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HB 376: "An Act establishing a state bank; relating to insurance, mortgage lending, securities, and permanent fund dividends; and providing for an effective date."

00 HOUSE BILL NO. 376 01 "An Act establishing a state bank; relating to insurance, mortgage lending, securities, 02 and permanent fund dividends; and providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 06.60.015(a) is amended to read: 05 (a) The following persons are exempt from the mortgage lender or mortgage 06 broker licensing requirements of this chapter: 07 (1) a depository institution; 08 (2) a subsidiary that is 09 (A) owned and controlled by a depository institution; and 10 (B) regulated by a federal banking agency; 11 (3) an institution regulated by the Farm Credit Administration; or 12 (4) a federal, state, or local government agency, including an agency 13 that arranges or provides financing for mortgage loans, and the Alaska State Bank 14 established under AS 44.90.010.

01 * Sec. 2. AS 36.30.990(1) is amended to read: 02 (1) "agency" 03 (A) means a department, institution, board, commission, 04 division, authority, public corporation, the Alaska Pioneers' Home, the Alaska 05 Veterans' Home, or other administrative unit of the executive branch of state 06 government; 07 (B) does not include 08 (i) the University of Alaska; 09 (ii) the Alaska Railroad Corporation; 10 (iii) the Alaska Housing Finance Corporation; 11 (iv) a regional Native housing authority created under 12 AS 18.55.996 or a regional electrical authority created under 13 AS 18.57.020; 14 (v) the Department of Transportation and Public 15 Facilities, in regard to the repair, maintenance, and reconstruction of 16 vessels, docking facilities, and passenger and vehicle transfer facilities 17 of the Alaska marine highway system; 18 (vi) the Alaska Aerospace Corporation; 19 (vii) the Alaska Retirement Management Board; 20 (viii) the Alaska Seafood Marketing Institute; 21 (ix) the Alaska children's trust and the Alaska 22 Children's Trust Board; 23 (x) the Alaska Industrial Development and Export 24 Authority; 25 (xi) the Alaska State Bank; 26 * Sec. 3. AS 39.25.110(11) is amended to read: 27 (11) the officers and employees of the following boards, commissions, 28 and authorities: 29 (A) [REPEALED 30 (B)] Alaska Permanent Fund Corporation; 31 (B) [(C)] Alaska Industrial Development and Export Authority;

01 (C) [(D)] Alaska Commercial Fisheries Entry Commission; 02 (D) [(E)] Alaska Commission on Postsecondary Education; 03 (E) [(F)] Alaska Aerospace Corporation; 04 (F) [(G) REPEALED 05 (H)] Alaska Gasline Development Corporation and subsidiaries 06 of the Alaska Gasline Development Corporation; 07 (G) Alaska State Bank; 08 * Sec. 4. AS 39.50.200(b) is amended by adding a new paragraph to read: 09 (65) the board of directors of the Alaska State Bank (AS 44.90.100). 10 * Sec. 5. AS 43.23 is amended by adding a new section to read: 11 Sec. 43.23.058. Purchase of Alaska State Bank shares. (a) An applicant for a 12 permanent fund dividend who is eligible under this chapter to receive a permanent 13 fund dividend, or the applicant's authorized representative, may direct that all or part 14 of the amount of the dividend payment be used to purchase shares of the Alaska State 15 Bank established under AS 44.90.010 at a discounted rate. 16 (b) The department shall prepare the permanent fund dividend application to 17 allow an applicant, or the applicant's authorized representative, to direct the 18 department to purchase shares of the Alaska State Bank established under 19 AS 44.90.010 at a discounted rate, as authorized under (a) of this section, and to 20 provide the information that the department determines is necessary to implement (a) 21 of this section. 22 * Sec. 6. AS 44 is amended by adding a new chapter to read: 23 Chapter 90. Alaska State Bank. 24 Article 1. Establishment, Name, and Purposes. 25 Sec. 44.90.010. Establishment of bank. (a) The Alaska State Bank is 26 established in the department as a public corporation of the state. The exercise by the 27 bank of the powers given to the bank under this chapter is considered to be for a public 28 purpose. 29 (b) The primary purpose of the bank is to promote infrastructure, education, 30 science, technology, infrastructure maintenance, engineering, and productive capacity 31 in the state through the sale or leveraging of financial instrument packages, including

01 the sale or leveraging of financial instrument packages that facilitates access to 02 Federal Reserve System and United States Department of the Treasury 03 (1) transactions that provide reserve and capital requirements for the 04 bank to use in fractional reserve banking; in this paragraph, "fractional reserve 05 banking" means a process by which a bank holds reserves that are a fraction of the 06 amount of its deposit liability; and 07 (2) funds that can be distributed for other purposes of the bank. 08 (c) The bank is not subject to regulation by the department under AS 06.01 or 09 AS 06.05. The bank is subject to regulation by the department under AS 21 when it 10 offers insurance. The bank is exempt from AS 45.45.010 - 45.45.090 when lending 11 money under this chapter. The bank is not subject to AS 10.06 (Alaska Corporations 12 Code) or AS 10.20 (Alaska Nonprofit Corporation Act). 13 (d) The bank shall exercise the powers granted by this chapter for the benefit 14 of the people of the state, for their well-being and prosperity, and for the improvement 15 of their social and economic conditions. 16 Sec. 44.90.020. Use of name. (a) The bank shall conduct business under the 17 name of "Alaska State Bank." 18 (b) Within the scope of authority that the bank grants, the president of the 19 bank may execute instruments on behalf of the bank, including an instrument that 20 grants, conveys, or otherwise affects an interest in or lien on real or personal property. 21 (c) An officer or employee of the bank may execute instruments on behalf of 22 the bank if the board authorizes the officer or employee to execute the instruments on 23 behalf of the bank. 24 Sec. 44.90.030. Other purposes of the bank. In addition to the primary 25 purposes of the bank described in AS 44.90.010(b), the purposes of the bank are to 26 (1) provide financing, insurance, and funding for economic 27 development projects and packages of financial instruments in the state; in this 28 paragraph, "economic development project" includes a project for infrastructure, 29 infrastructure maintenance, and productive capacity; 30 (2) provide stability to the financial sector in the state; 31 (3) facilitate transactions with the Federal Reserve System and the

01 United States Department of the Treasury; 02 (4) receive funding from the state and the federal government; 03 (5) increase access to capital and financial services for new and 04 existing businesses and the customers of those businesses; 05 (6) promote long-term economic growth in the state; 06 (7) reduce the costs of public and private banking and financial 07 services; 08 (8) promote science, technology, and engineering in the state; 09 (9) increase the economic efficiency and productivity of the state and 10 of individuals in the state; 11 (10) leverage packages of bonds, grants, and stocks; 12 (11) increase educational levels in the state; and 13 (12) provide grants to schools, colleges, and universities in the state. 14 Article 2. Management and Operation of Bank. 15 Sec. 44.90.100. Board of directors. (a) A board of directors shall manage the 16 bank. 17 (b) The board shall specify locations for and maintain places of business in 18 which the bank will operate and shall adopt and enforce bylaws and procedures for the 19 transaction of the bank's business. 20 Sec. 44.90.110. Composition of board. The board consists of the governor, 21 the commissioner of commerce, community, and economic development, the 22 commissioner of revenue, and the commissioner of labor and workforce development. 23 Three members of the board constitute a quorum to transact business and exercise the 24 rights, duties, and powers of the board. 25 Sec. 44.90.120. Board chair and officers. The governor shall act as the chair 26 of the board. The board shall select the president and other officers of the bank. 27 Sec. 44.90.130. Employees. The bank may hire employees. The executive 28 director, other officers of the bank, and employees of the bank are state employees and 29 are in the exempt service under AS 39.25. 30 Sec. 44.90.140. Advisory board. (a) The board shall appoint an advisory 31 board of directors. The advisory board shall consist of seven members.

01 (b) The members of the advisory board shall consist of representatives of the 02 financial, business, agricultural, and labor sectors of the state and a representative 03 from the University of Alaska. The members of the advisory board may include 04 employees of the bank. 05 Sec. 44.90.150. Advisory board meetings and activities. (a) The advisory 06 board shall meet regularly with the management of the bank to review the bank's 07 operations and finances to determine whether the advisory board has 08 recommendations to improve management performance, customer service, and the 09 internal methods, procedures, and operating policies of the bank. 10 (b) The advisory board shall meet regularly with the board to discuss the 11 advisory board's recommendations and to provide advice, expertise, and information at 12 the request of the board. 13 (c) The advisory board shall recommend to the board the criteria for the board 14 to establish for placing a project in a category under AS 44.90.610 and, for each 15 investment proposal the bank receives, the category under AS 44.90.610 in which the 16 board shall place the investment proposal. 17 (d) At the request of the board, the advisory board shall recommend additional 18 objectives for the bank's operations. 19 (e) The advisory board shall provide advice and consultation to the board 20 regarding the appointment of bank officers. 21 (f) The members of the advisory board shall participate as voting members on 22 loan committees. 23 (g) The advisory board shall recommend objectives for the bank to achieve the 24 bank's science, technology, infrastructure, and productive capacity goals. 25 (h) The advisory board shall meet with the public on a regular schedule to 26 provide the public with information on its activities. 27 Sec. 44.90.160. Review committee. (a) The board shall establish and maintain 28 a review committee to review investment proposals submitted to the bank and to assist 29 the persons submitting the investment proposals to provide investment proposals that 30 are complete and coherent. 31 (b) The board shall identify and make public the requirements that the review

01 committee applies when reviewing investment proposals to determine whether the 02 investment proposals are complete and coherent. 03 (c) The members of the review committee may not be members of the board 04 or members of the advisory board. 05 Sec. 44.90.170. Confidentiality of records. The following records of the bank 06 are confidential and are not public records subject to disclosure under AS 40.25.110 - 07 40.25.121: 08 (1) commercial and financial information of a customer of the bank, 09 whether obtained directly or indirectly, except as required by a court; 10 (2) internal or interagency memoranda or letters, except as required by 11 a court; 12 (3) except as provided in AS 44.90.700, information that is contained 13 in or related to an examination, operating, or condition report prepared by, on behalf 14 of, or for the use of a state or federal agency responsible for regulating or supervising 15 activities of the bank. 16 Sec. 44.90.180. Cooperation with authority. The board may work with the 17 Alaska Industrial Development and Export Authority on bank projects under this 18 chapter, including funding projects jointly. 19 Sec. 44.90.190. Contracts and procurement. The bank is not subject to the 20 procurement requirements of AS 36.30 when the bank procures services or property 21 for use by the bank. The bank may contract with professional advisors, counsel, 22 technical experts, and agents to carry out the bank's powers and duties under this 23 chapter. 24 Article 3. Powers and Duties of the Bank. 25 Sec. 44.90.200. Bank powers. The bank may 26 (1) solicit, receive, and accept money or its equivalent on deposit from 27 private customers, whether the deposit is made subject to a check or is evidenced by a 28 certificate of deposit, passbook, note, receipt, or other writing; 29 (2) negotiate for and discount promissory notes and other evidences of 30 indebtedness, sell and buy money or its equivalent, lend money on personal or real 31 property or other security, and perform other similar financial operations;

01 (3) sell shares in the bank; 02 (4) accept appropriations of money by the legislature; 03 (5) provide its services to persons in the state, in the United States, and 04 outside the United States; 05 (6) make, purchase, guarantee, or hold loans 06 (A) for state and federal financial institutions or other financial 07 institutions; 08 (B) that are obtained as security pledged for, or that originated 09 in the restructuring of, a loan that the bank originates or participates in; 10 (C) for agencies or other instrumentalities of this state; or 11 (D) that the United States or an agency of the United States 12 insures or guarantees in whole or in part; 13 (7) make participation loans or purchase participation interests in loans 14 that are made or held by a bank, bank holding company, lending agency, or other 15 financial institution if the loan meets underwriting standards that are generally 16 accepted by state or federal financial regulatory agencies; 17 (8) invest money of the bank in a manner consistent with the policies 18 of the board; 19 (9) lease, assign, sell, exchange, transfer, convey, grant, pledge, or 20 mortgage real and personal property; 21 (10) perform the acts necessary, convenient, advisable, or desirable to 22 carry out the powers expressly granted or necessarily implied in this chapter, through 23 its president, officers, agents, or employees, or by contracts with another person; 24 (11) act as a custodian institution for financial institutions; 25 (12) issue bank loans to a financial institution; 26 (13) take the action necessary to satisfy federal requirements for the 27 operation of the bank, including obtaining insurance for depositors from the Federal 28 Deposit Insurance Corporation; 29 (14) perform the functions and provide the services of a clearinghouse, 30 including providing domestic and foreign exchange, and rediscount commercial paper 31 on terms prescribed by the board;

01 (15) issue loans to a partnership or to form a partnership; 02 (16) make loans for large projects involving state infrastructure, 03 natural resources, industry, or technology; 04 (17) make loans to or for educational institutions; 05 (18) purchase or insure loans to finance the costs of manufacturing, 06 industrial, enterprise, and insurance projects; 07 (19) provide liquidity to local banks and credit unions; 08 (20) issue stocks and bonds and act in the proprietary trading of stocks 09 and bonds with public and private interests consistent with 12 U.S.C. 1851 (Dodd- 10 Frank Wall Street Reform and Consumer Protection Act); 11 (21) issue stocks, bonds, and grants to be discounted, rediscounted, 12 packaged, reimbursed, leveraged, purchased, or held by the Federal Reserve System; 13 (22) provide low-interest loans, bond reimbursements, and grants to 14 and for schools, colleges, universities, students, science, and technology in the state; 15 (23) leverage projects and packages of stocks, bonds, and grants with 16 the state, municipalities, state agencies, public corporations, financial entities, 17 corporations, and other persons; 18 (24) roll over, discount, or rediscount public and private existing loans, 19 mortgages, bonds, bills of exchange, tax credits, and promissory notes. 20 Sec. 44.90.210. Deposits and other items accepted by the bank. (a) The 21 bank may accept 22 (1) deposits, grants, bonds, stocks, shares, bills of exchange, 23 promissory notes, rediscounting, tax credits, treasury bills, and treasury currency from 24 private customers, state agencies, and federal agencies; 25 (2) appropriations from the legislature; and 26 (3) money from the federal government. 27 (b) The bank may accept deposits in cash and by electronic means from 28 marijuana-related businesses. 29 (c) The bank shall create a computer application that is able to accept deposits, 30 process point of sale and gift cards, automatically send tax payments to the state, and 31 pay marijuana-related businesses.

01 (d) To help marijuana-related businesses make deposits and to help other 02 financial institutions receive deposits from marijuana-related businesses, the bank may 03 create a division within the bank that works with the Financial Crimes Enforcement 04 Network of the United States Department of the Treasury to post specific guidelines 05 and documents about federal regulations and the filing of suspicious activity reports 06 with the Financial Crimes Enforcement Network. 07 Sec. 44.90.220. Surety bonds. The bank may provide surety bonds for public 08 and private construction projects in the state. 09 Sec. 44.90.230. General powers. To further its purposes, the bank may, in 10 addition to its other powers, 11 (1) sue and be sued; 12 (2) have a seal and alter it at pleasure; 13 (3) make and alter bylaws for its organization and internal 14 management; 15 (4) adopt regulations governing the exercise of its corporate powers; 16 (5) acquire an interest in a project as necessary or appropriate to 17 provide financing for the project, whether by purchase, gift, or lease; 18 (6) accept gifts, grants, or loans from, and enter into contracts or other 19 transactions regarding them with, a federal agency, an agency or instrumentality of the 20 state, a municipality, a private organization, or another person; 21 (7) make deposits in national banks and in state banks, trust 22 companies, and mutual savings banks operating in accordance with the laws of the 23 state; 24 (8) enter into contracts with respect to the exercise of its powers, and 25 do all things necessary or convenient to carry out its corporate purposes and exercise 26 the powers granted in this chapter; and 27 (9) exercise the incidental powers that are necessary or required to 28 enable the bank to carry on effectively the business for which the bank was 29 established. 30 Sec. 44.90.240. Investment in property and banking premises. The bank 31 may acquire, purchase, hold, and convey real and personal property

01 (1) if the book asset value of the purchase or investment does not 02 exceed 60 percent of the capital and surplus of the bank and if the property is 03 necessary for the convenient transaction of its business, including buildings containing 04 offices, equipment, furniture and fixtures, leasehold improvements, parking lots, and 05 real property reasonably anticipated to be necessary for future expansion of the bank; 06 (2) when necessary to pay debts previously contracted in the course of 07 the bank's business; and 08 (3) at sale under judgment, decree, lien, or mortgage foreclosure, 09 against security held by the bank. 10 Sec. 44.90.250. Sale of discounted bank shares. The bank may sell bank 11 shares at a discounted rate 12 (1) directly to an individual who is a resident of the state; 13 (2) to the Department of Revenue under AS 43.23.058. 14 Article 4. Financial Provisions. 15 Sec. 44.90.300. Deposit interest. The bank shall pay interest on money 16 received on deposits made by customers of the bank at a rate that is comparable to the 17 average statewide interest rates paid by financial institutions and may offer other 18 financial products to state agencies on a competitive basis with other financial 19 institutions. 20 Sec. 44.90.310. Excess income. As soon as possible after the end of each 21 calendar year, the board shall determine the amount of income, if any, earned by the 22 bank in that calendar year that exceeds the amount of money that is necessary to pay 23 for the expenses of administering the activities of the bank. The bank shall deposit this 24 excess income in the bank fund. 25 Sec. 44.90.350. Project and bond leveraging. (a) The bank shall leverage the 26 funding for projects and financial packages to promote the purposes of the bank, 27 except that the bank investment may not exceed 35 percent of the total cost of a single 28 project or single financial package when combining all bonds, grants, obligations, 29 shares, insurance, and loans from the bank for the project. 30 (b) The bank investment may exceed the limit of 35 percent set under (a) of 31 this section

01 (1) if a person is disrupting the project by hostile, illegal, or predatory 02 financial action, as determined by the board or advisory board; 03 (2) for an individual infrastructure project, productive capacity project, 04 or financial package if the governor, the Alaska Industrial Development and Export 05 Authority, the president of the University of Alaska, the board, and the advisory board 06 place the project or package in the category described under AS 44.90.610(1); or 07 (3) for a research and development project related to education, 08 whether for profit or not for profit, if the board, advisory board, and president of the 09 University of Alaska identify the project as a project under AS 44.90.610(1); however, 10 the bank may not invest more than 80 percent of the total amount invested in the 11 research and development project related to education. 12 Sec. 44.90.360. Investment fund activity prohibited or restricted. (a) The 13 employees, directors, and investors in the bank may not use the bank 14 (1) for a sale of a borrowed security in anticipation that the security 15 price will fall and can be paid back from the profits earned after repurchasing the 16 security at a lower price; 17 (2) for the purchase of assets by paying a percentage of the value of the 18 assets and borrowing the balance from a bank or broker. 19 (b) The bank shall require, to the extent determined by the board, that the 20 financial instruments that are received or sold by the bank comply with the investment 21 standards established by P.L. 111-203 (Dodd-Frank Wall Street Reform and 22 Consumer Protection Act) and by 7 U.S.C. 1 - 27f (Commodity Exchange Act) as 7 23 U.S.C. 1 - 27f (Commodity Exchange Act) existed before enactment of P.L. 111-203 24 (Dodd-Frank Wall Street Reform and Consumer Protection Act). 25 (c) The board shall place derivatives, including high risk derivatives that are 26 predatory financial instruments in the category established under AS 44.90.610(4). 27 (d) The bank may not issue or invest in derivatives that are credit default 28 swaps and may not issue or invest in other derivatives unless the derivatives comply 29 with federal law. The bank shall severely restrict or penalize the use of high risk 30 derivatives, including credit default swaps and predatory financial instruments. In this 31 subsection, "credit default swap" means a financial contract under which a buyer of

01 debt attempts to eliminate possible loss arising from default by the issuer of the debt. 02 (e) In this section, "predatory financial instrument" means a high risk 03 investment that can cause debt-pyramiding, asset-stripping, or a debt for equity change 04 of ownership. 05 Sec. 44.90.370. Bonds of the bank. (a) The bank may issue bonds, including 06 bonds on which the principal and interest are payable 07 (1) exclusively from the income and receipts or other money derived 08 from the project financed with the proceeds of the bonds; 09 (2) exclusively from the income and receipts or other money derived 10 from designated projects or development projects or other sources whether or not the 11 projects are financed, insured, or guaranteed in whole or in part with the proceeds of 12 the bonds; or 13 (3) from the income, receipts, and other assets of the bank. 14 (b) The bank shall authorize its bonds by resolution of the bank. The bonds 15 must be dated and mature as the resolution provides. The resolution may provide the 16 interest rate, the denominations, the form, the registration privileges, the manner of 17 execution, the medium of payment, the place of payment, and the terms of redemption 18 for the bonds. 19 (c) The bonds of the bank, regardless of form or character, are negotiable 20 instruments for all the purposes of AS 45.01 - AS 45.08, AS 45.12, AS 45.14, and 21 AS 45.29 (Uniform Commercial Code). 22 (d) The bank may sell its bonds at public or private sale in the manner, for the 23 price, and at the time that the bank determines. 24 (e) Before issuing bonds, the bank shall provide for consideration that the 25 bank judges is at least sufficient to pay the principal of and interest on the bonds as the 26 bonds become due, to create and maintain the reserves for the payments that the bank 27 considers necessary or desirable, and to meet all obligations and necessary costs in 28 connection with the bonds. 29 (f) The superior court may hear and determine actions relating to the bonds of 30 the bank, including actions or other proceedings brought to foreclose or otherwise 31 enforce a mortgage, pledge, assignment, or security interest brought by or for the

01 benefit or security of a holder of the bank's bonds or by a trustee or other 02 representative of the holders. 03 (g) The bank may combine, for the purposes of a single offering, bonds 04 financing more than one project. 05 Sec. 44.90.380. Infrastructure and productive capacity projects. If a project 06 is not subject to AS 36.05.005 - 36.05.110, the bank shall require the owners of 07 infrastructure projects or productive capacity projects that are leveraged through the 08 bank and that exceed $25,000 to require that the contractors and subcontractors on 09 those projects pay their laborers, mechanics, and field surveyors wages that are not 10 less than the current prevailing rate of wages required by AS 36.05.010, based on the 11 date of the contract for the project, not on the receipt of bids. In this section, "laborer, 12 mechanic, or field surveyor" has the meaning given in AS 36.95.010. 13 Sec. 44.90.390. Terms of loans. The board shall determine the monetary 14 increments for bonds and loan terms and allow for the creation of bonds that have a 15 term of 100 years. 16 Sec. 44.90.400. Tax exemption. (a) The bank and its property, franchises, 17 capital, reserves, surpluses, income, and other money are exempt from taxation by the 18 state or a municipality. 19 (b) All obligations issued under this chapter are considered to be issued by a 20 body corporate and public of the state and for an essential public and governmental 21 purpose, and the obligations, and the interest and income on and from the obligations, 22 and all fees, charges, funds, revenue, income, and other money pledged or available to 23 pay or secure the payment of the obligations, or interest on the obligations, are exempt 24 from taxation except for transfer, inheritance, and estate taxes. 25 Sec. 44.90.410. Reserves against deposits. As provided by the regulations of 26 the bank, the bank shall maintain a reserve fund sufficient to maintain liquidity and 27 meet all reasonable demands of depositors. 28 Sec. 44.90.420. Bond debt reimbursement schedules. The board shall 29 publish bond debt reimbursement schedules each year on a date appropriate for 30 industrial and educational timetables. 31 Sec. 44.90.430. Nonpayment of tax. The board may declare an individual

01 financial instrument void if a court determines that a tax imposed on a transaction 02 involving the financial instrument has not been paid. 03 Sec. 44.90.440. Acquisition of property to satisfy or protect previous loan. 04 The bank may accept property of any kind to satisfy or protect a loan previously made 05 by the bank in good faith and in the ordinary course of business. The bank shall enter 06 the property on the books at cost or fair market value, whichever amount is less. The 07 bank shall dispose of property acquired to satisfy or protect previous loans over the 08 periods that the bank establishes by regulation. 09 Article 5. Alaska State Bank Fund. 10 Sec. 44.90.500. Alaska state bank fund. (a) The Alaska state bank fund is 11 established in the general fund. The bank fund consists of money appropriated to the 12 bank fund, money received from the Federal Reserve System and the United States 13 Treasury, interest received by the bank, and income received by the bank, including 14 the excess income calculated under AS 44.90.310. 15 (b) The bank may spend the money appropriated to the bank fund to 16 implement the provisions of this chapter without further appropriation. Appropriations 17 to the bank fund do not lapse under AS 37.25.010, but remain in the bank fund for 18 future disbursements. 19 (c) The legislature may appropriate to the bank fund the income and interest 20 received by the bank. 21 (d) Nothing in this section creates a dedicated fund. 22 Sec. 44.90.510. Fund use limit. During a fiscal year of the bank, the bank may 23 not use more than 25 percent of an amount that is equal to the value of the bank fund 24 at the beginning of that fiscal year for one construction project, productive capacity 25 project, or financial package, unless the process of rediscounting with the Federal 26 Reserve System and combining with the United States Treasury results in an amount 27 of more than 25 percent. 28 Article 6. Projects. 29 Sec. 44.90.600. Setting project priorities. The board shall determine the 30 priority of each project proposed for bank investment. The board shall place each 31 project proposed for bank investment in one of the four categories of priority

01 described under AS 44.90.610. The board shall establish the requirements that an 02 investment proposal must meet to be placed in a category described under 03 AS 44.90.610. 04 Sec. 44.90.610. Project categories. The following categories of projects for 05 bank investment are listed in descending order of priority: 06 (1) the first category applies to projects for education, science, 07 technology, productive capacity, and infrastructure; under this category, a project will 08 receive grants, stock purchases, bond reimbursement, and low interest rates; 09 (2) the second category applies to projects for education, science, 10 technology, productive capacity, and infrastructure; under this category, a project will 11 receive interest rates below the market interest rate, limited stock purchases, and 12 limited bond reimbursements; 13 (3) the third category applies to productive capacity, infrastructure, and 14 commercial business projects; under this category, a project will receive competitive 15 interest rates; 16 (4) the fourth category applies to projects with financial instruments 17 that present a high risk of loss; the bank will charge the projects in this category higher 18 interest rates than the other categories under this section, and the bank may impose 19 other requirements that the board determines are appropriate. 20 Sec. 44.90.620. Science and technology projects. (a) The board shall consider 21 funding science and technology projects that the University of Alaska, the Alaska 22 Industrial Development and Export Authority, or the advisory board identifies as 23 qualified for placement under AS 44.90.610(1), (2), or (3). 24 (b) When determining whether the bank will fund science and technology 25 projects, the board shall select projects that apply the principles of industrial science 26 and efficiency, including principles of industrial science and efficiency that are 27 associated with amperage, brightness, British thermal units, clarity, conductivity, 28 dynamics, energy coherence, energy conversion, energy flux density, horsepower, 29 intelligence, joules, luminosity, the machine tool principle, miniaturization, newtons, 30 plasma coherence, potential population density, the principle of least action, 31 productivity, qualitative transformation, radiancy, reliability, renewability, self-

01 organization, sustainability, thermal efficiency, throughput, torque, transparency, 02 volumetric energy density, volumetric energy efficiency, voltage, wattage, and work 03 flux density. In this subsection, 04 (1) "amperage" means the volume of electricity; 05 (2) "brightness" means the intensity of light emanating from a surface 06 or a point source; 07 (3) "British thermal unit" means the amount of heat required to raise 08 the temperature of one pound of water by one degree Fahrenheit; 09 (4) "clarity" means the quality of being clear, radiant, coherent, lucid, 10 intelligible, sharp in image or sound, or easy to see or hear; 11 (5) "conductivity" means the degree to which a specified material 12 conducts electricity or heat; 13 (6) "dynamics" means the cause of change or growth of an object, 14 force, motion, development, or intensity of a phenomenon or process; 15 (7) "energy coherence" means, for industrial policy, the ability to 16 select and utilize a particular phenomenon, wavelength, or process in the electrometric 17 spectrum; 18 (8) "energy conversion" means to transform one form of energy to 19 another form of energy; 20 (9) "energy flux density" means the amount of action or qualitative 21 transformation effected for each cross sectional area in an energy function; 22 (10) "horsepower" means the comparison of the output of horses with 23 that of engines, generally considered a unit of power equal to 550 foot-pounds a 24 second; 25 (11) "intelligence" means the ability to acquire and apply cognition, 26 knowledge, and skills; 27 (12) "joule" means a unit of energy equal to the energy transferred to, 28 or work done on, an object when a force of one newton acts on that object in the 29 direction of its motion through one meter; 30 (13) "luminosity" means the total amount of energy emitted by an 31 object for each unit of time;

01 (14) "machine tool principle" means the process of a scientist 02 recognizing a paradox and testing a hypothesis using an experimental apparatus that 03 becomes a machine tool or technology that is used by industry or commerce to 04 improve productivity or efficiency; 05 (15) "miniaturization" means the process of designing and 06 manufacturing smaller versions of mechanical, optical, and electronic products or 07 other devices; 08 (16) "newton" means the force required to cause a mass of one 09 kilogram to accelerate at a rate of one meter a second squared in the absence of other 10 force-producing effects; 11 (17) "plasma coherence" means, for industrial policy, the ability to 12 select and use a particular phenomenon, wavelength, or process in the fourth state of 13 matter that is an ionized gas having self-organizing properties; 14 (18) "potential population density" means the number of people for 15 each square mile or for each square meter supported by infrastructure and technology; 16 (19) "principle of least action" means a universal efficiency principle 17 in physics; 18 (20) "productivity" means the amount of output a worker can produce 19 in a given period or the effectiveness of effort as measured in terms of the rate of 20 output for each unit of input; 21 (21) "qualitative transformation" means the functional change in the 22 nature and character of a process; 23 (22) "radiancy" means the amount of radiation or heat that is emitted, 24 reflected, transmitted, or received by a given surface area; 25 (23) "reliability" means the 26 (A) degree to which the result of a measurement, calculation, or 27 specification can be depended on to be accurate; or 28 (B) rate of failure in production or a process; 29 (24) "renewability" means a source of energy that is not depleted when 30 used; 31 (25) "self-organization" means a process composed of many parts

01 spontaneously acquiring its structure or function through self-assembly; 02 (26) "sustainability" means meeting the needs of the present without 03 compromising future generations; 04 (27) "thermal efficiency" means the percentage of energy taken from 05 combustion that is converted to mechanical work or the ratio of hot and cold input and 06 output when measuring heat loss; 07 (28) "throughput" means the rate of production or processing; 08 (29) "torque" means the measurement of the ability of a rotating 09 element to overcome turning resistance; 10 (30) "transparency" means the quality of allowing the passage of a 11 specified form of radiation without appreciable scattering; 12 (31) "voltage" means the pressure of electricity; 13 (32) "volumetric energy density" means the amount of energy stored in 14 a given system or area of space for each unit of volume or mass; 15 (33) "volumetric energy efficiency" means the measurement, by 16 volume, of the ratio of maximum theoretical energy potential to actual measured use 17 or work; 18 (34) "wattage" means the amount of electricity used by a power- 19 consuming device; 20 (35) "work flux density" means the amount of action or qualitative 21 transformation effected for each cross sectional area in a work function. 22 Article 7. General Administrative Provisions. 23 Sec. 44.90.700. Examinations and audits. (a) In addition to any other 24 regulation allowed or required under this chapter, the department shall examine the 25 bank at least once each calendar quarter to verify and ensure that the bank is 26 complying with the regulations of the board. The department shall report the results of 27 the examination to the board. The department's report is a public record subject to 28 disclosure under AS 40.25.110 - 40.25.121. 29 (b) The bank shall have an audit of the accounts and financial affairs of the 30 bank performed by an independent auditor at least once every two years. 31 Sec. 44.90.710. Regulations. The bank shall adopt regulations consistent with

01 this chapter and other applicable law to 02 (1) ensure the safety and soundness of the bank, adhere to sound 03 underwriting practices, and reflect applicable standards for safety and soundness as 04 provided in 12 C.F.R. 364; 05 (2) specify limits for loans and other obligations the bank makes or 06 undertakes; 07 (3) specify reserve requirements; 08 (4) set other requirements that the board considers necessary to 09 administer the bank under this chapter; 10 (5) determine borrower eligibility; 11 (6) set loan guidelines and terms, including 12 (A) maximum loan amounts; 13 (B) required loan-to-value ratios; and 14 (C) a method for determining loan interest rates; 15 (7) identify the characteristics of projects eligible for loans or purchase 16 of loans; and 17 (8) establish the qualifications of loan originators and servicers and the 18 method of allocating amounts available for the purchase of loans. 19 Sec. 44.90.720. Public meetings. The board shall hold public meetings on a 20 regular basis. 21 Sec. 44.90.730. Nonapplicability of Administrative Procedure Act. Except 22 for AS 44.62.310 - 44.62.319 (Open Meetings Act), the provisions of the 23 Administrative Procedure Act regarding the adoption of regulations (AS 44.62.040 - 24 44.62.320) do not apply to the bank. 25 Sec. 44.90.740. Regulation adoption procedure. (a) Except as provided in 26 AS 44.90.750, at least 15 days before adopting regulations, the bank shall give public 27 notice of the proposed regulation by publishing the notice in at least three newspapers 28 of general circulation in the state and by mailing a copy of the notice to every person 29 who has filed a request for notice of proposed regulations with the bank. The public 30 notice must include a statement of the time, place, and nature of the proceedings for 31 the regulations and must include an informative summary of the subject of the

01 proposed regulatory action. 02 (b) On the date and at the time and place designated in the notice, the bank 03 shall give each interested person, an authorized representative of the person, or both, 04 the opportunity to present statements, arguments, and viewpoints orally or in writing. 05 The bank shall consider all relevant matter presented to it before adopting the 06 proposed regulations. 07 (c) The bank may continue or postpone a hearing to a time and place 08 determined by the bank and announced at the hearing before taking action to continue 09 or postpone the hearing. 10 (d) The bank may adopt, amend, or repeal a regulation that varies from the 11 informative summary specified in this section if the subject matter of the regulation 12 remains the same and if the original notice of the proposed regulation reasonably 13 notified the public of its subject matter so that a person could determine whether the 14 bank's proposed regulation on the subject affected the person's interests. 15 Sec. 44.90.750. Emergency regulations. (a) The bank may adopt emergency 16 regulations if, in the order of the emergency regulation, the bank states the facts 17 constituting the emergency and makes a finding that the emergency regulation is 18 necessary for the immediate preservation of the orderly operation of the bank's 19 programs. 20 (b) The requirements of AS 44.90.740 do not apply to the initial adoption of 21 emergency regulations. However, the bank shall, within 10 days after adopting the 22 emergency regulations, publish notice of the emergency regulations in accordance 23 with the notice procedures in AS 44.90.740. 24 (c) An emergency regulation does not remain in effect for more than 120 days 25 unless, before the expiration of that period, the bank adopts the emergency regulation 26 as a permanent regulation in accordance with the procedures specified in 27 AS 44.90.740. 28 Sec. 44.90.760. Effective date of regulations. A regulation adopted by the 29 bank takes effect immediately upon its adoption by the bank or at another time 30 specified by the bank in its order of adoption. 31 Sec. 44.90.770. Regulation distribution. (a) The bank shall make available to

01 members of the public copies of the regulations adopted under this chapter. Within 45 02 days after adoption of a regulation, the chair of the bank shall submit the regulation 03 adopted to the chair of the Administrative Regulation Review Committee under 04 AS 24.20.400 - 24.20.460. 05 Article 8. Miscellaneous Provisions. 06 Sec. 44.90.800. Civil actions. A person may bring a civil action against the 07 state for a claim that arises out of a transaction that is connected with the operation of 08 the bank. 09 Sec. 44.90.810. Prohibited bank practices. The bank may not engage in 10 unfair, deceptive, or fraudulent practices, including predatory practices in loan 11 origination. 12 Sec. 44.90.820. Compliance with law. Except as otherwise provided by this 13 chapter, the bank shall comply with all federal and state laws related to the bank's 14 operations, including federal law related to issuing financial instruments. 15 Article 9. General Provisions. 16 Sec. 44.90.990. Definitions. In this chapter, unless the context indicates 17 otherwise, 18 (1) "advisory board" means the advisory board appointed under 19 AS 44.90.140; 20 (2) "bank" means the Alaska State Bank established under 21 AS 44.90.010; 22 (3) "bank fund" means the Alaska state bank fund created under 23 AS 44.90.500; 24 (4) "board" means the board of directors of the Alaska State Bank; 25 (5) "customer" means a person that has transacted or is transacting 26 business with the bank, that has used or is using the services of the bank, or for whom 27 the bank has acted or is acting as a fiduciary with respect to trust property; 28 (6) "department" means the Department of Commerce, Community, 29 and Economic Development; 30 (7) "derivative" means a security with a price that depends on the 31 underlying asset;

01 (8) "financial instruments" means bonds, grants, shares, insurance, 02 loans, bills of exchange, promissory notes, treasury bills and treasury currency cash, 03 contractual rights, or other types of assets; 04 (9) "grant" includes bond debt reimbursement; 05 (10) "infrastructure" means 06 (A) bridges, dams, highways, roads, pathways, waterways, 07 navigable water, railroads, electrical production and distribution, water 08 management systems, communication systems, transportation systems, 09 agricultural structures, schools, universities, and other structures and facilities 10 required for the operation of a society; and 11 (B) the maintenance of the structures and facilities described in 12 (A) of this paragraph; 13 (11) "leverage" means using debt to create new loans; 14 (12) "productive capacity" means the physical plant, equipment, 15 vehicles, ships, trains, buildings, technology, and engineering services of a public or 16 private enterprise; 17 (13) "regulation" means the adoption, amendment, or repeal of a 18 regulation. 19 Sec. 44.90.995. Short title. This chapter may be cited as the Alaska State Bank 20 Act. 21 * Sec. 7. AS 45.55.990(32) is amended to read: 22 (32) "security" means a note; stock; treasury stock; bond; debenture; 23 evidence of indebtedness; certificate of interest or participation in any profit-sharing 24 agreement; limited liability company interest under AS 10.50, notwithstanding the 25 limitations of AS 45.08.103(c); collateral-trust certificate; preorganization certificate 26 or subscription; transferable share; investment contract; voting-trust certificate; 27 certificate of deposit for a security; viatical settlement interest; certificate of interest or 28 participation in an oil, gas, or mining title or lease or in payments out of production 29 under the title or lease or in any sale of or indenture or bond or contract for the 30 conveyance of land or any interest in land; an option on a contract for the future 31 delivery of agricultural or mineral commodities or any other commodity offered or

01 sold to the public and not regulated by the Commodity Futures Trading Commission; 02 however, the contract or option is not subject to the provisions of AS 45.55.070 if it is 03 sold or purchased on the floor of a bona fide exchange or board of trade and offered or 04 sold to the public by a broker-dealer or agent registered under this chapter; investment 05 of money or money's worth including goods furnished or services performed in the 06 risk capital of a venture with the expectation of some benefit to the investor where the 07 investor has no direct control over the investment or policy decision of the venture; or, 08 in general, any interest or instrument commonly known as a "security," or any 09 certificate of interest or participation in, temporary or interim certificate for, receipt 10 for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing; 11 "security" does not include a participation agreement entered into under AS 14.40.802, 12 a program account established under AS 06.65, [OR] an insurance or endowment 13 policy or annuity contract under which an insurance company promises to pay a fixed 14 or variable sum of money either in a lump sum or periodically for life or for some 15 other specified period, or a share in the Alaska State Bank established under 16 AS 44.90.010; 17 * Sec. 8. The uncodified law of the State of Alaska is amended by adding a new section to 18 read: 19 APPLICABILITY. AS 44.90.430, added by sec. 6 of this Act, applies to instruments 20 entered into on or after the effective date of this Act. 21 * Sec. 9. This Act takes effect July 1, 2019.