Legislature(2015 - 2016)HOUSE FINANCE 519

03/16/2016 01:30 PM FINANCE

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 16, 2016                                                                                            
                         1:32 p.m.                                                                                              
1:32:47 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair  Thompson   called  the  House   Finance  Committee                                                                    
meeting to order at 1:32 p.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Representative Mark Neuman, Co-Chair                                                                                            
Representative Steve Thompson, Co-Chair                                                                                         
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Cathy Munoz                                                                                                      
ALSO PRESENT                                                                                                                  
Senator  Cathy  Giessel,  Sponsor; Gene  Therriault,  Deputy                                                                    
Director,  Statewide   Energy  Policy   Development,  Alaska                                                                    
Energy  Authority,  Department  of Commerce,  Community  and                                                                    
Economic   Development;   Michael  Lamb,   Chief   Financial                                                                    
Officer,   Alaska   Industrial    Development   and   Export                                                                    
Authority; Representative Liz Vasquez.                                                                                          
PRESENT VIA TELECONFERENCE                                                                                                    
Carrie  Doyle,  Adult   Health  Clinical  Nurse  Specialist,                                                                    
Alaska  Clinical   Nurse  Specialists   Associations;  Laura                                                                    
Sarcone,   Certified   Nurse-Midwife  and   Past   Co-Chair,                                                                    
Advanced  Practice Registered  Nurse Alliance;  Gail Bernth,                                                                    
Executive  Administrator, Board  of  Nursing; Tracey  Wiese,                                                                    
Family  and  Psychiatric  Nurse Practitioner,  and  Co-Chair                                                                    
Advanced Practice Registered Nurse Alliance.                                                                                    
HB 268    AIDEA: DIVIDEND TO STATE; INCOME; VALUATION                                                                           
          HB 268 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
SB 53     ADVANCED PRACTICE REGISTERED NURSES                                                                                   
          SB 53 was HEARD and HELD in committee for further                                                                     
Co-Chair  Thompson  reviewed the  meeting  for  the day.  He                                                                    
reviewed  legislative procedure  and  decorum regarding  the                                                                    
committee and legislation process.                                                                                              
SENATE BILL NO. 53                                                                                                            
     "An Act relating to advanced practice registered                                                                           
     nursing; relating to certified direct-entry midwifery;                                                                     
     and providing for an effective date."                                                                                      
1:35:12 PM                                                                                                                    
SENATOR  CATHY  GIESSEL,  SPONSOR,  thanked  the  chair  for                                                                    
hearing the  bill. She explained that  the legislation would                                                                    
update the state's 34-year-old  statute titles pertaining to                                                                    
nurse practitioners. The existing  title was "advanced nurse                                                                    
practitioner (ANP)"  and "nurse  anesthetist (NA)"  The bill                                                                    
would  implement  the  updated term  of  "advanced  practice                                                                    
registered nurse (APRN)." The bill  did not change the scope                                                                    
of  practice  performed   by  advanced  practice  registered                                                                    
nurses.  She  referred  to  a   chart  in  members'  packets                                                                    
illustrating  title  changes the  bill  would  put in  place                                                                    
(copy on file). She detailed  she had served on the National                                                                    
Council of State  Boards of Nursing in the  past; during her                                                                    
time  on  the  council   the  title  for  advanced  practice                                                                    
registered  nurses was  standardized  in  a consensus  model                                                                    
document  agreed to  by all  of the  states. She  elaborated                                                                    
that prior to  the change, each state had its  own title for                                                                    
advanced practice registered nurses.  The top portion of the                                                                    
chart showed  ANP and  NA, which were  the old  terms. Three                                                                    
subspecialties  fell underneath  the ANP  umbrella including                                                                    
nurse  practitioner,  certified  nurse-midwife  (responsible                                                                    
for  delivering   babies),  and  certified   clinical  nurse                                                                    
specialist (employed in hospitals).                                                                                             
Senator Giessel  continued to address  the title  chart. The                                                                    
proposed  statute  change  was   represented  in  the  lower                                                                    
portion of  the chart.  The title would  change to  APRN and                                                                    
four  subcategories included  certified nurse  practitioner,                                                                    
certified   nurse-midwife,    certified   registered   nurse                                                                    
anesthetist, and certified clinical nurse specialist.                                                                           
1:37:51 PM                                                                                                                    
Senator Giessel  relayed that the  bill's only  function was                                                                    
to  transform state  statutes to  reflect  the updated  APRN                                                                    
title change. Part  of the reason for the change  was due to                                                                    
confusion  within  insurance  companies. She  detailed  that                                                                    
each  state had  been  using a  different title;  therefore,                                                                    
sometimes  reimbursements  were   denied  because  insurance                                                                    
companies    (including   Medicare    and   the    Veterans'                                                                    
Administration)  did not  recognize  the  credential of  the                                                                    
person who provided the service.  The bill would make Alaska                                                                    
in  uniform conformity  with other  states. Currently  there                                                                    
were 1,000  advanced practice  registered nurses  in Alaska;                                                                    
therefore,  the  change  would  impact  a  large  number  of                                                                    
Co-Chair  Neuman  referred  to Senator  Giessel's  testimony                                                                    
there  had  been  reimbursements based  on  confusion  about                                                                    
service providers. He asked for  examples and the associated                                                                    
Senator  Giessel  explained  that a  primary  care  provider                                                                    
could  bill  insurance  for  services  just  like  a  family                                                                    
practice physician.  She was personally  an APN or  NP under                                                                    
the current  category. She detailed if  an insurance company                                                                    
did  not recognize  what ANP  stood for,  it would  question                                                                    
what kind of reimbursement the  she would be entitled to for                                                                    
the  care  of a  patient.  The  bill would  standardize  the                                                                    
Co-Chair Neuman asked  if Alaska was behind  other states in                                                                    
making the changes.                                                                                                             
Senator Giessel answered that 13  states had implemented the                                                                    
change in  title. Additionally,  there were  currently about                                                                    
29 states (including Alaska) working on making the change.                                                                      
Co-Chair Thompson  noted Representative Gara had  joined the                                                                    
1:40:05 PM                                                                                                                    
Representative  Gattis  asked  if the  label  changes  would                                                                    
force  any  kind  of  wage change  paid  by  hospitals.  She                                                                    
wondered  if  the bill  would  make  a difference  from  the                                                                    
hospitals'  standpoint. Additionally,  she  wondered if  the                                                                    
change would result in different costs to patients.                                                                             
Senator Giessel  responded that it would  make no difference                                                                    
in the  reimbursement or wage  for any of the  categories of                                                                    
APNs. In  terms of  hospital practice, the  certified nurse-                                                                    
midwife and the certified  registered nurse anesthetist were                                                                    
the two categories that would  be practicing both inside and                                                                    
outside hospital  facilities. The  nurses had been  doing so                                                                    
for  numerous years  if they  had  hospital privileges.  The                                                                    
clinical nurse specialist practiced  almost exclusively in a                                                                    
hospital. She relayed  the bill should not  change their pay                                                                    
category at all.                                                                                                                
Representative    Guttenberg    wondered    if    additional                                                                    
credentials  would be  necessary if  a nurse  practitioner's                                                                    
title  changed  to  certified  nurse  practitioner.  Senator                                                                    
Giessel  answered that  the  requirements for  certification                                                                    
would  remain the  same. She  detailed that  since ANPs  had                                                                    
been  recognized in  Alaska (for  34 years),  national board                                                                    
certification was required to  receive a license in advanced                                                                    
practice. The  bill would not  change the  requirements. The                                                                    
same national  certifying boards would still  administer the                                                                    
same examinations and certified in the same way.                                                                                
Representative  Guttenberg observed  the title  chart showed                                                                    
nurse anesthetists  as separate  under existing law,  but it                                                                    
included them under  APRNs in the proposed  law. He wondered                                                                    
about the bill's  impact on nurse anesthetists  and asked if                                                                    
they were supportive of the legislation.                                                                                        
Senator Giessel explained that the  reason ANPs and NAs were                                                                    
separate on  the upper portion of  the chart was due  to the                                                                    
way the statutes had been  originally written. The new title                                                                    
would put  everyone under  the APRN title.  All four  of the                                                                    
categories  under  APRN  were part  of  a  coalition,  which                                                                    
unanimously supported the legislation.                                                                                          
Representative Guttenberg appreciated the answer. He                                                                            
commented that sometimes alliances did not always speak                                                                         
Co-Chair Thompson called for invited testimony.                                                                                 
1:44:31 PM                                                                                                                    
CARRIE DOYLE, ADULT HEALTH CLINICAL NURSE SPECIALIST,                                                                           
ALASKA CLINICAL NURSE SPECIALISTS ASSOCIATIONS (via                                                                             
teleconference), read from a prepared statement:                                                                                
     I am  Dr. Carrie Doyle,  I am an adult  health clinical                                                                    
     nurse  specialist  and  represent the  Alaska  Clinical                                                                    
     Nurse  Specialists Association.  I'm also  a member  of                                                                    
     the  Alaska APRN  Alliance, which  is comprised  of all                                                                    
     four  advanced practice  registered nurse  specialties,                                                                    
     AANA, and  the University of Anchorage  Alaska, as well                                                                    
     as  the Board  of Nursing.  I'd like  to thank  you for                                                                    
     allowing me  to testify in  support of Senate  Bill 53,                                                                    
     which   is  an   act  related   to  advanced   practice                                                                    
     registered nursing that will  align Alaska statute with                                                                    
    the nationwide movement called the consensus model.                                                                         
     Currently, as  a clinical nurse specialist  I am called                                                                    
     a  nurse practitioner  legally, which  is not  the role                                                                    
     that I perform and can  be confusing to patients. So as                                                                    
     noted,  there  are  four  different  specialties.  That                                                                    
     being  the  nurse   practitioner,  the  clinical  nurse                                                                    
     specialist, the  nurse-midwife, and  the CRNA  or nurse                                                                    
     anesthetist.   The   statute    will   separate   these                                                                    
     categories. As  I mentioned, the  consensus model  is a                                                                    
     nationwide    movement   that    includes   all    four                                                                    
     specialties. It was comprised or  built by the National                                                                    
     Council  of State  Boards  and  Nursing in  conjunction                                                                    
     with an  APRN workgroup that comprised  of 48 different                                                                    
     national nursing organizations.                                                                                            
     The  consensus  model  does  seek  uniformity  in  APRN                                                                    
     licensure,     accreditation,    certification,     and                                                                    
     education.    Uniformity   will    expedite   insurance                                                                    
     reimbursement  as  noted  by  Senator  Giessel  and  by                                                                    
     eliminating  confusion about  service providers,  which                                                                    
     in turn,  eliminates the  confusion with  our patients.                                                                    
     It  will also  allow APRNs  from other  states to  more                                                                    
     easily  obtain Alaska  licensure. Senate  Bill 53  does                                                                    
     not change  the scope  of practice  for ANPs  and nurse                                                                    
     anesthetists  who will  still  be able  to continue  to                                                                    
     provide that  same high-quality, safe,  accessible care                                                                    
     that they  have provided  to Alaskans across  the state                                                                    
     for the  last 34 years. It  will just have a  new name:                                                                    
     APRN. I thank you for your  time today and ask that you                                                                    
     support Senate Bill 53.                                                                                                    
1:47:02 PM                                                                                                                    
LAURA  SARCONE, CERTIFIED  NURSE-MIDWIFE AND  PAST CO-CHAIR,                                                                    
ADVANCED   PRACTICE    REGISTERED   NURSE    ALLIANCE   (via                                                                    
teleconference), read from a prepared statement:                                                                                
     Good  afternoon.  My name  is  Laura  Sarcone. I  am  a                                                                    
     certified  nurse-midwife and  I am  the immediate  past                                                                    
     co-chair  of  the APRN  Alliance.  Thank  you for  this                                                                    
     opportunity to  testify in support  of SB 53.  The four                                                                    
     advanced practice  nursing groups have been  working on                                                                    
     this issue for nearly five years.                                                                                          
     The APRN Consensus Model is  a national "best practice"                                                                    
     act. It puts consumers,  employers, APRNs, the Board of                                                                    
     Nursing,  insurance companies,  and the  legislature on                                                                    
     the    same    page.   It    standardizes    licensing,                                                                    
     accreditation,    certification,     and    educational                                                                    
     requirements  for APRNs.  Thirteen states  have already                                                                    
     fully  implemented the  Model. Another  29 states  plus                                                                    
     the District  of Columbia are  more than  fifty percent                                                                    
     implemented.  Only 8  states are  less than  50 percent                                                                    
     implemented and 33 states use the title "APRN."                                                                            
     The  APRN Alliance  has reviewed  the  fiscal note.  We                                                                    
     understand  that  the  $7500  cost  will  be  recovered                                                                    
     through licensing fees and not  general funds. We would                                                                    
     like  to  thank  Senator Giessel  for  sponsoring  this                                                                    
     bill, and for  championing this issue on  behalf of her                                                                    
     fellow APRNs.  I urge you  to vote  in favor of  SB 53.                                                                    
     Thank you.                                                                                                                 
Representative  Gara asked  Ms.  Sarcone about  why it  took                                                                    
five years for  the various nursing groups  to come together                                                                    
on the  issue. He  wondered what the  dispute had  been. Ms.                                                                    
Sarcone corrected  that the nursing groups  had been working                                                                    
on the  issue for nearly  five years;  it had not  taken the                                                                    
groups  that time  to come  together. She  explained it  had                                                                    
taken five  years for the  groups to work through  the Board                                                                    
of Nursing,  getting language  together, and  requesting the                                                                    
bill through Senator Giessel.                                                                                                   
1:49:47 PM                                                                                                                    
GAIL BERNTH, EXECUTIVE ADMINISTRATOR,  BOARD OF NURSING (via                                                                    
teleconference), read from a prepared statement:                                                                                
     Thank you for  hearing this bill and  for permitting me                                                                    
     to  address  this hearing.  The  Board  of Nursing  has                                                                    
     requested that  I voice their  support of this  bill to                                                                    
     update our regulations. This will  help to bring Alaska                                                                    
     into  compliance  with  the  national  consensus  model                                                                    
     developed by  the National Council  of State  Boards of                                                                    
     Nursing. I thank you.                                                                                                      
1:50:19 PM                                                                                                                    
TRACEY WIESE, FAMILY and  PSYCIATRIC NURSE PRACTITIONER, and                                                                    
CO-CHAIR, ADVANCED  PRACTICE REGISTERED NURSE  ALLIANCE (via                                                                    
teleconference), urged support of the bill.                                                                                     
Co-Chair Neuman  referred to  the bill's  sectional analysis                                                                    
(copy  on  file)  and  observed   that  Section  10  deleted                                                                    
vocational  nursing  and  added a  paragraph  requiring  the                                                                    
Department of  Commerce, Community and  Economic Development                                                                    
to set fees  to practice registered nursing.  He asked about                                                                    
the reason for the change.                                                                                                      
Senator Giessel relayed that the  bill would remove the term                                                                    
"vocational"  because it  was no  longer used;  it had  been                                                                    
removed  from most  of the  state's statutes  by legislation                                                                    
approximately  five years  earlier; the  term that  would be                                                                    
deleted  in  the  current  bill had  been  missed  when  the                                                                    
changes had been made in the past.                                                                                              
Co-Chair  Neuman asked  for verification  it was  conforming                                                                    
language. Senator Giessel answered in the affirmative.                                                                          
Representative Neuman  remarked that Section 13  would amend                                                                    
statute to  add advanced  practice registered nurses  to the                                                                    
persons authorized  to supervise  a practical nurse.  He did                                                                    
not know  what the current qualifications  were. He believed                                                                    
the bill seemed  to do more than merely change  the name. He                                                                    
observed  the  bill provided  for  more  services or  duties                                                                    
nurses  could do.  He  asked  for detail  on  the change  in                                                                    
Section 13.                                                                                                                     
Senator Giessel  explained that  a practical  nursing degree                                                                    
was  typically  two  years.  She read  from  Section  13  of                                                                    
existing statute:  "a practical  nurse shall work  under the                                                                    
supervision   of  a   licensed   registered  nurse..."   She                                                                    
explained  that  a  registered  nurse  was  a  higher  level                                                                    
licensure that  qualified a registered nurse  to supervise a                                                                    
licensed  practical  nurse  (LPN). She  elaborated  that  an                                                                    
advanced  practice   registered  nurse  was  at   minimum  a                                                                    
master's degree (most of the  education was moving towards a                                                                    
doctoral degree). The section  added the doctorally prepared                                                                    
nurse who would also supervise the LPN.                                                                                         
1:54:01 PM                                                                                                                    
Co-Chair  Neuman  referred to  Sections  52  through 54.  He                                                                    
stated  that  the  bill  would  add APRNs  to  the  list  of                                                                    
practitioners   who   may,    under   statutory   provisions                                                                    
concerning mental  health commitment, determine if  a person                                                                    
may  be  administered   psychotropic  medication  without  a                                                                    
person's  consent. He  remarked  that  in other  occurrences                                                                    
pertaining to  the medical industry, doctors  were sensitive                                                                    
to the  ability to  administer different  prescription drugs                                                                    
because   of  the   amount  of   education  they   received,                                                                    
particularly  with   the  use  of  psychotropic   drugs.  He                                                                    
wondered  why  the  language  was  needed  and  believed  it                                                                    
advanced a nurse's authority substantially.                                                                                     
Senator Giessel  began with Section  52. She  clarified that                                                                    
the  underlined words  in the  bill draft  represented areas                                                                    
that  would change  current  statute.  The existing  statute                                                                    
read "as determined by a  licensed physician or a registered                                                                    
nurse..."  She emphasized  a registered  nursing degree  was                                                                    
either  two  to four  years  (a  bachelor's degree)  and  an                                                                    
advanced practice  registered nursing degree was  a master's                                                                    
or doctorate.  Under existing  statute an  advanced practice                                                                    
registered nurse  could administer  psychotropic medication.                                                                    
The  language  simply  clarified the  statute  by  inserting                                                                    
"advanced practice registered nurse"  as well. She specified                                                                    
that  an advanced  practice registered  nurse  was a  higher                                                                    
level  registered  nurse   with  prescriptive  authority;  a                                                                    
registered nurse did not have prescriptive authority.                                                                           
Senator  Giessel   moved  to  Section  53   related  to  the                                                                    
definition  of a  mental health  professional. The  existing                                                                    
statute  applied  to  a registered  nurse  with  a  master's                                                                    
degree in  psychiatric nursing, which was  the definition of                                                                    
an APRN.  She stated  it was  possible for an  RN to  have a                                                                    
master's degree in psychiatric nursing,  but not be an APRN.                                                                    
She  detailed it  clarified  that a  nurse  with a  master's                                                                    
degree or a doctorate could  also be categorized as a mental                                                                    
health  professional.  She  referred  to  testimony  by  Dr.                                                                    
Tracey  Wiese who  is a  doctorally  prepared mental  health                                                                    
professional. The  definition did  not extend or  expand the                                                                    
scope of practice.                                                                                                              
Senator  Giessel moved  to  Section  54 on  page  25 of  the                                                                    
legislation. The original language  had been "...reviewed by                                                                    
a registered nurse licensed  under..." The section pertained                                                                    
to  reviewing   a  residence   assisted  living   plan.  She                                                                    
explained that an APRN was  also an RN (the individuals held                                                                    
two licenses  and paid  twice to the  State of  Alaska). The                                                                    
language  had  been  updated to  clarify  the  inclusion  of                                                                    
1:57:34 PM                                                                                                                    
Co-Chair  Neuman assumed  that  specific  training would  be                                                                    
required for an APRN to administer psychotropic medication.                                                                     
Senator  Giessel answered  that  a  nurse practitioner  held                                                                    
either  a master's  or doctoral  degree  and were  currently                                                                    
statutorily  authorized  to  prescribe. She  furthered  that                                                                    
with  drug enforcement  authority, nurse  practitioners also                                                                    
prescribed  controlled  substances  should  they  decide  to                                                                    
apply  for  the  authorization.  She  explained  that  nurse                                                                    
practitioners had  full prescriptive  authority just  like a                                                                    
family practice or other physician.                                                                                             
Co-Chair Neuman  remarked that nurses performed  some of the                                                                    
clinical work  in villages and  some health  centers without                                                                    
doctors.  He  believed  the  bill  would  provide  increased                                                                    
opportunities within the  state. He asked if it  was part of                                                                    
the  reason for  the legislation.  He spoke  to the  need to                                                                    
continue  to  reduce  the  budget,  while  ensuring  medical                                                                    
services were available throughout the state.                                                                                   
Senator Giessel answered that he  was speaking to her heart.                                                                    
She clarified  that the  bill did  not change  anything that                                                                    
did  not currently  exist. She  elaborated  that many  APRNs                                                                    
practice  in  rural  areas where  no  other  healthcare  was                                                                    
available (including  an Indian Health Service  clinic). She                                                                    
detailed that  one of  the provisions  in another  bill that                                                                    
would come  before the committee  related to  Medicaid would                                                                    
allow  nurse  practitioners (particularly  practitioners  in                                                                    
mental  and behavioral  health) to  expand their  ability to                                                                    
practice. She  thanked him for the  question. She reiterated                                                                    
SB  53 did  not  expand  work performed  by  APRNs in  rural                                                                    
Alaska or in any other venue.                                                                                                   
2:00:03 PM                                                                                                                    
Vice-Chair Saddler asked if the  bill changed the membership                                                                    
of  the Board  of  Nursing  such that  it  would impact  the                                                                    
professional licensing fee.                                                                                                     
Senator  Giessel  replied  in the  negative.  She  explained                                                                    
there was  currently a seat on  the Board of Nursing  for an                                                                    
APRN and the bill would make no changes to the area.                                                                            
Vice-Chair  Saddler  asked  which professional  board  would                                                                    
regulate  APRNs.   He  wondered  if  it   would  change  the                                                                    
"universe  of license  fee payers"  and  the required  rate.                                                                    
Senator  Giessel  responded  that  the bill  would  make  no                                                                    
changes  to the  area.  She explained  that currently  APRNs                                                                    
fell under the  Board of Nursing; the  board regulated about                                                                    
12,000  licensees  from  certified   nurse  aides  up  to  a                                                                    
doctorally prepared APRN.                                                                                                       
Senator Giessel thanked the committee for its time.                                                                             
SB  53  was   HEARD  and  HELD  in   committee  for  further                                                                    
2:01:54 PM                                                                                                                    
AT EASE                                                                                                                         
2:02:51 PM                                                                                                                    
HOUSE BILL NO. 268                                                                                                            
     "An  Act  relating to  the  dividends  from the  Alaska                                                                    
     Industrial Development  and Export  Authority; relating                                                                    
     to  the meaning  of 'mark-to-market  fair value,'  'net                                                                    
     income,'  'project or  development,' and  'unrestricted                                                                    
     net  income'  for  purposes of  the  Alaska  Industrial                                                                    
     Development and Export Authority;  and providing for an                                                                    
     effective date."                                                                                                           
2:03:16 PM                                                                                                                    
GENE  THERRIAULT, DEPUTY  DIRECTOR, STATEWIDE  ENERGY POLICY                                                                    
DEVELOPMENT,   ALASKA   ENERGY  AUTHORITY,   DEPARTMENT   OF                                                                    
COMMERCE,  COMMUNITY  AND   ECONOMIC  DEVELOPMENT,  directed                                                                    
attention to  page 2  of the  legislation. He  addressed the                                                                    
existing  statutory language  (implemented  in 1996),  which                                                                    
required Alaska Industrial  Development and Export Authority                                                                    
(AIDEA) to  pay a dividend  to the State of  Alaska. Shortly                                                                    
after   the  statutory   sections   had   been  added,   the                                                                    
legislature  had realized  there  were  certain things  that                                                                    
happened  as  the  enterprise  achieved  or  received  their                                                                    
audited financial  statement on a yearly  basis. He detailed                                                                    
that  adjustments  were  made  to net  income  in  order  to                                                                    
receive the audited financial  statement. He continued there                                                                    
were  certain things  it  made  sense to  back  out, to  get                                                                    
closer to  a true  picture of  the net  income for  the year                                                                    
before the dividend  was calculated for the  state (in order                                                                    
for  the dividend  to be  calculated on  income received  by                                                                    
AIDEA).   He  referred   to  the   inclusion  of   the  word                                                                    
"excluding" on page  3, lines 3 and 21  of existing statute.                                                                    
He explained  it was a  recognition of the  legislature that                                                                    
while  certain  things needed  to  be  done to  receive  the                                                                    
audited financial statement,  certain accounting adjustments                                                                    
needed to  be backed out  to get  to true net  income before                                                                    
calculating the dividend to the state.                                                                                          
Mr.  Therriault   continued  to   address  page  2   of  the                                                                    
legislation. The  bill would expand the  language (following                                                                    
the word  excluding) to include  a couple of  new accounting                                                                    
rules and address a couple  of problems AIDEA had identified                                                                    
that   were   bringing   unnecessary   volatility   to   the                                                                    
calculation of the AIDEA dividend.  He elaborated there were                                                                    
two problems  the legislation aimed  to fix.  First, related                                                                    
to mark-to-market  adjustments that  were required  in order                                                                    
to  get   the  financial   audited  statement.   Second,  in                                                                    
instances where AIDEA  was tasked with looking  at a project                                                                    
and given an outside source  of money (e.g. an appropriation                                                                    
from the  state or  receipt of  federal funds  to look  at a                                                                    
specific  project),  previously the  legislature  instructed                                                                    
AIDEA to  disregard those  receipts when  they came  in. For                                                                    
example, if the  legislature gave AIDEA $1,000 to  look at a                                                                    
project,  it did  not expect  AIDEA to  give half  the money                                                                    
back in the  calculation of the dividend. The  bill aimed to                                                                    
fix the  specific problem when  any project had  a component                                                                    
that   got   written   off.   Additionally,   mark-to-market                                                                    
adjustments would be excluded.                                                                                                  
Mr. Therriault pointed to the  language on page 2, beginning                                                                    
on  line  5  and  explained  that losses  on  a  project  or                                                                    
development  to the  extent it  was financed  with state  or                                                                    
federal grants  (money appropriated to AIDEA  outside of its                                                                    
revenue  stream) were  to be  disregarded. Line  7 specified                                                                    
the mark-to-market adjustments  done for accounting purposes                                                                    
were  to be  excluded.  He referred  to  a presentation  his                                                                    
colleague would  provide momentarily  and noted he  had gone                                                                    
through an  abbreviated version  with each  committee member                                                                    
or their  staff. He believed the  presentation included some                                                                    
examples that  would help  committee members  understand the                                                                    
impact of  the adjustments needing  to be made in  order for                                                                    
AIDEA  to get  its audited  financial statement  and why  it                                                                    
made sense  to back the  items out to  get back to  true net                                                                    
income in order to calculate the AIDEA dividend.                                                                                
2:08:26 PM                                                                                                                    
Co-Chair Thompson referred  to page 2, lines 8  and 26 where                                                                    
a  reference  to  AS  44.88.172  (the  economic  development                                                                    
account) was  removed. He wondered  how the omission  of the                                                                    
account would impact the AIDEA dividend.                                                                                        
MICHAEL  LAMB, CHIEF  FINANCIAL  OFFICER, ALASKA  INDUSTRIAL                                                                    
DEVELOPMENT AND  EXPORT AUTHORITY, answered that  there were                                                                    
two  [statutes] "155  and 172";  AS  44.88.172 pertained  to                                                                    
projects. To some extent the  removal did not really have an                                                                    
effect. Some  of the language  changes in the bill  had gone                                                                    
through  Legislative Legal  Services  for clarification.  He                                                                    
explained  that the  bill  included  language specifying  if                                                                    
there was  any financing  for a project  that came  from the                                                                    
state or the federal government  "it comes out." He detailed                                                                    
that  part of  the problem  with  AS 44.88.172  was it  only                                                                    
picked  part of  the projects  that AIDEA  actually did.  He                                                                    
explained the  presentation noted  that under the  right set                                                                    
of circumstances or  an AS 44.88.172 project,  it would have                                                                    
an  effect  under  current statute;  however,  under  an  AS                                                                    
44.88.155 the language  did not apply. The goal  had been to                                                                    
clean  up  the  language  by removing  AS  44.88.172.  Under                                                                    
either  case or  type  of  project (even  if  it  was an  AS                                                                    
44.88.155 project) if  the money came from the  state or the                                                                    
federal  government it  would not  affect  the dividend.  He                                                                    
believed  an  example he  would  provide  would clarify  the                                                                    
Co-Chair Thompson  remarked there were quite  a few projects                                                                    
under AS 44.88.172.                                                                                                             
Mr. Therriault  believed AS 44.88.172  had existed  when the                                                                    
exclusion  had first  been  added to  the  statute, but  the                                                                    
Sustainable Energy Transmission and  Supply (SETS) funds and                                                                    
other funds had  not existed at that time. It  had been very                                                                    
specific that federal or outside  grants that came into that                                                                    
fund  were to  be  excluded; by  removing  the language  the                                                                    
exclusion would  apply to AS  44.88.172 and the  other funds                                                                    
that had been created since that time.                                                                                          
2:10:56 PM                                                                                                                    
Vice-Chair Saddler asked Mr. Lamb  to explain the term mark-                                                                    
to-market  fair  value. Mr.  Lamb  replied  that mark  meant                                                                    
adjusting  to  market. For  example,  if  a stock  had  been                                                                    
purchased  for  $1,000  and  one year  later  it  was  worth                                                                    
$1,100, the value was marked up to $1,100.                                                                                      
Vice-Chair  Saddler had  understood the  term to  mean "from                                                                    
this to  that, from mark  to the market." He  understood Mr.                                                                    
Lamb's explanation to mean "ascertained  it according to, in                                                                    
reference to the market."                                                                                                       
Mr.  Lamb responded  that the  mark-to-market would  be book                                                                    
value  on the  financial  statements according  to what  the                                                                    
market deemed something to be worth as of a point in time.                                                                      
Mr.  Therriault relayed  that Mr.  Lamb would  continue with                                                                    
the presentation.                                                                                                               
2:12:46 PM                                                                                                                    
Mr. Lamb  introduced the PowerPoint  Presentation, "Alaska's                                                                    
Development Finance Authority" (copy  on file). He indicated                                                                    
that the  bill was really  about accounting. He  relayed the                                                                    
legislation  was  not  overly complicated  and  the  concept                                                                    
would  be clear  to  accountants. He  had  tried to  develop                                                                    
analogies in  order to explain  the cause and effect  of the                                                                    
legislation. He asked how much time the committee had.                                                                          
Co-Chair  Thompson indicated  that there  was about  an hour                                                                    
and fifteen minutes.                                                                                                            
Mr. Lamb  requested to hold  questions until the end  of the                                                                    
Mr.  Lamb  addressed  slide   2  titled  "AIDEA's  Dividend:                                                                    
History,  Goal,  Statutory   Language,  and  Two  Accounting                                                                    
Problems  Working  to Fix."  He  relayed  that the  existing                                                                    
statutory language  was perfectly good;  however, accounting                                                                    
authoritative guidance  had changed. He elaborated  that the                                                                    
impacts  of   the  original   language  now   had  different                                                                    
consequences  if  adjustments  were not  made.  The  primary                                                                    
purpose of the bill was to fix the issue.                                                                                       
Mr. Lamb  turned to  slide 3: "AIDEA  Dividends to  State of                                                                    
Alaska." He  explained that the  dividend process  covered a                                                                    
three-year  period. He  pointed to  a chart  on slide  3 and                                                                    
specified the columns were year,  year payable, and dividend                                                                    
amount. The first row began  with 1995, which was payable in                                                                    
FY 96.  He elaborated  the books were  closed and  the audit                                                                    
process was  undertaken. Somewhere  around December  of each                                                                    
year the staff  recommended the dividend be  declared by the                                                                    
board based  on audited results  and then the  checks became                                                                    
payable  in  the  third  year. He  relayed  that  the  first                                                                    
dividend  was  $15  million.  He  stated  that  ideally  the                                                                    
schedule  would   keep  going  into  the   future  and  more                                                                    
dividends   would   be   paid   by   AIDEA   and   received.                                                                    
Approximately $380  million in  dividends had  been declared                                                                    
over time.  The original capitalization had  been about $332                                                                    
million. He stated there was  time value, but in essence the                                                                    
money that had  been made available had  been repaid through                                                                    
the dividends, which would  ideally persist perpetually into                                                                    
the future.                                                                                                                     
2:16:41 PM                                                                                                                    
Mr. Lamb slide 4 titled  "AIDEA's Dividend & Language Change                                                                    
     Share with the State, through an annual dividend (that                                                                     
     is stable and more predictable), the financial                                                                             
     benefits of AIDEA's actual results of operations.                                                                          
Mr.  Lamb  discussed  the goal  of  bringing  stability  and                                                                    
predictability to  the dividend. He recalled  the first year                                                                    
he had  worked at AIDEA there  had been a huge  swing in the                                                                    
net income  (and dividend)  and the  board had  specified an                                                                    
explanation was  needed to inform legislators  about why the                                                                    
dividend  had dropped  significantly. He  had explained  the                                                                    
answer was easy - the  unrealized losses had reduced the net                                                                    
income.  He  reasoned  the  concept  was  easier  said  than                                                                    
understood. He  stated the stability and  predictability "in                                                                    
fixing it was partly driven by  not having to deal with that                                                                    
Mr.  Lamb  turned  to  slide   5  titled  "Dividend  Statute                                                                    
Language  Needs   Modernizing,  As  Accounting   Rules  Have                                                                    
Evolved over  Time." He detailed  there were three  types of                                                                    
transactions  (only  the third  one  was  really a  problem,                                                                    
which  the  bill addressed).  The  first  pertained to  real                                                                    
transactions  that actually  occurred -  real revenues  were                                                                    
earned, checks  were written,  and equipment  was purchased.                                                                    
The  second pertained  to  estimates  and allocations  (i.e.                                                                    
booking  depreciation  on  purchased  equipment,  amortizing                                                                    
intangibles,  and  etcetera).  The  third  transaction  type                                                                    
related  to  entries  from   market  value  adjustments.  He                                                                    
detailed the  entries were related to  transactions that did                                                                    
not  occur,  but  were  required  to  book  and  adjust  the                                                                    
records.  He furthered  that in  order  for AIDEA  to be  in                                                                    
compliance with  the audit it  needed to be  GAAP (Generally                                                                    
Accepted Accounting  Principles) based,  which meant  it was                                                                    
necessary  to follow  the Governmental  Accounting Standards                                                                    
Board (GASB) - the  highest authoritative body. He explained                                                                    
that AIDEA  wanted to modernize  the exclusion  language [in                                                                    
statute] to  do a bit of  cleanup, which was the  essence of                                                                    
the legislation.                                                                                                                
2:19:31 PM                                                                                                                    
Mr.  Lamb  advanced to  slide  6:  "Payment of  dividend  to                                                                    
state."  He referred  to statutory  language specifying  the                                                                    
authority shall  adopt a policy  for payment of  a dividend,                                                                    
which may not be less than  25 percent of the net income. He                                                                    
pointed  to  language at  the  bottom  of the  slide,  which                                                                    
pertained to the reason for  the legislation. Net income was                                                                    
statutorily defined and meant the  change in net position or                                                                    
the equivalent [term under GAAP].  He noted that in the past                                                                    
net income had  also been termed results  of operations (the                                                                    
terms  were  the  same  label  for  the  difference  between                                                                    
revenues  and  expenses).  He explained  the  statutory  net                                                                    
income had to  be GAAP based; the net income  number was the                                                                    
result  of the  audited  financials, meaning  an audit  that                                                                    
followed   authoritative  guidance.   He  referred   to  the                                                                    
additional language pertaining to exclusions [see slide 6].                                                                     
Mr. Lamb  continued to slide 7:  "Dividend Calculation Stack                                                                    
Visual." He noted  the dividend to the state was  at the top                                                                    
of the  slide, which  was based  on statutorily  defined net                                                                    
income.  He continued  that a  GAAP based  audited financial                                                                    
statement was  required and  was accepted  by the  board. He                                                                    
furthered  that  the  financial statements  had  to  include                                                                    
applicable market  value and/or  write-down or  loss entries                                                                    
as  required  by  GAAP,  which in  turn  required  GASB.  He                                                                    
relayed  that HB  268 merely  modified "excluding"  language                                                                    
from  the  audit results  so  that  statutorily defined  net                                                                    
income would  not include any  market value and/or  state or                                                                    
federally funded  write-down activity, when  calculating the                                                                    
dividend. Once  the statutorily defined net  income had been                                                                    
determined  the board  was given  a recommendation  by staff                                                                    
pertaining to the dividend amount  (between 25 to 50 percent                                                                    
of net income).                                                                                                                 
2:22:39 PM                                                                                                                    
Mr.  Lamb  read  from  slide 8:  "Dividend  Problem  No.  1:                                                                    
"Market Value" Adjusting Entries":                                                                                              
   Problem 1:                                                                                                                   
     1. G.A.A.P. keeps evolving, requiring booking/recording                                                                    
        "market value"  adjusting entries.  Essentially, act                                                                    
        like something happened that didn't happen, and book                                                                    
        it as though it did…                                                                                                    
     2. The result: AIDEA's "net income" swings, sometimes                                                                      
        materially, which means the  State's dividend swings                                                                    
        sometimes materially yearoveryear,   we want  to fix                                                                    
     3. And in the end, ultimately, the dividend payment is                                                                     
        a cash  based  transaction.  (Paying  it  when  cash                                                                    
        hasn't been earned  is a  problem    for  AIDEA, but                                                                    
        likewise, not paying it when it has been earned, and                                                                    
        is available, is a problem  for the State.)                                                                             
Mr.  Lamb advanced  to slide  9: "Problem  No. 1  Analogy of                                                                    
"Market Value" Entries  Impacts" and slide 10:  "$ Based Tax                                                                    
Payer  Analogy." Slide  10  showed a  copy  of the  Internal                                                                    
Revenue Service (IRS)  1040 income tax form.  He referred to                                                                    
individuals  as cash-based  tax  payers.  He discussed  that                                                                    
individuals  applied their  final net  income number  to the                                                                    
federal  government's  tax  tables, which  resulted  in  the                                                                    
amount owed to the  government. Likewise, AIDEA went through                                                                    
a process  to come  up with  a net  income number,  at which                                                                    
point the board  applied a tax or dividend rate  of 25 to 50                                                                    
Mr. Lamb moved  to slide 11 and addressed an  extract of the                                                                    
income  section  1040  tax  form (shown  on  slide  10).  He                                                                    
reviewed the  example depicted on the  slide, which included                                                                    
$100,000  net  income.  The   example  assumed  a  brokerage                                                                    
account containing  $250,000 earning  3 percent in  the form                                                                    
of  interest and  dividend, which  would  be declared  under                                                                    
lines  8  and  9  at  $7,500. Line  21  reflected  a  $1,000                                                                    
Permanent  Fund Dividend.  The total  revenue number  on the                                                                    
slide was $109,000.                                                                                                             
2:26:03 PM                                                                                                                    
Mr. Lamb addressed slide 12:  "GASB Statements 31, 68, 72, &                                                                    
75."  He continued  with the  example and  asked members  to                                                                    
suppose an  individual had to apply  the mark-to-market fair                                                                    
value  adjustment GASB  standards.  He  spoke to  volatility                                                                    
brought on  by GASB  statement 31. He  believed it  was fair                                                                    
and  accurate  to  anticipate a  compounding  effect,  which                                                                    
would make  volatility even greater.  He detailed  that GASB                                                                    
statement  68   was  related   to  recording   the  unfunded                                                                    
obligation  related   to  pensions.  The   pension  unfunded                                                                    
obligation had  two sides to  the balance sheet:  assets and                                                                    
liabilities.  He  furthered  that  much of  the  asset  side                                                                    
included investments (marketable  securities). He elaborated                                                                    
that GASB statement 31 would drive  the gain and loss on the                                                                    
retirement  funds  and the  number  would  end up  following                                                                    
through to  the income statement  of all the  local entities                                                                    
(including AIDEA).                                                                                                              
Mr. Lamb turned  to slide 13: "Form 1040 Analogy  - Add GASB                                                                    
Impacts." He continued to address  an example where the four                                                                    
GASB statements  applied to individual  tax payers.  He used                                                                    
the IRS 1040  form and spoke to the  various GASB statements                                                                    
(31, 68,  72, and 75). He  detailed that GASB 31  related to                                                                    
marketable  securities.  He  explained that  anyone  with  a                                                                    
portfolio where  no sales  or purchases  were made  within a                                                                    
year, but  the stocks  were worth  $25,000 more  because the                                                                    
market  value  had increased,  the  gain  would have  to  be                                                                    
recorded as if it had been  sold to recognize an increase in                                                                    
wealth.  He  elaborated it  was  an  unrealized increase  in                                                                    
wealth, but  it would have  to be recorded. He  relayed that                                                                    
GASB  68  related   to  the  pension  side   of  the  Public                                                                    
Employees' Retirement  System (PERS) component. He  spoke to                                                                    
IRAs   and  401k   retirement  plans.   He  furthered   that                                                                    
retirements  account were  worth about  $200,000 and  in the                                                                    
example  increased by  about 5  percent over  one year;  the                                                                    
increased adjustment  would be claimed  on the IRS  form. He                                                                    
relayed GASB  72 was a  fair value adjustment and  went into                                                                    
effect for AIDEA  at the end of the tax  year June 30, 2016.                                                                    
He provided  an analogy  of owning  a rental  property worth                                                                    
$400,000  that  had  increased   5  percent  over  the  year                                                                    
($20,000).  He  specified that  GASB  75  was not  yet  into                                                                    
effect, but began  for years ending June 30,  2018 (the item                                                                    
pertained  to   the  fair  market  value   for  other  post-                                                                    
employment  benefits  such  as healthcare,  disability,  and                                                                    
other); the example  used an amount of  $5,000. He explained                                                                    
that due to the increases the  total revenue on the form was                                                                    
$60,000 higher. He detailed the  adjustments could go in any                                                                    
Mr. Lamb scrolled  to slide 14: "HB 268's /  SB 149's Impact                                                                    
to 1040 Analogy." He addressed  the proposed modification to                                                                    
the  excluding  language  -  from  AIDEA's  perspective  the                                                                    
market  value  adjustments would  be  removed  from its  net                                                                    
income.  He referred  back to  the example  on slide  13 and                                                                    
explained the net income would  be back down to $109,000 for                                                                    
purposes of determining the dividend.                                                                                           
2:31:47 PM                                                                                                                    
Mr. Lamb  advanced to  slide 15:  "AIDEA's Net  Income, Pre-                                                                    
G.A.S.B.  31 "Market  Value" Adjusting  Entries." The  chart                                                                    
depicted 25 years  of AIDEA's net income from  1991 to 2015.                                                                    
He remarked  the income fluctuated  - the largest  swing had                                                                    
been in  2003 to  2004 from  about $35  million down  to $25                                                                    
million (each  of the  points on  the chart  represented the                                                                    
year-end).  He moved  to slide  16:  "GASB 31"Market  Value"                                                                    
Impact  to  Net  Income"  that showed  what  AIDEA's  actual                                                                    
audited  financial   statement  numbers  looked   like  when                                                                    
factoring in GASB 31. He  had used audited financial numbers                                                                    
and had  backed out GASB  31 unrealized gains and  losses to                                                                    
come  up  with  the  green  line on  the  chart.  The  chart                                                                    
indicated GASB 31 had begun in  1997; the yellow line on the                                                                    
chart, which fluctuated  substantially, reflected net income                                                                    
post  GASB 31  entries.  He explained  that  AIDEA had  been                                                                    
required  to  calculate a  dividend  based  upon the  yellow                                                                    
line.  He discussed  that most  individuals were  cash-based                                                                    
tax  payers;  whatever the  tax  bill  was, in  theory,  the                                                                    
individual  had the  cash to  pay the  taxes, which  was the                                                                    
reason accrual  was not  used on  personal income  taxes. He                                                                    
pointed  to  2010  and  relayed  the  net  income  had  been                                                                    
approximately $41 million; with GASB  31 it had increased to                                                                    
close  to $58  million. He  explained it  was a  substantial                                                                    
chunk to  apply a  50 percent dividend  to, while  the money                                                                    
had not  actually been received  in the bank. Blue  lines on                                                                    
the  slide  specified  instances  where  GASB  31  made  the                                                                    
statutory net  income number and dividend  lower. He pointed                                                                    
to 2013  and explained the  audited net income prior  to the                                                                    
impact of GASB  31 had been about $44  million, whereas, the                                                                    
mark-to-market effect  (acting as though AIDEA  had sold all                                                                    
of the  investments at June  30) had reduced the  net income                                                                    
to just  above $20 million.  He emphasized the scope  of the                                                                    
2:35:23 PM                                                                                                                    
Mr. Lamb  continued to address  slide 16. He  explained that                                                                    
2013 was an instance where AIDEA  had the ability to write a                                                                    
larger check, but  the check was less because  of the impact                                                                    
of GASB  31 on the  financial statements. He  expounded that                                                                    
if GASB 68, 72,  and 75 were stacked on top  of GASB 31, the                                                                    
line would become even more  volatile. He moved to slide 17:                                                                    
"Problem  No. 2  "Dividend Penalty"  Adjusting Entries"  and                                                                    
slide  18:  "Dividend   Problem  No.  2:  "Dividend-Penalty"                                                                    
Effect Adjusting Entries." He  discussed that when AIDEA was                                                                    
given money from  the state or federal  government (cash was                                                                    
converted to build an asset),  the asset was written off the                                                                    
books (an  asset that  really did not  have the  value could                                                                    
not be reported  on financial statements). To  get the asset                                                                    
off  the books  the asset  was reduced  and it  had to  flow                                                                    
through  the income  statement as  an  expense (basically  a                                                                    
write  down), which  resulted in  less income.  He addressed                                                                    
that the dividend  penalty could be 25 to  55 percent, which                                                                    
AIDEA wanted to fix.                                                                                                            
2:37:54 PM                                                                                                                    
Mr.  Lamb  turned  to  slide 19:  "Potential  Effect  of  an                                                                    
Adjustment   to   State   Funded   Investment   (Project   X                                                                    
Hypothetical)." Under the current  statute the example would                                                                    
be  an  AS  44.88.155  project;   it  was  part  of  AIDEA's                                                                    
revolving fund.  He explained  the computation  of statutory                                                                    
net income  for the FY 17  dividend came out of  the back of                                                                    
the  audit  (Schedule  7).  The total  began  at  about  $28                                                                    
million;   after   adjustments   (for   existing   statutory                                                                    
language) the  net income was  reduced to $25.3  million. He                                                                    
stressed  that the  specific issue  was not  consistent like                                                                    
the annual GASB 31. They  had determined the issue should be                                                                    
brought  forward  for  the legislature  to  rectify  if  the                                                                    
legislature  chose  to  do  so.   He  continued  to  address                                                                    
"project  x"   and  discussed   a  circumstance   where  the                                                                    
legislature or  federal government  chose not to  invest any                                                                    
more  money and  determined there  was no  future value  and                                                                    
that the  item required  a write-down. All  of a  sudden the                                                                    
$25.3 million  in net income  was reduced to  $16.5 million,                                                                    
which  would be  the  audited  net income  number.  At a  50                                                                    
percent  dividend  the  net  income   number  would  mean  a                                                                    
reduction of  $4.4 million to  the dividend. He  provided an                                                                    
example  where the  federal government  had  given the  $8.8                                                                    
million  to AIDEA,  which  had been  eroded  off. The  state                                                                    
would actually  be out $4.4  million of the dividend  due to                                                                    
current statute that did not exclude the specific item.                                                                         
2:39:56 PM                                                                                                                    
Mr.  Lamb  continued  that  in the  example  the  state  was                                                                    
penalized  for a  project funded  with  federal dollars.  He                                                                    
furthered that AIDEA had received  the money, followed GAAP,                                                                    
reported it, determined  there was no value,  wrote the item                                                                    
down,  and  the  dividend  was   reduced.  He  spoke  to  an                                                                    
alternative scenario  where the state provided  $8.8 million                                                                    
to  AIDEA for  a project,  but then  determined the  project                                                                    
would  not move  forward and  subsequently the  dividend was                                                                    
reduced. He explained it had seen  like a good idea, but all                                                                    
of a sudden  the $8.8 million project really  cost the state                                                                    
$13.2 million in cash; the  dividend penalty occurred solely                                                                    
because  of   following  the  reporting  criteria.   If  the                                                                    
language  was altered  to exclude  projects  or write  downs                                                                    
financed  with federal  or state  money would  eliminate the                                                                    
dividend penalty.                                                                                                               
Mr.  Lamb turned  to slide  20:  "Hypothetical State  Funded                                                                    
Non-172  Project, if  Stopped, Impact  to "Net  Income"." He                                                                    
referred to the green line  [pre-net income] for GASB 31 and                                                                    
pointed to an  excerpt on the right of the  slide. The green                                                                    
line was about $28 million  he had addressed in the Schedule                                                                    
7. The  yellow line  in the  excerpt represented  net income                                                                    
post GASB  31; the  net income reduced  to $16.6  million if                                                                    
the  $8.8 million  if the  loss was  reflected. The  excerpt                                                                    
provided a visual of how the  lines would change if the $8.8                                                                    
million was  added to  the net income  number. He  noted the                                                                    
unrealized losses  changed to include the  reduction of $8.8                                                                    
million  for  a  net  income   of  around  $16  million.  He                                                                    
continued  that  50  percent   of  $8.8  million  meant  the                                                                    
dividend  would  be  $4.4  million  smaller.  He  noted  the                                                                    
situation did  not happen frequently,  but it  could happen;                                                                    
therefore, AIDEA believed the problem should be fixed.                                                                          
2:42:59 PM                                                                                                                    
Mr.  Lamb moved  to slide  21: "Proposed  Statutory Language                                                                    
Explanation"  and slide  22:  "Language  Changes -  Selected                                                                    
   · BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF                                                                           
   · Section 1. AS 44.88.088(b) is amended to read:                                                                             
   · (2) "marktomarket fair value" means fixing the value                                                                       
     of  an  investment  as  its  market  value  as  of  the                                                                    
     financial reporting date;                                                                                                  
   · (3) "net income" means the change in net position, or                                                                      
     the   equivalent   term    under   generally   accepted                                                                    
     accounting  principles,  of  the  revolving  fund,  the                                                                    
     change  in  net  position   of  the  Alaska  Industrial                                                                    
     Development  and  Export Authority  sustainable  energy                                                                    
     transmission   and   supply    development   fund   (AS                                                                    
     44.88.660),  or  the  change in  net  position  of  the                                                                    
     Arctic infrastructure  development fund  (AS 44.88.810)                                                                    
     as set out  in the audited financial  statements of the                                                                    
     authority for  the base fiscal year,  excluding amounts                                                                    
     attributable  to  intergovernmental transfers,  capital                                                                    
     contributions,  grants,  [OR  IMPAIRMENT] losses  on  a                                                                    
     project  or  development  to  the  extent  [DEVELOPMENT                                                                    
     PROJECTS]  financed with  state  or  federal grants  or                                                                    
     appropriations,   marktomarket     fair   value   based                                                                    
     accounting  entries,  and  noncash  accounting  entries                                                                    
     related   to    retirement   obligations    [UNDER   AS                                                                    
Mr.  Lamb explained  that  the  language "excluding  amounts                                                                    
attributable   to   intergovernmental   transfers,   capital                                                                    
contributions, grants,  [OR IMPAIRMENT] losses on  a project                                                                    
or   development  to   the  extent   [DEVELOPMENT  PROJECTS]                                                                    
financed with state or  federal grants or appropriations..."                                                                    
would  fix problem  2 that  he had  discussed. The  language                                                                    
"marktomarket   fair  value  based accounting  entries,  and                                                                    
noncash   accounting    entries   related    to   retirement                                                                    
obligations" fixed  the impact of  GASB 31, 68, 72,  and 75.                                                                    
He elaborated  AIDEA had  tried to  make the  language broad                                                                    
enough that  whatever GASB  decided it  wanted to  adjust to                                                                    
(if  it  was market  value),  the  language should  fix  the                                                                    
issue. He  continued that  it would enable  AIDEA to  pay on                                                                    
the $109  million, not $169  million or whatever  the number                                                                    
turned out to be.                                                                                                               
2:44:43 PM                                                                                                                    
Mr. Lamb reviewed slide 23: "Summary":                                                                                          
     The proposed statutory change of HB 268 / SB 149:                                                                          
     1) Removes  the "market value" entries  that impact the                                                                    
     dividend, thus  better stabilizing the  dividend amount                                                                    
     paid to the State yearoveryear.                                                                                            
     2)  Removes   the  "dividendpenalty"   result   on  the                                                                    
     financier  of  an  investment   project  that  did  not                                                                    
     materialize as originally planned.                                                                                         
     3)  Modernizes and  aligns  statutory  language to  the                                                                    
     fact that  the dividend  is a check  to the  State, and                                                                    
     thus,  is a  cash based  transaction. Language  changes                                                                    
     better  connect  the  payment to  the  actual  realized                                                                    
     results of operations. Paying it  when cash hasn't been                                                                    
     earned  is a  problem (for  AIDEA), and  not paying  it                                                                    
     when  it  has  been  earned, and  is  available,  is  a                                                                    
     problem (for the State).                                                                                                   
Mr. Lamb  explained the bill  simply tried to  modernize the                                                                    
old language  to the fact that  reporting requirements under                                                                    
GAAP had evolved  and changed. He believed there  would be a                                                                    
compounding effect.                                                                                                             
Representative  Wilson understood  the bill  would entail  a                                                                    
different accounting method.  She  asked if the change would                                                                    
impact the state's bond and credit rating.                                                                                      
Mr. Lamb  responded in the  negative. He explained  that the                                                                    
audited financials  would still  be the  audited financials.                                                                    
He detailed  in order  to get to  the statutory  defined net                                                                    
income it  was necessary to  get to the audit.  He furthered                                                                    
that  rating agencies  always looked  at the  financials. He                                                                    
had  previously  worked  for   the  [Fairbanks  North  Star]                                                                    
borough  and had  been  through  12 to  18  bond sales  with                                                                    
numerous  rating agencies.  He stated  they were  very smart                                                                    
people  who understood  financials and  accounting with  the                                                                    
ability  to make  adjustments for  the  type of  adjustments                                                                    
[the bill would implement]. He  concluded the changes in the                                                                    
bill would  have no impact  [on the state's bond  and credit                                                                    
rating] because  an audited financial statement  would still                                                                    
be  required. The  statutorily defined  net income  used for                                                                    
the dividend was post the  audited number. To his knowledge,                                                                    
the statutory  net income number  was not used  for anything                                                                    
other  than the  dividend  calculation. He  referred to  Mr.                                                                    
Therriault's  testimony related  to appropriations  from the                                                                    
state.  He explained  if the  appropriation was  included it                                                                    
would  be  like  the  state giving  AIDEA  money  and  AIDEA                                                                    
writing  a check  back to  the  state for  the dividend.  He                                                                    
noted the method did not make sense.                                                                                            
2:47:30 PM                                                                                                                    
Representative Wilson  asked for verification that  the bill                                                                    
would not impact the state's bond rating in any way.                                                                            
Mr. Lamb agreed.  He noted that AIDEA's AA+  rating had been                                                                    
reaffirmed in  a recent  update by  Standard and  Poor's (he                                                                    
had received the update on March 3, 2017).                                                                                      
Vice-Chair  Saddler asked  if any  other state  corporations                                                                    
paid dividends  based on the  same calculation.  He wondered                                                                    
if the legislature should expect  to see similar legislation                                                                    
come  forward for  entities such  as Alaska  Housing Finance                                                                    
Corporation  (AHFC), the  Alaska  Railroad Corporation,  and                                                                    
the Alaska Energy Authority (AEA).                                                                                              
Mr. Lamb replied  that he had no knowledge of  how the other                                                                    
agency's dividends  were calculated or what  they were based                                                                    
on.  He  detailed  it  had  taken  him  a  year  or  two  to                                                                    
understand  the  ramifications   of  the  current  statutory                                                                    
language.  He  expounded  AIDEA  had to  sign  a  letter  of                                                                    
representation  annually specifying  actions  that had  been                                                                    
taken. He  explained it  took time  to understand  the cause                                                                    
and  effect  of  the  accounting  records,  ordinances,  and                                                                    
other. He shared that he was  still a licensed CPA and would                                                                    
not  compromise his  livelihood. He  believed the  statutory                                                                    
language should be fixed. He  elaborated the glaring problem                                                                    
related to the swings in  the dividend. He concluded that at                                                                    
least AIDEA was doing what  it believed was the right thing,                                                                    
which was identifying the problem that needed to be fixed.                                                                      
Vice-Chair  Saddler  asked  if  there  was  any  correlation                                                                    
between the  proposed accounting  change and  the governor's                                                                    
executive  order considering  consolidation or  efficiencies                                                                    
between AIDEA, AHFC, and AEA.                                                                                                   
Mr. Lamb  replied that  he did not  believe so.  He detailed                                                                    
the  issue had  been brought  up by  AIDEA around  July 2015                                                                    
when it had  been going through an audit.  He furthered that                                                                    
recommendations  for  statutory  changes  were  due  to  the                                                                    
administration around  December each year. He  stated he had                                                                    
no  idea  how the  world  would  unfold  in the  future.  He                                                                    
explained  the end  of  2016 would  come  quickly and  AIDEA                                                                    
would  be in  the same  circumstance -  it would  conduct an                                                                    
audit, consider exclusions, and determine the dividend.                                                                         
2:51:01 PM                                                                                                                    
Vice-Chair  Saddler asked  for the  current balances  of the                                                                    
SETS,  revolving,  and   Arctic  Infrastructure  Development                                                                    
Mr.  Lamb believed  no funding  had ever  been put  into the                                                                    
Arctic  fund.  The   balance  in  the  SETS   Fund  was  not                                                                    
substantial; the  available money was primarily  directed to                                                                    
the IEP  [Interior Energy  Project], so  he did  not believe                                                                    
there  was  anything there.  He  reported  that AIDEA's  net                                                                    
assets  for  the  revolving  fund  were  approximately  $1.2                                                                    
Co-Chair  Thompson  asked  AIDEA   to  follow  up  with  the                                                                    
information. Mr. Lamb complied.                                                                                                 
Representative  Kawasaki asked  how  many AIDEA  development                                                                    
projects  currently existed  that would  be impacted  by the                                                                    
change in law proposed under the legislation.                                                                                   
Mr.  Lamb responded  that the  legislation  would have  zero                                                                    
impact  on the  issue.  He explained  that  AIDEA had  three                                                                    
primary  revenue  sources:  direct loans,  return  from  its                                                                    
eight  or  so  projects,  and  its  own  externally  managed                                                                    
investments  used  to  stabilize   the  agency's  cash  (the                                                                    
investments were  also a big  deal with rating  agencies for                                                                    
general obligation bonds). The bill  would have no impact on                                                                    
the  projects, but  it could  have  an impact  in the  other                                                                    
direction. For  example, the Coast  Guard had  been thinking                                                                    
about  leaving  Anchorage  because   they  did  not  have  a                                                                    
facility,  so  AIDEA had  built  a  facility on  Joint  Base                                                                    
Elmendorf-Richardson for 30 years.  He explained that if the                                                                    
project was  on AIDEA's books  for $13 million and  for some                                                                    
reason  the project  went away  and  the federal  government                                                                    
exercised imminent  domain and gave AIDEA  $5 million, there                                                                    
would be  $8 million  difference between AIDEA's  book value                                                                    
and money it  received. The difference would  have an effect                                                                    
on net  income and subsequently the  dividend. He summarized                                                                    
that  the bill  would have  no impact  on projects,  but the                                                                    
projects could impact the result of the legislation.                                                                            
2:54:42 PM                                                                                                                    
Representative Kawasaki  asked about  writing assets  off of                                                                    
the  books for  a project  that was  not moving  forward. He                                                                    
wondered how the entries were configured.                                                                                       
Mr.  Lamb replied  it  was  an accounting  term  of art.  He                                                                    
furthered that  AIDEA's balance sheet  had to  reflect owned                                                                    
and owed amounts. He continued  it was wrong to claim owning                                                                    
something  worth "x"  dollars  when it  was  not worth  that                                                                    
amount. The way to change "x"  was to do a write down, which                                                                    
essentially credited  the asset account (i.e.  write down or                                                                    
loss in value)  - the debit was shifted from  being an asset                                                                    
to  an expense  "and it's  gone." Under  the example  he had                                                                    
provided, it was exactly what  would happen. Auditors worked                                                                    
to determine  whether an  entity had  followed authoritative                                                                    
guidance  and  whether items  on  the  financial sheet  were                                                                    
materially accurate.  He referred back to  his example where                                                                    
a $5  million purchase was  made by the  federal government;                                                                    
the  $5 million  would be  recorded and  a write  down would                                                                    
occur.  Secondly, the  financial statements  would recognize                                                                    
depreciation or  amortization - the  value of the  asset was                                                                    
recorded year-over-year  (it was basically wearing  out over                                                                    
2:57:16 PM                                                                                                                    
Representative Kawasaki  referred to the Ambler  mining road                                                                    
project, which had  started out as an  $8 million Department                                                                    
of  Transportation and  Public  Facilities  project and  had                                                                    
shifted  to AIDEA  for  surveys. He  asked  if the  specific                                                                    
project would  have a bookable  value. He about  the ability                                                                    
for a private entity to build a road.                                                                                           
Mr.  Lamb  replied in  the  affirmative.  He furthered  that                                                                    
AIDEA had conversations about whether  there was still value                                                                    
in the specific project.  He elaborated that the legislature                                                                    
had  appropriated  money  for the  project,  the  governor's                                                                    
office had  approved it, and  AIDEA was moving  forward with                                                                    
the assumption that if a viable  route was found, all of the                                                                    
associated permits  and work to  get from "point A  to point                                                                    
B" had value.  He explained that the  project was considered                                                                    
an asset because  they were paying for things  that would be                                                                    
necessary   to   build   the   road;   conduct   permitting,                                                                    
engineering, and environmental  impact statements (EIS); and                                                                    
other. The reason  the cost had been incurred was  to end up                                                                    
with an asset;  therefore, it became a part of  the basis of                                                                    
the asset until it had been determined there was no asset.                                                                      
Representative Gattis  asked if  there was  a point  in time                                                                    
the cost of the EIS, record  of decisions, or other could be                                                                    
backed   out  because   they  had   expired  as   the  asset                                                                    
depreciated over time.                                                                                                          
Mr.  Lamb replied  in the  affirmative. He  referred to  the                                                                    
Ambler project.  He stated  that at  one point  the governor                                                                    
had put Susitna  and Ambler projects on  halt, partially due                                                                    
to a shelf-life  to EIS studies (at some point  there was no                                                                    
value).  Part  of  AIDEA and  AEA's  communications  to  the                                                                    
governor's  office  was about  the  shelf-life  and need  to                                                                    
finish some of the work in  order to avoid losing all of the                                                                    
value. The  question became that he  and AIDEA's controller,                                                                    
who   were   responsible   for   signing   the   letter   of                                                                    
representation  related to  the  asset  values, ensured  the                                                                    
values were fairly represented. Much  of the process was not                                                                    
black and  white; there  was significant  subjectivity about                                                                    
what someone thought  or did not think would  happen. At the                                                                    
current point the legislature had  not stopped the Ambler or                                                                    
Susitna  projects;  therefore,  there was  still  value.  He                                                                    
noted that  at some point  there may  not be value.  At some                                                                    
point  items with  a shelf-life  had to  be written  down at                                                                    
some  point when  they no  longer had  value, otherwise  the                                                                    
value  of  the assets  were  misstated  and financials  were                                                                    
3:02:04 PM                                                                                                                    
Representative Kawasaki  referred to  Mr. Lamb's  example of                                                                    
the  1040  IRS  form,   which  essentially  included  future                                                                    
unrealized losses (not gains).  He remarked that there could                                                                    
be unrealized  gains or  losses. He  surmised AIDEA  did not                                                                    
anticipate future dividends to be  any larger or smaller due                                                                    
to the  legislation. He believed the  legislation would mean                                                                    
the dividend would be flatter over time.                                                                                        
Mr.  Lamb  responded  that  over the  25-year  life  of  the                                                                    
dividend the average was just  under 50 percent. He detailed                                                                    
that if  the dividend  was based  on 50  percent of  the net                                                                    
income pre-GASB  31 (green line  in presentation  charts) it                                                                    
swung  from  year-to-year,  but  the  changes  were  not  as                                                                    
significant as  those post-GASB 31  (there was  currently no                                                                    
exclusion  in statute).  He agreed  that the  dividend would                                                                    
flatten out  a bit. He  explained AIDEA's goal was  to share                                                                    
its  earnings, create  jobs, and  to  provide stability  and                                                                    
predictability  at  the  same   time.  He  stated  the  same                                                                    
dividend amount did  not necessarily occur over  a period of                                                                    
time if  the items  were excluded  [from net  income]. There                                                                    
was still the  issue about when the check  could be written.                                                                    
He  referred   to  his  earlier  analogy   about  cash-based                                                                    
taxpayers -  they received  the money and  if they  were not                                                                    
able to  write a check  they had  to explain why.  He shared                                                                    
that  when  he  had  worked for  the  Fairbanks  North  Star                                                                    
Borough, their  investments had  always been  in government,                                                                    
safety,  liquidity, and  yield.  Generally most  investments                                                                    
(AIDEA  had  an  investment resolution  for  internally  and                                                                    
externally  managed funds)  were in  safe assets.  He stated                                                                    
"then you  really look to liquidity  of when you go  out and                                                                    
buy." For example, if he had  $10 million and needed it back                                                                    
in 60 days, he would specify  that for all the things he was                                                                    
authorized  to  buy, he  wanted  the  $10 million  back.  He                                                                    
believed at the  borough the amount would ebb  and flow over                                                                    
time, but  the net number would  turn out to be  the same in                                                                    
the  end. The  difference for  AIDEA (and  probably AHFC  or                                                                    
other)  was  it had  two  outside  entities that  externally                                                                    
managed investments, which included  buying and selling (the                                                                    
average life  was around five  years). He could not  say the                                                                    
net  number  would turn  out  to  be  the same  because  the                                                                    
managers were  buying and selling,  and the timing  for what                                                                    
was going on in the market changed things.                                                                                      
3:05:55 PM                                                                                                                    
Representative  Edgmon summarized  his understanding  of Mr.                                                                    
Lamb's testimony by referring to  slide 23, point 3. He read                                                                    
from  the  slide:  "Language   changes  better  connect  the                                                                    
payment to  the actual  realized results of  operations." He                                                                    
asked  for verification  AIDEA would  essentially be  paying                                                                    
its dividend off of its  audited financial statements if all                                                                    
of the  GASB requirements  [listed in  the bill]  were taken                                                                    
out.  He asked  for  confirmation that  the  issue was  that                                                                    
Mr.  Lamb  responded that  [currently]  AIDEA  paid off  the                                                                    
audited results adjusted for the items.                                                                                         
Representative  Edgmon clarified  he was  referring to  what                                                                    
would occur if the bill became law.                                                                                             
Mr. Lamb  answered in the  affirmative. He referred  back to                                                                    
the analogy related to individual  tax returns. He explained                                                                    
that if  individuals had  to specify  how much  their wealth                                                                    
increased  and included  their gain  or loss  over a  year -                                                                    
"you   take  all   that  stuff   out."   He  believed   what                                                                    
Representative Edgmon was saying was correct.                                                                                   
Co-Chair Thompson  clarified that  the unrealized  gains and                                                                    
losses were taken out. Mr.  Lamb answered in the affirmative                                                                    
and that it was the mark-to-market.                                                                                             
Representative  Edgmon surmised  that  essentially the  bill                                                                    
would put AIDEA on equal  footing as a public/private entity                                                                    
with a private sector  corporation. He reasoned that private                                                                    
sector  corporations  paid   their  dividends  from  audited                                                                    
financial statements.                                                                                                           
Mr. Lamb agreed that  private sector corporations paid their                                                                    
dividends  from audited  financial statements.  However, the                                                                    
Financial   Accounting   Standards   Board   (FASB),   which                                                                    
pertained  to the  private sector,  had mark-to-market  too.                                                                    
There  was  a  reason  GASB had  the  adjustments,  but  the                                                                    
question for a  legislative body was to  consider whether it                                                                    
really  wanted  the items  to  be  a  part of  the  dividend                                                                    
calculation. The money  given for a project was  part of the                                                                    
audited financial  statement. The other large  number on the                                                                    
balance sheet  was for the  dividends paid to the  state. He                                                                    
believed the  current year operations should  not be reduced                                                                    
by the  fact AIDEA was paying  a dividend that showed  up as                                                                    
an   expense   on   AIDEA's   books.   He   concluded   that                                                                    
Representative Edgmon was essentially correct.                                                                                  
3:09:00 PM                                                                                                                    
Representative Edgmon  thought the bill made  good sense and                                                                    
wanted to see it move forward.                                                                                                  
Vice-Chair Saddler  asked how much  discretion there  was in                                                                    
determining the dividend amount AIDEA paid to the state.                                                                        
Mr. Lamb  answered that  per statute  AIDEA was  required to                                                                    
pay a  dividend, which was  no less  than 25 percent  and no                                                                    
more than 50 percent of  the statutorily defined net income.                                                                    
Historically,  over  the  25 years  the  dividend  had  been                                                                    
provided, the number was an average  of 47 or 48 percent. He                                                                    
was  proud of  AIDEA's  work. The  current conversation  was                                                                    
only related  to the dividend.  He spoke to  the significant                                                                    
number of jobs  created and all of the  financing offered by                                                                    
the agency.                                                                                                                     
3:10:32 PM                                                                                                                    
Vice-Chair Saddler  surmised there was some  discretion, but                                                                    
someone had  exercised the discretion  to be much  closer to                                                                    
50  percent than  25  percent. He  asked  about the  board's                                                                    
criteria used to determine the dividend amount.                                                                                 
Mr. Lamb referred  to an extract from a  December 19th board                                                                    
resolution, which specified  AIDEA's mission was established                                                                    
by statute. He read from the document:                                                                                          
     The  authority  was created  by  the  legislature as  a                                                                    
     public corporation  to advance the  economic prosperity                                                                    
     of  Alaskans   by  diversifying  the   Alaska  economy,                                                                    
     promoting the  creation and  retention of  Alaska jobs.                                                                    
     The dividend  did not  change the  authority's mission,                                                                    
     in fact, in establishing  the dividend requirement, the                                                                    
     legislature  stated  it's  intend  that  the  financial                                                                    
     integrity  of  the  authority   remain  secure  so  the                                                                    
     authority can  continue to  fulfill its  vital economic                                                                    
     development   mission   for   the  state.   Thus,   the                                                                    
     legislature made  clear that  although a  dividend must                                                                    
     be made available, the dividend  must not be determined                                                                    
     in  a  manner  that  does not  impede  the  authority's                                                                    
     ability  to   fulfill  its   mission;  and   with  this                                                                    
     background in  mind, the staff believes  the board must                                                                    
     counterbalance  two  competing  interests:  provide  an                                                                    
     adequate financial return  to the state in  the form of                                                                    
     a  cash dividend  as contemplated  by the  state versus                                                                    
     ensure the  authority retains the  financial capability                                                                    
     to  achieve its  economic development  mission for  the                                                                    
Mr.  Lamb   looked  at  AIDEA   similarly  to   the  federal                                                                    
government.  He  detailed  the federal  government  had  the                                                                    
employment    counterbalance     against    inflation.    He                                                                    
acknowledged  that   sometimes  the   two  things   were  in                                                                    
competition.   He  furthered   that   AIDEA's  mission   for                                                                    
employment and economic  activity balanced against providing                                                                    
financing  for development  projects.  The  entity was  also                                                                    
expected to  be self-sustaining  and to  pay a  dividend. He                                                                    
explained  those items  were given  consideration -  "can we                                                                    
pay as large of a  dividend as possible without jeopardizing                                                                    
our  ability to  do  our  mission and  have  the cash."  His                                                                    
recommendation  to  the board  was  based  upon future  cash                                                                    
Co-Chair Thompson asked for final comments.                                                                                     
Mr. Lamb was in favor of the bill and appreciated the                                                                           
committee's support.                                                                                                            
HB 268 was HEARD and HELD in committee for further                                                                              
Co-Chair Thompson reviewed the agenda for the following                                                                         
3:14:27 PM                                                                                                                    
The meeting was adjourned at 3:14 p.m.                                                                                          

Document Name Date/Time Subjects
HB268 Sectional Analysis.pdf HFIN 3/16/2016 1:30:00 PM
HB 268
HB268 Transmittal Letter.pdf HFIN 3/16/2016 1:30:00 PM
HB 268
HB268 031616 HFIN Presentation.pdf HFIN 3/16/2016 1:30:00 PM
HB 268
SB 53 NEW FN DCCED-CBPL 3-11-16.pdf HFIN 3/16/2016 1:30:00 PM
SB 53