Legislature(2003 - 2004)
04/15/2003 01:40 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 203 "An Act relating to the definitions of 'net income' and 'unrestricted net income' for purposes of calculating the dividends to be paid to the state by the Alaska Industrial Development and Export Authority; and providing for an effective date." REPRESENTATIVE HAWKER, SPONSOR, testified in support of the bill. He explained that the bill regarded the formula by which the Alaska Industrial Development and Export Authority (AIDEA) determined its dividend to the state of Alaska. He noted that current statutes directed that 25 to 50 percent of Authority's net income be paid as a dividend to the State, not to exceed its unrestricted net income. He stated that the language defining "net income" was later modified to agree with the agency's accounting standards and annual report language. He noted that the legislature subsequently defined the income subject to distribution to exclude intergovernmental transfers, capital contributions and grants. He pointed out that the State did not wish to change these exclusions. Representative Hawker observed that assets invested in by AIDEA had become impaired in the current fiscal year. He acknowledged that there is a loss of value when something happens to an asset owned by AIDEA that causes its value to decline or become impaired, but emphasized that the operating net income for the year is not affected. He maintained that impaired assets do not affect the Authority's current net income. Impairments are currently taken into consideration in calculations of net income for AIDEA dividend distributions. In the current year, values of certain assets were written down as impairment loss, which resulted in a negative net income and no dividend to the state of Alaska. Representative Hawker stated that the proposed bill would change this practice, and no longer account for failed assets when calculating the dividend since these non- performing properties do not result in a net loss to the agency. He observed that, had the State not factored two impaired assets into AIDEA's net income for the past fiscal year, the State would have received between $9 and $18 million in a dividend payment. He emphasized the benefit of clarifying the dividend policy and stated that there is no reason not to have a general fund contribution by AIDEA when unusual write-downs occur, which do not have an otherwise detrimental affect on the cash flow. Representative Hawker noted that at the end of fiscal year, AIDEA showed $789 million in unrestricted net assets. He maintained that the new procedure would not result in a loss to the agency, and would enable the State to budget for a consistent dividend payment. In response to a question by Co-Chair Harris, Representative Hawker stated that the Labor and Commerce Committee did not amend the bill. Co-Chair Harris asked for clarification about the net effect of the bill. Representative Hawker clarified that the bill would further define "net income" and "unrestricted net income" for the purpose of calculating the dividend. Co-Chair Harris expressed his strong support of the bill. MIKE BARRY, CHAIRMAN, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY, (AIDEA) spoke in opposition to the legislation. He explained that the basis for opposition was the issue of consistency. He discussed the history of the dividend policy and expressed the Board's full support of the current policy. He noted the controversy within the businesses community regarding the rules established for calculating the dividend payment. He pointed out that this was the first year in which AIDEA had not paid a dividend. He stated the reason as being two large investments that had suffered impairment. Mr. Barry maintained that the Authority might be damaged by the prospect that the legislature may at any time change the rules established by the original statute. He noted that a lack of consistency might negatively impact the impression of the Authority by the business and bonding community. HB 203 was HEARD and HELD in Committee for further consideration.