finds to be reasonable.
 
21      (3)  Principal and interest on outstanding bonds applicable
 
22 to the debt limit. (A) According to the department of budget and
 
23 finance, the total amount of principal and interest on
 

 
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 1 outstanding general obligation bonds, after the exclusions
 
 2 permitted by article VII, section 13 of the state constitution,
 
 3 for determining the power of the State to issue general
 
 4 obligation bonds within the debt limit as of December 1, 1999, is
 
 5 as follows for fiscal year 2000-2001 to fiscal year 2006-2007:   
 
 6                     Fiscal           Principal
 
 7                      Year          and Interest
 
 8                     2000-2001      $352,508,780
 
 9                     2001-2002       367,994,493
 
10                     2002-2003       411,701,970
 
11                     2003-2004       378,223,219
 
12                     2004-2005       373,053,164
 
13                     2005-2006       347,383,328
 
14                     2006-2007       344,154,560
 
15 The department of budget and finance further reports that the
 
16 amount of principal and interest on outstanding bonds applicable
 
17 to the debt limit generally continues to decline each year from
 
18 fiscal year 2007-2008 to fiscal year 2019-2020 when the final
 
19 installment of $27,612,984 shall be due and payable.  (B) The
 
20 department of budget and finance further reports that the
 
21 outstanding principal amount of bonds constituting instruments of
 
22 indebtedness under which the State may incur a contingent
 
23 liability as a guarantor is $191,000,000, all or part of which is
 

 
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 1 excludable in determining the power of the State to issue general
 
 2 obligation bonds, pursuant to article VII, section 13 of the
 
 3 state constitution.
 
 4      (4)  Amount of authorized and unissued general obligation
 
 5 bonds and guaranties and proposed bonds and guaranties.  (A) As
 
 6 calculated from the state comptroller's bond fund report as of
 
 7 October 31, 1999, adjusted for (a) appropriations to be funded by
 
 8 general obligation bonds and reimbursable general obligation
 
 9 bonds as provided in Act 91, Session Laws of Hawaii 1999 (General
 
10 Appropriations Act of 1999) to be expended in fiscal year 2000-
 
11 2001; (b) appropriations to be funded by reimbursable general
 
12 obligation bonds as provided in Act 151, Session Laws of Hawaii
 
13 1999 (Relating to Hawaii Hurricane Relief Fund Bonds) to be
 
14 expended in fiscal year 2000-2001; and Act 156, Session Laws of
 
15 Hawaii 1999 (Judiciary Appropriations Act of 1999) to be expended
 
16 in fiscal year 2000-2001, the total amount of authorized but
 
17 unissued general obligation bonds is $1,396,394,543.  (B) As
 
18 reported by the department of budget and finance the outstanding
 
19 principal amount of bonds constituting instruments of
 
20 indebtedness under which the State may incur a contingent
 
21 liability as a guarantor is $191,000,000, all or part of which is
 
22 excludable in determining the power of the State to issue general
 
23 obligation bonds, pursuant to article VII, section 13 of the
 

 
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 1 state constitution.  The total amount of guaranties authorized by
 
 2 this Act is $47,500,000 and are herein validated.  The total
 
 3 amount of guaranties previously authorized and validated by this
 
 4 Act is $238,500,000.
 
 5      (5)  Proposed general obligation bond issuance.  As reported
 
 6 therein for fiscal years 1998-1999, 1999-2000, 2000-2001, 2001-
 
 7 2002, and 2002-2003, the State proposed to issue $200,000,000 in
 
 8 general obligation bonds during the remainder of fiscal year
 
 9 1999-2000, $350,000,000 during the first half of fiscal year
 
10 2000-2001, $150,000,000 during the second half of fiscal year
 
11 2000-2001, $150,000,000 during the first half of fiscal year 2001
 
12 -2002, $150,000,000 during the second half of fiscal year 2001-
 
13 2002, $100,000,000 during the first half of fiscal year 2002-
 
14 2003, and $300,000,000 during the second half of fiscal year
 
15 2002-2003.  It has been the practice of the State to issue
 
16 twenty-year serial bonds with principal repayments beginning the
 
17 third year, the bonds payable in substantially equal annual
 
18 installments of principal and interest payment with interest
 
19 payments commencing six months from the date of issuance and
 
20 being paid semi-annually thereafter.  It is assumed that this
 
21 practice will continue to be applied to the bonds which are
 
22 proposed to be issued except that principal repayments will begin
 
23 in the fourth year.
 

 
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 1      (6)  Sufficiency of proposed general obligation bond
 
 2 issuance to meet the requirements of authorized and unissued
 
 3 bonds, as adjusted, and bonds authorized by this Act.  From the
 
 4 schedule reported in paragraph (5), the total amount of general
 
 5 obligation bonds which the State proposes to issue during the
 
 6 fiscal years 1999-2000 to 2001-2002 is $1,000,000,000.  An
 
 7 additional $400,000,000 is proposed to be issued in fiscal year
 
 8 2002-2003.  The total amount of $1,000,000,000 which is proposed
 
 9 to be issued through fiscal year 2001-2002 is sufficient to meet
 
10 the requirements of the authorized and unissued bonds, as
 
11 adjusted, the total amount of which is $1,396,394,543, as
 
12 reported in paragraph (4), except for $396,394,543.  It is
 
13 assumed that the appropriations to which an additional
 
14 $396,394,543 in bond issuance needs to be applied will have been
 
15 encumbered as of June 30, 2002.  The $400,000,000 which is
 
16 proposed to be issued in fiscal year 2002-2003 will be sufficient
 
17 to meet the requirements of the June 30, 2002 encumbrances in the
 
18 amount of $396,394,543.  The amount of assumed encumbrances as of
 
19 June 30, 2002, is reasonable and conservative, based upon an
 
20 inspection of June 30 encumbrances of the general obligation bond
 
21 fund as reported by the state comptroller.  Thus, taking into
 
22 account the amount of authorized and unissued bonds, as adjusted,
 
23 and the bonds authorized by this Act versus the amount of bonds
 

 
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 1 which is proposed to be issued by June 30, 2002, and the amount
 
 2 of June 30, 2002 encumbrances versus the amount of bonds which is
 
 3 proposed to be issued in fiscal year 2002-2003, the legislature
 
 4 finds that in the aggregate, the amount of bonds which is
 
 5 proposed to be issued is sufficient to meet the requirements of
 
 6 all authorized and unissued bonds and the bonds authorized by
 
 7 this Act.
 
 8      (7)  Bonds excludable in determining the power of the State
 
 9 to issue bonds.  As noted in paragraph (1), certain bonds are
 
10 excludable in determining the power of the State to issue general
 
11 obligation bonds.  (A) General obligation reimbursable bonds can
 
12 be excluded under certain conditions.
 
13      It is not possible to make a conclusive determination as to
 
14 the amount of reimbursable bonds which are excludable from the
 
15 amount of each proposed bond issued because:
 
16      (i)  It is not known exactly when projects for which
 
17 reimbursable bonds have been authorized in prior acts and in this
 
18 Act will be implemented and will require the application of
 
19 proceeds from a particular bond issue; and
 
20      (ii)  Not all reimbursable general obligation bonds may
 
21 qualify for exclusion.
 
22      However, the legislature notes that with respect to the
 
23 principal and interest on outstanding general obligation bonds,
 

 
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 1 according to the department of budget and finance, the average
 
 2 proportion of principal and interest which is excludable each
 
 3 year from the calculation against the debt limit is 6.97 per cent
 
 4 for the ten years from fiscal year 2000-2001 to fiscal year 2009-
 
 5 2010.  For the purpose of this declaration, the assumption is
 
 6 made that five per cent of each bond issue will be excludable
 
 7 from the debt limit, an assumption which the legislature finds to
 
 8 be reasonable and conservative.  (B) Bonds constituting
 
 9 instruments of indebtedness under which the State incurs a
 
10 contingent liability as a guarantor can be excluded but only to
 
11 the extent the principal amount of such guaranties does not
 
12 exceed seven per cent of the principal amount of outstanding
 
13 general obligation bonds not otherwise excluded under
 
14 subparagraph (A) of this paragraph (7) and provided that the
 
15 State shall establish and maintain a reserve in an amount in
 
16 reasonable proportion to the outstanding loans guaranteed by the
 
17 State as provided by law.  According to the department of budget
 
18 and finance and the assumptions presented herein, the total
 
19 principal amount of outstanding general obligation bonds and
 
20 general obligation bonds proposed to be issued, which are not
 
21 otherwise excluded under article VII, section 13 of the state
 
22 constitution for fiscal years 1999-2000, 2000-2001, 2001-2002,
 
23 and 2002-2003 are as follows:
 

 
Page 23                                                    2873
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        

 
 1                Fiscal Year            Total Amount of
 
 2                                      General Obligation Bonds
 
 3                                      Not Otherwise Excluded By
 
 4                                      Article VII, Section 13
 
 5                                      of the State Constitution
 
 6                1999-2000                  3,309,433,537
 
 7                2000-2001                  3,600,550,972
 
 8                2001-2002                  3,677,655,955
 
 9                2002-2003                  3,843,443,582
 
10      Based on the foregoing and based on the assumption that the
 
11 full amount of a guaranty is immediately due and payable when
 
12 such guaranty changes from a contingent liability to an actual
 
13 liability, the aggregate principal amount of the portion of the
 
14 outstanding guaranties and the guaranties proposed to be
 
15 incurred, which does not exceed seven per cent of the average
 
16 amount set forth in the last column of the above table and for
 
17 which reserve funds have been or will have been established as
 
18 heretofore provided, can be excluded in determining the power of
 
19 the State to issue general obligation bonds.  As it is not
 
20 possible to predict with a reasonable degree of certainty when a
 
21 guaranty will change from a contingent liability to an actual
 
22 liability, it is assumed in conformity with fiscal conservatism
 
23 and prudence, that all guaranties not otherwise excluded pursuant
 

 
Page 24                                                    2873
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        

 
 1 to article VII, section 13 of the state constitution will become
 
 2 due and payable in the same fiscal year in which the greatest
 
 3 amount of principal and interest on general obligation bonds,
 
 4 after exclusions, occurs.  Thus, based on such assumptions and on
 
 5 the determination in paragraph (8), all of the outstanding
 
 6 guaranties can be excluded.
 
 7      (8)  Determination whether the debt limit will be exceeded
 
 8 at the time of issuance.  From the foregoing and on the
 
 9 assumption that all of the bonds identified in paragraph (5) will
 
10 be issued at an interest rate of 6.0 per cent, it can be
 
11 determined from the following schedule that the bonds which are
 
12 proposed to be issued, which include all authorized and unissued
 
13 bonds previously authorized, as adjusted, general obligation
 
14 bonds and instruments of indebtedness under which the State
 
15 incurs a contingent liability as a guarantor authorized in this
 
16 Act, will not cause the debt limit to be exceeded at the time of
 
17 such issuance:
 
18 Time of Issuance         Debt Limit       Greatest Amount
 
19 and Amount to be         at Time of         and Year of
 
20 Counted Against           Issuance        Highest Principal
 
21   Debt Limit                                and Interest
 
22                                        on Bonds and Guaranties
 

 
 
 
Page 25                                                    2873
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        

 
 1 Remainder FY 1999-2000
 
 2 $190,000,000             589,871,788   423,101,970 (2002-2003)
 
 3 1st half FY 2000-2001
 
 4 $332,500,000             588,178,623   443,051,970 (2002-2003)
 
 5 2nd half FY 2000-2001
 
 6 $142,500,000             588,178,623   451,601,970 (2002-2003)
 
 7 1st half FY 2001-2002
 
 8 $142,500,000             584,550,956   455,876,970 (2002-2003)
 
 9 2nd half FY 2001-2002
 
10 $142,500,000             584,500,956   464,426,970 (2002-2003)
 
11 1st half FY 2002-2003
 
12 $95,000,000              578,336,270   549,374,614 (2004-2005)
 
13 2nd half FY 2002-2003
 
14 $285,000,000             578,336,270   479,324,614 (2004-2005)
 
15      (9)  Overall and concluding finding.  From the facts,
 
16 estimates, and assumptions stated in this declaration of
 
17 findings, the conclusion is reached that the total amount of
 
18 principal and interest estimated for the general obligation bonds
 
19 authorized in this Act, and for all bonds authorized and
 
20 unissued, and calculated for all bonds issued and outstanding,
 
21 and all guaranties, will not cause the debt limit to be exceeded
 
22 at the time of issuance.
 

 
 
 
Page 26                                                    2873
                                     S.B. NO.           S.D. 1
                                                        H.D. 2
                                                        

 
 1      SECTION 6.  The legislature finds the bases for the
 
 2 declaration of findings set forth in this Act reasonable.  The
 
 3 assumptions set forth in this Act with respect to the principal
 
 4 amount of general obligation bonds which will be issued, the
 
 5 amount of principal and interest on reimbursable general
 
 6 obligation bonds which are assumed to be excludable, and the
 
 7 assumed maturity structure shall not be deemed to be binding, it
 
 8 being the understanding of the legislature that such matters must
 
 9 remain subject to substantial flexibility.
 
10      SECTION 7.  Statutory material to be repealed is bracketed.
 
11 New statutory material is underscored.
 
12      SECTION 8.  The provisions of this Act are declared to be
 
13 severable and if any portion thereof is held to be invalid for
 
14 any reason, the validity of the remainder of this Act shall not
 
15 be affected.
 
16      SECTION 9.  This Act shall take effect on July 1, 2005.