Legislature(2019 - 2020)ADAMS ROOM 519

01/31/2020 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

Audio Topic
01:32:24 PM Start
01:33:25 PM HB205 || HB206
01:33:36 PM Overview: Alaska Permanent Fund
02:59:15 PM Fy 21 Department Budget Overview: Judiciary
03:35:22 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: Alaska Permanent Fund by TELECONFERENCED
Alaska Permanent Fund Corp.
+= HB 205 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
+= HB 206 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
+ FY21 Dept. Budget Overview: Judiciary TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      January 31, 2020                                                                                          
                         1:32 p.m.                                                                                              
                                                                                                                                
1:32:24 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Foster called the House Finance Committee meeting                                                                      
to order at 1:32 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Jennifer Johnston, Co-Chair                                                                                      
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Andy Josephson                                                                                                   
Representative Gary Knopp                                                                                                       
Representative Bart LeBon                                                                                                       
Representative Kelly Merrick                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
Representative Cathy Tilton                                                                                                     
Representative Adam Wool                                                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Angela Rodell, Executive Director, Alaska Permanent Fund                                                                        
Corporation; Doug Wooliver, Deputy Administrative Director,                                                                     
Alaska Court System.                                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
`HB 205    APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                 
                                                                                                                                
           HB 205 was HEARD and HELD in committee for                                                                           
           further consideration.                                                                                               
                                                                                                                                
HB 206     APPROP: MENTAL HEALTH BUDGET                                                                                         
                                                                                                                                
           HB 206 was HEARD and HELD in committee for                                                                           
           further consideration.                                                                                               
                                                                                                                                
OVERVIEW: ALASKA PERMANENT FUND                                                                                                 
                                                                                                                                
FY 21 DEPARTMENT BUDGET OVERVIEW: JUDICIARY                                                                                     
                                                                                                                                
Co-Chair Foster REVIEWED THE AGENDA FOR THE DAY.                                                                                
                                                                                                                                
HOUSE BILL NO. 205                                                                                                            
                                                                                                                                
      "An  Act  making  appropriations   for  the  operating   and                                                              
      loan  program   expenses   of  state   government   and  for                                                              
      certain    programs;      capitalizing     funds;     making                                                              
      appropriations  under  art.  IX,  sec. 17(c),  Constitution                                                               
      of the  State of  Alaska,  from  the constitutional   budget                                                              
    reserve fund; and providing for an effective date."                                                                         
                                                                                                                                
HOUSE BILL NO. 206                                                                                                            
                                                                                                                                
      "An  Act  making  appropriations   for  the  operating   and                                                              
      capital    expenses     of    the     state's    integrated                                                               
      comprehensive  mental  health  program;  and  providing  for                                                              
      an effective date."                                                                                                       
                                                                                                                                
1:33:25 PM                                                                                                                    
                                                                                                                                
^OVERVIEW: ALASKA PERMANENT FUND                                                                                              
                                                                                                                                
1:33:36 PM                                                                                                                    
                                                                                                                                
ANGELA   RODELL,  EXECUTIVE   DIRECTOR,   ALASKA  PERMANENT   FUND                                                              
CORPORATION,   introduced  herself.  She  stated  that there  were                                                              
a couple   of additional   people  available  for  questions.  She                                                              
explained their roles in the corporation.                                                                                       
                                                                                                                                
Ms. Rodell discussed the presentation, "Senate Finance                                                                          
Committee; APFC and The Alaska Permanent Fund" (copy on                                                                         
file). She looked at slide 2, "1969":                                                                                           
                                                                                                                                
      Alaska  receives   $900  million   in  Prudhoe   lease  sale                                                              
      bonuses.                                                                                                                  
                                                                                                                                
      FY70 state budget: $173 million.                                                                                          
                                                                                                                                
Ms. Rodell discussed slide 3, "The Alaska Permanent Fund":                                                                      
                                                                                                                                
      1976 Alaska voters approve a Constitutional Amendment                                                                     
      establishing the Permanent Fund.                                                                                          
                                                                                                                                
      1977 Permanent Fund receives its first deposit of                                                                         
     constitutionally dedicated oil revenues, $734,000.                                                                         
                                                                                                                                
      1980 The Alaska Permanent Fund Corporation is                                                                             
      established to manage and invest the Fund.                                                                                
                                                                                                                                
      2020 The Fund now has over $66 billion in assets under                                                                    
      management.                                                                                                               
                                                                                                                                
Ms. Rodell highlighted slide 4, "APFC  40 Years":                                                                               
                                                                                                                                
      Forty years ago, on April 8, 1980                                                                                         
                                                                                                                                
           .notdef Governor Jay Hammond signed SB  161  into  law,                                                            
           establishing      the     Alaska     Permanent     Fund                                                              
           Corporation   as an  independent  state  entity  tasked                                                              
           with  the  management  and  investment  of  the  Alaska                                                              
           Permanent Fund.                                                                                                      
                                                                                                                                
      Today                                                                                                                     
                                                                                                                                
           .notdef APFC is a talented, award-winning,  investment                                                             
           firm  that  embodies  the resiliency,   integrity,  and                                                              
           pioneer spirit of Alaska.                                                                                            
                                                                                                                                
           .notdef The influence   of   our    dynamic,    Alaskan                                                            
           corporation   extends   around   the  world   based  on                                                              
           APFC's      practices      of     good     governance,                                                               
           transparency, and a long-term investment horizon.                                                                    
                                                                                                                                
Co-Chair  Johnston  recalled  a  testifier  from  the week  prior,                                                              
which  addressed  awards  received  by  the fund  management.  She                                                              
asked   which    awards   were    granted   to    those   in   the                                                              
corporation.                                                                                                                    
                                                                                                                                
Ms. Rodell mentioned that there was a slide in the                                                                              
presentation acknowledging the awards.                                                                                          
                                                                                                                                
Ms. Rodell highlighted slide 5, "Generating Revenue for                                                                         
AK":                                                                                                                            
                                                                                                                                
      As stewards of the Alaska Permanent Fund, our team                                                                        
      possesses the skill and efficiency to ensure that                                                                         
      Alaskans benefit from this resource for generations to                                                                    
      come.                                                                                                                     
                                                                                                                                
      APFC's Mission                                                                                                            
                                                                                                                                
           To  manage  and invest  the  assets  of  the  permanent                                                              
           fund and other funds designated by law.                                                                              
                                                                                                                                
      APFC's Vision                                                                                                             
                                                                                                                                
           To   deliver    sustained,    compelling    investment                                                               
           returns   as the  United   States'  leading   sovereign                                                              
           endowment   manager,   benefitting   all  current   and                                                              
           future generations of Alaskans.                                                                                      
                                                                                                                                
      APFC's Values                                                                                                             
                                                                                                                                
           Integrity  Stewardship  Passion                                                                                      
                                                                                                                                
Ms.  Rodell discussed   slide 6,  "Number  1 Source  of  Revenue."                                                              
She  remarked   that   the  slide  was   from  the  Fall   Revenue                                                              
Forecasts   from  FY  15  to  FY  19,  and  it  showed   that  the                                                              
Permanent  Fund  was the  number  one source  of  revenue  for the                                                              
state.                                                                                                                          
                                                                                                                                
Ms. Rodell looked at slide 7, "POMV AS 37.13.140 (b)":                                                                          
                                                                                                                                
      Percent of Market Value (POMV)                                                                                            
                                                                                                                                
           Draw  of the  average  market  value  of  the Fund  for                                                              
           the  first five  of  the preceding  six  fiscal  years,                                                              
           subject     to    annual    appropriation     by    the                                                              
           Legislature.                                                                                                         
                                                                                                                                
      5.25 percent - Effective July 1, 2018 (FY19)                                                                              
                                                                                                                                
           .notdef FY19 5.25 percent POMV = $2.7 billion                                                                      
           .notdef FY20 5.25 percent POMV = $2.9 billion                                                                      
           .notdef FY21 5.25 percent POMV = $3.1 billion                                                                      
                                                                                                                                
      5.0 percent - Effective July 1, 2021 (FY22)                                                                               
                                                                                                                                
           .notdef FY22 5.0 percent POMV = $3.1 billion                                                                       
           .notdef FY23 5.0 percent POMV = $3.3 billion                                                                       
           .notdef FY24 5.0 percent POMV = $3.4 billion                                                                       
                                                                                                                                
1:40:26 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz asked for the effective draw of the fund.                                                                      
                                                                                                                                
Ms. Rodell would get back to the committee.                                                                                     
                                                                                                                                
Ms.     Rodell      highlighted      slide     9,     "Investment                                                               
Responsibilities AS 37.13.120":                                                                                                 
                                                                                                                                
      .notdef When adopting regulations or managing and  investing                                                            
      fund   assets,   the   prudent-investor    rule   shall   be                                                              
      applied   by  the   corporation.   The   corporation   shall                                                              
      exercise  the  judgment  and  care  that  an  institutional                                                               
      investor    of   ordinary    prudence,    discretion,    and                                                              
      intelligence    exercises    in    the    designation    and                                                              
      management  of  large  investments   entrusted   to it,  not                                                              
      in  regard   to   speculation,   but   in   regard   to  the                                                              
      permanent     disposition      of    funds,     considering                                                               
      preservation  of  the  purchasing  power  of  the fund  over                                                              
      time  while  maximizing  the  expected   total  return  from                                                              
      both income and the appreciation of capital.                                                                              
                                                                                                                                
      .notdef The corporation may not borrow money   or  guarantee                                                            
      from principal   of the  fund  the  obligations  of  others.                                                              
      Except the  corporation   may, either  directly  or  through                                                              
      an  entity  in  which   the  investment   is  made,   borrow                                                              
      money   if   the   borrowing    is   nonrecourse    to   the                                                              
      corporation and the fund.                                                                                                 
                                                                                                                                
      .notdef The board     shall    maintain     a    reasonable                                                             
      diversification   among   investments   unless,   under  the                                                              
      circumstances,  it  is clearly  prudent  not  to do  so. The                                                              
      board shall  invest  the  assets  of  the fund  in  in-state                                                              
      investments   to  the  extent  that   in-state  investments                                                               
      are available   and if  the  in-state  investment   provides                                                              
      the  same   risk-reward    benefit   as   other  investment                                                               
      opportunities.                                                                                                            
                                                                                                                                
Ms.  Rodell addressed   slide  10, "Historical   Asset Allocation                                                               
based  on  actuals."  She  explained  that  the  asset allocation                                                               
had  changed  due  to  many different   factors.  She  noted  that                                                              
it  showed   that   the  corporation   was   responding   to  many                                                              
different   economies,  and  bring   those  returns  back  to  the                                                              
state.  She   remarked  that  the  state   had  one  of  the  most                                                              
diverse  sets  of economies  of  any state.  She  felt that  there                                                              
was  a resilient   asset  allocation  that  could  withstand  many                                                              
volatilities within the market.                                                                                                 
                                                                                                                                
                                                                                                                                
Ms. Rodell displayed slide 11, "Allocation Structure":                                                                          
                                                                                                                                
      .notdef The asset allocation structure    is  organized   by                                                            
      growth  and  income   strategies,   as  well  as   liquidity                                                              
      objectives.                                                                                                               
                                                                                                                                
      .notdef This strategic categorization provides  a  framework                                                            
      for  ensuring    that   investment    return   targets   are                                                              
      commensurate with the risks undertaken.                                                                                   
                                                                                                                                
      .notdef The Board of Trustees reviews the Asset  Allocation                                                             
      annually.                                                                                                                 
                                                                                                                                
Ms. Rodell looked at slide 12, "Management of the Fund":                                                                        
                                                                                                                                
      The  Board  of  Trustees   continues   to  work  towards  an                                                              
      optimal  mix   of  in-house   versus   external  management                                                               
     capabilities based on resources and opportunities.                                                                         
                                                                                                                                
      In-House Management Allows for:                                                                                           
           .notdef Alignment of investment goals and mandates                                                                 
                                                                                                                                
           .notdef Increased flexibility    in    timing/tactical                                                             
           decisions                                                                                                            
                                                                                                                                
           .notdef Lower fees with investment benefit of active                                                               
           management                                                                                                           
                                                                                                                                
Co-Chair    Johnston   mentioned    the   presentation    by   the                                                              
Department   of   Revenue   (DOR)  in   the  previous    day.  She                                                              
wondered   about   the  results   of  in-house   investments   and                                                              
management   fees.   She   asked   for   a  breakdown   of   those                                                              
investments and fees.                                                                                                           
                                                                                                                                
Ms.  Rodell responded   that the  decrement  was  a result  of the                                                              
discontinuation   of  a  program  that  was  initiated  ten  years                                                              
prior.  She explained   that the  Board  determined  that  program                                                              
was  no   longer   useful.  The   staff  did   a  review   of  the                                                              
program,  and  determined  that  there  would  be  better  returns                                                              
in other assets.                                                                                                                
                                                                                                                                
1:45:17 PM                                                                                                                    
                                                                                                                                
Representative    Carpenter    was   curious   about   the   asset                                                              
allocation  of  the corpus  versus  the  earning  reserve  account                                                              
(ERA).                                                                                                                          
                                                                                                                                
Ms.  Rodell  responded  that  they  were the  same.  She  provided                                                              
an example to demonstrate the allocations.                                                                                      
                                                                                                                                
1:46:15 PM                                                                                                                    
                                                                                                                                
Representative   Sullivan-Leonard    mentioned  discussion   about                                                              
a  group   managing    within   Alaska   versus   from  a   global                                                              
perspective.                                                                                                                    
                                                                                                                                
Ms.  Rodell   did  not  have  information   regarding   the  asset                                                              
allocation.   She  elaborate   that   the  Board  allocated   $200                                                              
million  out  of its  private  equity  special   opportunities  to                                                              
the  creation  of an  instate  program.  She furthered  that  $100                                                              
million  was  allocated  to  McKinley  Capital,  which  had  great                                                              
experience  with  the  opportunities  in  Alaska.  The other  $100                                                              
million  was  awarded  to Barings  on  the  East Coast.  They  had                                                              
a  reputation   for   developing   instate   programs   for  other                                                              
states.  She  felt  that  there  would  be  a good  cross-section                                                               
of ideas.  She  explained  that,  currently,  there  had  not been                                                              
yet  been  a  draw,   but  when  they  were   ready  to  fund  the                                                              
investment   there   would  be   a  request   to  draw   from  the                                                              
account.                                                                                                                        
                                                                                                                                
Representative    Sullivan-Leonard    asked    if  there    was  a                                                              
location   online   for  additional   information   at   the  APFC                                                              
website.                                                                                                                        
                                                                                                                                
Ms.  Rodell  responded  that  the  information  was  available  on                                                              
the APFC website.                                                                                                               
                                                                                                                                
Representative    Knopp    recalled    that   some    funds   were                                                              
eliminated   that  were  no  longer  a  part  of  the  investment                                                               
portfolio.   He   understood   that   the  decision   only   saved                                                              
approximately   $2.5   million   in  management   fees,   but  DOR                                                              
showed   a  savings    of  $25   million.   He   asked  for   more                                                              
information about inhouse managers.                                                                                             
                                                                                                                                
Ms.  Rodell reported   that APFC  had two  decrements.  The  first                                                              
was  a  decrement  for  the  discontinued   external   program  of                                                              
approximately   $17   million  total.   She  explained   that  the                                                              
$2.5  million   was  a  request   to  manage  more   of  the  real                                                              
estate      portfolio   in   house.   The   request   created   an                                                              
increment    to   the   operating    budget    of   approximately                                                               
$100,000.  She  stated  that  the request   was expected   to save                                                              
$2.5  million  in net  of fee  arrangements.  She  explained  that                                                              
using  an  outside  firm  to  manage  real  estate   deducted  all                                                              
fees and expenses before remitting the income off of the                                                                        
properties.                                                                                                                     
                                                                                                                                
1:50:52 PM                                                                                                                    
                                                                                                                                
Ms. Rodell addressed slide 13, "Management of the Fund by                                                                       
Asset Class":                                                                                                                   
                                                                                                                                
      Internal Management                                                                                                       
                                                                                                                                
           Public Markets -APFC investment staff directly                                                                       
           buys and sells the publicly traded securities.                                                                       
                                                                                                                                
           Private   Markets  -APFC  investment   staff   directly                                                              
           conduct   the  investment   and  legal  due   diligence                                                              
           for  the  fund or  investment  and  make  the  decision                                                              
           to invest.                                                                                                           
                                                                                                                                
Ms.    Rodell     looked     at    slide    14,    "Awards     and                                                              
Accomplishments":                                                                                                               
                                                                                                                                
      ? Angela  Rodell,  CEO  ranked  in the  Top  5 of  Sovereign                                                              
      Wealth  Quarterly's  100  Most  Significant   and  Impactful                                                              
      Asset Owner and Public Executives of 2019.                                                                                
                                                                                                                                
      ? Marcus   Frampton,   CIO  named  one  of  Private   Equity                                                              
      International's   40 under  40  Future  Leaders  of  Private                                                              
      Equity and  Trusted  Insight's  Sovereign   Wealth Fund  CIO                                                              
      of   the   Year   for   2019.    Recognized    amongst   CIO                                                              
      Magazines'   Power   100  of   2019  and   for  their   2019                                                              
      Industry Innovation Awards.                                                                                               
                                                                                                                                
      ? PEI's  Private  Debt Magazine   recognized  APFC  in their                                                              
      inaugural   30  Most  Influential    Investors   in  Private                                                              
      Credit  for  our  internal  management   team's  pioneering                                                               
      contributions in this asset class.                                                                                        
                                                                                                                                
      ?  Chad  Brown,  Human   Resources   Manager  was   accepted                                                              
      into Forbes Human Resource Council.                                                                                       
                                                                                                                                
      ?  Tom   O'Day,   Portfolio    Manager       Fixed   Income,                                                              
      selected   by  Chief   Investment   Officer   Magazine   for                                                              
      their Class of 2019 NextGen Award.                                                                                        
                                                                                                                                
      ? Steve   Moseley,  Director   of  Alternative   Assets  was                                                              
      recognized  as  one  of the  2018  Top  30  Private  Equity,                                                              
      Venture Capital Investors by Trusted Insight.                                                                             
                                                                                                                                
      ? The Alaska  Permanent   Fund selected  as  North  American                                                              
      Limited  Partner  of the  Year for  2018 by  Private  Equity                                                              
      International for the second year in a row.                                                                               
                                                                                                                                
      ? APFC  received  dual  nominations   for 2018  Partnership                                                               
      of the  Year   for  Institutional   Investor's  Allocators'                                                               
      Choice  Awards   and   won  the   award   for  our   Capital                                                              
      Constellation Partnership.                                                                                                
                                                                                                                                
Ms.  Rodell  looked  at  slide  15,  "Global  Diversification   as                                                              
of  June   30,  2019."   She  noted  that   the  map   showed  the                                                              
locations  of  investments  around  the  world.  She stressed  the                                                              
importance   of  the  work  outside   of  Alaska,   and  that  the                                                              
money was brought back to the state.                                                                                            
                                                                                                                                
Ms.   Rodell    discussed    slide    17,   "Fiscal    Year   2019                                                              
Performance   as of  June  30,  2019."  She stated   that many  of                                                              
the  strategies   were  not  designed  to  be  daily  strategies,                                                               
but  rather were  intended  for  success  over a  period  of time.                                                              
She  noted the  difference  in  return  between  the one-year  and                                                              
three-year   terms.  She  stated  that  the  first  benchmark  was                                                              
the Passive Index Benchmark.                                                                                                    
                                                                                                                                
1:55:46 PM                                                                                                                    
                                                                                                                                
Co-Chair  Foster  wondered  whether  the  passive  or performance                                                               
benchmarks would be most commonly used in the discussions.                                                                      
                                                                                                                                
Ms.  Rodell responded   that when  Callan  reported  to the  Board                                                              
each  quarter,  there  was  a  measurement  against   the pool  of                                                              
peers  in  fund  performance.   The  report  leaned   more  toward                                                              
the  performance   benchmark,   because  of  the  recognition   of                                                              
the  different   strategies.   She  noted  that  the  measurement                                                               
against   peers  became  challenging   at  times,  because   there                                                              
might  be 38  percent  to public  equities  and  someone  else may                                                              
have  60 percent  to  public equities.   She stressed  that  there                                                              
would be determination of recognizing that difference.                                                                          
                                                                                                                                
Ms.  Rodell highlighted   slide  18, "Fund  Value  and Returns  in                                                              
millions."                                                                                                                      
                                                                                                                                
      1977 Initial   Legislation  permitted   an  investment  list                                                              
      that  included   only  fixed  income   securities   such  as                                                              
      treasury bonds.                                                                                                           
                                                                                                                                
      1983  Following   changes   to  the  statutory   investment                                                               
      list, the  Fund  makes its  first  investment  in the  stock                                                              
      market,  and   later  that   year,  indirectly    held  real                                                              
      estate.                                                                                                                   
                                                                                                                                
      1990  After   the   Legislature    expands   the   statutory                                                              
      investment  list,   the  Fund  begins  to  invest  in  stock                                                              
      and bond markets outside the United States.                                                                               
                                                                                                                                
      2005 The  Legislature  makes  a significant   change  in how                                                              
      Permanent  Fund  investments  are  determined,  by  removing                                                              
      the  allowed   investment    list   from  state   law.   The                                                              
      Trustees   will  make   investment   decisions   under   the                                                              
      guidelines of the prudent investor rule.                                                                                  
                                                                                                                                
Representative   LeBon  surmised  that  the  relationship   in the                                                              
companies  would  allow   them to  invest  the  dollars,  but  the                                                              
APFC   was  not  part   of  the   decision   making  process.   He                                                              
wondered  whether  there  was oversight   of the  approval  or any                                                              
role  in the  evaluation  of  the  investment.  He  asserted  that                                                              
there   was   trust   in  the   outcome    of  the   third   party                                                              
partnership decision.                                                                                                           
                                                                                                                                
Ms.   Rodell   agreed.   She   explained    that  there    was  an                                                              
agreement  for  the external   managers  to return  expectations,                                                               
so they made the investment decisions.                                                                                          
                                                                                                                                
Representative   LeBon  wondered   how  much  money  was  involved                                                              
in each company.                                                                                                                
                                                                                                                                
Ms.  Rodell  replied  that  each company   had $100  million  each                                                              
for a total of $200 million.                                                                                                    
                                                                                                                                
Representative   LeBon  asked  if  the  companies  were  aware  of                                                              
their expected terms.                                                                                                           
                                                                                                                                
Ms.  Rodell  replied   in the  affirmative.   It  was  clear  that                                                              
they  had  to  fit  into  the  mandate  for  private   equity,  so                                                              
there  were  certain   expectations  of  return  objectives.   The                                                              
terms  were   clearly  outlined,   but   the  external   investors                                                              
could   pick  and   choose  the   type  of   investment   such  as                                                              
mariculture, telecom, alternative energy, etc.                                                                                  
                                                                                                                                
Representative   LeBon  wondered   whether  the  timeline  on  the                                                              
investment could be very long.                                                                                                  
                                                                                                                                
Ms. Rodell responded in the affirmative.                                                                                        
                                                                                                                                
2:00:54 PM                                                                                                                    
                                                                                                                                
Ms.  Rodell addressed   slide 20,  "Future  Growth  of the  Fund -                                                              
10 Year Capital Markets Forecast":                                                                                              
                                                                                                                                
      .notdef For planning purposes,  APFC   references    both  a                                                            
      current  fiscal   year  and  a  10-year  forecast   for  the                                                              
      projected  return  of  the  Fund  that is  provided   by our                                                              
      performance consultant, Callan Associates.                                                                                
                                                                                                                                
      .notdef It is understood that there will be a wide range  of                                                            
      returns  delivered   by  each  asset   class  to  the  total                                                              
      Fund performance over any given time.                                                                                     
                                                                                                                                
      .notdef Callan Associates projects  a  total  return   of  7                                                            
      percent  over the  next 10-year   period for  the  portfolio                                                              
      that APFC has constructed for the Fund.                                                                                   
                                                                                                                                
      .notdef They also project an inflation rate of 2.25  percent                                                            
      over  that  same  period,  which  brings   the  real  return                                                              
      for  the  portfolio   to  4.75  percent  over   the  10-year                                                              
      period from FY21- FY29.                                                                                                   
                                                                                                                                
Co-Chair Johnston asked about the Callan projection.                                                                            
                                                                                                                                
Ms.  Rodell  highlighted  slide  21,  "Callan's   Capital  Markets                                                              
Forecast."   She   noted   that   no  single   asset   class   was                                                              
expected   to  return  double   digits  over  the  next   ten-year                                                              
period.    She   explained    that   the    annualized    standard                                                              
deviation   showed  the   difference   around  the  returns.   She                                                              
looked  at  the cash  equivalence,   which  was only  expected  to                                                              
vary plus or minus 0.9 percent.                                                                                                 
                                                                                                                                
Co-Chair   Johnston   stated  that  she   had  a  "pie-in-the-sky                                                               
question."  She  asked  for  the number  of  years  for the  state                                                              
to go from its current balance to $100 billion.                                                                                 
                                                                                                                                
Ms.  Rodell  responded  that  several  caveats  would  have  to be                                                              
in place. She noted several other assumptions.                                                                                  
                                                                                                                                
2:05:57 PM                                                                                                                    
                                                                                                                                
Ms.  Rodell  pointed  to slide  22,  "Projections   FY 20  excerpt                                                              
from  APFC's   History   and  Projections   as  of  December   31,                                                              
2019."  She  announced   the  low  expected  return   of  negative                                                              
0.52   percent.   She  explained   that   adding   the   effective                                                              
inflation  would  result   in a  total  return  of  negative  0.52                                                              
percent.  She  shared   that  there  was a  tendency   to use  the                                                              
mid,   which  was   6.61   percent,   with  inflation    would  be                                                              
slightly   above  5  percent.  She  shared  that  it  was  only  a                                                              
coincidence   that  both  the  total  return   and  the  statutory                                                              
return were the same.                                                                                                           
                                                                                                                                
Ms.  Rodell  discussed   slide  23, "History   and  Projections                                                                 
Dec 31, 2019":                                                                                                                  
                                                                                                                                
      The Fund is projected to have a balance of $84.6                                                                          
      Billion at the end of FY29.                                                                                               
                                                                                                                                
      .notdef This projection assumes the 7 percent total return                                                              
      over ten years, and                                                                                                       
      .notdef Adherence to rules-based deposits into and                                                                      
      withdrawals from the Fund.                                                                                                
           Royalty Deposits - AS 37.13.010 (a) (1) and (a)                                                                      
           (2)                                                                                                                  
                 .notdef Constitutional minimum of 25 percent                                                                 
                 .notdef Statutory 50 percent for leases after 1979                                                           
           Inflation Proofing -AS 37.13.145 (c)                                                                                 
                 .notdef Annual CPI calculated on  the   Principal                                                            
                 Amount                                                                                                         
           POMV - AS 37.13.140 (b) and AS 37.13.145 (e) and                                                                     
           (f)                                                                                                                  
                 .notdef (e) The legislature may not  appropriate                                                             
                 from  the  earnings   reserve   account   to  the                                                              
                 general  fund a  total  amount  that exceeds  the                                                              
                 amount  available  for  appropriation   under  AS                                                              
               37.13.140(b) in a fiscal year.                                                                                   
                 .notdef (f) The combined total of  the   transfer                                                            
                 under    (b)    of   this    section    and    an                                                              
                 appropriation   under  (e) of  this  section  may                                                              
                 not   exceed    the    amount    available    for                                                              
                 appropriation under AS 37.13.140(b).                                                                           
                                                                                                                                
Ms.  Rodell  looked  at  slide  24.  She  stated  that  the  slide                                                              
included  the  actual  POMV calculations   for both  FY 20  and FY                                                              
21.  She noted  the  yellow  highlighted  bars  on  slide  24. She                                                              
explained   that  it  showed   the  low,  mid,  and   high  cases,                                                              
which  were  the  rates  of  returns  from  the  previous   slide.                                                              
She  explained  that the  mid case  expected  that  by the  end of                                                              
the  fiscal  year  there  would  be a  balance  in  the  principal                                                              
of the fund of approximately $53.4 billion.                                                                                     
                                                                                                                                
Ms. Rodell discussed slide 26, "The Alaska Constitution":                                                                       
                                                                                                                                
      In 1976, Alaskans voted, 75,588 to 38,518, in favor to                                                                    
      amend the Constitution of the State of Alaska and                                                                         
      created the Alaska Permanent Fund.                                                                                        
                                                                                                                                
      Alaska Constitution Article IX, Section 15                                                                                
      Section 15. Alaska Permanent Fund                                                                                         
                                                                                                                                
           At  least twenty-five   percent  of all  mineral  lease                                                              
           rentals,    royalties,     royalty    sale    proceeds,                                                              
           federal   mineral   revenue    sharing   payments   and                                                              
           bonuses  received   by the  state  shall  be placed  in                                                              
           a permanent   fund, the  principal  of  which  shall be                                                              
           used  only  for  those  income-producing   investments                                                               
           specifically   designated   by  law  as  eligible   for                                                              
           permanent   fund  investments.   All  income  from  the                                                              
           permanent  fund  shall  be  deposited  in  the  general                                                              
           fund unless otherwise provided by law.                                                                               
                                                                                                                                
Ms.  Rodell  addressed   slide  27,   "Renewable  Resource."   She                                                              
shared  that  every   year  there  was  an  attempt  to  create  a                                                              
graphic  to  show how  the  funds  were interacting   and  how the                                                              
money  was  moving   through  the  fund.   She  noted  that  money                                                              
came   in,   was   invested,    there   were   unrealized    gains                                                              
associated   with  the  principal,   money  moves   into  the  ERA                                                              
from  gains,  expenses  were paid,  percent  of  market value  was                                                              
paid, and then reinvest whatever is left behind.                                                                                
                                                                                                                                
Representative   Carpenter   asked   if  inflation  proofing   was                                                              
reflected in the renewable resources chart.                                                                                     
                                                                                                                                
Ms.   Rodell   replied   that   it   all   happened   subject   to                                                              
appropriation,     which    it   was    under    "Available    for                                                              
Appropriation."                                                                                                                 
                                                                                                                                
Representative   Carpenter  asked  if the  POMV  was an  automatic                                                              
draw.                                                                                                                           
                                                                                                                                
Ms.  Rodell  responded  in  the negative.   She relayed  that  the                                                              
POMV   was  an   appropriation.    She   reviewed   some   of  the                                                              
legislative actions from the prior year.                                                                                        
                                                                                                                                
Representative   Carpenter   wondered   whether   it  was  in  the                                                              
legislature's    purview    to   appropriate    the    funds   for                                                              
inflation proofing.                                                                                                             
                                                                                                                                
Ms. Rodell replied in the affirmative.                                                                                          
                                                                                                                                
Ms.   Rodell    highlighted    slide    28,   "Contributions    to                                                              
Principal  in  millions."  She  stated  that  it was  the  largest                                                              
deposit  in the  history  of the  fund.  She noted  the influx  of                                                              
the  royalties  and  the  contributions  by  inflation   proofing.                                                              
She  noted that  in 2010,  inflation  was  flat,  so there  was no                                                              
inflation   proofing.  She  remarked   that  in  2016,  2017,  and                                                              
2018  there was  no  appropriation  for  inflation  proofing.  She                                                              
thanked  the legislature   and governor  for that  contribution.                                                                
                                                                                                                                
2:11:01 PM                                                                                                                    
                                                                                                                                
Ms.  Rodell  discussed  slide  29, "Values   in billions  -  as of                                                              
December  31,  FY20  Q2." She  announced  that  the  ERA had  $7.5                                                              
billion   in  realized    earnings,   which  was   available   for                                                              
appropriation.   She  furthered   that  there  was  an unrealized                                                               
gain  of  an  additional  $2.7  billion.   She  shared  that  $3.1                                                              
billion  was  set  aside   for  the  FY 21  POMV.   She  announced                                                              
that  the  $4  billion  principal  contribution   was  set  aside,                                                              
and  it was  required  to come  at  the end  of the  fiscal  year.                                                              
She  stated   that  inflation   proofing   was  marked   based  on                                                              
actual inflation.                                                                                                               
                                                                                                                                
Representative    Josephson   surmised  that   the  entire   money                                                              
would  not be  deposited,  because  the  inflation  did not  match                                                              
the number.                                                                                                                     
                                                                                                                                
Ms.   Rodell   responded   in   the  affirmative,    because   the                                                              
language   in  the  budget  bill   required  that   APFC  give  an                                                              
estimated   number  in  that  they  move  actual  inflation.   She                                                              
noted  that any  money  that was  not moved  over,  stayed  in the                                                              
ERA.                                                                                                                            
                                                                                                                                
Ms. Rodell looked at slide 30, "Return on Investment":                                                                          
                                                                                                                                
      FY 19                                                                                                                     
           Revenues: $3,907,500,000                                                                                             
          Operating/Investment Expenses: $,600,000                                                                              
                                                                                                                                
      Value Generated Per Day (based on 251 active trading                                                                      
      days through FY19)                                                                                                        
           Total Fund: $3.91 B / 251 = $15.6 M per day                                                                          
           Statutory Net Income: $3.3 B / 251 = $13.1 M per                                                                     
           day                                                                                                                  
                                                                                                                                
      Revenue Generation for the State of Alaska                                                                                
           ERA POMV Draw -                                                                                                      
                 42 percent of total General Fund revenues in                                                                   
                 the FY 19 budget                                                                                               
                 47 percent of total General Fund revenues in                                                                   
                 the FY 20 budget.                                                                                              
                 52 percent of total General Fund revenues in                                                                   
                 the FY21 proposed budget.                                                                                      
                                                                                                                                
Ms. Rodell addressed slide 31, "Reliance on Corporate                                                                           
Activity":                                                                                                                      
                                                                                                                                
      .notdef SB 26, CH 16 SLA 18 established a POMV  rules  based                                                            
      structure  for  Fund  withdrawals     a  percentage  of  the                                                              
      average  market value  of  the Fund  for the  first  five of                                                              
      the preceding six fiscal years.                                                                                           
                                                                                                                                
      .notdef Inflation Proofing AS 37.13.145  (c)  protects   the                                                            
      future   value   of  the   Principal   by   transferring   a                                                              
      portion  of  the earnings   to  the Principal   to  maintain                                                              
      the long term sustainability of the Fund.                                                                                 
                                                                                                                                
 .notdef APFC's operations and investment management of the                                                                   
      Fund's assets are supported by the ERA.                                                                                   
                                                                                                                                
      .notdef Agencies working on the collection of royalties also                                                            
      receive appropriations from the ERA.                                                                                      
                                                                                                                                
Ms. Rodell discussed slide 33, "Board of Trustees":                                                                             
                                                                                                                                
      Board of Trustees                                                                                                         
                                                                                                                                
      As the fiduciaries,   the Trustees  have  a duty to                                                                       
      Alaskans  in assuring  that the  Permanent  Fund is                                                                       
      managed and  invested  in a manner  consistent  with                                                                      
      legislative findings in AS 37.13.020                                                                                      
                                                                                                                                
        • The Fund should provide a means of conserving a                                                                       
           portion of the state's revenue from mineral                                                                          
           resources to benefit all generations of Alaskans.                                                                    
                                                                                                                                
        • The Fund's goal should be to maintain safety of                                                                       
          principal while maximizing total return.                                                                              
                                                                                                                                
      • The Fund should be used as a savings device                                                                             
           managed to allow the maximum use of disposable                                                                       
           income from the Fund for the purposes designated                                                                     
           by law.                                                                                                              
                                                                                                                                
2:15:26 PM                                                                                                                    
                                                                                                                                
Ms. Rodell addressed slide 34, "Resolution 18-04":                                                                              
                                                                                                                                
      Sustainable   Rules-   Based   Legal  Framework    For  Fund                                                              
      Transfers                                                                                                                 
                                                                                                                                
      In providing   guidance   on rules-based   withdrawals   for                                                              
      the   Fund    and    to   help    ensure    the    long-term                                                              
      sustainability  of  using  Fund  earnings  for  the  benefit                                                              
      of  all   generations   of  Alaskans,    the  Board   passed                                                              
      Resolution  18-04  at  a  special  meeting  on  October  17,                                                              
      2018.                                                                                                                     
                                                                                                                                
      This  resolution   affirms  the   importance  of   formulaic                                                              
      management  of  transfers   into  and  out  of  the  ERA  to                                                              
      ensure  sustainability    and   long-term   growth   of  the                                                              
      Fund, by identifying four key principles:                                                                                 
                                                                                                                                
           Adherence - Sustainability - Inflation Proofing -                                                                    
           Real Growth                                                                                                          
                                                                                                                                
Ms. Rodell looked at slide 35, "Evolving Role of the Fund":                                                                     
                                                                                                                                
      Successful  SWFs   operate  within   a  rules-based   system                                                              
      that allows   them  to perform   a combination   of  saving,                                                              
      stabilization,   and   income   generation   functions.   In                                                              
      Alaska,  the   latter  function   has   come  into   sharper                                                              
      focus, as  the Fund  income  supports  the  State budget  in                                                              
      an era of lower oil revenues.                                                                                             
                                                                                                                                
      Alaska   has   a   robust   system    of   constitutionally                                                               
      mandated  savings,   a  long  history   of  preserving   and                                                              
      growing  the real  value of  the fund,  and  a strong  track                                                              
      record in investment management.                                                                                          
                                                                                                                                
      This  paper  proposes   a  number   of  reforms   that  will                                                              
      strengthen    the   stability    and    sustainability    of                                                              
      Alaska's Permanent Fund:                                                                                                  
                                                                                                                                
           .notdef LESSON 1: MISSION CLARITY                                                                                  
           .notdef LESSON 2: THE IMPORTANCE OF RULES                                                                          
           .notdef LESSON 3: SUCCESSFUL ENFORCEMENT OF SAVING                                                                 
           RULES                                                                                                                
      .notdef LESSON 4: DESIGNING A POMV SPENDING RULE                                                                        
           .notdef LESSON 5: REFORMING THE ERA                                                                                
                                                                                                                                
                                                                                                                                
Ms.  Rodell   discussed  slide   36,  "APFC's  Strategic   5  Year                                                              
Plan":                                                                                                                          
                                                                                                                                
      Priorities for FY 20-FY25:                                                                                                
      1.   Position     the    organization     and    Fund    for                                                              
      implementation of annual POMV draw                                                                                        
      2. Develop  and  implement  comprehensive   risk management                                                               
      for the organization                                                                                                      
      3.   Integrate    best-in-class    investment    management                                                               
      capabilities to maximize investment returns                                                                               
      4. Enhance talent and staff across APFC                                                                                   
                                                                                                                                
Ms. Rodell looked at slide 38, "FY21 Budget":                                                                                   
                                                                                                                                
      APFC recognizes   this  evolution   in the  Fund's  role  to                                                              
      generate   revenue    to   support   state    services   and                                                              
      programs;  as  such,  APFC  looks  to the  State  to  ensure                                                              
      that   resources    are   available   to   support    APFC's                                                              
      investment  and management   needs  for ongoing  success  in                                                              
      generating long-term returns.                                                                                             
                                                                                                                                
      Operating Budget FY21                                                                                                     
                                                                                                                                
           Merit and Retention Adjustments $720.6                                                                               
           Real Estate Manager Position $257.5                                                                                  
           Operational Reductions ($1097.9)                                                                                     
           Investment Management Fees ($21,098.1)                                                                               
                                                                                                                                
2:19:03 PM                                                                                                                    
                                                                                                                                
Representative     Josephson    mentioned    the    international                                                               
conference  on  sovereign  wealth  funds  in  Juneau.  He  queried                                                              
details  on  the  visitors   to  that  conference,   and  wondered                                                              
what was learned during the conference.                                                                                         
                                                                                                                                
Ms.  Rodell   confirmed   that   Juneau  hosted   more   than  200                                                              
entities   from   around   the  world,   representing    sovereign                                                              
wealth  funds   from  Australia   to Kuwait   to  Abu  Dhabi;  and                                                              
some  of  the  Lower  48  peers  like  New  Mexico   and  Wyoming.                                                              
The  lessons  that she  took away  from  the conference   was that                                                              
there  was   a  tremendous   amount  of   interest  in   sovereign                                                              
wealth  funds.  One  of  the largest   questions  had  to do  with                                                              
how Alaska kept the fund intact.                                                                                                
                                                                                                                                
2:21:35 PM                                                                                                                    
                                                                                                                                
Co-Chair  Johnston  first  wanted  to  build  on what  Ms.  Rodell                                                              
had  stated.  She  mentioned   the  current  year's   budget  that                                                              
had  more  than a  $3  bill gap  in  the  budget.  The Department                                                               
of  Revenue  (DOR)  could not  tell  the committee   how much  was                                                              
needed  in  a reserve   account.  She  wondered  how  the  state's                                                              
capital market would change.                                                                                                    
                                                                                                                                
Ms.  Rodell  confirmed   that  there  was  a  significant   amount                                                              
being  asked  of the  Permanent  Fund,  and  it  caused  investors                                                              
to  rethink   investments.    The  DOR   was   tasked  with   cash                                                              
management   of the  state.  They  could  draw  down  the  account                                                              
as   fast   as  they   wanted.   In   the   previous   year,   the                                                              
department  withdrew   slowly.  In the  present  year,  the  money                                                              
was  being  drawn   down  much  more  quickly.   She  thought  the                                                              
question  should  be  presented   to the  Department   of Law  and                                                              
Legislative Legal Services.                                                                                                     
                                                                                                                                
Co-Chair   Johnston  noted  that   in  the  budget,  there  was  a                                                              
deficit  of $1.5  billion  that  would come  out  of the  CBR. She                                                              
remarked  that   there  was  a presentation   from  DOR  that  did                                                              
not provide the cash amount needed                                                                                              
                                                                                                                                
Representative    Sullivan-Leonard    called   for   a  point   of                                                              
order.  She  suggested   that  Co-Chair   Johnston  was  asking  a                                                              
policy question.                                                                                                                
                                                                                                                                
Co-Chair   Johnston  wondered   whether  Ms.  Rodell   would  feel                                                              
comfortable   saying  to  the Board,   "we  maintain  our  current                                                              
investment   strategy."  She  remarked  that,   in 15  years,  the                                                              
fund could possibly grow to $100 billion.                                                                                       
                                                                                                                                
Ms.  Rodell  responded,   "That   is correct."   For  the  past  2                                                              
years   the  legislature   had   placed  restraints   on   itself.                                                              
Therefore,   there  was  not a  recommendation   for  a  different                                                              
allocation for the ERA.                                                                                                         
                                                                                                                                
Co-Chair  Johnston  referred  to  the current  year's  budget  and                                                              
to slide  38.  She stated  that  the money  came  out of  the fund                                                              
itself.                                                                                                                         
                                                                                                                                
Ms. Rodell  responded  that  the APFC  was funded  from  the ERA.                                                               
                                                                                                                                
2:30:06 PM                                                                                                                    
                                                                                                                                
Co-Chair  Foster   surmised  that  Ms.  Rodell  did  not  want  to                                                              
violate   the  POMV.   He  also  noted   the  mention   of  faster                                                              
draws.  He  remarked   that  there  were  differing   opinions  of                                                              
the  minimum  that  could  be  used from  the  CBR,  ranging  from                                                              
$1.4  billion  to  $100  million.  He  felt that  the  current  $2                                                              
billion  already  showed  impacts,   because  draws  needed  to be                                                              
made  sooner.   Therefore,   the  impacts   would   be  felt  more                                                              
significantly.                                                                                                                  
                                                                                                                                
Ms.  Rodell  thought  the  question  was  good  for  the  Treasury                                                              
Division  to  understand  the differences   between  FY 19  and FY                                                              
20,  and  why the  speed  may  be different.   She  remarked  that                                                              
it was a new operational paradigm.                                                                                              
                                                                                                                                
Co-Chair Foster noted the award for APFC.                                                                                       
                                                                                                                                
2:33:05 PM                                                                                                                    
                                                                                                                                
Representative     Knopp     thanked    Co-Chair     Foster    for                                                              
highlighting    the  accomplishment    of  the   corporation.   He                                                              
looked  at  slide   31,  and  wondered   whether  the  operations                                                               
fund was all for internal operations managers.                                                                                  
                                                                                                                                
Ms.  Rodell  responded   that it  was  for  everything   operating                                                              
out  of  Juneau.  She  shared   that  the  investment  management                                                               
fees  were fees  paid to  external managers  outside  of  Juneau.                                                               
                                                                                                                                
Representative    Knopp  wondered   whether   the  appropriations                                                               
were line items every year.                                                                                                     
                                                                                                                                
Ms. Rodell replied in the affirmative.                                                                                          
                                                                                                                                
Representative   LeBon  spoke  of  the  juggling   of all  of  the                                                              
pertinent   accounts.  He  had  the  perception   of the  ERA  was                                                              
pretty  well  spread   out evenly.   He  suggested  that  the  CBR                                                              
was used in an aggressive measure in recent years.                                                                              
                                                                                                                                
Ms.  Rodell  responded   that  he  was  correct.  The  CBR  had  a                                                              
very specific investment expectation.                                                                                           
                                                                                                                                
Representative   LeBon  felt  that  the  CBR should   be as  large                                                              
as possible to enhance the ERA.                                                                                                 
                                                                                                                                
Ms. Rodell suggested that it was one way to look at it.                                                                         
                                                                                                                                
Representative   Knopp  wondered  whether  the scenario   with the                                                              
goal  of reaching  $100  billion  in 15  years accounted   for the                                                              
market projection within 10 years.                                                                                              
                                                                                                                                
Ms.  Rodell   responded   that   the  APFC   did  not   take  into                                                              
consideration    individual   years,   but   that   it  would   be                                                              
smoothed  over  time.  she noted  that  there was  some  stressing                                                              
of  understanding  of  when  actions  might  hit,  and the  impact                                                              
of  those  actions.  She  explained   that  the  7 percent   was a                                                              
forecasted   amount,    and  there   were   standard   deviations                                                               
around all the different asset classes.                                                                                         
                                                                                                                                
Vice-Chair   Ortiz  referred  to  slide  20.  He  wanted  to  talk                                                              
more  about  inflation  and  real rates  of  return.  It  appeared                                                              
the  rate of  inflation  was  2.5  percent  expected,  and  he saw                                                              
some  things   that  might  bump   up  inflation.   He  asked  Ms.                                                              
Rodell to comment.                                                                                                              
                                                                                                                                
Ms.  Rodell  turned  to slide  17  which  showed  the calculation                                                               
with  actual  inflation   plus the  5  percent  real  target.  She                                                              
stated  that   the  CPI  plus  5  in  FY  19  was  6.65   percent,                                                              
subtracting    the  real   return   of   5  percent   shows   that                                                              
inflation   was 1.65  percent   for  FY 19.  She  noted  that  the                                                              
inflation   in  the   43  years   since  inception   showed   2.65                                                              
percent.   She  shared  that  the  2.25  percent  was  reasonable                                                               
given the historical experience.                                                                                                
                                                                                                                                
2:41:35 PM                                                                                                                    
                                                                                                                                
Representative   Josephson   pointed  to  slide  20.  He  wondered                                                              
whether   the  4.75  percent   was  net   of  an  expectation   of                                                              
inflation proofing by the state.                                                                                                
                                                                                                                                
Ms.  Rodell replied  that  the  calculation  of  2.25 percent  for                                                              
inflation  4.75  percent  was  how  the entire  pool  would  grow,                                                              
so  there was  not  a recognition   in the  number  of what  would                                                              
move  between  accounts.  She  explained  that  the  reason  there                                                              
was  a request   for  an appropriation   for  inflation   proofing                                                              
was  because  the  principal  did  not  get any  value  back  that                                                              
may have been generated through inflation.                                                                                      
                                                                                                                                
Representative   Josephson  felt  that  that  the argument   was a                                                              
justification   for   PFD  reform.   He  remarked   that  the  PFD                                                              
received  the  benefit  of  the separation.   He stated  that  the                                                              
corpus did not see a benefit from inflation.                                                                                    
                                                                                                                                
Ms. Rodell agreed.                                                                                                              
                                                                                                                                
Representative   Carpenter   asked  why  the  target  was  only  5                                                              
percent.                                                                                                                        
                                                                                                                                
Ms.  Rodell  explained  that  the  5 percent   was a  real  growth                                                              
number that the board had had in place for over 15 years.                                                                       
                                                                                                                                
2:46:03 PM                                                                                                                    
                                                                                                                                
Representative   Carpenter  noted  the  corporation's   vision  to                                                              
deliver   sustainable   returns.  He  queried   the  risk  of  the                                                              
legislature's    action   or   inaction   that   would   make   it                                                              
difficult   to   achieve   the   vision   to  deliver    sustained                                                              
returned.                                                                                                                       
                                                                                                                                
Ms.  Rodell  responded   that the  legislature   should  keep  its                                                              
expectation   a 5  percent  return  of  the POMV.  She  felt  that                                                              
keeping  the  certainty   of  liability  management   was  crucial                                                              
to the  ongoing  success.  She  stressed  the continuing   support                                                              
of  resources,   because  the  authority   was  needed  to  ensure                                                              
that  the   money  could   be  in  the  best  place   to  get  the                                                              
sustained returns.                                                                                                              
                                                                                                                                
2:47:49 PM                                                                                                                    
                                                                                                                                
Co-Chair  Johnston  asked  about  a slide  reflecting  the  annual                                                              
growth of the fund.                                                                                                             
                                                                                                                                
Ms.  Rodell turned  to  slide 18  to the  growth  of the  fund bar                                                              
chart.                                                                                                                          
                                                                                                                                
Representative    Tilton    asked    about   the   language    for                                                              
inflation   proofing   was  included   in   the  previous   year's                                                              
budget.                                                                                                                         
                                                                                                                                
Ms.  Rodell  responded   in  the  affirmative.   The  legislative                                                               
intent  language  was  to  forward  fund  inflation   of 8  years,                                                              
but  expectation  was  about  half  of  the amount   of time.  The                                                              
board  encouraged   the  legislature   to continue   the  practice                                                              
of inflation proofing the fund.                                                                                                 
                                                                                                                                
Representative Tilton asked a clarifying question.                                                                              
                                                                                                                                
Co-Chair  Foster  asked   Ms. Rodell  if  she  considered   the $4                                                              
billion to be inflation proofing.                                                                                               
                                                                                                                                
Ms.  Rodell   reiterated  that   the  position   of  the  trustees                                                              
that it was not forward funding inflation.                                                                                      
                                                                                                                                
Representative   Josephson  tended  to  differ  to  the  trustees.                                                              
He  suggested  that  there  was no  difference  in  the  treatment                                                              
of the funding. He asked how to measure inflation proofing.                                                                     
                                                                                                                                
Ms.  Rodell  responded  that  the  concern  of  the  trustees  was                                                              
that  in   4  years  no   one  would  remember   the   reason  for                                                              
inflation   proofing,   so   would   be  difficult   to   get  new                                                              
legislature to do inflation proofing in the future.                                                                             
                                                                                                                                
Representative   Carpenter  clarified  that  the  legislature  had                                                              
the  responsibility    to  inflation   proof  the  fund,   because                                                              
there was not automatic inflation proofing.                                                                                     
                                                                                                                                
Ms.   Rodell  responded    that  Representative    Carpenter   was                                                              
correct.    She   added   that    the   board   had   recommended                                                               
constitutionalizing inflation proofing.                                                                                         
                                                                                                                                
Representative    Carpenter   had  asked   Ms.  Rodell   what  the                                                              
legislature  needed  to  do in  order for  the corporation   to do                                                              
its   job.   He   suggested    a   trust-worthy    mechanism   for                                                              
inflation to occur each year.                                                                                                   
                                                                                                                                
Ms. Rodell agreed.                                                                                                              
                                                                                                                                
2:55:24 PM                                                                                                                    
                                                                                                                                
Co-Chair  Johnston  stressed  that  the  discussion  of  inflation                                                              
proofing  was  really  a  discussion  of  a transfer   the  ERA to                                                              
the corpus.                                                                                                                     
                                                                                                                                
Ms. Rodell agreed.                                                                                                              
                                                                                                                                
Co-Chair  Johnston   stated  that  the  corpus  was  protected  by                                                              
the constitution.                                                                                                               
                                                                                                                                
Ms. Rodell agreed.                                                                                                              
                                                                                                                                
Co-Chair  Johnston  stated  that  the  ERA  was not  protected  by                                                              
the constitution.                                                                                                               
                                                                                                                                
Ms. Rodell responded, "That is correct."                                                                                        
                                                                                                                                
Vice-Chair  Ortiz  asked  if  the board  had  ever  weighed  in on                                                              
simply  combining   the  funds,   and  limiting  the  use  to  the                                                              
POMV of one fund.                                                                                                               
                                                                                                                                
Ms.  Rodell reported  that  the  board had  weighed  in on  it but                                                              
had only recommended a constitutional amendment.                                                                                
                                                                                                                                
Vice-Chair   Ortiz   queried   Ms.  Rodell's   personal   view  on                                                              
combining the two accounts.                                                                                                     
                                                                                                                                
Ms.  Rodell  responded   that  no  matter  the  structure,   there                                                              
must  be  an  accounting  of  the  nominal  amount  that  must  be                                                              
spent.  She  felt  that  combining  both  would  still  result  in                                                              
all   of   the   income    of   the   fund   being    subject   to                                                              
appropriation.                                                                                                                  
                                                                                                                                
Co-Chair   Foster   thought   it   was   time  to   move   to  the                                                              
presentation   to Judiciary.   He  asked  if Ms.  Rodell  had  any                                                              
closing comments.                                                                                                               
                                                                                                                                
Ms.  Rodell   reiterated   that  there  was  a  great   amount  if                                                              
information   available  on  the  website.   She thanked   members                                                              
for the opportunity to present.                                                                                                 
                                                                                                                                
^FY 21 DEPARTMENT BUDGET OVERVIEW: JUDICIARY                                                                                  
                                                                                                                                
2:59:15 PM                                                                                                                    
                                                                                                                                
DOUG  WOOLIVER,  DEPUTY  ADMINISTRATIVE   DIRECTOR,  ALASKA  COURT                                                              
SYSTEM,  was  before  the  committee  to  review  its  budget.  He                                                              
discussed    the   presentation,    "House    Finance    Committee                                                              
Alaska Court System Overview" (copy on file).                                                                                   
                                                                                                                                
Mr. Wooliver turned to slide 1, " Mission Statement":                                                                           
                                                                                                                                
      The mission   of the  Alaska  Court  System  is  to  provide                                                              
      an  accessible    and   impartial   forum   for   the   just                                                              
      resolution  of  all  cases  that  come  before  it,  and  to                                                              
      decide   such   cases   in   accordance    with   the   law,                                                              
      expeditiously   and   with  integrity.    which  noted   the                                                              
      people the court system served.                                                                                           
                                                                                                                                
Mr.   Wooliver   highlighted   slide   2.  "Alaskans   Served   in                                                              
2019":                                                                                                                          
                                                                                                                                
       ? 120,239 new cases filed (trial and appellate)                                                                          
      ? 6,562 contacts through the Family Law Self Help                                                                         
      Center                                                                                                                    
      ? 24,888 jurors reported for service                                                                                      
      ? 9,896 law library patrons                                                                                               
      ? 633,393 citizens passed through security screening                                                                      
      ? 6,397,763 visits to the court's website                                                                                 
      ? 1,767,105 Court View searches                                                                                           
      ? 20,401 online payments made                                                                                             
      ? 425 therapeutic court participants                                                                                      
      ? Thousands of on-line court forms accessed or                                                                            
      downloaded                                                                                                                
                                                                                                                                
Mr.   Wooliver   turned   to  slide   3   reflecting   the   court                                                              
system's   total  share  of  the  State  of  Alaska's  government                                                               
spending.  He  noted that  there  was a  change  from 2.2  percent                                                              
to 2.36 percent.                                                                                                                
                                                                                                                                
Mr.  Wooliver   moved   to  slide  4  showing   that  Judiciary's                                                               
funding   primarily    came   via   general   fund   dollars.   He                                                              
remarked the commissions and councils.                                                                                          
                                                                                                                                
Mr.  Wooliver  turned  to slide  5.  He  noted Therapeutic   Court                                                              
appropriation,    which   was   a  separate   appropriation.    He                                                              
explained  that  the  legislature   created  that  appropriation,                                                               
so  there  could  be a  total  line to  keep  the  funding  within                                                              
the Therapeutic Court.                                                                                                          
                                                                                                                                
3:04:02 PM                                                                                                                    
                                                                                                                                
Mr.  Wooliver  explained   slide  6, "GF  Budget  Changes   FY16                                                                
FY20":                                                                                                                          
                                                                                                                                
      FY16  ($3,430,400)    (3.1 percent)*                                                                                      
      FY17  ($3,805,000)    (3.5 percent)                                                                                       
      FY18  ($3,671,800)    (3.5 percent)**                                                                                     
      FY19       $606,300         .6 percent                                                                                    
      FY20    $2,932,200       2.8 percent                                                                                      
                                                                                                                                
       *  The FY16 cut was offset by a 2.5 percent salary                                                                       
      increase resulting in a net      reduction of                                                                             
      $1,427,600.                                                                                                               
      ** The FY18 cut was offset by increased healthcare                                                                        
      costs resulting in a net reduction of $1,821,400.                                                                         
                                                                                                                                
Mr.  Wooliver  looked  at  slide  7,  "Examples  of  Cost-Savings                                                               
Measures":                                                                                                                      
                                                                                                                                
      Between FY16 and FY19,  Deleted 44 PFT, 14 PPT, and 2                                                                     
      Temporary Positions for a total of 60 Deleted                                                                             
      Positions                                                                                                                 
                                                                                                                                
      Salary Schedules Capped at "R" Step .notdefHolding Positions                                                            
      Vacant to Generate Savings                                                                                                
                                                                                                                                
      Friday Afternoon Closures                                                                                                 
                                                                                                                                
      E-Distribution Project                                                                                                    
                                                                                                                                
      Expanded Use of Videoconferencing                                                                                         
                                                                                                                                
3:06:51 PM                                                                                                                    
                                                                                                                                
Representative      Sullivan-Leonard       mentioned      previous                                                              
discussions    about   Friday   afternoon   closures.   She   also                                                              
mentioned  that  employees  were  currently  mandated  to  work 40                                                              
hours.                                                                                                                          
                                                                                                                                
Mr.   Wooliver   clarified   that  the   court   system   was  not                                                              
subject to a 40 hour work week.                                                                                                 
                                                                                                                                
Co-Chair   Johnston  asked  if  the  Court  System   vacancy  rate                                                              
had changed much.                                                                                                               
                                                                                                                                
Mr.   Wooliver   indicated   the   vacancy   rate   was   about  7                                                              
percent.                                                                                                                        
                                                                                                                                
Co-Chair   Johnston  asked  if  the  holding   open  of  positions                                                              
was a new practice.                                                                                                             
                                                                                                                                
Mr.  Wooliver   responded   that  the   Court  System   had  every                                                              
Judicial  position  filled.  He  explained  that  In order  not to                                                              
run  out  of money,  the  Court  System  had  begun  the  practice                                                              
of  holding  the  positions   open for  45  days  rather  than  30                                                              
days.                                                                                                                           
                                                                                                                                
Co-Chair  Johnston   wondered  about  the expanded   use of  video                                                              
conferencing.   She  asked if  the  Court  System  was monitoring                                                               
the effectiveness of video conferencing.                                                                                        
                                                                                                                                
Mr.   Wooliver   responded    that  teleconferencing     primarily                                                              
benefited   other   agencies   such   as  Department   of   Public                                                              
Safety.  He  provided  an example.   He was  not sure  of  a total                                                              
cost  savings   as  a result   of  video  conferencing.   He  also                                                              
explained   that   under  the   American  Disabilities    Act  the                                                              
Court  was required   to provide  sign  language  interpretation,                                                               
which   could   be   done   with   little   notice   using   video                                                              
conferencing.                                                                                                                   
                                                                                                                                
Co-Chair  Johnston   thought  the  legislature  had  expanded  the                                                              
Court  System's  video  conferencing  abilities   in the  previous                                                              
year's budget.                                                                                                                  
                                                                                                                                
Mr.  Wooliver  replied  in  the affirmative.   He  concurred  that                                                              
it was a great benefit.                                                                                                         
                                                                                                                                
3:14:02 PM                                                                                                                    
                                                                                                                                
Vice-Chair   Ortiz  referred  to  the  first  line  of  the  cost-                                                              
savings   measures  on  slide   7.  He  queried  the  opportunity                                                               
costs  to the  public  and the  workforce,  related  to losing  60                                                              
positions within the system.                                                                                                    
                                                                                                                                
Mr.  Wooliver   replied  that  "it  hurts.   There  was  always  a                                                              
downside  to  being  short-staff.   He suggested,   however,  when                                                              
running lean, made for more efficiencies.                                                                                       
                                                                                                                                
Representative   Carpenter   was  curious  to  know  how  many  of                                                              
the  court  hearing  for  pre-trials   were  occurring  via  video                                                              
conferencing.                                                                                                                   
                                                                                                                                
Mr. Wooliver asked for clarification.                                                                                           
                                                                                                                                
Representative Carpenter clarified.                                                                                             
                                                                                                                                
Mr. Wooliver agreed to provide that information.                                                                                
                                                                                                                                
Mr.  Wooliver  moved  to slide  8,  " Operating   Budget  Outcomes                                                              
(GF)":                                                                                                                          
                                                                                                                                
      $1,674,600  3 percent Salary Increase                                                                                     
                                                                                                                                
      $393,800  Facility O and M Increases                                                                                      
                                                                                                                                
      $(334,700)  Appellate Court Budget Veto                                                                                   
                                                                                                                                
      $1,733,700  FY20 Operating Budget Change                                                                                  
                                                                                                                                
Representative     Josephson    asked   about    the    veto   for                                                              
Therapeutic Courts.                                                                                                             
                                                                                                                                
Mr.  Wooliver   responded   that  the  increment   requests   were                                                              
also  vetoed  by  the governor.   He included   the  veto to  show                                                              
the net difference from the year prior.                                                                                         
                                                                                                                                
3:19:41 PM                                                                                                                    
                                                                                                                                
Mr.  Wooliver  turned  to slide  9  showing  the FY  21  operating                                                              
budget   increases   in  general  funds   funding.   He  read  the                                                              
items  on  the slide  and  provided  background   information  for                                                              
each item:                                                                                                                      
                                                                                                                                
      FY21 Operating Budget Increases (GF)                                                                                      
                                                                                                                                
           $ 578,700 1 percent Salary Increase                                                                                  
          $ 334,700 Restore Appellate Court Budget                                                                              
           $ 364,500 Appellate Court Resources                                                                                  
           $ 250,000 Court Business on Friday PM                                                                                
           $ 220,500 Facility O and M Increases                                                                                 
           $ 130,000 Deputy Therapeutic Courts Coordinator                                                                      
           $ 290,000 GF Funding for Mat-Su Therapeutic                                                                          
           Courts                                                                                                               
           $ 113,900 Executive Branch Services $2,282,300                                                                       
         Total FY21 Alaska Court System GF Request                                                                              
                                                                                                                                
Mr.  Wooliver   continued  to  explain   the  items  on  slide  9,                                                              
"FY21 Operating Budget Increases (GF)":                                                                                         
                                                                                                                                
      $578,700  1 percent Salary Increase                                                                                       
                                                                                                                                
      $334,700  Restore Appellate Court Budget                                                                                  
                                                                                                                                
      $364,500  Appellate Court Resources                                                                                       
                                                                                                                                
      $250,000  Court Business on Friday PM                                                                                     
                                                                                                                                
      $220,500  Facility O and M Increases                                                                                      
                                                                                                                                
      $130,000  Deputy Therapeutic Courts Coordinator                                                                           
                                                                                                                                
     $290,000  GF Funding for Mat-Su Therapeutic Courts                                                                         
                                                                                                                                
      $113,900  Executive Branch Services                                                                                       
                                                                                                                                
      $2,282,300  Total FY21 Alaska Court System GF Request                                                                     
                                                                                                                                
3:23:48 PM                                                                                                                    
                                                                                                                                
Mr.  Wooliver  stated  that  the other  part  of the  request  was                                                              
tied  to  legislation  -  $230,000  for  pro  tem judges  to  work                                                              
through  the  backlog.  The  first  choice  was SB  55 introduced                                                               
by  Senator  David  Wilson  for  a  fourth  judge  -  if the  bill                                                              
passed   the   request   would   go  away.   He   highlighted   an                                                              
increment    for  court   business    on   Friday   afternoons   -                                                              
$250,000.   There  had   always  been   some  vacancies   and  the                                                              
court  had  been able  to  do some  things  on Friday  afternoons                                                               
that   it  would   like   to  continue.   He   provided   examples                                                              
including  grand  juries,  arraignments,   and other.  The  courts                                                              
would  like   to  include   the  money  in  its  base   budget  to                                                              
continue   the  work.  There  were  numerous   benefits  to  being                                                              
closed on Friday afternoons.                                                                                                    
                                                                                                                                
Mr.  Wooliver  continued  to  review  increments  on  slide  9. He                                                              
highlighted   the   facility   increases.   He   also  noted   the                                                              
executive  branch  services  costs  and  the costs  to the  Alaska                                                              
State Museum Achieves for the storage of court documents.                                                                       
                                                                                                                                
3:30:33 PM                                                                                                                    
                                                                                                                                
Representative   Carpenter   asked  who  decided  whether  a  case                                                              
was ready to be briefed.                                                                                                        
                                                                                                                                
Mr.  Wooliver  explained   that  the  cases  were  not  ready  for                                                              
the  court,  because   the attorney   had  not  yet  prepared  the                                                              
brief.   He  stressed  that   the  period  could   be  up  to  two                                                              
years.                                                                                                                          
                                                                                                                                
Representative   Carpenter  felt  that the  delay  was a  problem,                                                              
but commented that it was a conversation for another day.                                                                       
                                                                                                                                
Mr. Wooliver agreed that the delay was a huge problem.                                                                          
                                                                                                                                
Representative   Sullivan-Leonard    returned   to  the  issue  of                                                              
Friday  afternoon  closures.   She  wondered  about  the  overtime                                                              
hours.  She  wondered   whether  those  employees   were  required                                                              
to work 37.5 hours or 40 hours per week employees.                                                                              
                                                                                                                                
Mr.  Wooliver  replied   that those   employees  worked  36  hours                                                              
per  week.  noted  that  when  the court  moved  to  the  closures                                                              
of Friday  afternoon,   they received  a  4 percent  reduction  in                                                              
hours   and  a  4  percent   reduction   in  pay.  He   agreed  to                                                              
provide information about the total overtime costs.                                                                             
                                                                                                                                
Representative   Sullivan-Leonard   commended  Judiciary   for its                                                              
ability to adjust to the reductions with efficiency.                                                                            
                                                                                                                                
Mr.  Wooliver   mentioned   the   FY  20  supplemental    request,                                                              
which were increased fees from FY 20.                                                                                           
                                                                                                                                
Mr. Wooliver moved to slide 11, "Criminal Case Filing                                                                           
Increases":                                                                                                                     
                                                                                                                                
      FY17 Felonies  6,198                                                                                                      
      FY19 Felonies  7,321 (Up 18.1 percent)                                                                                    
                                                                                                                                
      FY17 Misdemeanors  19,030                                                                                                 
      FY19 Misdemeanors  25,288 (Up 32.9 percent)                                                                               
                                                                                                                                
3:34:33 PM                                                                                                                    
                                                                                                                                
Mr. Wooliver included slide 12 reflecting a useful summary                                                                      
of the current finances of the Alaska Court System.                                                                             
                                                                                                                                
Co-Chair Foster reviewed the schedule for the following                                                                         
Monday.                                                                                                                         
                                                                                                                                
HB 205 was HEARD and HELD in committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
HB 206 was HEARD and HELD in committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
3:35:22 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:35 p.m.                                                                                          

Document Name Date/Time Subjects
APFC Overview 13120 HFIN.pdf HFIN 1/31/2020 1:30:00 PM
2020JAN_APFC_Newspaper-Insert.pdf HFIN 1/31/2020 1:30:00 PM
APFC Overview Document HFIN
2020_APFC Trustees' Paper Volume 9_S.pdf HFIN 1/31/2020 1:30:00 PM
APFC Overview Document HFIN
FY 21 JUD Overview HFIN 013120.pdf HFIN 1/31/2020 1:30:00 PM
2019-APFC-Annual-Report.pdf HFIN 1/31/2020 1:30:00 PM
SFIN 1/31/2020 9:00:00 AM
FY 21 Judiciary Overview Answers to Questions.pdf HFIN 1/31/2020 1:30:00 PM
JUD Responses to HFIN