Legislature(2017 - 2018)

2017-01-18 Senate Journal

Full Journal pdf

2017-01-18                     Senate Journal                      Page 0037
SB 26                                                                                                                         
SENATE BILL NO. 26 BY THE SENATE RULES COMMITTEE                                                                                
BY REQUEST OF THE GOVERNOR, entitled:                                                                                           
       "An Act relating to the Alaska Permanent Fund                                                                            
       Corporation, the earnings of the Alaska permanent fund,                                                                  
       and the earnings reserve account; relating to the mental                                                                 
       health trust fund; relating to deposits into the dividend                                                                
       fund; relating to the calculation of permanent fund                                                                      
       dividends; relating to unrestricted state revenue available                                                              
       for appropriation; and providing for an effective date."                                                                 
was read the first time and referred to the State Affairs and Finance                                                           
The following fiscal information was published today:                                                                           
Fiscal Note No. 1, zero, Department of Administration                                                                           
Fiscal Note No. 2, Department of Corrections                                                                                    
Fiscal Note No. 3, Department of Revenue                                                                                        
Fiscal Note No. 4, zero, Department of Revenue                                                                                  
Fiscal Note No. 5, zero, Department of Administration                                                                           
Fiscal Note No. 6, Department of Revenue                                                                                        

2017-01-18                     Senate Journal                      Page 0038
Governor's transmittal letter dated January 17:                                                                                 
Dear President Kelly:                                                                                                           
Under the authority of Article III, Section 18, of the Alaska                                                                   
Constitution, I am transmitting a bill relating to the Alaska permanent                                                         
fund and the funding structure for State government.                                                                            
This bill would establish a new financial model to enable sustainable                                                           
funding of State services and the protection of the Permanent Fund.                                                             
The bill would provide for an annual sustainable draw, subject to                                                               
appropriation, from the Permanent Fund earnings reserve account to                                                              
the general fund to support State government services. Additionally,                                                            
the bill would provide that the Legislature may make appropriations                                                             
for Permanent Fund dividends based on the value of the entire                                                                   
Permanent Fund and the value of mineral royalties. As a result of the                                                           
changes in this bill, the Permanent Fund earnings reserve account                                                               
would generate a predictable and solid return of revenues for State                                                             
government, and the dividend would continue, but on a more                                                                      
sustainable and predictable basis.                                                                                              
In detail, the bill would make the following changes to allow for                                                               
sustainable withdrawals from the Permanent Fund to the general fund:                                                            
     · Amend AS 37.13.145 to provide for an annual appropriation                                                                
          from the earnings reserve account to the general fund to pay                                                          
          for State government services, calculated based on five and                                                           
          one-quarter percent of the average market value of the                                                                
          Permanent Fund for the first five of the preceding six fiscal                                                         
          years (hereafter, "POMV draw").                                                                                       
     · Add a new section, AS 37.13.146, to provide that the                                                                     
          Legislature may appropriate for the payment of dividends                                                              
          from the general fund based on an amount equal to 20 percent                                                          
          of the POMV draw and 20 percent of the mineral royalties                                                              
          received by the State. For the next two years, the dividend                                                           
          would be set at $1,000. Thereafter, the new formula would go                                                          
          into effect, resulting in a dividend of approximately $1,000                                                          
          into the future.                                                                                                      

2017-01-18                     Senate Journal                      Page 0039
     · Change the inflation-proofing mechanism by providing that                                                                
          the Legislature may appropriate any amount in the earnings                                                            
          reserve that exceeds the annual POMV draw multiplied by                                                               
          four to Permanent Fund principal. This will ensure that a                                                             
          sufficient amount of funds remains in the earnings reserve                                                            
          account for the POMV draw, while also continuing to build                                                             
          up the principal of the Permanent Fund over time.                                                                     
     · Add a new section reducing the annual draw from the                                                                      
          earnings reserve account to the general fund if the State                                                             
          receives more than $1.2 billion in mineral royalties and oil                                                          
          and gas production taxes in a fiscal year.                                                                            
Finally, the bill seeks to amend the uncodified law to express the                                                              
intent of the Legislature that the Legislature reevaluate the use of                                                            
Permanent Fund earnings as provided for in this bill in three years.                                                            
Upon becoming law, the bill would become effective immediately.                                                                 
I urge your prompt and favorable action on this measure.                                                                        
Bill Walker