Legislature(2023 - 2024)ADAMS 519
02/23/2024 08:30 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB83 | |
| HB145 | |
| HB174 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 83 | TELECONFERENCED | |
| + | HB 145 | TELECONFERENCED | |
| *+ | HB 174 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
February 23, 2024
8:36 a.m.
8:36:46 AM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 8:36 a.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative DeLena Johnson, Co-Chair
Representative Julie Coulombe
Representative Mike Cronk
Representative Alyse Galvin
Representative Sara Hannan
Representative Andy Josephson
Representative Dan Ortiz
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative Bryce Edgmon, Co-Chair
ALSO PRESENT
Representative George Rauscher, Sponsor; Ryan McKee, Staff,
Representative George Rauscher; Rod Arno, Policy Director,
Alaska Outdoor Council and Former Member, CACFA;
Representative Stanley Wright, Sponsor; Rachael Gunn,
Staff, Representative Stanley Wright; Representative Kevin
McCabe, Sponsor; Julie Morris, Staff, Representative Kevin
McCabe.
PRESENT VIA TELECONFERENCE
Ashlee Adoko, Director, Office of Project Management and
Permitting, Department of Natural Resources; Jen Griffis,
Vice President of Policy and Advocacy, Alaska Children's
Trust; Tracy Reno, Financial Examiner, Division of Banking
and Securities, Department of Commerce, Community and
Economic Development; Rob Schmidt, Director, Division of
Banking and Securities, Department of Commerce, Community
and Economic Development; Pam Leary, Director, Treasury
Division, Department of Revenue.
SUMMARY
HB 83 CITIZEN ADVISORY COMM ON FEDERAL AREAS
HB 83 was HEARD and HELD in committee for further
consideration.
HB 145 LOANS UNDER $25,000; PAYDAY LOANS
HB 145 was HEARD and HELD in committee for
further consideration.
HB 174 STATE FUND FIDUC DUTY:SOCIAL/POL INTEREST
HB 174 was HEARD and HELD in committee for
further consideration.
Co-Chair Foster reviewed the meeting agenda. He noted the
meeting had a hard stop at 9:55 a.m.
HOUSE BILL NO. 83
"An Act reestablishing the Citizens' Advisory
Commission on Federal Management Areas in Alaska; and
providing for an effective date."
8:38:43 AM
Co-Chair Foster noted the bill had last been heard in May
2023. He asked the sponsor to provide a review of the
legislation.
REPRESENTATIVE GEORGE RAUSCHER, SPONSOR, thanked the
committee for hearing the bill. He relayed that the bill
would reestablish the Citizens' Advisory Commission on
Federal Areas (CACFA) in Alaska, which sunset in 2021. The
bill set a new sunset date of June 30, 2031. The commission
was comprised of ten public members, one senator, and one
representative who reflected the diversity of users of
federal land in Alaska and were appointed by the governor
and legislature. He stated that CACFA had operated for
decades as an independent and impartial source for
information and a center for advocacy on statehood, Alaska
Native Claims Settlement Act (ANCSA), and Alaska National
Interest Lands Conservation Act (ANILCA) issues impacting
all Alaskans. He stated that CACFA helped Alaskans navigate
through complex regulations and worked with federal
agencies to ensure congressional intent was implemented
with respect to Alaska's interests. He asked his staff to
review changes to the bill resulting from work that took
place over the interim.
8:41:00 AM
RYAN MCKEE, STAFF, REPRESENTATIVE GEORGE RAUSCHER, shared
that Alaska Federation of Natives (AFN) and Native Peoples
Action (NPA) had shared their concerns over the summer with
the bill sponsor. In response to the concerns, the sponsor
was proposing several changes. The first change clarified
that the establishment of CACFA within the Department of
Natural Resources (DNR) was for administrative purposes
only. The sponsor's office had received concern that by
housing the commission within DNR it was viewed as another
branch of the department. The intent was for CACFA to
operate autonomously with its own decision making power.
The second change would add language clarifying that CACFA
would determine which matters it would hear and consider.
The goal was to clarify that the commission acted on its
own behalf and not on behalf of the department. The third
change would require that the public members of the
commission represent all four Alaska judicial districts,
with no more than three members from each of the districts.
The goal was to ensure fair representation throughout
Alaska. The fourth change would require at least one member
of the commission to be enrolled in a federally recognized
tribe and another member to be a shareholder in an ANCSA
corporation. The goal was to ensure representation from
rural Alaska. The fifth change would move the bill's
effective date from July 1, 2023, to July 1, 2024.
Co-Chair Foster listed individuals available to testify. He
invited members to ask questions.
Representative Galvin referenced a letter from Native
Peoples Action in the bill packets (copy on file). She
thought it sounded like the proposed changes specifically
addressed the questions in the letter. She asked if the
organization had reassessed and was now comfortable with
the change.
Mr. McKee replied that the sponsor's office had not
officially received a response.
Representative Hannan asked if there was a draft committee
substitute (CS) incorporating the changes reviewed by Mr.
McKee.
Mr. McKee replied that there was not a CS for HB 83 that
incorporated the changes; however, the Senate had adopted
all of the changes in its version of the bill [SB 34],
which had reported out of the Senate Finance Committee
earlier in the week.
Representative Hannan remarked that without an updated CS
an amendment deadline would be a struggle. In addition to
an updated CS, she was interested in updated letters from
the parties that had previously expressed concerns.
8:45:44 AM
AT EASE
8:46:42 AM
RECONVENED
Representative Hannan stated there had been some clearly
articulated concerns the past May. She wanted to resolve
the issue and clarified she was not doubting the sponsor's
office. She wanted to see updated letters from the
organizations [that had previously expressed concerns over
aspects of the legislation].
Ms. McKee replied that the sponsor's office would contact
the organizations to request updated letters. He would
provide any responses to the committee.
Co-Chair Foster asked Mr. McKee to put the changes in
writing and provide them to the committee. He noted the
changes were included in the Senate version of the bill
that was coming the committee's way. He remarked that there
was uncertainty about whether the committee would get to
amendments prior to receiving the Senate version of the
bill.
Representative Hannan stated that if the intention was to
wait for the Senate version, she did not need the sponsor's
office to chase its tail if the information was expected to
come.
Co-Chair Foster explained the intent to get the committee
up to speed in anticipation of potentially receiving the
Senate version of the bill.
Representative Josephson referenced an AFN letter in
members' packets that he believed to be from the previous
year (copy on file). He asked how a reader could hear
dissenting views in CACFA reports. He remarked that
including a member of a federally recognized tribe and an
ANCSA member on the commission was to give voice to
potentially dissenting views. He cited a Klutina Lake
dispute and RS 2477s as an example and stated there would
be Alaskans who viewed the issue differently. He did not
think an echo chamber kind of report had great value for
the reader. He asked if it would be considered not terribly
threatening for the reports to include information on the
dissenting views of commission members.
8:50:41 AM
Mr. McKee asked for clarification on the question. He asked
if Representative Josephson was asking whether the views of
dissenting commission members would be published.
Representative Josephson answered that the information
would be part of the online version of the report with an
occasional hard copy.
Mr. McKee answered that it would be something the
commission would have to discuss. He did not believe the
language would be included in the bill.
Co-Chair Foster asked for verification that the bill added
two seats including one tribal seat. He asked what the
second seat would be.
Mr. McKee replied that the additional seats would include
one tribal member and one ANCSA corporation shareholder.
Co-Chair Foster remarked that when he saw the inclusion of
the two groups, typically it did not involve a tribal
member, but a person representing a tribal organization and
someone representing Native corporations as opposed to an
ANCSA shareholder. He asked if there was a reason why the
legislation specified a tribal member and shareholder.
Mr. McKee answered that they had worked on a couple of
different options. He relayed that the language in the bill
was based off the language used by the Senate Finance
Committee. The sponsor's office was open to hearing
concerns and was trying to address as many of them as
possible.
Co-Chair Foster stated he may reach out to organizations in
his district about the proposal. He cited Kawerak as an
example and explained the tribal consortium may be
interested in including someone from its organization
versus an individual tribal member who was not necessarily
representing the region. He discussed why he believed the
bill had merit. He stated that former CACFA chair Charlie
Lean was from his district. He explained that the only
people who could go to the Serpentine Hot Springs within
the national park [in his district] were people with
airplanes or helicopters during the summer months. He noted
the area was accessible by snow machine during the winter.
He stated that only affluent people could visit the area
because four wheelers were not permitted. He relayed the
distance was only about six miles. He saw CACFA as an
organization to help spearhead the possibility for
individuals who want to use old trails that had been
established as far back as 100 years ago. He understood
that each of the trails had to be treated differently,
which was where the value of the commission came in.
8:55:18 AM
Co-Chair Foster asked the department to review the fiscal
note.
ASHLEE ADOKO, DIRECTOR, OFFICE OF PROJECT MANAGEMENT AND
PERMITTING, DEPARTMENT OF NATURAL RESOURCES (via
teleconference), reviewed the fiscal note from the
Department of Natural Resources (DNR) Office of Project
Management and Permitting (OPMP), OMB Component Number
2733. The request for $145,000 in personal services and
$15,000 in services and commodities beginning in FY 25 was
for the CACFA executive director housed in OPMP to carry
out the intent of the bill. The position would report to
the commission and was needed for administrative purposes
including standing up and administering the program,
coordinating commission feedback, and response to citizen
inquiries and concerns about actions on federal lands. The
note included an additional $30,000 in services starting in
FY 27 for legal support, which would be accomplished
through a reimbursable services agreement (RSA) from DNR to
the Department of Law (DOL). Additionally, the note
included an annual request of $10,000 for travel to hold
meetings commensurate with the intent of the bill and its
administrative purposes.
Representative Hannan remarked that the fiscal note and
bill showed the CACFA executive director as reporting to
the commission. She asked who had the human resources
responsibility for hiring and firing the executive director
position. She asked if the responsibility would reside with
the commission or OPMP.
Ms. Adoko answered that she would need to follow up in
writing. She believed it would be a combination.
Representative Hannan requested the information in writing.
She wondered if the position would be a state employee with
state protections and hiring/firing practices or whether it
was equally shared and up to the commission.
8:58:35 AM
Co-Chair Johnson referenced letters in the packet
requesting an additional board seat reflective of tribes
and [Native] corporations. She asked if it was prompted by
something that had happened on the board in the past or if
it was an additional request for a board seat because it
pertained to federal lands.
Representative Rauscher responded that it was his
understanding the additional seats were to make the board
have better representation when looking at things as a
whole. He stated it was not really directed at anything
from the past.
Co-Chair Johnson wanted to make sure it was not in response
to something that had taken place in the past.
Co-Chair Foster noted that one of the amendments he had
come up with the past year was to address AFN's concern. He
thought the concern was about making sure the public would
not have free reign to trespass on their private lands. He
remarked that Alaska Native corporations had a substantial
amount of land, and they could not monitor it all. He
detailed that one of his amendments was to clearly
enunciate that CACFA would not try to open up old trails
that may cross private lands for the same reason he would
not want people driving through his back yard.
Representative Rauscher appreciated the explanation.
Representative Josephson recalled looking at the online
version of the [CACFA] report ten years earlier, which he
found very professional. He noted that one year ago the
supreme court rejected a state attempt to overrule a
federal ban on bear baiting on the Kenai National Wildlife
Refuge. He elaborated that the issue had gone to the ninth
circuit and the supreme court said that the federal
government could ban some bear baiting. He explained that
the supreme court refused to take the issue up, making it
binding. He asked for verification that CACFA would be
designed to be informative and not to have a call to arms
or express bombast or outrage. He did not want to create a
state document that was designed to fire up the masses in a
tone that was inappropriate.
Representative Rauscher answered, "No, I do not believe
so." He elaborated that the commission was for information
gathering for being able to understand all points of view
in an argument including ANCSA, ANILCA, or advocacy for a
question under debate at a given time. He stated it was not
to be used in the way referenced by Representative
Josephson.
9:03:38 AM
Representative Josephson recalled that he had voted to
reauthorize the commission in 2013 or 2014.
Representative Tomaszewski asked for an example of a
success resulting from the commission in the past.
Representative Rauscher deferred the question to a former
member of the board.
ROD ARNO, POLICY DIRECTOR, ALASKA OUTDOOR COUNCIL AND
FORMER MEMBER, CACFA, shared that he had served on CACFA
until it had lost its funding. He believed one of CACFA's
biggest successes pertained to local hire. He elaborated
that when the [U.S.] Department of Interior was hiring
individuals to work on the conservation system throughout
the state, CACFA had worked to ensure the department had
the ability to hire individuals living in those rural
areas. He stated it was contested and had gone through the
courts. The idea had been that if there were more
individuals working for the department who lived on the
land next to the federal lands, better decisions would be
made than were taking place from directors of the
department residing in Washington D.C.
Representative Stapp asked about the role CACFA played in
helping Alaskans navigate through the federal permitting
process. He considered the time and effort spent at a state
and individual level on permits that ultimately failed
because of missed details. He asked how the commission had
assisted with the process.
Mr. Arno replied that the public had the opportunity to
bring issues to CACFA if they were having problems with
permitting or access. He elaborated that CACFA had been
able to work with DNR and DOL to try to simplify the DNR
permitting process as much as possible. The idea was for
the public to come to CACFA and not for CACFA to be sitting
there coming up with things that were inconsistent with the
federal law governing the conservation system unit areas.
Representative Stapp asked if it was fair to say there were
plenty of regular Alaskans who came to talk to CACFA on
permitting issues that DNR may not have ever known about.
Mr. Arno responded affirmatively. He cited trapper cabins
on federal lands as an example. He expounded that CACFA had
been able to try to work through a policy change to
establish that trappers with traplines could have winter
cabins for safety reasons.
9:08:28 AM
Co-Chair Foster set an amendment deadline of March 4 at
5:00 p.m.
HB 83 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 145
"An Act relating to loans in an amount of $25,000 or
less; relating to deferred deposit advances; and
providing for an effective date."
9:09:05 AM
Co-Chair Foster invited the sponsor and his staff to the
table.
REPRESENTATIVE STANLEY WRIGHT, SPONSOR, introduced the bill
with prepared remarks.
Payday loans with astronomical interest rates of up to
521.4 percent, rates that turn a lifeline into a
chain, were not legal in Alaska until 2004. Despite
dire warnings from consumer protection groups back
then, exemptions for payday lenders were made. Twenty
years down the road, we have seen the worst
consequences from this oversight come to fruition,
harming the most vulnerable members of our population.
Payday loans, marketed as an instant solution to a
short-term emergency, are structured as a debt trap by
design. HB 145 removes the exemptions that have
allowed such predatory practices to flourish
unchecked. This legislation will align the interest
rates and fees of payday loans with those charged by
traditional banks, restoring fairness and equity to
our lending laws. Today, we have a chance to right
that wrong and ensure that no Alaskan has to suffer
under the burden of predatory interest rates ever
again.
9:10:58 AM
RACHAEL GUNN, STAFF, REPRESENTATIVE STANLEY WRIGHT,
discussed the legislation with prepared remarks:
The stark reality is that more than half of Alaskans
live paycheck to paycheck. For many, the margin
between managing daily expenses and a financial
catastrophe is razor thin.
Ms. Gunn shared that her background was in tourism, sales,
mining, and fishing. She detailed that her first paid sick
day was working for the legislature the previous session.
She continued with prepared remarks:
And when life inevitably happens, as it does every
year thousands of residents in our community, folks
turn to payday loans.
Interest rates for these payday loans average 421
percent. This is because the rate is not set by the
friendly competition of the market, but by an
exemption for these payday lenders crafted in Alaska
statute in 2004. At that time, consumer protections
groups warned us of the consequences of this
exemption. It's a rate so astronomical that it's hard
to fathom - but if you paid that interest rate on a
$300,000 house, you'd be paying $1.6 million yearly
for the 30-year term of the loan.
You don't need a credit history to access a payday
loan, you just show up with a paystub and your bank
account details. The average payday loan taken out in
Alaska is $440. If the average person taking out a
payday loan doesn't have the money saved to cover the
expense in the first place, it is unlikely they will
have the money to pay the loan back in two weeks they
might not even be able to cover the exorbitant
interest that is due in that time. The average time it
takes the average Alaskan to pay off this loan is five
months, and these folks access payday loans five times
a year.
Payday loans target folks locked out of the regular
consumer borrowing markets - perhaps due to poor
credit history or no credit history at all - they can
borrow the money they need to avoid the immediate
crisis and default at incredibly high rates. Payday
loans cost Alaskans $29 million a year. 68 percent of
these payday loans are taken out online, and the
majority of brick and mortar payday loan shops, which
are concentrated in economically depressed parts of
our cities, are not incorporated in our state.
20 states have capped interest rates for these kinds
of loans at 36 percent. Active duty military members
and their dependents are federally protected from
predatory rates. Once the member separates, they no
longer enjoy that protection. One Texas study shows
that while less than one in ten people in the general
population took out a payday loan to cover expenses,
that rate jumped to half of the veteran population.
9:13:34 AM
Ms. Gunn relayed that one of the big players that devised
the loophole for interest rates in 2004 no longer operated
in Alaska, but the company left a legacy in CourtView and
small claims court of 18,809 cases. She stated that
Alaska's Permanent Fund Dividend (PFD) was a lifeline for
its most vulnerable populations and when the state was able
to garnish the PFD to pay the predatory lenders, it was
removing the most basic lifeline that people relied on. She
concluded her prepared remarks:
HB 145 removes the exemptions for these payday lenders
under the small loans act, and it flattens the
interest rates for these types of loans at 36 percent.
It creates an anti-evasion provision so that predatory
online lenders can't use rent-a-bank schemes posing as
financial institutions in states with lax banking
regulations to utilize loopholes to target Alaskans.
9:14:44 AM
Representative Wright added that many individuals were
being affected across the state and it was hurting the
state's economy. He explained that the funds collected [by
the payday lenders] did not remain in Alaska. He remarked
that nine times out of ten the money was going to another
unnamed state. The situation hurt the most vulnerable
Alaskans and the state's economy.
Co-Chair Foster noted that the bill was currently in its
first hearing and there would be no public testimony or
fiscal note review during the present meeting.
Representative Ortiz thanked the sponsor for bringing the
bill forward. He stated the $29 million per year cost to
Alaskans from payday loans was an astounding statistic. He
asked how the number had been calculated.
Ms. Gunn replied that there was a good amount of data
available. She deferred the question to Jen Griffis with
the Alaska Children's Trust.
JEN GRIFFIS, VICE PRESIDENT OF POLICY AND ADVOCACY, ALASKA
CHILDREN'S TRUST (via teleconference), asked for a
restatement of the question.
Representative Ortiz restated his above question.
9:17:46 AM
Ms. Griffis replied that she would provide an answer in
writing.
Co-Chair Foster listed additional testifiers available for
questions.
Representative Coulombe thanked the sponsor for bringing
the bill forward. She asked if the legislation put a cap on
the interest rate.
Representative Wright replied that the cap was 36 percent.
Representative Coulombe asked why veterans were more
vulnerable than others to the situation. She observed
veterans' numbers were double that of others.
Ms. Gunn responded that many individuals joining the
military were young and once their service was complete
they were starting over without much oversight or family
guidance. She stated that younger individuals, older
individuals on a fixed income, and recently separated
military members were all seeking out the loans. She stated
that the loans were targeted to the most vulnerable, low
income members of the population.
Representative Coulombe asked if there was a sense that the
companies located themselves outside of military
installations. She asked if there was evidence the
companies were targeting military members.
Representative Wright replied affirmatively. There were
companies located outside the base in his district. He
stated it was astonishing to know the companies preyed on
certain groups. He stated it was where the clientele was.
9:20:56 AM
Co-Chair Johnson remarked that there was a place for many
types of things in the market. She asked if the bill would
reduce the amount of money available for people to borrow.
She recalled when she was young and unable to pay for
things out of pocket and the need for quick access to
funds. She stated that she would have been much more likely
to use something like payday loans than something she knew
she could pay off. She understood what the bill sponsor was
saying about the cycle of lending, but she also recognized
that people could make their own decisions.
Ms. Gunn responded that 68 percent of all payday loans were
being taken out online. She relayed there were credit
unions offering small loans products with reasonable terms,
providing more access to small loans than ever. Much of
what was seen with the [payday loan] locations were the
convenience and education in the areas. She added that 20
states had capped the interest rate at 36 percent for
payday lenders. She stated that the small loan market was
alive and well in those states.
Co-Chair Johnson asked if any businesses would be put out
of business as a result of the bill.
Ms. Gunn answered that the sponsor did not anticipate any
businesses incorporated in Alaska would be put out of
business as a result of the bill. She could not answer
whether any out of state incorporated businesses would
continue to do business. She explained that for the payday
lenders currently operating in Alaska, payday loans
accounted for 10 to 15 percent of their business. The
lenders were primarily pawn shops with other products. The
sponsor did not anticipate that reducing the "astronomical
interest rates" down to 36 percent would put any of the
businesses out of business.
Co-Chair Johnson asked if it was an interest rate or an
advance fee.
Ms. Gunn responded that the exemption for payday lenders
was brought about from SB 272 in 2004. She stated there had
been warnings from AARP, AKPRIG [Alaska Public Interest
Research Group], and Catholic charities about what the
exemption could cause in Alaska. She stated that the
average interest rate was 421 percent up to a maximum
exceeding 500 percent. She stated that the businesses were
charging the maximum allowed under the statutory exemption.
She stated it was not an interest rate set by the market.
9:24:17 AM
Co-Chair Johnson asked if it was actually an interest rate.
She thought it seemed like a cash advance fee as opposed to
an interest rate.
Ms. Gunn referenced others available to answer questions.
She referenced a provision related to the Small Loans
Reform Act in the legislation and explained that setting
the interest rate at 36 percent was for transparency.
Currently, the interest rate was compounding and customers
were charged for the interest on the loan and the principal
and balance. She stated it is an interest rate. She
deferred additional details to the Division of Banking and
Securities.
Co-Chair Johnson relayed that she could ask further
questions offline.
Representative Tomaszewski referenced the statement that
payday loans could be done online. He asked if the bill
would prevent online companies out of state [from providing
the loans in Alaska]. He asked how it would be regulated in
order to prevent individuals from using the same service
online that was currently offered in brick and mortar
stores.
9:26:43 AM
Ms. Gunn answered there was an anti-evasion provision in
the bill that would create a safe harbor. She explained
that lenders charging an Alaskan an interest rate above 36
percent had to play by Alaska's rules. There was no
regulation if a business was charging under 36 percent.
Representative Stapp looked at the analysis in the packet
and noted that currently there were licensing fees for 19
Deferred Deposit Advance (DDA) lenders. He asked if the out
of state lenders paid the licensing fees.
Ms. Gunn deferred the question to the Division of Banking
and Securities.
Representative Stapp stated that the [licensing] fee was
currently $3,000. He suggested that the state licensing fee
could be increased to $100,000, which would likely make
businesses change their behavioral practices. He asked to
hear from the department.
9:28:23 AM
TRACY RENO, FINANCIAL EXAMINER, DIVISION OF BANKING AND
SECURITIES, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT (via teleconference), answered that everyone
currently paid a licensing fee. She stated that because the
bill removed the exemption for payday lenders or deferred
deposit advances, they would try to mesh the loan into the
Small Loan Company Act, which would require amendments to
make it work. She explained that companies would pay the
annual renewal fees though the online nationwide multistate
licensing system as all small loan companies currently did.
She noted there were 12 current licensed locations with 7
approved companies all out of state. Three of the companies
had branches in Alaska and there was one website and one
mobile app. The fees paid were annual renewals and would be
done just like the small loan companies if the bill went
through and removed the Deferred Deposit Advance Act.
Representative Stapp asked for verification there was a
separate licensing fee. He stated his understanding that if
the bill moved forward the companies would be rolled under
the existing license fee. He considered that there were 19
businesses engaged in the activity under a separate license
fee. He asked if increasing the renewal fee from $3,000 to
$100,000 per year would net revenue for the state and
change behavior.
Ms. Reno answered that the maximum loan amount was $500 or
less with a 14-day advance maximum. She assumed that the
fee would put the businesses out of business. She stated
that the businesses could not make enough money on a $500
loan to stay in business with a $100,000 annual fee.
Representative Stapp asked for verification that the
[payday lender] businesses would have a different license
if the bill passed.
Ms. Reno responded affirmatively.
9:31:12 AM
Representative Hannan pointed out that the fiscal notes
indicated that some businesses may choose to move to the
new type of licensure. She asked if there would still be a
remaining licensure the businesses could operate under. She
referenced the language in the fiscal note specifying that
some DDA licenses may choose to apply for licensure under
the Alaska Small Loans Act, which was where the cap of 36
percent was located. She remarked it was the loophole the
bill was trying to close, but the language in the fiscal
note seemed to indicate businesses would still have the
ability to operate under their current licensure.
Ms. Reno responded that it was her understanding that the
bill would completely repeal the Deferred Deposit Advance
Act (the payday lending act); that current license type
would go away completely. The businesses would be able to
apply for a small loan company license, which would allow
them to lend $25,000 or less under usury. She explained
that if a business chose to go over usury (around 10.5
percent depending on the day), it would be required to get
a small loan company license. She stated it depended on the
type of business a company was doing. She elaborated that
if a business chose to apply for a small loan company act
license in Alaska with restrictions on the interest rate,
the rate would decrease from around 400 percent (depending
on the specific program) to 36 percent.
Representative Hannan asked what the legal structure would
be to prevent someone from going online and using a non-
licensed Alaska predatory loan company.
Ms. Reno answered that the department was normally alerted
when someone had a complaint. She explained that
occasionally when someone had a problem the division was
able to investigate and do searches online when it had the
capacity. Additionally, the division was alerted by other
states. She relayed it was typically word of mouth until
someone brought an issue to the division's attention.
Representative Hannan asked for verification that the
division had investigatory staff to look into and shut down
predatory lending by non-licensed providers in Alaska if
the legislation became law.
Ms. Reno agreed. She deferred the question to the director
for additional detail.
9:34:41 AM
ROB SCHMIDT, DIRECTOR, DIVISION OF BANKING AND SECURITIES,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT
(via teleconference), answered that unlicensed activity in
any of the division's program areas was a fact of life and
the division routinely took action against people engaging
in unlicensed activity. He assured committee members that
if the bill passed and the division discovered someone was
providing loans at an annualized interest rate over 500
percent, the department would pursue and enforce the
matter.
Representative Hannan stated she was supportive of the
bill, and she wanted to ensure the legislature was closing
any online loopholes.
Co-Chair Foster thanked the sponsor for the presentation.
HB 145 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 174
"An Act restricting fiduciary actions by a fiduciary
of a state fund, the Alaska Retirement Management
Board, and the Alaska Permanent Fund Corporation Board
that have the purpose of furthering social, political,
or ideological interests."
9:35:55 AM
Co-Chair Foster welcomed the bill sponsor and listed
individuals available to testify.
REPRESENTATIVE KEVIN MCCABE, SPONSOR, introduced the bill
with prepared remarks:
HB 174 prioritizes the financial or pecuniary
interests of beneficiaries when managing state funds,
ensuring responsible investment decisions focus solely
on the financial gain. The bill strengthens efforts to
establish a sustainable long-term fiscal plan for
Alaska by eliminating external social, political, or
ideological goals from investment considerations. It
will align Alaska with a growing number of states
introducing legislation that emphasizes responsible
investment management and fiscal responsibility. It
prohibits practices like board stacking and ensures
that members of key boards prioritize financial gain
and refrain from advancing external interests. Passage
of HB 174 signifies a significant step forward in
responsible investment management for Alaska,
safeguarding citizens financial interest for the
state's long-term benefit. With the bill's passage,
Alaskans can trust that their financial interests are
being protected, contributing to confidence in the
state's management and fostering a stable economic
environment. My hope is that it will fortify the
development of a durable, sustainable, long-term
fiscal strategy for the state, devoid of transient
trends or influences.
Representative McCabe continued with prepared remarks:
Investing in sustainable funds that prioritize ESG
goals is supposed to help improve environmental and
social sustainability of business practices.
Unfortunately, close analyses suggests that its not
only not making much difference to companies' actual
ESG performance, but it may actually be directing
capital into poor business performers and poor
business models.
9:38:52 AM
JULIE MORRIS, STAFF, REPRESENTATIVE KEVIN MCCABE, reviewed
the sectional analysis (copy on file):
Section 1 amends AS 37.10.071 to require fiduciaries
of state funds to prioritize the financial interests
of beneficiaries when investing public funds. This
prohibits consideration of social, political, or
ideological factors in investment decisions.
Section 2 amends AS 37.10.220 to require the Alaska
Retirement Management board to prioritize the
financial interests of beneficiaries when investing
public funds. This prohibits consideration of social,
political, or ideological factors in investment
decisions.
Section 3 amends AS 37.10.220 to require the Alaska
Permanent Fund Corporation board to prioritize the
financial interests of beneficiaries when investing
public funds. This prohibits consideration of social,
political, or ideological factors in investment
decisions.
9:39:52 AM
Representative McCabe thanked Co-Chair Foster for hearing
the bill. He noted individuals were available for
questions.
Co-Chair Foster stated it was the first bill hearing and
there would be no public testimony or fiscal note review
during the meeting.
Representative Ortiz remarked that the bill raised some
interesting questions in relationship to the status quo. He
asked if it was the bill sponsor's position that the Alaska
Permanent Fund Corporation (APFC) did not have enough
autonomy to operate in the manner envisioned by the
legislation. He asked if there was an existing problem.
Representative McCabe responded that he did not believe the
current [APFC] board was hamstrung by the issue or was
investing in any environmental social governance (ESG)
companies simply for ESG policy. He used ExxonMobil as an
example and stated that it had a robust ESG policy, but the
company also made money. He believed the pertinent question
was whether a company made money. He stated that if the
answer was yes, APFC could invest in the company. He
relayed there was no intent to limit what APFC could invest
in. However, if a company did not make money because of its
ESG policies or merely focused on ESG, like a Solyndra
style, APFC should not invest in it and the guidance
appeared in the bill.
9:42:31 AM
Representative Ortiz stated his understanding that the
primary mission of APFC was to invest in the long-term
interest of the fund and its Alaskan beneficiaries.
Consequently, he asked for verification that APFC would
likely not invest in a company such as Exxon if it was not
making money because of its ESG policies.
Representative McCabe answered affirmatively. He stated
that the APFC board, under its current structure, was
investing for maximum investment. However, he had seen
evidence that other boards around the country were
embracing the ESG mindset and investing more for social,
environmental, and governmental factors ahead of fiscal
factors. He explained that the bill communicated to APFC
and the state's retirement system that the money belonged
to the state and beneficiaries and the funds should be
invested for maximum risk adjusted performance. The bill
specified that ESG would not be the top priority when
making investments. He stated the focus should be on
maximizing investments because retirees depend on the
funds. He stated that retirees could not eat or live off of
an investment in Solyndra, but they could eat or live off
an investment in Exxon.
9:44:38 AM
Representative Hannan asked whether Alaska Retirement
Management Board (ARMB) had any considerations or
investment efforts for any companies based on ESG policies.
PAM LEARY, DIRECTOR, TREASURY DIVISION, DEPARTMENT OF
REVENUE (via teleconference), replied that ARMB and other
fiduciaries followed the fiduciary standard in AS
37.10.071. She explained that the standard had been around
for a very long time and was more stringent than every
other state. She explained the standard had served the
state well because anytime ARMB had been approached for
investments for or against something, it had to stick to
its statutes. She elaborated that ARMB did not consider
factors other than what was in the sole financial interest
of beneficiaries as required in statute. There was already
an existing sole financial interest statute and ARMB and
other fiduciaries had not followed any ESG or anti-ESG
investments other than those that had strictly financial
benefits to the funds.
Representative Hannan stated her understanding that under
current statute the state may not base invest decisions on
anything but the financial basis of investments and the
consideration of ESG policies was not an element that could
be allowed for state investment funds.
Ms. Leary responded affirmatively.
Representative McCabe replied that they had seen a number
of states with similar laws on the books specifying they
were not supposed to consider ESG; however, he stated that
the long-term effect of ESG such as carbon credits and
carbon taxes would eventually be profit making. He remarked
that there were ways around the law that he was concerned
about. He wanted to ensure the direction from the
legislature to ARMB and APFC was clear that it was only
interested in financial gain for the funds. He stated there
was also some evidence that some companies publicly embrace
ESG as a cover for poor business performance. He cited a
recent report authored by Ryan Flugum of the University of
Northern Iowa and Matthew Souther of the University of
South Carolina specifying that when managers underperformed
earnings expectations set by analysts, they often publicly
talked about their focus on ESG; however, when returns
exceeded expectations the managers made few public
statements related to ESG. He believed there were 119
different laws throughout the states being considered based
on ESG investing. He stated that ESG was a newer term since
the law in Alaska statute.
9:49:27 AM
Representative McCabe thanked the committee for hearing the
bill. He thought it was time to update the state's statutes
with newer investment terms and strategies.
HB 174 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster reviewed the schedule for the afternoon
meeting.
ADJOURNMENT
9:50:14 AM
The meeting was adjourned at 9:50 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 174 .VerB.SectionalAnalysis.5.3.23.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 174 |
| HB 174 .VerB.SponsorStatement.5.3.23.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 174 |
| HB 174 Public Testimony rec'd by 021624.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 174 |
| HB 145 Sponsor Statement.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 145 |
| HB 145 Ver R Sectional Analysis 2.21.24.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 145 |
| HB 145 -Supporting Document- Payday Jubilee Report- 2.21.24.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 145 |
| HB 145 Supporting Document - AKPIRG Fact Sheet.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 145 |
| HB 145 Supporting Document - Definitions & Rate Board Picture.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 145 |
| HB 145 Letters of Support as of 2.21.24.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 145 |
| HB 145 ACT Response HFIN 022624.pdf |
HFIN 2/23/2024 8:30:00 AM |
HB 145 |