Legislature(2023 - 2024)ADAMS 519

05/04/2023 10:30 AM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
+ SB 98 AK PERM FUND CORP. & PCE ENDOWMENT FUND TELECONFERENCED
Heard & Held
+ HB 19 REGISTRATION OF BOATS: EXEMPTION TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 4, 2023                                                                                             
                        10:35 a.m.                                                                                              
                                                                                                                                
10:35:56 AM                                                                                                                   
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Foster  called the  House Finance Committee  meeting                                                                   
to order at 10:35 a.m.                                                                                                          
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bryce Edgmon, Co-Chair                                                                                           
Representative Neal Foster, Co-Chair                                                                                            
Representative DeLena Johnson, Co-Chair                                                                                         
Representative Julie Coulombe (via teleconference)                                                                              
Representative Mike Cronk                                                                                                       
Representative Alyse Galvin                                                                                                     
Representative Sara Hannan                                                                                                      
Representative Andy Josephson                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Will Stapp                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Frank Tomaszewski                                                                                                
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Tim  Grussendorf,  Staff, Senator  Lyman  Hoffman,  Co-Chair,                                                                   
Senate  Finance  Committee;  Representative   Louise  Stutes,                                                                   
Sponsor;  Glenn Haight,  Commissioner,  Commercial  Fisheries                                                                   
Entry  Commission; Tracy  Welch,  Executive Director,  United                                                                   
Fishermen of Alaska.                                                                                                            
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Deven  Mitchell, Executive  Director,  Alaska Permanent  Fund                                                                   
Corporation;   Pam   Leary,  Director,   Treasury   Division,                                                                   
Department of Revenue.                                                                                                          
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 19     REGISTRATION OF BOATS: EXEMPTION                                                                                      
                                                                                                                                
          HB 19 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
CSSB 98(FIN)                                                                                                                    
          AK PERM FUND CORP. & PCE ENDOWMENT FUND                                                                               
                                                                                                                                
          CSSB 98(FIN) was HEARD and HELD in committee for                                                                      
          further consideration.                                                                                                
                                                                                                                                
Co-Chair Foster reviewed the meeting agenda.                                                                                    
                                                                                                                                
CS FOR SENATE BILL NO. 98(FIN)                                                                                                
                                                                                                                                
     "An   Act   requiring   the    Alaska   Permanent   Fund                                                                   
     Corporation  to  manage   the  power  cost  equalization                                                                   
     endowment  fund;  requiring  the Alaska  Permanent  Fund                                                                   
     Corporation to  publish certain reports relating  to the                                                                   
     power  cost  equalization  endowment fund;  relating  to                                                                   
     the Alaska  Permanent Fund Corporation's  management and                                                                   
     investment  of  the power  cost  equalization  endowment                                                                   
     fund; and providing for an effective date."                                                                                
                                                                                                                                
10:36:50 AM                                                                                                                   
                                                                                                                                
TIM  GRUSSENDORF,  STAFF, SENATOR  LYMAN  HOFFMAN,  CO-CHAIR,                                                                   
SENATE    FINANCE    COMMITTEE,   provided    a    PowerPoint                                                                   
presentation   titled    "Senate   Bill   98:    Power   Cost                                                                   
Equalization  Fund Management,"  dated May  4, 2023  (copy on                                                                   
file).  He relayed  that the bill  did not  change the  Power                                                                   
Cost Equalization  (PCE) program  but changed the  management                                                                   
of the  fund. He addressed  slide 2  titled  What Does  SB 98                                                                   
Do:                                                                                                                             
                                                                                                                                
     The  Power Cost  Equalization Endowment  Fund has  about                                                                   
     $1 billion  Currently, it  is managed by  the Department                                                                   
     of Revenue                                                                                                                 
                                                                                                                                
     S898 would  transfer management to the  Alaska Permanent                                                                   
     Fund Corporation (APFC):                                                                                                   
                                                                                                                                
      The APFC would manage the money alongside their own                                                                       
      assets.                                                                                                                   
      The PCE would be exactly as diversified as the                                                                            
      Permanent Fund.                                                                                                           
      (This is what they currently do for the Mental Health                                                                     
      Trust fund.)                                                                                                              
      Regular reporting to the legislature regarding asset                                                                      
      value and income.                                                                                                         
                                                                                                                                
Mr. Grussendorf  informed  the committee  that the fund  will                                                                   
still be house in the Alaska Energy Authority (AEA).                                                                            
                                                                                                                                
Mr. Grussendorf discussed slide 3 titled "Why Change it:"                                                                       
                                                                                                                                
     Why change it?                                                                                                             
                                                                                                                                
      More diversity: the Dept.  of Revenue's managers can                                                                      
      only invest in stocks and bonds, and not the various                                                                      
    alternative investments used by the Permanent Fund.                                                                         
                                                                                                                                
      More stability: the PCE fund has changed it's                                                                             
     earnings goals and investment allocation at least                                                                          
      three times in the last four years.                                                                                       
                                                                                                                                
          OFund lost close to $200 million in FY2022 (-16%)                                                                     
                                                                                                                                
    Less liquidity: managers moved much of the fund out                                                                         
      of equities in early FY2021 expecting there would not                                                                     
      be a "reverse sweep" at the end of that year and                                                                          
      missed big market gains.                                                                                                  
                                                                                                                                
          oPCE fund made 14% in FY 21, while the Permanent                                                                      
           Fund made 29%. That premature liquidation may                                                                        
           have cost the fund $150 million.                                                                                     
                                                                                                                                
          oCourts later determined fund wasn't sweepable.                                                                       
                                                                                                                                
Mr.  Grussendorf   elaborated  that  the  inception   of  the                                                                   
legislation transpired  after an  overview by the  Department                                                                   
of Revenue  (DOR)  and by the  APFC during  a Senate  Finance                                                                   
Committee  hearing.  The  committee  members  were  concerned                                                                   
over the  how the  fund was  managed and  the limitations  on                                                                   
investments  by the  current managers;  DOR. They  discovered                                                                   
that  the answer  was  more  diversity, more  stability,  and                                                                   
less  liquidity.   He  explained   that  the  Department   of                                                                   
Revenue's  managers could  only  invest in  stocks and  bonds                                                                   
and not the various alternative investments used by APFC.                                                                       
                                                                                                                                
10:40:41 AM                                                                                                                   
                                                                                                                                
Mr.  Grussendorf advanced  to slide  4 titled  "How would  it                                                                   
change the PCE fund and program:"                                                                                               
                                                                                                                                
     It would not.                                                                                                              
                                                                                                                                
           The same 5% of fund value would be available                                                                         
           each year to fund the programs described in                                                                          
           statute.                                                                                                             
                                                                                                                                
           The same "waterfall" of priority would be                                                                            
           funded:                                                                                                              
                                                                                                                                
               1.The PCE program itself                                                                                         
               2.Costs of managing the fund                                                                                     
               3.If the previous year's earnings are                                                                            
                more than what is needed for #1 and #2, 70%                                                                     
                of the remaining earnings may be used for:                                                                      
                                                                                                                                
                    1.Community Assistance (up to $30                                                                           
                     million)                                                                                                   
                    2.Renewable Energy Grant Fund, Bulk                                                                         
                     Fuel Revolving Loan Fund, or Rural                                                                         
                     Power system upgrades (up to $25                                                                           
                     million)                                                                                                   
                                                                                                                                
Co-Chair Foster asked Mr. Grussendorf to review the                                                                             
sectional.                                                                                                                      
                                                                                                                                
Mr. Grussendorf read the sectional analysis (copy on file):                                                                     
                                                                                                                                
     Section  1:  AS  37.13.310 gives  the  Alaska  Permanent                                                                   
     Fund   Corporation   (APFC)   management  of   the   PCE                                                                   
     endowment  fund  and  manage  the  fund  with  the  same                                                                   
     Investment  objective  and  asset allocation  that  they                                                                   
     currently have in place.                                                                                                   
                                                                                                                                
     (b) Adds the  power cost equalization endowment  and its                                                                   
     current reporting  requirements to the  Alaska Permanent                                                                   
     Fund Corporation statute.                                                                                                  
                                                                                                                                
     Section 2:  AS 42.45.080(a) Makes the change  in the PCE                                                                   
     statute  that  the  corporation  will  manage  the  fund                                                                   
     under  AS.37.13.310.  by   Creating  a  new  section  in                                                                   
     article  2 management of  other assets  for the  APFC to                                                                   
     include the PCE fund.                                                                                                      
                                                                                                                                
     Section  3: AS  42.45.0S0(c) reporting  timing makes  it                                                                   
     clear  that there is  a lag  when determining  the value                                                                   
     of the  fund and earnings  of the  fund by using  a June                                                                   
     30 verses July 1.                                                                                                          
     Section 4: conforming language changes Commissioner of                                                                     
     Revenue with Corporation                                                                                                   
                                                                                                                                
     Section 5: AS42.45.099 Definitions. Adds Corporation                                                                       
     definition in the PCE statute.                                                                                             
                                                                                                                                
     Section 6 is repealed no longer necessary.                                                                                 
                                                                                                                                
     Section 7 adds transition language.                                                                                        
                                                                                                                                
     Section 8 is the effective date.                                                                                           
                                                                                                                                
10:43:08 AM                                                                                                                   
                                                                                                                                
Co-Chair  Foster  asked  if the  legislature  wanted  to  add                                                                   
another   category  to   the  waterfall   it  would   not  be                                                                   
prohibited  by the change  made by  the bill. He  exemplified                                                                   
using excess  earnings to help  communities that  were having                                                                   
difficulties with  the scoring system for Village  Safe Water                                                                   
(VSW).  Mr. Grussendorf  replied  in the  negative and  added                                                                   
that it  would not  prohibit any changes  from being  made to                                                                   
the waterfall, which fell outside the scope of the bill.                                                                        
                                                                                                                                
Representative  Hannan asked  if the  idea behind  SB 98  had                                                                   
been contemplated  in the past. Mr. Grussendorf  replied that                                                                   
Senator Hoffman  had contemplated the  idea in the  past, but                                                                   
it  had not  been offered  until  PCE had  lost roughly  $200                                                                   
million.  Representative Hannan  shared  a concern  regarding                                                                   
page  2  of the  bill  and  the provision  to  diversify  PCE                                                                   
exactly the same  as the Permanent Fund. She  elucidated that                                                                   
throughout the  years, the PF  had been managed using  a more                                                                   
liberalized   diversified  portfolio,   which  provided   the                                                                   
opportunity  for  larger gains  but  also the  potential  for                                                                   
larger  losses.  She  remarked  that  APFC  had  invested  in                                                                   
things like   Alaskan entrepreneurial  endeavors   decided by                                                                   
its  board. She  inquired  whether the  investment  decisions                                                                   
for PCE  would be made entirely  by APFCs  board or  if there                                                                   
were any sideboards against risk.                                                                                               
                                                                                                                                
10:46:13 AM                                                                                                                   
                                                                                                                                
Mr. Grussendorf  answered  that in his  discussions with  the                                                                   
Senators,  they were comfortable  with  the way APFC  managed                                                                   
the PF.  He offered  that the  fund was  consistent, and  the                                                                   
track  record  of  the  corporation   spoke  for  itself.  He                                                                   
believed  APFC management  removed some  of the politics  out                                                                   
of the  issue. He did  not believe there  would be  a problem                                                                   
for the  PCE fund.  He noted  that PCE  was well  established                                                                   
and could  withstand a down year  or two and was  designed to                                                                   
backfill in the  good years. Representative  Hannan indicated                                                                   
that currently  the PCE portfolio  had a fairly  conservative                                                                   
asset allocation  of stocks  and bonds.  She wondered  if the                                                                   
fund would be   rebalanced  to the PFs  asset  allocation and                                                                   
how it would  happen; slowly or immediately.  Mr. Grussendorf                                                                   
believed APFC  would manage the  fund like its  other assets.                                                                   
He deferred to the corporation for more detail.                                                                                 
                                                                                                                                
Representative Ortiz  referenced Mr. Grussendorf's  statement                                                                   
that  the   fund  would   remain  with   the  Alaska   Energy                                                                   
Authority. He wondered  what authority AEA had  over PCE. Mr.                                                                   
Grussendorf responded  that AEA would continue  to manage the                                                                   
PCE program,  and nothing  would change.  He delineated  that                                                                   
the 5  percent of  the fund  would be  distributed as  needed                                                                   
through  AEA  and anything  remaining  would  be  redeposited                                                                   
into the  PCE fund.  The corporation would  report to  AEA on                                                                   
how  it managed  the fund,  its  balance, and  the 5  percent                                                                   
amount.                                                                                                                         
                                                                                                                                
10:49:31 AM                                                                                                                   
                                                                                                                                
Representative Ortiz  asked if there  would be any  change in                                                                   
management costs or  expenses to the state if  the change was                                                                   
made.  Mr.  Grussendorf  responded  that there  would  be  an                                                                   
added expense  due to  DOR. He reported  that they  used some                                                                   
of  the management  fees for  staffing  and did  not want  to                                                                   
lose  the  individuals.  The  department  wanted  some  state                                                                   
General Funds (GF) to backfill their losses.                                                                                    
                                                                                                                                
Co-Chair  Edgmon supported  the  bill and  thought  it was  a                                                                   
smart move.  In the  prior year,  the legislature  adopted SB
243 [SB  234 -  PWR Cost  EQ: Raise,  Endow Fund  Investment,                                                                   
Chapter 39  SLA 22,  07/15/2022] that moved  the fund  from a                                                                   
traditional endowment  management scheme of low  risk and low                                                                   
return to  the realm  of the   prudent investor rule,   which                                                                   
guided  the  PF   and  its  asset  allocation   approach.  He                                                                   
believed that  SB 98  supported that  action. He stated  that                                                                   
the PCE  endowment was  a huge part  of the energy  portfolio                                                                   
for Alaska  and needed  to remain that  way into  the future.                                                                   
He underscored that  it made sense to put PCE  into the hands                                                                   
of APFC who  when compared to other mammoth  trust funds like                                                                   
the  California Trust  Fund,  only lost  3.2  percent of  its                                                                   
value.  He  reiterated   that  the  bill  was   a  good  move                                                                   
especially in another  high earning year. He  thanked Senator                                                                   
Hoffman for bringing it forward.                                                                                                
10:52:22 AM                                                                                                                   
                                                                                                                                
Representative   Josephson  recounted   that   in  2019   the                                                                   
governor  did  not support  capitalized  funds  and  believed                                                                   
that the funding  should be approved each year.  In addition,                                                                   
there had  always been  a concern that  someone would  try to                                                                   
reappropriate  the  funds  in  declining  revenue  years.  He                                                                   
asked  if the  bill  prevented those  types  of actions.  Mr.                                                                   
Grussendorf  replied in  the negative.  The  fund was  housed                                                                   
under  AEA   and  was  still  available   for  appropriation.                                                                   
However,  the  PCE  fund was  determined  as  not  sweepable.                                                                   
Representative Josephson  acknowledged that there  was a risk                                                                   
of reappropriation  and supporters of the fund  would need to                                                                   
remain  hypervigilant.   Mr.  Grussendorf  answered   in  the                                                                   
affirmative.                                                                                                                    
                                                                                                                                
Co-Chair  Foster  noted  that   Representative  Coulombe  was                                                                   
online.                                                                                                                         
                                                                                                                                
Representative Coulombe stated her support for the bill.                                                                        
                                                                                                                                
10:54:27 AM                                                                                                                   
                                                                                                                                
Representative  Stapp   echoed  comments  made   by  Co-Chair                                                                   
Edgmon.  He  hoped  the  PCEs   asset  classes  mimicked  the                                                                   
Permanent Fund  asset allocation.  He supported the  bill. He                                                                   
referenced a Department  of Revenue fiscal note  [FN2 (REV)].                                                                   
He pointed  to the  management fee of  $2.5 million  that was                                                                   
based on basis  points. He noted that basis  points ebbed and                                                                   
flowed, but  the fiscal note was  static in the  outyears. He                                                                   
asked if the investment fees would be the same.                                                                                 
                                                                                                                                
Mr. Grussendorf deferred the answer to APFC.                                                                                    
                                                                                                                                
DEVEN  MITCHELL, EXECUTIVE  DIRECTOR,  ALASKA PERMANENT  FUND                                                                   
CORPORATION (via  teleconference), responded that  the fiscal                                                                   
note  was  partly  due  to the  expectation  there  would  be                                                                   
relatively  modest short-term  fluctuations  in value.  There                                                                   
would  need to  be  modifications  over time  in  contractual                                                                   
costs that would increase or decrease in a like manner.                                                                         
                                                                                                                                
10:56:45 AM                                                                                                                   
                                                                                                                                
Representative  Cronk supported  the bill.  He discussed  the                                                                   
waterfall  in  the  current program.  He  thought  the  first                                                                   
listing  on  the  waterfall,  Community  Assistance  and  the                                                                   
second listing,  Renewable Energy  Grants were backwards.  He                                                                   
deduced that  the purpose  of PCE was  to lower  energy costs                                                                   
and also  continue building anything  that lowered  costs. He                                                                   
believed  that   the  state  would  want  to   do  everything                                                                   
possible  to reinvest  in less  expensive energy  everywhere.                                                                   
He thought  the renewable energy  grants should be  the first                                                                   
priority  after paying  PCE. He  inquired how  much was  paid                                                                   
out in community  assistance versus addressing  the high cost                                                                   
of energy  first. He was favorable  to an answer  in writing.                                                                   
Mr. Grussendorf responded  that he had been  present when the                                                                   
waterfall  had  been  decided. He  recounted  that  community                                                                   
assistance  was   universally  popular  when   the  waterfall                                                                   
provision was  developed. At  the time, PCE  was in  a period                                                                   
of  high  earnings,  but  the  community  assistance  program                                                                   
shrank from  $180 million to $60  million and even  less. The                                                                   
program  had to  be back  funded and  was consistently  short                                                                   
funded. The idea  behind it being first on  the waterfall was                                                                   
that excess  PCE earnings could  be shared because  community                                                                   
assistance had been short funded.                                                                                               
                                                                                                                                
10:59:27 AM                                                                                                                   
                                                                                                                                
Representative  Hannan  directed her  question  to APFC.  She                                                                   
supported  the bill. She  reiterated her  question about  the                                                                   
expected timeline  it would take  to rebalance and  match the                                                                   
Permanent  Fund  asset  allocations.  Mr.  Mitchell  answered                                                                   
that   rather  than   trying  to   transfer  securities   the                                                                   
corporation  would ask  DOR to liquidate  the current  assets                                                                   
and transfer  the amount  to the  corporation. He  elaborated                                                                   
that the  corporation had  annual cash  flow needs  and would                                                                   
incorporate  the cash  to its  projections on  how the  money                                                                   
would  be  reinvested  in  the  portfolio.  Since  money  was                                                                   
fungible, it  would not necessarily  be specific  PCE dollars                                                                   
that ended up  in certain investments, but  rather money that                                                                   
could be used  to fulfill the percent of market  value (POMV)                                                                   
transfer  to the state.  Representative  Hannan asked  how it                                                                   
would be determined  that the full and true  current value of                                                                   
PCE  was transferred  when liquidated.  She wondered  whether                                                                   
he was  concerned. Mr.  Mitchell was  not concerned  that any                                                                   
value would  be lost. He  elucidated that currently  the fund                                                                   
was held  in public securities  and was in very  liquid asset                                                                   
classes.  He  added that  from  a  cash flow  perspective  in                                                                   
aggregate from  the state, any  cash allowed  the corporation                                                                   
to retain  investments  at the corporation  in similar  asset                                                                   
classes  across  its  portfolio,  there was  a  cost  setting                                                                   
effect to  any liquidation  that could  occur. He  summarized                                                                   
that the short answer was no.                                                                                                   
                                                                                                                                
11:02:53 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
11:05:13 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  Foster perceived  that  there was  support for  the                                                                   
bill and  was inclined  to move it  from committee.  He asked                                                                   
for  a review  of the  fiscal  notes. He  referenced the  DOR                                                                   
APFC fiscal  impact  note [FN3  (REV)] in  the amount  of $60                                                                   
thousand for auditing services and asked for comment.                                                                           
                                                                                                                                
Mr.  Mitchell confirmed  that  APFC  estimated  the need  for                                                                   
approximately  $60  thousand  per year  for  financial  audit                                                                   
services for the Fund.                                                                                                          
                                                                                                                                
Co-Chair Foster  moved to  the next  fiscal impact  note from                                                                   
DOR APFC  in the amount  of $2.5  million for the  management                                                                   
fees  based  on  25  basis  points.   He  asked  for  further                                                                   
comment. Mr.  Mitchell commented  that the appropriation  was                                                                   
for  a  combination  of things  that  included  external  and                                                                   
internal managers  adding up  to the  25 basis points,  which                                                                   
was an estimate  that would not  be exceeded.  He  added that                                                                   
if PCE  experienced  exceptional performance  in the  markets                                                                   
there  would  be  an  increased  need  for  investment  fees,                                                                   
however that would be a positive outcome.                                                                                       
                                                                                                                                
11:09:15 AM                                                                                                                   
                                                                                                                                
Co-Chair Foster  turned to  the fiscal  impact note  for DOR,                                                                   
Taxation and  Treasury [FN1 (REV)]  and read the  analysis as                                                                   
follows:                                                                                                                        
                                                                                                                                
     SB  98  transfers  the  responsibility   to  manage  the                                                                   
     investments  of the  Power  Cost Equalization  Endowment                                                                   
     Fund established  in AS 42.45.070 from  the Commissioner                                                                   
     of  Revenue to  the  Alaska Permanent  Fund  Corporation                                                                   
     (APFC).  The Power Cost  Equalization Endowment  Fund is                                                                   
     currently  budgeted  to   fund  $1.179  million  towards                                                                   
     Treasury's FY24  budget.  The Treasury  structure allows                                                                   
     it  to efficiently  manage numerous  funds at low  cost.                                                                   
     Transferring  the  Power   Cost  Equalization  Endowment                                                                   
     Fund to APFC  will not reduce Treasury's  budget because                                                                   
     Treasury  allocates  all  of  its costs  among  the  $48                                                                   
     billion  in state  and  retirement  investment funds  it                                                                   
     manages.   As  such, transferring  fund management  from                                                                   
     the Treasury will result in increased funding from the                                                                     
     general fund.                                                                                                              
                                                                                                                                
Mr.  Mitchell  deferred to  DOR  for  comment on  the  fiscal                                                                   
note.                                                                                                                           
                                                                                                                                
Co-Chair  Foster noted  that  Pam Leary,  Director,  Treasury                                                                   
Division, Department  of Revenue  should speak to  the fiscal                                                                   
note, and she was not available.                                                                                                
                                                                                                                                
Mr. Grussendorf  relayed  that the $1.1  million fiscal  note                                                                   
was  for the  management of  the  fund and  not for  transfer                                                                   
costs.  He  delineated  that   DOR  would  not  receive  $1.1                                                                   
million in management  fees from the PCE fund  any longer and                                                                   
wanted  to switch  the fund  source  to Undesignated  General                                                                   
Funds  (UGF) even  though they  were no  longer managing  the                                                                   
fund.                                                                                                                           
                                                                                                                                
11:11:47 AM                                                                                                                   
                                                                                                                                
Representative  Ortiz  understood   that  there  would  be  a                                                                   
consistent  request of  $1.1 million  UGF annually.  He asked                                                                   
what   the  funding   would  go   towards.  Mr.   Grussendorf                                                                   
responded that  he was  not certain of  the purpose.  He knew                                                                   
that there  were DOR personnel who  were paid out of  the PCE                                                                   
investment fees. He deferred to DOR for further answer.                                                                         
                                                                                                                                
Co-Chair Foster  decided to  recess the  meeting in  order to                                                                   
request  that the  someone from  the  department address  the                                                                   
fiscal note at the continued meeting.                                                                                           
                                                                                                                                
11:13:34 AM                                                                                                                   
                                                                                                                                
Representative   Josephson   had   the   same   question   as                                                                   
Representative Ortiz.                                                                                                           
                                                                                                                                
Representative   Stapp   echoed   the  prior   comments.   He                                                                   
supported  moving the  bill  but wanted  DOR  to discuss  the                                                                   
fiscal note.                                                                                                                    
                                                                                                                                
Co-Chair Foster  set an amendment  deadline for 1:00  p.m. on                                                                   
the same day.                                                                                                                   
                                                                                                                                
CSSB  98(FIN) was  HEARD and  HELD in  committee for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 19                                                                                                             
                                                                                                                                
     "An  Act  relating  to the  registration  of  commercial                                                                   
     vessels; and providing for an effective date."                                                                             
                                                                                                                                
11:14:54 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE LOUISE STUTES, SPONSOR, introduced the bill.                                                                     
She read from prepared remarks.                                                                                                 
                                                                                                                                
     Thank  you,  House  Finance Co-Chairs,  members  of  the                                                                   
     committee.                                                                                                                 
                                                                                                                                
     For   the   record,   Representative    Louise   Stutes,                                                                   
     representing  District  5,  including  Kodiak,  Cordova,                                                                   
     Seward, and many smaller coastal communities.                                                                              
                                                                                                                                
     Thank  you for  the opportunity  to  present House  Bill                                                                   
     19.  House  Bill  19  would   exempt  active  commercial                                                                   
     fishing    vessels   from    duplicative    registration                                                                   
     requirements created  by the passage of  Senate Bill 92,                                                                   
     the "derelict vessel bill", in 2018.                                                                                       
                                                                                                                                
     SB 92  aimed to provide  State and local  municipalities                                                                   
     with  a   searchable  database  containing   details  of                                                                   
     vessels   and  ownership.   That  database  exists   for                                                                   
     commercial fishing  vessels in the  Commercial Fisheries                                                                   
     Entry  Commission  (CFEC). The  database  is updated  in                                                                   
     real  time  and  operators   are  required  to  register                                                                   
     yearly.  The database  is publicly  accessible, and  the                                                                   
     information is provided under penalty of perjury.                                                                          
                                                                                                                                
           The information includes:                                                                                         
                                                                                                                                
              the legal owner of the vessel and a contact                                                                    
               person if not the same person as the                                                                             
               applicant.                                                                                                       
          o    permanent and mailing address,                                                                                   
          o    SSN,                                                                                                             
          o    phone numbers,                                                                                                   
          o    DOB, and                                                                                                         
          o    email address.                                                                                                   
                                                                                                                                
     Members and  the public can find copies  of the relevant                                                                   
     forms  on BASIS. Further,  House  Bill 19 institutes  an                                                                   
     annual $8  fee for documented, CFEC-registered  vessels.                                                                   
     Currently, vessels  owners pay a  $24 fee to DMV.  HB 19                                                                   
     waives  the fee for  those vessel  owners who  have paid                                                                   
     the $24  to DMV in  the past two  years. This is  NOT an                                                                   
     additional fee for commercial fishermen.                                                                                   
                                                                                                                                
Representative Stutes  interjected that currently  documented                                                                   
fishing  vessels were  required  to have  both a  CFEC and  D                                                                   
sticker.  The rationale  for the requirement  was to  provide                                                                   
the state  and local municipalities  with a  state-maintained                                                                   
database  of who owns  and operated  vessels. She  summarized                                                                   
that  the legislation  removed  the requirement  to obtain  a                                                                   
DMV  sticker  if the  vessel  operator  had a  CFEC  sticker.                                                                   
However,  documented  vessels  without  a CFEC  sticker  were                                                                   
still  required to  obtain a  DMV sticker.  She informed  the                                                                   
committee  that for the  prior 4  years, in conjunction  with                                                                   
the bill sponsor,  the Department of Public  Safety (DPS) had                                                                   
not enforced the dual sticker requirement.                                                                                      
                                                                                                                                
Representative Stutes  reviewed the sectional  analysis (copy                                                                   
on file):                                                                                                                       
                                                                                                                                
     Section 1:  Amends AS 05.25.055(i) to exempt  U.S. Coast                                                                   
     Guard  (USCG) documented  vessels with  a valid  license                                                                   
     issued  by  the Commercial  Fisheries  Entry  Commission                                                                   
     (CFEC)  from  the  requirement   to  register  with  the                                                                   
     Division of Motor Vehicles (DMV).                                                                                          
                                                                                                                                
     Section  2:  Adds new  subsection  (e) to  AS  16.05.475                                                                   
     that  requires CFEC  to assess  an  $8 registration  fee                                                                   
     for USCG documented  vessels upon a renewal  or issuance                                                                   
     of a license  beginning on January 1, 2024.  This fee is                                                                   
     in  lieu of  the  current  3-year, $24  registration  or                                                                   
     renewal fee  collected by  DMV. Adds new  subsection (f)                                                                   
     to  AS  16.05.475  specifying  that  fees  collected  in                                                                   
     subsection (e)  will be accounted for as  provided in AS                                                                   
     05.25.096(b),  to be  made available  to the  Department                                                                   
     of   Administration,   the    Department   of   Commerce                                                                   
     Community and  Economic Development, and  the Department                                                                   
     of Natural Resources.                                                                                                      
                                                                                                                                
     Section  3: Adds a  new section  to uncodified  law that                                                                   
     requires  CFEC  to waive  the  $8 registration  fee  for                                                                   
     years  that USCG  documented vessels  have already  paid                                                                   
     through the 3-year, $24 registration fee with the DMV.                                                                     
     Section  4: Adds  a new  section to  the uncodified  law                                                                   
     that  makes  Section  1   of  this  act  retroactive  to                                                                   
     January 1, 2023.                                                                                                           
                                                                                                                                
     Section 5: Establishes an immediate effective date for                                                                     
     the remainder of the bill.                                                                                                 
                                                                                                                                
11:20:54 AM                                                                                                                   
                                                                                                                                
Co-Chair  Edgmon provided  some  historical  context for  the                                                                   
bill. He  reported that the issue  of derelict vessels  was a                                                                   
longstanding issue  in the state.  With the passage of  SB 92                                                                   
[SB  92 -  Vessels: Registration/Titles;  Derelicts,  Chapter                                                                   
111  SLA 18,  10/11/2018],  "the  derelict vessel  bill,"  in                                                                   
2018,  an   oversight  occurred   resulting  in   duplicative                                                                   
registration.  He believed  that  the bill  was common  sense                                                                   
especially in  small communities  with one small  Division of                                                                   
Motor  Vehicle (DMV)  Office.  The  issue also  created  more                                                                   
complications  for the commercial  fishers. He  characterized                                                                   
the  issue  as  a   small  oversight    and  hoped  that  the                                                                   
committee passed the bill out of committee.                                                                                     
                                                                                                                                
Co-Chair  Johnson  recalled  hearing the  bill  the  previous                                                                   
year.  She  asked  about Coast  Guard  licensed  vessels  not                                                                   
licensed  by  CFEC. She  asked  for  comment by  the  sponsor                                                                   
regarding allowing  for other types of boats  licensed by the                                                                   
Coast Guard.                                                                                                                    
                                                                                                                                
Representative  Stutes  was unsure  about  the question.  She                                                                   
explained that  vessels registered by  the Coast Guard  had a                                                                   
federal registration.  The bill created a  state registration                                                                   
for vessels.                                                                                                                    
                                                                                                                                
11:24:31 AM                                                                                                                   
                                                                                                                                
GLENN  HAIGHT,   COMMISSIONER,  COMMERCIAL   FISHERIES  ENTRY                                                                   
COMMISSION,  understood   the  question  to  mean   that  all                                                                   
documented vessels  would register with the CFEC.  He thought                                                                   
that it  would not be practical.  He explained that  when the                                                                   
CFEC licensed  a vessel  a metal plate  was issued,  and each                                                                   
subsequent  year was given  an updated  decal to display.  He                                                                   
furthered   that  for   non-commercial   vessels  that   were                                                                   
involved  in  other  endeavors   it  would  be  difficult  to                                                                   
distinguish  for  enforcement.  The documented  vessels  that                                                                   
were not involved  in commercial fisheries would  continue to                                                                   
register   with  the   DMV,  which   allowed   for  a   state                                                                   
registration and accompanying data base.                                                                                        
Representative  Stutes interjected that  there was  an effort                                                                   
to combine the CFEC database and DMV database into one.                                                                         
                                                                                                                                
Co-Chair Foster asked for closing comments.                                                                                     
Representative  Stutes  had  received  no opposition  to  the                                                                   
legislation.                                                                                                                    
                                                                                                                                
TRACY WELCH, EXECUTIVE  DIRECTOR, UNITED FISHERMEN  OF ALASKA                                                                   
(UFA), related that  UFA was in full support of  the bill and                                                                   
viewed it as a cleanup measure.                                                                                                 
                                                                                                                                
HB  19   was  HEARD  and   HELD  in  committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
CS FOR SENATE BILL NO. 98(FIN)                                                                                                
                                                                                                                                
     "An   Act   requiring   the    Alaska   Permanent   Fund                                                                   
     Corporation  to  manage   the  power  cost  equalization                                                                   
     endowment  fund;  requiring  the Alaska  Permanent  Fund                                                                   
     Corporation to  publish certain reports relating  to the                                                                   
     power  cost  equalization  endowment fund;  relating  to                                                                   
     the Alaska  Permanent Fund Corporation's  management and                                                                   
     investment  of  the power  cost  equalization  endowment                                                                   
     fund; and providing for an effective date."                                                                                
                                                                                                                                
11:27:06 AM                                                                                                                   
                                                                                                                                
Co-Chair Foster asked for a review of the DOR fiscal note.                                                                      
                                                                                                                                
PAM  LEARY,   DIRECTOR,  TREASURY  DIVISION,   DEPARTMENT  OF                                                                   
REVENUE  (via  teleconference),   reviewed  the  fiscal  note                                                                   
request of  roughly $1.2  million in  UGF. She explained  the                                                                   
reason  for  the   change.  She  shared  that   the  treasury                                                                   
efficiently managed  a variety of funds at a low  cost and by                                                                   
transferring  the Power Cost  Equalization Endowment  Fund to                                                                   
APFC  it  would  not decrease  treasury's  budget  and  would                                                                   
necessitate  reallocating  all of  its  costs. She  furthered                                                                   
that  because treasury  had  limited resources  the  division                                                                   
would  need some UGF  to fully  fund the  division. One  less                                                                   
fund would  not change its  staffing requirements  because of                                                                   
how efficiently the funds were managed.                                                                                         
                                                                                                                                
Representative  Ortiz  asked  for  more detail  on  what  Ms.                                                                   
Leary  meant  by  cost  reallocation   related  to  the  $1.2                                                                   
million annual need.  He asked why the department  needed the                                                                   
funding.  Ms.  Leary  answered  that  the  division's  budget                                                                   
funded all of its  staffing and if it managed  one less fund,                                                                   
they still had  the same costs that needed  to be reallocated                                                                   
to other  fund sources.  She indicated  that  PCE was  one of                                                                   
the larger  funds and currently  was charged 10  basis points                                                                   
of  the  assets  under  management.  A loss  of  the  funding                                                                   
source  meant  the  need  to  replace  the  funds  with  UGF.                                                                   
Representative   Ortiz  asked   for  verification   that  the                                                                   
department  needed the funds  in order  to retain  staff. Ms.                                                                   
Leary  replied  in  the  affirmative  and  related  that  the                                                                   
department still  needed the same  number of staff  to manage                                                                   
all the other funds and its costs would not be reduced.                                                                         
                                                                                                                                
11:30:34 AM                                                                                                                   
                                                                                                                                
Representative  Stapp asked for  clarity. He understood  that                                                                   
the department currently  took 10 basis points  to manage its                                                                   
funds  and deduced  that  the division  would  lose about  $1                                                                   
billion  under management.  He  wondered  why  she could  not                                                                   
increase the  basis points to  11 instead of  requesting $1.2                                                                   
million  UGF  in  perpetuity.  Ms. Leary  answered  that  the                                                                   
divisions   cost allocation  plan was  based on assets  under                                                                   
management;  a typical  way  to  charge investing  fees.  She                                                                   
delineated  that  treasurys    cost  allocation  plan  had  2                                                                   
components.  First,  the  division   allocated  assets  under                                                                   
management  to all of  its funds  and certain endowment  like                                                                   
funds  were charged  a minimum  of 10 basis  points. Many  of                                                                   
the  funding  sources  were  GF and  the  division  did  have                                                                   
funding sources from  funds like the Public  School Trust and                                                                   
PCE,  but other  funds  did not  have  other revenue  sources                                                                   
besides  UGF.  There would  be  a  relative increase  to  the                                                                   
amount charged to  other funds but primarily  UGF would carry                                                                   
the bulk of the lost funding.                                                                                                   
                                                                                                                                
11:32:44 AM                                                                                                                   
                                                                                                                                
Co-Chair Foster  asked if Ms.  Leary was available  to return                                                                   
at  the 1:30  p.m.  meeting and  offered  to accommodate  the                                                                   
time she could be available.                                                                                                    
                                                                                                                                
CSSB  98(FIN) was  HEARD and  HELD in  committee for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Foster reviewed the schedule for the afternoon.                                                                        
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
11:34:05 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 11:34 a.m.                                                                                         

Document Name Date/Time Subjects
SB 98 Sectional.pdf HFIN 5/4/2023 10:30:00 AM
SB 98
SB 98 slide deck.pdf HFIN 5/4/2023 10:30:00 AM
SB 98
HB019 Research AAHPA Resolutions 4.24.23.pdf HFIN 5/4/2023 10:30:00 AM
HB 19
HB019 Research CFEC Vessel License, Number Plate, and Decal 1.26.23.pdf HFIN 5/4/2023 10:30:00 AM
HB 19
HB019 Research CFEC Public Database 1.25.23.pdf HFIN 5/4/2023 10:30:00 AM
HB 19
HB019 Research CFEC Vessel Licensing Forms 1.26.23.pdf HFIN 5/4/2023 10:30:00 AM
HB 19
HB019 Research DMV Registration FAQ - CFEC June 2019 1.25.23.pdf HFIN 5/4/2023 10:30:00 AM
HB 19
HB019 Research USCG Documentation and Tonnage Brochure 1.25.23.pdf HFIN 5/4/2023 10:30:00 AM
HB 19
HB019 Sectional Analysis ver A 4.14.23.pdf HFIN 5/4/2023 10:30:00 AM
HB 19
HB019 Sponsor Statement ver A 4.14.23.pdf HFIN 5/4/2023 10:30:00 AM
HB 19
HB019 Supporting Documents 4.20.23.pdf HFIN 5/4/2023 10:30:00 AM
HB 19