Legislature(1997 - 1998)
03/19/1998 01:50 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 19, 1998
1:50 P.M.
TAPE HFC 98 - 70, Side 1.
TAPE HFC 98 - 70, Side 2.
CALL TO ORDER
Co-Chair Therriault called the House Finance Committee
meeting to order at 1:50 P.M.
PRESENT
Co-Chair Hanley Representative Kelly
Co-Chair Therriault Representative Kohring
Representative J. Davies Representative Martin
Representative G. Davis Representative Moses
Representative Foster Representative Mulder
Representative Grussendorf
ALSO PRESENT
Doug Griffin, (Testified via Teleconference), Alcohol
Beverage Control Board (ABC), Anchorage; Cliff Stone,
Staff, Representative Alan Austerman; Representative Alan
Austerman; Mary Gore, Staff, Senator Mike Miller; Byron
Mallott, Executive Director, Alaska Permanent Fund
Corporation; Jim Kelly, Director of Communications, Alaska
Permanent Fund Corporation.
SUMMARY
HB 317 An Act relating to investments of the Alaska
Permanent Fund Corporation.
HB 317 was reported out of Committee with a "do
pass" recommendation and with a fiscal note by
the Department of Revenue.
HB 411 An Act relating to issuance of a winery license
in a local option area.
CS HB 411 (FIN) was reported out of Committee
with "no recommendation" and with a fiscal note
by the Department of Revenue dated 3/18/98.
SB 261 An Act relating to the Special Olympics World
Winter Games to be held in Anchorage in the year
2001; establishing a reserve fund for the games;
providing certain duties and authority for the
Alaska Industrial Development and Export
Authority regarding financing for those games;
and providing for an effective date.
CSSB 261 (FIN) was HELD in Committee for further
consideration.
HCR 9 Proposing amendments to the Uniform Rules of the
Alaska State Legislature relating to committee
meetings; and providing for an effective date.
HCR 9 was HELD in Committee for further
consideration.
HOUSE BILL NO. 411
"An Act relating to issuance of a winery license in a
local option area."
Co-Chair Therriault distributed a copy of new amendment for
HB 411, 0-LS1583\A.1, Ford, 3/19/98. [Copy of File].
CLIFF STONE, STAFF, REPRESENTATIVE ALAN AUSTERMAN, noted
that Representative Austerman does support the language of
the amendment.
Co-Chair Therriault asked if the community of Port Lions
would exercise "option F" added by the amendment.
DOUG GRIFFIN, (TESTIFIED VIA TELECONFERENCE), ALCOHOL
BEVERAGE CONTROL BOARD, ANCHORAGE, noted that he had
received a copy of the amendment and that the ABC Board
would support addition of that language.
Co-Chair Therriault MOVED to adopt Amendment #1. There
being NO OBJECTION, it was adopted.
Representative Foster MOVED to report CS HB 411 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 411 (FIN) was reported out of Committee with "no
recommendation" and with a fiscal note by the Department of
Revenue dated 3/18/98.
SENATE BILL NO. 261
"An Act relating to the Special Olympics World Winter
Games to be held in Anchorage in the year 2001;
establishing a reserve fund for the games; providing
certain duties and authority for the Alaska Industrial
Development and Export Authority regarding financing
for those games; and providing for an effective date."
Co-Chair Therriault explained that during previous
Committee discussion, the intent was to add language to the
legislation clarifying that the State would limit it's
moral obligation to the first $4 million dollars of
currency raised and expended on the special Olympic effort.
MARY GORE, STAFF, SENATOR MIKE MILLER, addressed Committee
concerns regarding how the funds would increase the overall
budget. She assured members that the particular segment of
the operating agreement between the game organizing
committee clearly stipulates that the budget is to remain
at $8 million dollars. The $4 million State dollars would
be the entire cost to the State.
Ms. Gore acknowledged that the investment would be a risk
to the State. In order to be awarded this bid, Senator
Miller, Representative Phillips and Governor Knowles had to
agree that the Legislature would provide moral obligation
by being the financial backer for the games. Providing the
guarantee, Alaska was awarded the bid, although, the final
agreement has not yet been signed. It will be signed with
Jim Palmer of BP Exploration and Carl Mars, who will then
take the agreement to Washington D.C. and present it to
Senator Stevens. Ms. Gore emphasized that it is the intent
that this agreement will not cost the State any money.
Co-Chair Hanley commented that the bill does not specify
that the State's contribution would be limited to $4
million dollars. He understood that the intent was to
receive $4 million dollars in in-kind contributions. Co-
Chair Hanley stressed that the language of the bill needs
to be coherent with the intent and that the $4 million
State dollars should be clearly specified. Ms. Gore
replied that the understanding with Special Olympics
International (SOI) is that the State Legislature would be
the "backend guarantor" of the event.
Co-Chair Hanley reiterated that the language needs to
clearly specify the amount the State is responsible for.
Ms. Gore reported that the International Committee would
like to guarantee that any Olympic committee, SOI or the
hosting city will not go into the "hole" as a result of the
event. Co-Chair Hanley understood, although, he continued
to disagree with the proposed legislation's verbiage.
Co-Chair Therriault recommended that the wording specify
that the total budget not exceed $8 million dollars. Co-
Chair Hanley pointed out that there is no language
specifying the in-kind monies.
Representative Mulder noted that Alaska Industrial
Development Export Authority (AIDEA) supports the
legislation and is willing to be the "stake holder".
Representative Grussendorf requested a copy of
correspondence received by Senator Miller's office,
November 1997, from Special Olympic International (SOI).
Ms. Gore suggested inserting language from the SOI Charter,
placing it on Page 3, Line 7 and Line 30, and Page 4, Line
1. She advised adding language: "Of the total operating
budget of $8 million dollars". Representative Mulder
recommended adding an additional reference: "As pertained
in Article #10 of the Special Olympic International
Charter".
Representative Mulder MOVED the proposed conceptual
amendment. There being NO OBJECTION, it was adopted.
Co-Chair Hanley asked who would receive the money. Ms.
Gore explained that it would go to the organizing
committee. A Reserved Established Fund was created in the
case that there would be a government who wanted to
financially participate by donating funds to the organizing
committee, but were not able to give it to a nonprofit,
those funds could then be directly deposited into the
reserve. That fund would be used as a portion of the
State's $4 million dollar appropriation.
Co-Chair Therriault noted that the bill would be held in
Committee until the committee substitute was received back
from the legal drafters.
CSSB 261 (FIN) was HELD in Committee for further
consideration.
HOUSE BILL NO. 317
"An Act relating to investments of the Alaska
Permanent Fund Corporation."
BYRON MALLOT, EXECUTIVE DIRECTOR, ALASKA PERMANENT FUND
CORPORATION (APFC), stated that HB 317 was supported by the
APFC Board of Trustees. The bill would increase from 50%
to 60% the Board's investment authorization in common
stocks.
He noted that virtually all the literature on capital
markets theory and practice indicates that equities provide
a vastly superior long-term rate of return compared to
other financial assets, albeit with increased short and
intermediate term volatility.
HB 317 would give the Board of Trustees the flexibility to
increase the Fund's investments in equities to a level
comparable to its peers. Currently, the Permanent Fund has
a smaller fund allocation for equities than most other
larger institutional funds, including the State of Alaska's
retirement fund.
Mr. Mallott urged the Committee's support of the
legislation. He provided a packet entitled: Alaska
Permanent Fund Corporation - The Case for HB 317. [Copy on
File].
Representative Mulder commented that the fiscal note does
not indicate the offset costs associated with the State's
investment.
JIM KELLY, DIRECTOR OF COMMUNICATIONS, ALASKA PERMANENT
FUND CORPORATION, agreed, adding that for every $100
dollars the fund earns, it will cost $1.50 in management
fees. The fiscal note covers those costs. Representative
Mulder thought that APFC had been overly critical in their
fiscal analysis, which he felt would instead be a positive
impact. Mr. Kelly reiterated that the fiscal note
indicates the increased management fees.
Co-Chair Hanley agreed that the fiscal note should indicate
the anticipated revenue. Co-Chair Therriault recommended
that an analysis provide back up information regarding the
anticipated revenue.
(Tape Change HFC 98- 70, Side 2).
Co-Chair Hanley questioned how the percentage of
anticipated profit was determined. Mr. Kelly replied that
the Daily Supplemental Report indicates the daily amount of
money the PFC has invested in the stock market. Mr.
Mallott added that the data was based on the market value
opposed to cost value.
Co-Chair Therriault inquired if fund advisors anticipate
that it would increase to 60% right away. Mr. Mallott
responded that during the annual planning process, the
fund's asset allocation is determined on an annual basis.
Representative Foster MOVED to report HB137 out of
Committee with individual recommendations and with the
revised fiscal note. There being NO OBJECTION, it was so
ordered.
HB 317 was reported out of Committee with a "do pass"
recommendation and with a fiscal note by the Department of
Revenue.
HOUSE CONCURRENT RESOLUTION NO. 9
Proposing amendments to the Uniform Rules of the
Alaska State Legislature relating to committee
meetings; and providing for an effective date.
Co-Chair Therriault distributed the work draft committee
substitute #0-LS0579\B, Cook, 3/18/98, for CSHCR 9 (FIN).
[Copy on File]. The language of the draft would allow for
a legislator to participate in a meeting and vote via
teleconference. He noted that the sponsor of the bill,
Representative Rokeberg was agreeable to that language and
would testify on the proposed change at a later scheduled
meeting.
HCR 9 was HELD in Committee for further consideration.
PERMANENT FUND INTERNSHIP PROGRAM
Mr. Mallott advised that Robert Snickerhoff, a young Native
born Alaskan had been named the Chief Investment Officer
for the San Diego County Pension Investment Fund. Mr.
Snickerhoff began his career at the Alaska Permanent Fund
Corporation as an intern.
Mr. Kelly added that the program is still on going and
there continues to be opportunities for students to apply.
There are ten companies participating at this time. The
internships usually last for three months and the students
are able to work with the best companies in the business.
He commented that about 25% of the students have been
placed with full-time work with participating companies.
ADJOURNMENT
The meeting adjourned at 2:45 P.M.
H.F.C. 7 3/19/98 p.m.
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