Legislature(1993 - 1994)
03/08/1994 03:00 PM House HES
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES
STANDING COMMITTEE
March 8,1994
3:00 p.m.
MEMBERS PRESENT
Rep. Cynthia Toohey, Co-Chair
Rep. Con Bunde, Co-Chair
Rep. Gary Davis, Vice Chair
Rep. Al Vezey
Rep. Pete Kott
Rep. Harley Olberg
Rep. Bettye Davis
Rep. Irene Nicholia
Rep. Tom Brice
MEMBERS ABSENT
None
OTHER LEGISLATORS PRESENT
Rep. John Davies
COMMITTEE CALENDAR
HB 506: "An Act relating to student loans; to sanctions
for defaulting on a student loan, including denial
of a state occupational license or disbursement of
state money; and providing for an effective date."
PASSED OUT OF COMMITTEE
*HB 466: "An Act authorizing the issuance of bonds by the
Alaska Housing Finance Corporation to pay for the
cost of repair and rehabilitation of student
housing facilities of the University of Alaska;
authorizing the insurance of bonds by the
University of Alaska to pay for the costs of
repair and rehabilitation of facilities of the
University of Alaska; amending powers of the
Alaska Housing Finance Corporation; amending the
definition of "public building"; relating to the
Alaska debt retirement fund; and providing for an
effective date."
PASSED OUT OF COMMITTEE
*HB 234: "An Act relating to endowments and donations of
the University of Alaska and the University of
Alaska endowment trust fund; and providing for an
effective date."
PASSED OUT OF COMMITTEE
(* First public hearing.)
WITNESS REGISTER
JOE MCCORMICK, Executive Director
Alaska Commission on Postsecondary Education
3030 Vintage Blvd.
Juneau, Alaska 99801-7109
Phone: (907) 465-6740
Position Statement: Answered questions on HB 506
BRIAN ROGERS, Vice-President for Finance
University of Alaska System
207 D Butrovich UA
Fairbanks, Alaska 99775
Phone: (907) 474-7448
Position Statement: Testified in support of HB 466 and
HB 234
WILL GAY, Executive Director
Alaska Housing Finance Corporation
520 E. 34th Ave.
Anchorage, Alaska 99503
Phone: (907) 564-9326
Position Statement: Testified in support of HB 466
(spoke via offnet)
ALISON ELGEE, Statewide Budget Director
University of Alaska
227 4th St.
Juneau, Alaska 99801
Phone: (907) 463-3086
Position Statement: Testified on HB 466
CHIP WAGONER, Vice-President
Alumni Board
University of Alaska Fairbanks
3294 Pioneer Ave.
Juneau, Alaska 99801
Phone: (907) 586-1867
Position Statement: Testified in support of HB 466
NICHOLAS ABRAMCZYK, Member
Associated Students of the
University of Alaska, Fairbanks
P.O. Box 99775
Fairbanks, Alaska 99775
Phone: (907) 474-5156
Position Statement: Testified in support of HB 466
LARAINE DERR, Deputy Commissioner
Treasury
Department of Revenue
P.O. Box 110400
Juneau, Alaska 99811-0400
Phone: (907) 465-4880
Position Statement: Testified in opposition of HB 234
PREVIOUS ACTION
BILL: HB 506
SHORT TITLE: STUDENT LOAN PROGRAM
SPONSOR(S): HEALTH, EDUCATION AND SOCIAL SERVICES BY REQUEST
JRN-DATE JRN-PG ACTION
02/16/94 2416 (H) READ THE FIRST TIME/REFERRAL(S)
02/16/94 2416 (H) HES, L&C, FINANCE
03/03/94 (H) HES AT 03:00 PM CAPITOL 106
03/03/94 (H) MINUTE(HES)
BILL: HB 466
SHORT TITLE: AHFC BONDS FOR UNIV. OF ALASKA USES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
02/11/94 2348 (H) READ THE FIRST TIME/REFERRAL(S)
02/11/94 2348 (H) HES, FINANCE
02/11/94 2348 (H) -2 ZERO FISCAL NOTES (GOV,
REV) 2/11/94
02/11/94 2349 (H) GOVERNOR'S TRANSMITTAL LETTER
03/08/94 (H) HES AT 03:00 PM CAPITOL 106
BILL: HB 234
SHORT TITLE: UNIVERSITY OF AK ENDOWMENT TRUST FUND
SPONSOR(S): REPRESENTATIVE(S) DAVIES,Martin,Phillips,Bunde,
Ulmer
JRN-DATE JRN-PG ACTION
03/17/93 684 (H) READ THE FIRST TIME/REFERRAL(S)
03/17/93 684 (H) HES, FINANCE
03/08/94 (H) HES AT 03:00 PM CAPITOL 106
ACTION NARRATIVE
TAPE 94-40, SIDE A
Number 000
CHAIR BUNDE called the meeting to order at 3:08 p.m., noted
members present and announced the calendar. He then read
portions of an article from the Anchorage Daily News
regarding students and student loans. He indicated that
collectively students in the United States owe $41.9 billion
on student loans. He said in many schools 70% of the
student body choose to borrow, and the average debt per
student is $79,000. He further related that in a survey of
551 recent college graduates, four out of ten students said
they could handle their payments; however, one out four said
their debt affected their decision as to when or if to
marry. One-third stated that it also influenced their
decision to start a family, and four out of ten work at two
jobs or more because of their debt. He further stated that
1/4 said their loans have caused them to live with relatives
and 35% said they have postponed needed health care because
of their debt. He also said that 13% said they were forced
to drop out of school because of their debt.
(CHAIR BUNDE stated for the record that Rep. Nicholia and
Rep. B. Davis arrived at 3:10 p.m.)
CHAIR BUNDE then brought HB 506 to the table.
HB 506 - STUDENT LOAN PROGRAM
Number 122
CHAIR BUNDE indicated that Amendment 1 was before the
committee, which would address the issue of consolidating
loans and would allow loans to be rounded off to the nearest
tenth. (He indicated that Rep. Olberg arrived at 3:11 p.m.)
He then moved Amendment 1 for purposes of discussion.
REP. BRICE objected.
CHAIR BUNDE asked Mr. McCormick to speak to the amendment.
Number 130
JOE MCCORMICK, Executive Director, Alaska Commission on
Postsecondary Education (ACPE), answered questions on HB
506. He stated that "this is just a mechanical, or what I
would call a technical, amendment to exact the
administration of this provision of the bill. And, this is
the only further amendment that we have today..."
Number 165
CHAIR BUNDE asked Rep. Brice to speak to his objection.
REP. BRICE asked, if loans are consolidated and the average
rate is 7.6%, will the rate then be rounded off to 8%?
MR. MCCORMICK explained that it is the nearest tenth of a
percent.
REP. BRICE said he understood.
CHAIR BUNDE asked if Rep. Brice still maintained his
objection.
REP. BRICE said no.
Number 194
CHAIR BUNDE, hearing no further objections, declared that
Amendment 1 was adopted. He said HB 506 as amended was
before the committee.
REP. VEZEY proposed an amendment that would incorporate the
body of a bill he introduced (HB 488) with that of HB 506 as
amended. He said it dealt with the same chapters of Alaska
statutes.
CHAIR BUNDE interjected and said he assumed Rep. Vezey's
amendment would limit student loans to Alaskan schools only.
REP. VEZEY said yes.
CHAIR BUNDE asked if he were interested in pursuing the
issue.
REP. VEZEY asked the pleasure of the committee in regards to
HB 488.
REP. BRICE said he felt that the amendment might hold merit
in certain circumstances, but indicated that he would feel
much more comfortable with back-up information and the
opportunity to debate that specific bill before the
amendment would be made. He said he opposed the amendment.
Number 262
CHAIR BUNDE asserted that he would rather address HB 488
separately to allow opportunity for testimony and
discussion.
REP. TOOHEY suggested that a roll call vote be taken.
CHAIR BUNDE stated that before the amendment could be
addressed it would have to be seen and testified upon. He
said the committee would not vote on something that has not
been discussed. He reiterated that he wanted to handle it
as a separate issue.
REP. VEZEY concurred.
CHAIR BUNDE asked for further discussion on HB 506.
REP. BRICE suggested that perhaps some discussion should be
made in the Labor and Commerce Committee in regards to
capping the interest rate at 15% or 16%. He referred to the
article that indicated that employers are looking for highly
skilled and technically trained college graduates. He said
that a free floating percentage rate could leave students in
very difficult situations and that the loan program would
not be making any loans.
CHAIR BUNDE asked the pleasure of the committee.
REP. VEZEY made a motion to pass HB 506 as amended out of
committee with individual recommendations and accompanying
fiscal note.
CHAIR BUNDE, hearing no objections, stated that HB 506 was
so moved. He then brought HB 466 to the table. He asked
for public testimony.
HB 466 - AHFC BONDS FOR UNIV OF AK USES
Number 394
BRIAN ROGERS, Vice-President for Finance, University of
Alaska, testified in support of HB 466. He stated that the
legislation would address the long standing problem of
deferred maintenance throughout the University of Alaska
system. He said the proposal would authorize the Alaska
Housing Finance Corporation (AHFC) to issue up to $30
million for the repair and rehabilitation of student housing
projects and would authorize the University of Alaska to
issue an additional $45 million in bonds to cover other
deferred maintenance projects throughout the system.
MR. ROGERS referred to project lists in the committee bill
packets and stated that the deferred maintenance problem
totals over $150 million. He said, accumulated over time,
it would be a major step in solving the problem. He
expected that funds would be spent at $25 million per year,
which would fix dormitories and address other projects. He
further stated that $30 million in AHFC bonds is the full
amount of the repair and rehabilitation projects for student
housing throughout the system and would bring all existing
student housing deferred maintenance down to zero. He
stated that $45 million is the most current debt capacity
allowed and he felt that going further than that would
jeopardize the University's excellent credit rating. He
said bonds would provide a comprehensive program to address
the deferred maintenance problem and would prevent
accelerated deferred maintenance.
MR. ROGERS further stated that currently the cost of money
is the lowest it has been in the last thirty years. He said
with a payoff over time with inflated dollars, the net
present value will not be that much larger than the cost of
issuance. He then indicated that Will Gay was on line to
testify also.
CHAIR BUNDE asked for testimony from Mr. Gay.
Number 477
WILL GAY, Executive Director, Alaska Housing Finance
Corporation, testified via offnet in support of HB 466. He
stated that the bill would allow a chance for the AHFC to
have access to the capital market and to help youths with
student housing. He said this was an example of one of the
many ways that AHFC can help the state. He commented that
he had heard rumors about various amounts of assets that
could be expropriated away from the AHFC. He felt it was an
example of how AHFC can help the state with its housing
needs.
Number 507
REP. BRICE asked if the AHFC or the University will have to
go before the legislature again for approval of specific
projects.
MR. ROGERS stated that the bond issue would not require
further legislative authority. He said the University has
tried to supply the legislature with a full list of projects
and he would continue to keep the legislature apprised of
the progress.
Number 532
REP. VEZEY asked Mr. Rogers to explain to him why there is a
$75 million bond authorization and a zero fiscal note.
MR. ROGERS explained that the fiscal note is zero in terms
of initial costs, but there is a debt service note that has
not been provided. The amount of debt service would "ramp
up" to a total of $6.2 million on an annual basis, once all
the bonds are issued and debt service begins. There would
be no cost to the general fund next year, but there
certainly would be in the following years.
REP. VEZEY said he did not have a fiscal note from the
University.
CHAIR BUNDE asked Alison Elgee to testify.
Number 550
ALISON ELGEE, Statewide Budget Director, University of
Alaska, testified on HB 466. She stated that the proposal
is in essence an appropriation bill that would appropriate
debt capacity. She said included in Section 6, subsection
B, is the description of the anticipated annual payment
amount on $45,000 that would be bonded under the
University's debt capacity.
Number 593
(CHAIR BUNDE stated for the record that Rep. Kott arrived at
3:24 p.m.)
REP. VEZEY said he is still did not see a fiscal note that
addresses the debt service.
MS. ELGEE said she would be glad to provide Rep. Vezey with
a fiscal note.
MR. ROGERS stated that the debt service would be
appropriated out of the Alaska Debt Retirement Fund. He
said he was unaware that a fiscal note had not been prepared
for that.
REP. VEZEY asked what the Alaska Debt Retirement Fund is.
MR. ROGERS explained that it is a fund that was created by
Alaska Statute 37.15.011 that consists of annual
appropriations by the legislature.
Number 627
CHAIR BUNDE asked Chip Wagoner to testify.
Number 630
CHIP WAGONER, Vice-President, Alumni Board, University of
Alaska Fairbanks (UAF), testified in support of HB 466. He
stated that there is much history in the University of
Alaska and today the University is one of the most
internationally known research, teaching and public service
institutions in the world. He said it is rated in the top
ten in research institutions in the country, and second in
the Pacific Northwest for the number of national merit
scholars attending UAF. He stated that UAF is one of the
few institutions in the country that has been not only
designated as a land grant college, but also as a sea grant
college and a space grant college. He indicated that past
legislatures have certainly recognized the importance of
young people and their futures in the state.
MR. WAGONER said there are over 22 acres of roofs on the
buildings at UAF, nearly 2.6 million square feet of floors,
and over 25% of all state facilities are on the UAF campus.
He then explained that UAF is one of the oldest investments
in the state with buildings over 70 years old. He said the
mechanical systems are falling apart and they do not have
ventilation systems. He also stated that nearly 90% of the
buildings are over 20 years old.
MR. WAGONER further commented on the state of disrepair
throughout the entire UAF campus, citing leaking roofs and
falling concrete. He asserted that if the situation
continues into the next few years, it will cost the state
even more to maintain its investment. He said the deferred
maintenance is "catch up work." He said deferred
maintenance has been the Alumni Board's number one priority
for the last two years. He suggested that if the entire
$150 million could not be funded, they were willing to
accept $75 million.
MR. WAGONER stated that a comprehensive funding solution is
necessary to maintain Alaska's sound investment in the
University. He urged the committee to make deferred
maintenance for the University system its chief priority
this session.
Number 818
CHAIR BUNDE asked Mr. Wagoner if there was any private
support coming through from the Alumni.
MR. WAGONER stated that UAF just completed a campaign to
raise funds for scholarships, etc. He said he was pleased
to say that the Alumni Board and the public contributed over
$12 million. He said the Alumni Association plans to become
more proactive.
CHAIR BUNDE commended the efforts of the Alumni Board. He
then commented that the reason the state has the deferred
maintenance problem now is because the University
administration and the Regents did not spend the money that
had been given to them by the legislature, they invested it
in other places. He said he will support the bill now but
would not support any reallocation of funds in the future.
Number 865
REP. BRICE added that the Chamber of Commerce has been a
great support to the University. He then thanked Mr.
Wagoner for his time and testimony..
Number 884
NICHOLAS ABRAMCZYK, Member, Associated Students of the
University of Alaska, Fairbanks, testified in support of
HB 466. He stated that he is a resident on the UAF campus.
He said that he uses the analogy that he is the tenant and
the state is his landlord. He specified various states of
disrepair he has encountered, citing flooded bathrooms,
broken heating systems at -60 degrees, and obstacle courses
of buckets in the halls that catch the water leaking from
the ceilings. He related his concern he had as to whether
his younger brother would be offered any type of quality
education if the problem wasn't addressed. He urged the
committee to pass HB 466.
Number 955
CHAIR BUNDE thanked Mr. Abramczyk for his testimony.
REP. BRICE explained that while he was sitting in class at
UAF he had encountered tiles and light panels falling from
the ceiling. He asserted that there is bound to be
liability when deferred maintenance is not dealt with
appropriately and he supposed that a student could be
seriously injured. He said ultimately the cost would fall
back on the state.
Number 000
CHAIR BUNDE suggested that another option would be to close
the facilities. He then closed public testimony and asked
for testimony.
REP. G. DAVIS reiterated the problems the University was
facing and said the issue must be addressed. He indicated
that the financial aspect should be addressed in the Finance
Committee. He made a motion to move HB 466 out of committee
with individual recommendations.
CHAIR BUNDE objected and asked if the committee would rather
wait for the missing fiscal note.
REP. VEZEY said he would vote against moving the bill out
until a fiscal note is received.
Number 022
REP. BRICE indicated that the committee is aware of the
necessary funds which are outlined specifically in the bill.
He said the information is there but not in fiscal note
form.
Number 028
REP. TOOHEY agreed with Rep. Brice. She said the
committee's job has been done and the funding would be
addressed by Finance.
REP. BRICE agreed with Rep. Toohey and Rep. Brice.
CHAIR BUNDE called for the vote. Representatives Toohey,
Bunde, G. Davis, Olberg, B. Davis, Nicholia, and Brice voted
Yea, and Rep. Vezey voted Nay. Chair Bunde stated that
HB 466 was passed out of committee without the accompanying
fiscal note.
MR. ROGERS stated that he could have the fiscal note
delivered to the committee by the end of the day.
CHAIR BUNDE thanked Mr. Rogers. He then brought HB 234 to
the table.
HB 234 - UNIVERSITY OF AK ENDOWMENT TRUST FUND
TAPE 94-40, SIDE B
Number 000
REP. JOHN DAVIES, Prime Sponsor of HB 234, addressed his
bill. He stated that the legislation would transfer the
management of the University of Alaska endowment trust fund
from the Department of Revenue to the University. He said
Governor Hickel has charged the University "with managing
the ranch." He said the University seeks to have the
authority to meet that responsibility. He said, "I would
note that the Department of Revenue has said that perhaps
the comparisons here are apples and oranges. Being an
educational institution, the University chooses apples."
Number 051
CHAIR BUNDE called on Brian Rogers for further testimony.
Number 053
BRIAN ROGERS, Vice-President for Finance, University of
Alaska, testified in support of HB 234. He stated that the
bill would increase the University's control over its
endowment revenues and potentially increase income to the
University. He said the trust fund was established prior to
statehood as a trust fund tied to the University's land
activities. The net income from the development of the land
is placed in the trust fund and the University has access to
the revenues annually. He said that as of June 30, 1993,
there was a total of $21 million in the trust and expected
there to be $26 million by this year end.
MR. ROGERS asserted that the concern regarding management by
the Department of Revenue was in the area of investment
performance. He said the Department does a "spectacular
job" of managing fixed income investments; however, their
equity funds have lagged significantly. He said there are
no international investment opportunities. He indicated
that after reviewing the last five years, it was felt that
if the University had managed the portfolio under the asset
allocation that the Foundation uses, as opposed to the asset
allocation the Department uses, the difference would be
about $300,000 per year. He said the legislation was
introduced by the five members of the University Budget
Subcommittee of the House Finance Committee.
MR. ROGERS further stated that he had performance comparison
numbers comparing the state's and the University's
management plans. He said the University may still want to
have the state manage portions of the fixed income
investment because they have done such a good job. But, he
felt that further diversification makes more sense.
Number 145
CHAIR BUNDE asked if the University would be at a greater
risk managing the money as it would be looking for a greater
return.
MR. ROGERS explained that because of the kind of
diversification the University has been able to do, the risk
levels are not being exceeded, while the return levels are
being exceeded. He attributed the success to the choice of
superior managers that have been in the top 14% in the
country for the last five years. He said their fees are
lower than comparable commercial managers because they are
set up as a nonprofit organization.
Number 194
CHAIR BUNDE referred to the zero fiscal note from the
University and said there must be a cost for managing the
funds. He asked, if additional funds are added to what is
already being managed, would there be an additional cost.
MR. ROGERS said that there would be a cost, but it would be
netted against the investment results. Investment fees are
deducted from the net that is received. He said it would be
additional income, but the amount could not be predicted.
He said he was surprised to see that it would actually cost
the Department of Revenue more not to manage the funds.
CHAIR BUNDE asked what percentage it costs to manage the
funds.
Number 223
MR. ROGERS stated that it ranged from 20 to 50 basis points
depending on the type of investment. "The state's at 20% on
average on theirs. I believe we pay them $52,000... it was
last year for managing our funds."
CHAIR BUNDE requested testimony from Laraine Derr.
Number 230
LARAINE DERR, Deputy Commissioner, Treasury, Department of
Revenue, testified in opposition to HB 234. She stated that
the Department of Revenue believes that it makes more sense
for funds to be in one place. When there are more funds to
manage the costs are less expensive. She said it cost the
Department about 20 basis points to manage the funds. She
explained that 100 basis points is 1%, indicating that the
Department charges the University 200ths of a percent to
manage the funds which is "as inexpensive as you can get
anywhere."
MS. DERR stated that in a performance measurement report
that she received that week, the fund surpassed $26.7
million in December. She said the Department's strength is
in fixed management and the fund earned $2.2 million from
September 30, 1993, to December 31, 1994. She further
stated that the asset allocation in the Department for the
trust fund is relatively risk free at 82% in fixed income
and only 8% in domestic equity. She explained that the
Department met with the University in December and indicated
that if the Department kept the funds and the funds were
maintained in the treasury, the Department would be
interested in working with an asset allocation. She said it
was true that the funds could be further diversified between
fixed income and domestic equities.
Number 326
CHAIR BUNDE asked Ms. Derr to speak to the fiscal note.
MS. DERR said there are no custodial fees because they are
"netted out." She said, "In their case, when they're not
using state people to manage the funds, they can take them
out of fees. We essentially charge them, but it would
reduce the earnings. It's portions of people time...
monitoring and investing managing the money."
CHAIR BUNDE said, "But, you really wouldn't be doing the
work. So would you still be losing the income?"
MS. DERR said, "The people are still there, so I have to pay
their salaries. Right now the fund is charged 22.5 thousand
to manage the funds. If the funds go away, I've still got
the people there because it's like... 10% of this person's
time and 3% of this person's time and counting the assets
and investing the fund. It's part of $3 billion in one part
and $6 billion in another part that's invested, so it's very
minuscule."
Number 359
REP. TOOHEY said she was a little nervous and said it would
be like changing stock brokers. She asked Ms. Derr if the
fund would be in jeopardy if given over to the University.
MS. DERR said no.
REP. TOOHEY asked if the Department's primary concern is
only to be in charge of the fund.
MS. DERR said yes.
MR. ROGERS said the University managers offer other
diversification and better equity management.
Number 394
REP. TOOHEY asked what happens if the University takes over
the fund and loses money. She asked if the fund would be
transferred back to the Department of Revenue.
MR. ROGERS said long term relationships must be stressed and
that it is not wise to jump from one management team to
another.
REP. BRICE said, "If University is paying that 22.5 out of
its earnings, the $26 million... that wouldn't be considered
straight general fund. That should probably be considered
program receipts."
MS. DERR said the Department of Revenue pays the University
interest on the fund quarterly and then they are billed
annually for the $22,500. She said the University may take
it out of the earnings and interest that the Department is
paying them. She stated that the trust account is split
amongst several people, and she would not be able to lay off
a half-time person. She said, "I would have to pick up the
22.5. I can't lay off a half-time person."
Number 460
REP. BRICE asked where the $22,500 was going to as it was
not reflected anywhere else in the fiscal notes.
MS. DERR said, "...and what Mr. Rogers said was that they
would pick it up. But they wouldn't be using University
people to manage it. They wouldn't be paying somebody in
house. They would be paying an external manager. So, they
could net fees on the entire thing, and so it would be just
a different form of management."
REP. BRICE said it sounds like it is all within the same
system.
Number 480
REP. VEZEY stated that the Department invests in fixed
income and the University invests in equity which has
fluctuating principle values. He said there would be higher
return potential with the equity investment, but there would
be a substantially higher risk involved.
MR. DERR said if the University invested all the funds in
domestic equity, and the Department invested it all in fixed
income, there would certainly be a difference in risk
return.
REP. TOOHEY asked if the University managers are going to be
"willy-nilly" investors. She said the Department has a
proven track record.
MS. DERR said that the assets are primarily in fixed income
investments and indicated that it is relatively risk free.
Number 518
REP. BRICE suggested that the business students at UAF could
do a great job at managing the funds.
REP. G. DAVIS asked Mr. Rogers to explain the comparison of
earnings rates that is supplied in the bill packet.
Number 525
MR. ROGERS stated that both the state and the University get
performance evaluations that are conducted by the state. He
indicated that he also had results from an evaluation that
ended June 30, 1993, whereby the University endowment fund
earned 14.17% under state management. The University of
Alaska Foundation Funds earned 16.1% over the same period.
He said in 1993 the state earned 14.3% under fixed income
versus the University at 13.2% and the Department out-
performed the University's fixed income manager. He further
stated that the state earned 13.63% on the equity fund and
the University earned 24.90%.
Number 564
REP. G. DAVIS asked if 1988 was the first year of
comparison.
MR. ROGERS said yes.
REP. DAVIES maintained that the risk is relative to the
nature of the particular investment and that most
investments would be over a long period of time, thereby
reducing the risk.
MR. ROGERS noted that Mr. Rassmussen, Chair of the
University Investment Committee, has helped to set the
guidelines for asset allocation. He further stated that the
University's asset allocation does not normally exceed 50%
in equities at any given point in time. Approximately 25%
of University equity investments will be foreign equities,
and approximately 20% of bond investments will be outside
the United States. He said the University is taking a very
cautious approach to nontraditional investments.
MS. DERR asserted that the majority of funds in the
Department are diversified in similar ratios to that of the
University. She indicated that the Department just recently
received returns on the retirement fund that put them in the
top seventh and eighth percentile in the United States for
fund investments.
Number 632
CHAIR BUNDE asked Ms. Derr what the percentage of return was
for the Department last year.
MS. DERR said 14.3% for the entire funds.
CHAIR BUNDE asked what the total percentage of return was
for the University's portion.
MS. DERR answered 11.5%.
CHAIR BUNDE asked for further discussion.
MR. ROGERS stated that the Department of Revenue has been
paying more attention to the fund since last year when they
became aware that the University wanted to take over the
management of funds.
CHAIR BUNDE interjected and indicated that Rep. B. Davis was
leaving for another meeting and for the record welcomed her
back to Juneau.
MR. ROGERS further stated that it appears that competition
does have advantages.
Number 669
CHAIR BUNDE said he endorsed competition amongst the three
branches of the University.
REP. BRICE made a motion to move HB 234 out of committee.
CHAIR BUNDE indicated that public testimony had not been
closed. He asked for further testimony. Hearing none, he
closed public testimony and asked for discussion from the
committee.
REP. BRICE made a motion to pass HB 234 out of committee
with individual recommendations and accompanying fiscal
note.
REP. VEZEY objected.
Number 682
CHAIR BUNDE called for the vote. Representatives Bunde, G.
Davis, Nicholia, Brice, and Toohey voted Yea and Rep. Vezey
voted Nay. Chair Bunde declared that HB 234 was so moved.
Seeing no further business before the committee, CHAIR BUNDE
ADJOURNED the meeting at 4:12 p.m
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