Legislature(2019 - 2020)SENATE FINANCE 532

01/20/2020 10:00 AM BICAMERAL PERMANENT FUND WORKING GROUP

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Audio Topic
10:05:55 AM Start
10:06:31 AM Overview: Working Group Draft Report
10:52:31 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Working group draft report TELECONFERENCED
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
             BICAMERAL PERMANENT FUND WORKING GROUP                                                                           
                        January 20, 2020                                                                                        
                           10:05 a.m.                                                                                           
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Jennifer Johnston, Co-Chair                                                                                      
Representative Jonathan Kreiss-Tomkins                                                                                          
Representative Kelly Merrick                                                                                                    
Representative Adam Wool                                                                                                        
                                                                                                                                
Senator Click Bishop, Co-Chair                                                                                                  
Senator Shelley Hughes                                                                                                          
Senator Donald Olson                                                                                                            
Senator Bert Stedman                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Sara Hannan                                                                                                      
Representative Andy Josephson                                                                                                   
Representative Bart LeBon                                                                                                       
                                                                                                                                
Senator Cathy Giessel                                                                                                           
Senator Josh Revak                                                                                                              
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW: WORKING GROUP DRAFT REPORT                                                                                            
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
                                                                                                                                
10:05:55 AM                                                                                                                   
CO-CHAIR JENNIFER  JOHNSTON called  the Bicameral  Permanent Fund                                                             
Working Group meeting to order at  10:05 a.m. Present at the call                                                               
to order were Representatives  Wool, Kreiss-Tomkins, Merrick, and                                                               
Co-Chair Johnston.                                                                                                              
                                                                                                                                
10:06:31 AM                                                                                                                   
CO-CHAIR  CLICK  BISHOP  stated   that  Senators  Olson,  Hughes,                                                             
Stedman, and Co-Chair Bishop were present at the call to order.                                                                 
                                                                                                                                
10:06:36 AM                                                                                                                   
CO-CHAIR  JOHSTON  recognized   that  Representatives  Josephson,                                                               
Hannan  and  LeBon, and  Senators  Giessel  and Revak  were  also                                                               
present.                                                                                                                        
                                                                                                                                
^OVERVIEW: Working Group Draft Report                                                                                           
              OVERVIEW: Working Group Draft Report                                                                          
                                                                                                                                
10:07:11 AM                                                                                                                   
CO-CHAIR  JOHNSTON   announced  that  the  business   before  the                                                               
bicameral working  group was  to review  the Working  Group Draft                                                               
Report, dated January 20, 2020.                                                                                                 
                                                                                                                                
She explained  that the report  represents a summary of  the work                                                               
the working group has done  over the last seven months, including                                                               
a history of  the creation of the working group,  a brief history                                                               
of the Alaska  permanent fund dividend (PFD), a  synopsis of each                                                               
of the  working group's meetings,  the working  group assignments                                                               
that were completed, and the models the working group evaluated.                                                                
                                                                                                                                
She  said House  Concurrent  Resolution 101  created the  working                                                               
group and  charged it with  making policy recommendations  on the                                                               
future  use of  the earnings  of the  Alaska Permanent  Fund. The                                                               
report  does not  make a  recommendation  on changes  to the  PFD                                                               
formula or  the size  of the  PFD check.  However, the  group was                                                               
able to  establish and recommend  that the permanent  fund should                                                               
be  protected  from  inflation and  the  legislature  should  not                                                               
utilize more of  the earnings reserve than is  outlined in Senate                                                               
Bill 26  from 2018,  otherwise known as  percent of  market value                                                               
(POMV).                                                                                                                         
                                                                                                                                
She  pointed out  that at  the  last meeting,  the working  group                                                               
evaluated several different  scenarios related to the  use of the                                                               
earnings reserve  and the  size of the  dividend check.  She said                                                               
she was pleased that the  working group developed a framework for                                                               
modeling  the options  heading  into the  second  session of  the                                                               
Thirty-First  Alaska State  Legislature.  She reminded  listeners                                                               
that the models represent a snapshot  in time. They assumed a $50                                                               
million supplemental and  were based on the  Alaska Department of                                                               
Revenue Spring 2019  Revenue Forecast. Since then,  the Fall 2019                                                               
Revenue  Forecast   was  released  resulting  in   an  additional                                                               
shortfall  of  approximately  $200   million  and  a  preliminary                                                               
supplemental of approximately $230 million.                                                                                     
                                                                                                                                
CO-CHAIR  JOHNSTON  asked  if  any working  group  member  had  a                                                               
comment.                                                                                                                        
                                                                                                                                
SENATOR  HUGHES  thanked  the  individuals  that  worked  on  the                                                               
working group report.  She highlighted that one of  the edits she                                                               
suggested was  in the  first paragraph  of the  executive summary                                                               
regarding what  the working group  was tasked to  do. Originally,                                                               
the  report  stated  that  the  working  group  was  tasked  with                                                               
submitting a report to the  legislature in January 2020. However,                                                               
the resolution  (HCR 101)  tasked the  working group  with making                                                               
policy  recommendations.  She  asked the  co-chairs  what  policy                                                               
recommendations the working group was making in the report.                                                                     
                                                                                                                                
CO-CHAIR    JOHNSTON   opined    that   the    strongest   policy                                                               
recommendation is  that the  legislature needs  to adhere  to the                                                               
structured draw  no matter what kind  of formula is used  for the                                                               
PFD  and what  revenue the  legislature is  looking for,  for the                                                               
state.                                                                                                                          
                                                                                                                                
10:10:54 AM                                                                                                                   
SENATOR  HUGHES highlighted  a recommendation  she made  that was                                                               
not included in the final  draft. She said she suggested striking                                                               
the  phrase  "To  that  end,"  from  the  last  sentence  of  the                                                               
executive summary and insert:                                                                                                   
                                                                                                                                
     A majority of members agree  that use of permanent fund                                                                    
     earnings must stay within draw  limits established by a                                                                    
     structure like the percent of  market value law enacted                                                                    
     in 2018.                                                                                                                   
                                                                                                                                
She  said  the  phrase  "To  that end,"  is  not  an  appropriate                                                               
conjunction because  it implies  that the structured  draw itself                                                               
takes care of  inflation proofing and it doesn't. It  might do so                                                               
indirectly because some funds outside  of the structured draw may                                                               
inflation proof  the corpus, but  a limited structured  draw does                                                               
not provide automatic inflation proofing.                                                                                       
                                                                                                                                
SENATOR  HUGHES  said  she  also expressed  concern  and  made  a                                                               
suggestion  regarding  the POMV  but  it  did not  have  support.                                                               
Because her concern remains, she  prepared an amendment she hopes                                                               
other members agree with.                                                                                                       
                                                                                                                                
10:13:14 AM                                                                                                                   
She  suggested  striking  the  last  sentence  of  the  executive                                                               
summary and inserting:                                                                                                          
                                                                                                                                
     Also,  members   agree  that  use  of   permanent  fund                                                                    
     earnings  for  state  services and  dividends  must  be                                                                    
     limited in order to protect the permanent fund.                                                                            
                                                                                                                                
She said  the executive summary  will still say that  the working                                                               
group  agrees that  there must  be a  limit to  avoid willy-nilly                                                               
spending. She  added that if  the group  does not want  to change                                                               
the language, at least replace the  phrase "To that end," with "A                                                               
majority of members agree".                                                                                                     
                                                                                                                                
10:13:56 AM                                                                                                                   
At ease.                                                                                                                        
                                                                                                                                
10:20:29 AM                                                                                                                   
CO-CHAIR JOHNSTON called the committee back to order.                                                                           
                                                                                                                                
10:20:38 AM                                                                                                                   
SENATOR  HUGHES withdrew  her previous  suggestion and  offered a                                                               
conceptual  amendment to  strike the  words, "To  that end,"  and                                                               
insert,  "A  majority  of  members  agree  that".  The  last  two                                                               
sentences of the executive summary would read:                                                                                  
                                                                                                                                
     While agreement on the size  of a dividend may still be                                                                    
     difficult to  attain, members agree that  the permanent                                                                    
     fund must  be protected  from inflation so  that future                                                                    
     generations  of   Alaskans  may  benefit  from   it.  A                                                                    
     majority of  members agree that  use of  permanent fund                                                                    
     earnings must stay within draw  limits established by a                                                                    
     structure like the percent of  market value law enacted                                                                    
     in 2018.                                                                                                                   
                                                                                                                                
SENATOR  STEDMAN  asserted that  there  is  a huge  misconception                                                               
within the  working group.  Quite a  bit of  time has  been spent                                                               
debating  the POMV  concept, going  back to  Governor Murkowski's                                                               
administration.   A  couple   of   years   ago  the   legislature                                                               
established  a  POMV structure  that  limited  the draw  to  5.25                                                               
percent and  then to be  5.00 percent.  The comment that  it does                                                               
not take care of inflation  is inaccurate; that is precisely what                                                               
it does. The endowment-style structure  is proven over decades of                                                               
use all over the world.                                                                                                         
                                                                                                                                
SENATOR  STEDMAN   explained  that  what  drives   the  inflation                                                               
proofing is  a draw rate  lower than  the consumption of  all the                                                               
earnings, including  what is lost  in purchasing power.  The 5.25                                                               
percent  and then  5.00  percent  draw is  set  by the  permanent                                                               
fund's asset allocation  which is set by market  returns. That is                                                               
what  drives the  5  percent  draw. It's  not  8 percent  because                                                               
historic global  returns cannot produce  the income  to inflation                                                               
proof and  protect the purchasing  power of the  Alaska Permanent                                                               
Fund to sustain that draw. He continued to say:                                                                                 
                                                                                                                                
     To  miss  that  point,  to me,  is  phenomenal.  It  is                                                                    
     fundamental  to the  structure,  and  to have  language                                                                    
     that   may   give   flexibility  and   cover   to   the                                                                    
     legislature,  the  appropriating body,  to  appropriate                                                                    
     funds  above   what  the  portfolio  can   return  with                                                                    
     inflation and  protect itself,  and protect  the future                                                                    
     Alaskans   is   a   fundamental   abrogation   of   our                                                                    
     responsibility for future generations of Alaskans.                                                                         
                                                                                                                                
10:24:20 AM                                                                                                                   
SENATOR  STEDMAN emphasized  that the  current generation  should                                                               
not  be  consuming  all  the  revenue  and  wealth  created  from                                                               
Alaska's oil  basin. Some  of the wealth  created by  the current                                                               
generation must be left for future  Alaskans. He said he does not                                                               
want  to  see  weasel-words  in  the  working  group  report.  He                                                               
emphasized that  he wants to  see the legislature,  regardless of                                                               
the size of the PFD, protect  the current and future value of the                                                               
permanent fund. He opined that the PFD will just default out.                                                                   
                                                                                                                                
He stressed  that the  permanent fund  must be  protected against                                                               
the  legislature  spending  it,  and noted  that  both  political                                                               
parties have made  motions on the floor of the  bodies to do just                                                               
that. The  issue does  not reside  on one  side of  the political                                                               
spectrum or the  other. He said the legislature  worked very hard                                                               
to build  the Constitutional  Budget Reserve  (CBR) to  well over                                                               
$10 billion.  Assuming the proposed  budget passes  this session,                                                               
it has been  depleted to $500 million. He said  he disagrees with                                                               
those  who do  not  think  the legislature  will  spend down  the                                                               
permanent fund  if the window is  open. The depletion of  the CBR                                                               
over the last several years is proof of that.                                                                                   
                                                                                                                                
He stated  that he would like  the working group to  hold firm on                                                               
the language  in the final  report to make  it very clear  to the                                                               
public that  regardless of  the financial  demands over  the last                                                               
several years,  the purchasing power  of the permanent  fund will                                                               
not be depleted. Spending the  entire earnings reserve only takes                                                               
a majority vote of bodies and a signature by the governor.                                                                      
                                                                                                                                
10:26:53 AM                                                                                                                   
CO-CHAIR BISHOP pointed  out that the POMV is  an important piece                                                               
of legislation that gives the  legislature the predictability for                                                               
building future budgets.                                                                                                        
                                                                                                                                
SENATOR HUGHES  said she  appreciates Senator  Stedman's comments                                                               
and generally  agrees with  his concern  that the  permanent fund                                                               
should truly  be protected for  future generations.  However, the                                                               
fact is that the court ruling  and the legislature can go outside                                                               
the POMV  draw with a simple  majority vote. She opined  that the                                                               
only way to inflation proof the  permanent fund is to do what was                                                               
done  in fiscal  year 2020  and  that is  to put  funds from  the                                                               
earnings reserve  into the corpus.  She reiterated that  taking a                                                               
limited  draw   does  not  secure  inflation   proofing  for  the                                                               
permanent fund.                                                                                                                 
                                                                                                                                
10:28:40 AM                                                                                                                   
REPRESENTATIVE  KREISS-TOMKINS agreed  with Senator  Stedman that                                                               
the permanent  fund must be  protected. He opined that  the order                                                               
of  priority is  that  without  a permanent  fund  there isn't  a                                                               
permanent fund  dividend. He said  as somebody who  is passionate                                                               
about the  future, integrity,  and intergenerational  solvency of                                                               
the  permanent  fund,   he  also  believes  in  the   PFD  as  an                                                               
institution.                                                                                                                    
                                                                                                                                
He  said he  appreciates  the report,  including Senator  Hughes'                                                               
amendment, and believes that every  member supports the integrity                                                               
and protection of  the permanent fund, but it does  not create an                                                               
orb of protection for the permanent fund into the future.                                                                       
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS opined that  as much as Senate Bill                                                               
26 was a watershed  moment in terms of how the  state is going to                                                               
manage the  permanent fund  asset, there is  ongoing risk  to the                                                               
permanent  fund and  it will  always  exist. Statute  alone or  a                                                               
consensus that  may evaporate from legislature  to legislature or                                                               
decade to decade into the future  is not sufficient to protect an                                                               
asset that is the best thing Alaska has going.                                                                                  
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS  said he  appreciates the  work the                                                               
working  group   has  done  but   he  believes   the  legislature                                                               
ultimately has to rely on  the constitution to provide protection                                                               
that is  inviolate. A  report and  executive summary  cannot make                                                               
the permanent fund truly permanent  as whims change and political                                                               
winds blow.                                                                                                                     
                                                                                                                                
10:31:06 AM                                                                                                                   
He said  his second  comment is that  the executive  summary does                                                               
not  address the  permanent fund  dividend formula.  He expressed                                                               
appreciation for  Senator Hughes'  comments last year  about what                                                               
the formula can  look like. He opined that all  members know that                                                               
the  PFD needs  to be  reexamined. However,  so long  as the  PFD                                                               
formula is  unresolved, there  is going to  be political  risk to                                                               
the  permanent fund,  not because  there are  people who  want to                                                               
raid the  permanent fund,  but because  there is  huge unresolved                                                               
business  in Alaska.  So  long as  there  is unresolved  business                                                               
regarding the  PFD formula, then  the permanent fund  becomes the                                                               
potential collateral damage.                                                                                                    
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS  opined that  there  is  a lot  of                                                               
potential for  the working group to  work on the PFD  formula. He                                                               
said  even though  he has  a different  perspective than  Senator                                                               
Hughes on what the PFD formula  should look like, it is important                                                               
for  there to  be resolution  in order  to protect  the permanent                                                               
fund.                                                                                                                           
                                                                                                                                
SENATOR  OLSON commented  that Senator  Stedman has  a very  good                                                               
understanding of  what the  nuts and  bolts are  for some  of the                                                               
financial situations  the state finds  itself in and POMV  is one                                                               
of those issues.                                                                                                                
                                                                                                                                
He   shared  that   his  constituents   do  not   have  a   clear                                                               
understanding of what  the POMV says or does so  it's easy for it                                                               
to be misinterpreted. The POMV  methodology may be interpreted as                                                               
being detrimental to the future  of his constituents' sacred cow,                                                               
the PFD.                                                                                                                        
                                                                                                                                
SENATOR  OLSON  offered his  belief  that  the working  group  is                                                               
trying to agree  that the permanent fund should  be protected. He                                                               
said he  is in favor  of the amendment  because it makes  it very                                                               
clear for people to understand  without having a strong financial                                                               
background.                                                                                                                     
                                                                                                                                
10:34:41 AM                                                                                                                   
SENATOR HUGHES pointed out that the  POMV is a percentage off the                                                               
value of  the entire fund. Over  a number of years  the POMV draw                                                               
works, and that is why a  lot of people skilled in fiscal matters                                                               
recommend it. However, a 5 percent  draw in a series of bad years                                                               
could eat into the corpus of the permanent fund.                                                                                
                                                                                                                                
SENATOR HUGHES remarked that the  working group has not discussed                                                               
other  options  to  the  POMV  methodology.  She  suggested  that                                                               
another option  would be to go  back to the original  formula but                                                               
subtract inflation  proofing and  put it in  the corpus  prior to                                                               
the  50:50 split  for the  PFD and  state services.  The original                                                               
formula  only deals  with  earnings and  avoids  having to  worry                                                               
about dipping into the permanent fund corpus during bad years.                                                                  
                                                                                                                                
10:37:06 AM                                                                                                                   
SENATOR  STEDMAN reiterated  that the  POMV looks  at the  entire                                                               
portfolio market to  market. The liquidation value  of all assets                                                               
is calculated  every year and  averaged over  a four to  six year                                                               
period to  smooth the  revenue stream  for the  predictability of                                                               
not only  dividends but for  monies used  in a budget.  He opined                                                               
that  for  this  legislature  to   reinvent  how  to  manage  its                                                               
portfolios for the  long-term best interest of  Alaskans would be                                                               
ludicrous.                                                                                                                      
                                                                                                                                
He emphasized that  the POMV methodology has  been implemented on                                                               
virtually all the large endowments  and sovereign wealth funds on                                                               
the planet. If  the POMV methodology was  structurally flawed, it                                                               
would have showed up in  the financial meltdown of 2008-2010 when                                                               
most of  the banking  industry got wiped  out and  the industrial                                                               
base got crippled.  There was also the dot-com  meltdown in 2000,                                                               
the huge selloff in October 1985, and the collapse in 1929.                                                                     
                                                                                                                                
He maintained that the legislature  does not need to reinvent the                                                               
wheel in  some politically expedient  way. The  legislature needs                                                               
to protect its wealth  fund and the way to do that  is to run and                                                               
manage a  POMV. Inflation will take  care of itself over  time if                                                               
the  POMV draw  rate is  low enough  to allow  gross earnings  to                                                               
exceed inflation plus the draw.                                                                                                 
                                                                                                                                
He  conceded that  there will  be several  years of  bear markets                                                               
where the overall  value of a portfolio moves  down. However, the                                                               
portfolio value  is smoothed out  by looking back  and averaging.                                                               
Bear markets  cannot be  avoided in  the financial  markets, even                                                               
bonds held to maturity fluctuate  daily due to interest rates and                                                               
economic conditions.                                                                                                            
                                                                                                                                
10:40:23 AM                                                                                                                   
SENATOR STEDMAN pointed out that  the permanent fund portfolio is                                                               
well  diversified and  continues to  diversify even  further. The                                                               
asset classes within the permanent  fund keep spreading out every                                                               
decade   to  protect   the  state   from  economic   shocks.  The                                                               
legislature has multiple meetings in  both finance rooms on asset                                                               
allocation  of   the  permanent   fund  to   address  asset-class                                                               
weighting.  The  responsibility  of sitting  in  the  legislature                                                               
necessitates the need to rely  on experts in particular fields. A                                                               
consultant  for  the permanent  fund,  Callan,  confers with  the                                                               
legislature  and permanent  fund  personnel  about the  permanent                                                               
fund.                                                                                                                           
                                                                                                                                
SENATOR  STEDMAN opined  that having  the legislature  experiment                                                               
with how  to run the Alaska  Permanent Fund would be  an absolute                                                               
disaster. Alaska  knows how to  run its sovereign wealth  fund by                                                               
allowing other  sovereign wealth funds  around the world  to lead                                                               
the  way. The  intent  is to  not be  overly  complicated but  to                                                               
simplify  so  that  the  public,   as  Senator  Olson  said,  can                                                               
understand. Alaska  does not need  to lead. What the  state needs                                                               
to do is  follow and allow the permanent fund  to grow, hopefully                                                               
to get the fund to $80 billion to $100 billion and on.                                                                          
                                                                                                                                
He  noted that  there are  communities in  the state  that run  a                                                               
similar POMV  model. The City of  Sitka has run a  POMV model for                                                               
over 20  years. The methodology  is nothing new.  However, having                                                               
too heavy a POMV draw is  as detrimental to Sitka's POMV model as                                                               
having too  large a POMV  draw is to  the permanent fund  for the                                                               
State of Alaska.                                                                                                                
                                                                                                                                
SENATOR  STEDMAN  said the  other  comment  he  has is  that  the                                                               
earnings reserve is  of such a significant size  that the account                                                               
will  continue to  grow and  become an  ever increasing  spending                                                               
target. The earnings  reserve is spendable with a 21  and 11 vote                                                               
in each body  and a signature by the governor.  The more that can                                                               
be transferred from the earnings  reserve to the constitutionally                                                               
protected  permanent  fund  corpus  the  better.  Last  year  the                                                               
legislature moved $5  billion to the corpus and his  hope is that                                                               
more is  moved because if  there are billions of  dollars sitting                                                               
in the  earnings reserve  to be  easily spent,  the account  is a                                                               
target.                                                                                                                         
                                                                                                                                
10:43:14 AM                                                                                                                   
CO-CHAIR JOHNSTON pointed out that  the Alaska Permanent Fund has                                                               
won  multiple international  awards  and  other sovereign  wealth                                                               
funds are  looking at Alaska's  fund as a  source of how  to best                                                               
operate.  The state  is  very fortunate  to  have excellent  fund                                                               
managers.                                                                                                                       
                                                                                                                                
CO-CHAIR JOHNSTON  opined that the  legislature forgets  that its                                                               
lane  is  a  lane  of  appropriation and  not  a  lane  of  asset                                                               
allocation. The legislature's lane is  not the lane of management                                                               
of the  permanent fund, it  is a lane  of how to  appropriate the                                                               
earnings reserve account.                                                                                                       
                                                                                                                                
REPRESENTATIVE  WOOL opined  that the  initial directive  for the                                                               
working group was to talk about  how to deal with the earnings of                                                               
the permanent fund  and not the PFD, specifically.  Last year was                                                               
a big sea change in that for  the first time in history the state                                                               
used earnings from  the permanent fund to  fund state government,                                                               
so   state   government  needs   now   compete   with  the   PFD.                                                               
Traditionally, the permanent  fund funded the PFD  and oil funded                                                               
state government. Recently, the  legislature used savings to fund                                                               
state government.  However, the legislature  is now at  the point                                                               
that it can no longer use savings.                                                                                              
                                                                                                                                
REPRESENTATIVE  WOOL opined  that the  use of  earnings from  the                                                               
permanent fund for  state government is the crux  of the problem.                                                               
The legislature needs to protect  the permanent fund indefinitely                                                               
because nobody  knows what the  future holds for oil  revenue. No                                                               
one is going  to predict oil is  going to come back  and save the                                                               
day.  Saudi Arabia  just decided  to  sell their  oil company  to                                                               
create an endowment to live on  in perpetuity, a decision that is                                                               
the responsible thing to do.                                                                                                    
                                                                                                                                
10:45:57 AM                                                                                                                   
He noted  that Representative Kreiss-Tomkins and  Senator Stedman                                                               
alluded to enshrining the permanent fund  draw in such a way that                                                               
it cannot  be violated; that is  a rule of an  endowment to stick                                                               
with its rules  and not overdraw. Then the  endowment should live                                                               
in perpetuity  to fund the things  that the state needs  to fund.                                                               
How the legislature  splits up permanent fund  earnings for state                                                               
government and  other things is another  discussion. He concurred                                                               
with previous  comments that hard  and fast rules must  be placed                                                               
on the permanent fund to not exceed the draw.                                                                                   
                                                                                                                                
REPRESENTATIVE  WOOL said  also  mentioned in  the working  group                                                               
document is  the $1.5  billion in the  earnings reserve  which is                                                               
money that was  not used to pay the statutory  PFD formula. There                                                               
are people  on different sides  who look  at the $1.5  billion as                                                               
being  available to  pay a  onetime surplus  PFD. Doing  so would                                                               
exceed the  permanent fund  draw and place  the legislature  on a                                                               
slippery slope. The  $1.5 billion should stay in the  fund and be                                                               
locked in.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  WOOL  noted  that  Representative  Kreiss-Tomkins                                                               
mentioned constitutionalizing  the POMV draw  as the only  way to                                                               
safeguard  the  earnings  from  51  percent  of  the  legislature                                                               
suddenly deciding to  access the funds to pay out  a bonus check.                                                               
Hopefully  the legislature  will figure  out  a way  to stick  to                                                               
that, he said.                                                                                                                  
                                                                                                                                
CO-CHAIR  BISHOP  opined that  the  answer  is in  the  executive                                                               
summary and historical  look back; the legislature  almost had it                                                               
in 2018 but was not able to get it over the top.                                                                                
                                                                                                                                
10:49:03 AM                                                                                                                   
CO-CHAIR  BISHOP  moved  to  adopt  and  finalize  the  Bicameral                                                               
Permanent Fund Working Group Report, as amended.                                                                                
                                                                                                                                
SENATOR  HUGHES said  she appreciated  the  motion that  Co-Chair                                                               
Bishop  made. She  referred to  page  9 in  the report  regarding                                                               
earnings versus market value, noting  that she disagreed with the                                                               
tone in the section. She said  she would not make any suggestions                                                               
for  editing the  section, but  she didn't  believe the  original                                                               
formula was  inherently wrong  and volatile.  She opined  that if                                                               
the state  had done a better  job of living within  its means and                                                               
been  more careful  with savings,  the legislature  would not  be                                                               
facing a  situation that  pits the PFD  against paying  for state                                                               
services.                                                                                                                       
                                                                                                                                
REPRESENTATIVE WOOL  pointed out  that on page  4 of  the report,                                                               
the $10  million motor fuel tax  in 1970 accounted for  6 percent                                                               
of the state's revenue.                                                                                                         
                                                                                                                                
10:51:31 AM                                                                                                                   
CO-CHAIR JOHNSTON  announced that  there being no  objection, the                                                               
motion to adopt and finalize the report, as amended, passed.                                                                    
                                                                                                                                
She thanked  the working group  and the staff members  who worked                                                               
on finalizing the report.                                                                                                       
                                                                                                                                
10:52:31 AM                                                                                                                   
There being  no further  business to  come before  the committee,                                                               
Co-Chair Johnston adjourned the  Bicameral Permanent Fund Working                                                               
Group meeting at 10:52 a.m.                                                                                                     
                                                                                                                                

Document Name Date/Time Subjects
Draft Permanent Fund Working Group Report, 19 January 2020.pdf JPFG 1/20/2020 10:00:00 AM
Bicameral Permanent Fund Working Group
Bicameral Permanent Fund Working Group Report, 20 January 2020.pdf JPFG 1/20/2020 10:00:00 AM
Bicameral Permanent Fund Working Group
Bicameral Permanent Fund Working Group Report With Title Page, 20 January 2020.pdf JPFG 1/20/2020 10:00:00 AM
Bicameral Permanent Fund Working Group