Legislature(2019 - 2020)CAPITOL 106

05/07/2019 03:00 PM STATE AFFAIRS

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Audio Topic
03:08:18 PM Start
03:09:55 PM HJR5|| HJR6|| HJR7
04:20:14 PM HB139
04:21:36 PM Presentation(s): Permanent Fund 101
05:33:38 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Location Change --
+= HJR 5 CONST. AM: STATE TAX; INTIATIVE TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+= HJR 6 CONST. AM.:PERMANENT FUND & DIVIDEND TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+= HJR 7 CONST AM:APPROP. LIMIT; RESERVE FUND TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 139 AK PERM. FUND CORP. PROCUREMENT EXEMPTION TELECONFERENCED
Moved HB 139 Out of Committee
-- Public Testimony --
+ Presentation: Permanent Fund 101 by TELECONFERENCED
Angela Rodell,CEO, Alaska Permanent Fund Corp &
David Teal, Dir., Legislative Finance Div.
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                          May 7, 2019                                                                                           
                           3:08 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Zack Fields, Co-Chair                                                                                            
Representative Jonathan Kreiss-Tomkins, Co-Chair                                                                                
Representative Grier Hopkins                                                                                                    
Representative Andi Story                                                                                                       
Representative Sarah Vance                                                                                                      
Representative Laddie Shaw                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Adam Wool                                                                                                        
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Click Bishop                                                                                                            
Representative Harriet Drummond                                                                                                 
Representative Kelly Merrick                                                                                                    
Representative Bart LeBon                                                                                                       
Representative Dan Ortiz                                                                                                        
Representative Sara Hannan                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 5                                                                                                    
Proposing amendments to  the Constitution of the  State of Alaska                                                               
prohibiting the  establishment of,  or increase  to, a  state tax                                                               
without the approval of the voters  of the state; and relating to                                                               
the initiative process.                                                                                                         
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 6                                                                                                    
Proposing amendments to  the Constitution of the  State of Alaska                                                               
relating  to the  Alaska permanent  fund and  the permanent  fund                                                               
dividend.                                                                                                                       
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 7                                                                                                    
Proposing amendments to  the Constitution of the  State of Alaska                                                               
relating  to  an  appropriation  limit; relating  to  the  budget                                                               
reserve fund and establishing the savings reserve fund; and                                                                     
relating to the permanent fund.                                                                                                 
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 139                                                                                                              
"An Act  providing an exemption  from the state  procurement code                                                               
for  the acquisition  of investment-related  services for  assets                                                               
managed by  the Board  of Trustees of  the Alaska  Permanent Fund                                                               
Corporation."                                                                                                                   
                                                                                                                                
     - MOVED HB 139 OUT OF COMMITTEE                                                                                            
                                                                                                                                
PRESENTATION: PERMANENT FUND 101                                                                                                
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HJR 5                                                                                                                   
SHORT TITLE: CONST. AM: STATE TAX; INTIATIVE                                                                                    
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/19       (H)       STA, JUD, FIN                                                                                          
04/30/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/30/19       (H)       Heard & Held                                                                                           
04/30/19       (H)       MINUTE(STA)                                                                                            
05/02/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
05/02/19       (H)       Scheduled but Not Heard                                                                                
05/07/19       (H)       STA AT 3:00 PM CAPITOL 106                                                                             
                                                                                                                                
BILL: HJR 6                                                                                                                   
SHORT TITLE: CONST. AM.:PERMANENT FUND & DIVIDEND                                                                               
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/19       (H)       STA, JUD, FIN                                                                                          
04/25/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/25/19       (H)       Heard & Held                                                                                           
04/25/19       (H)       MINUTE(STA)                                                                                            
04/30/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/30/19       (H)       Heard & Held                                                                                           
04/30/19       (H)       MINUTE(STA)                                                                                            
05/02/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
05/02/19       (H)       Scheduled but Not Heard                                                                                
05/07/19       (H)       STA AT 3:00 PM CAPITOL 106                                                                             
                                                                                                                                
BILL: HJR 7                                                                                                                   
SHORT TITLE: CONST AM:APPROP. LIMIT; RESERVE FUND                                                                               
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/20/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/20/19       (H)       STA, JUD, FIN                                                                                          
04/30/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/30/19       (H)       Heard & Held                                                                                           
04/30/19       (H)       MINUTE(STA)                                                                                            
05/02/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
05/02/19       (H)       Heard & Held                                                                                           
05/02/19       (H)       MINUTE(STA)                                                                                            
05/07/19       (H)       STA AT 3:00 PM CAPITOL 106                                                                             
                                                                                                                                
BILL: HB 139                                                                                                                  
SHORT TITLE: AK PERM. FUND CORP. PROCUREMENT EXEMPTION                                                                          
SPONSOR(s): JOHNSTON                                                                                                            
                                                                                                                                
04/17/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/17/19       (H)       STA, FIN                                                                                               
04/25/19       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/25/19       (H)       Heard & Held                                                                                           
04/25/19       (H)       MINUTE(STA)                                                                                            
05/07/19       (H)       STA AT 3:00 PM CAPITOL 106                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
VIC FISCHER                                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the hearing on HJR 5, HJR                                                               
6, and HJR 7.                                                                                                                   
                                                                                                                                
GORDON HARRISON                                                                                                                 
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the hearing on HJR 5, HJR                                                               
6, and HJR 7.                                                                                                                   
                                                                                                                                
ANGELA RODELL, Chief Executive Officer                                                                                          
Alaska Permanent Fund Corporation (APFC)                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented "Permanent Fund 101" with the use                                                              
of a PowerPoint presentation.                                                                                                   
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:08:18 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JONATHAN  KREISS-TOMKINS called the House  State Affairs                                                             
Standing   Committee    meeting   to    order   at    3:08   p.m.                                                               
Representatives Hopkins, Story, Vance,  Shaw, Fields, and Kreiss-                                                               
Tomkins were  present at the  call to  order.  Also  present were                                                               
Senator  Bishop  and  Representatives Drummond,  Merrick,  LeBon,                                                               
Ortiz, and Hannan.                                                                                                              
                                                                                                                                
   HJR  5-CONST. AM: SHJR  5-CONST. AM: STATE TAX; INTIATIVE                                                                
          HJR  6-CONST. AM.:PERMANENT FUND & DIVIDEND                                                                       
          HJR  7-CONST AM:APPROP. LIMIT; RESERVE FUND                                                                       
                                                                                                                                
                                                                                                                                
3:09:55 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  announced  that   the  first  order  of                                                               
business  would  be  HOUSE  JOINT  RESOLUTION  NO.  5,  Proposing                                                               
amendments   to  the   Constitution  of   the  State   of  Alaska                                                               
prohibiting the  establishment of,  or increase  to, a  state tax                                                               
without the approval of the voters  of the state; and relating to                                                               
the  initiative  process  and   HOUSE  JOINT  RESOLUTION  NO.  6,                                                               
Proposing amendments to  the Constitution of the  State of Alaska                                                               
relating  to the  Alaska permanent  fund and  the permanent  fund                                                               
dividend and  HOUSE JOINT RESOLUTION NO.  7, Proposing amendments                                                               
to  the  Constitution of  the  State  of  Alaska relating  to  an                                                               
appropriation  limit; relating  to  the budget  reserve fund  and                                                               
establishing  the  savings  reserve  fund; and  relating  to  the                                                               
permanent fund.                                                                                                                 
                                                                                                                                
CO-CHAIR KREISS-TOMKINS relayed a  personal anecdote of his first                                                               
meeting with  Vic Fischer  at the  Conference of  Young Alaskans.                                                               
He asked Mr. Fischer to offer  comments and insights to the House                                                               
State  Affairs  Standing  Committee regarding  the  Alaska  State                                                               
Constitution and the proposed amendments  under HJR 5, HJR 6, and                                                               
HJR 7.                                                                                                                          
                                                                                                                                
3:13:29 PM                                                                                                                    
                                                                                                                                
VIC  FISCHER   testified  as  a   former  delegate   to  Alaska's                                                               
Constitutional  Convention.     He  responded  to  Representative                                                               
Kreiss-Tomkins's  anecdote.    He  then referred  to  an  opinion                                                               
editorial ("Op Ed")  that he recently authored,  published in the                                                               
Anchorage Daily  News and other  local newspapers,  entitled "The                                                               
Alaska I  helped build is  under attack,"  which read in  part as                                                               
follows:                                                                                                                        
                                                                                                                                
     As  one  of the  founders  of  Alaska statehood,  I  am                                                                    
     appalled  by  Gov.  Mike  Dunleavy's  proposed  budget,                                                                    
     which drastically cuts  funding for  K-12 education and                                                                    
     the  university,   and  slashes  health   services  for                                                                    
     213,000  Alaskans, half  of them  children. It  reduces                                                                    
     support   for  seniors   and   undermines  the   taxing                                                                    
     authority of local governments across the state.                                                                           
                                                                                                                                
     The  Alaska that  I helped  to build  is under  attack.                                                                    
     When  we wrote  Alaska's  Constitution  in 1955-56  and                                                                    
     achieved statehood in 1959,  we established a structure                                                                    
     of  state and  local  government  to provide  essential                                                                    
     services. Now, 60 years later,  the ideals of statehood                                                                    
     and  our   constitution  are  under  assault   by  Gov.                                                                    
     Dunleavy and his people.                                                                                                   
                                                                                                                                
3:18:57 PM                                                                                                                    
                                                                                                                                
MR.  FISCHER   relayed  that  when   he  reviewed   the  proposed                                                               
constitutional  amendments under  HJR 5,  HJR  6, and  HJR 7,  he                                                               
thought  back to  his involvement  in  World War  II -  a war  to                                                               
protect democracy  around the world.   After  the war he  came to                                                               
Alaska, which  was a territory  at the time, and  became involved                                                               
in  the statehood  movement.   He  ran and  was elected  to be  a                                                               
delegate  to the  constitutional convention.   He  said that  the                                                               
impetus to  become a state  was so  that the residents  of Alaska                                                               
could be full-fledged citizens of  the U.S. and control their own                                                               
futures.   The  constitutional  convention  was initiated  before                                                               
statehood to demonstrate that the  territory was mature enough to                                                               
design a  constitution that  was as  good as  - and  maybe better                                                               
than - any other constitution in the U.S.                                                                                       
                                                                                                                                
3:23:01 PM                                                                                                                    
                                                                                                                                
MR.  FISCHER  stated  that  the  Alaska  State  Constitution  was                                                               
drafted  over a  period  of  75 active  days  in  session at  the                                                               
Fairbanks campus  of the University  of Alaska - the  only campus                                                               
of the  university at that  time.  It  was an excellent  venue in                                                               
that  it  was  away  from politics  and  special  interests;  the                                                               
convention lacked partisanship;  the elections were non-partisan;                                                               
and  there  was no  mention  of  political  parties.   They  were                                                               
working to  build a  foundation for  the future  of Alaska.   The                                                               
constitution was modeled  after the U.S. Constitution;  it was to                                                               
be  brief, easy  to understand,  and non-partisan,  and it  would                                                               
provide  the policies  and  structures for  the  future state  of                                                               
Alaska.   He  mentioned  his collaboration  and partnership  with                                                               
Jack Coghill, despite political differences.                                                                                    
                                                                                                                                
3:26:41 PM                                                                                                                    
                                                                                                                                
MR.  FISCHER  expressed  that the  constitution  is  composed  of                                                               
concise, short,  declarative statements  of policy,  process, and                                                               
organization.  He  stated that the proposed  amendments under HJR                                                               
5, HJR  6, and HJR 7  are atrociously written.   For the original                                                               
constitution, the Committee  on Drafting and Style  set the rules                                                               
for how  to write a constitution.   The language in  the proposed                                                               
amendments  is based  in legislative  drafting.   He relayed  his                                                               
extensive  experience  in state  government  over  the years  and                                                               
offered that  "there is  a time  and place  for everything."   He                                                               
maintained that the language in  the proposed amendments does not                                                               
belong in a constitution.                                                                                                       
                                                                                                                                
3:29:47 PM                                                                                                                    
                                                                                                                                
MR. FISCHER  referred to  HJR 5, which  proposes a  limitation on                                                               
taxes by amending  Section 1 of Article IX  [of the constitution]                                                               
- Finance and Taxation.  He  cited Section 1, which read in part,                                                               
"The power  of taxation  shall never  be surrendered."   It  is a                                                               
solid policy  statement; the  proposed amendment  would undermine                                                               
the stated  policy.  He  maintained that restrictions  should not                                                               
be  put  into  the  constitution based  on  "somebody's  thinking                                                               
today; it  may be  totally inappropriate 20  or 50  years hence."                                                               
He  said   that  the  proposed   amendments  would   shackle  the                                                               
legislature and  impose the  will and values  of today  on future                                                               
generations.   He continued by  saying that the  constitution has                                                               
been in effect for 60 years and  it works.  He offered that there                                                               
have  been  amendments  to  the   constitution  -  some  of  them                                                               
atrociously written - because there  has been no process of style                                                               
and  drafting in  consideration of  policies versus  legislation.                                                               
He  declared that  HJR 7  is  an insult  to constitutional  style                                                               
drafting;  "it  just  goes  on   and  on  and  on  with  detailed                                                               
legislative matter that may be  totally inappropriate seven years                                                               
from now, to say nothing of seventy years from now."                                                                            
                                                                                                                                
3:33:15 PM                                                                                                                    
                                                                                                                                
MR. FISCHER  referred to Gordon Harrison's  publication, entitled                                                               
"Alaska's  Constitution A  Citizen's  Guide."   He suggested  the                                                               
House  State Affairs  Standing Committee  invite Mr.  Harrison to                                                               
respond to the issues currently  being discussed in the committee                                                               
meeting.                                                                                                                        
                                                                                                                                
3:34:33 PM                                                                                                                    
                                                                                                                                
GORDON  HARRISON opined  that the  proposed spending  limit under                                                               
HJR 7 is particularly unwise, because  the state has no idea what                                                               
is in the future for Alaska.   He mentioned an oil field in Texas                                                               
- the largest  in the U.S. -  which had declined to  the point it                                                               
almost had  been abandoned.   Within  the last  few years  it has                                                               
revived  and is  now the  largest  oil field  in the  world.   He                                                               
declared, "Nobody foresaw  that."  He maintained  that nobody can                                                               
foresee   the  wild   price  swings   in  oil;   the  future   is                                                               
unpredictable.  He offered that  a spending limit, as proposed by                                                               
HJR 7, is very unwise.   He added that the spending limit already                                                               
in law has  not been effective.  That spending  limit was adopted                                                               
at a time when spending was  at record highs.  Currently spending                                                               
- by  historic levels  - is  low.  He  concluded that  a spending                                                               
limit now would be overstated.                                                                                                  
                                                                                                                                
3:36:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOPKINS referred to  constitutional changes in the                                                               
past  and asked  for  circumstances under  which the  legislature                                                               
should propose amendments to the constitution.                                                                                  
                                                                                                                                
MR. FISCHER responded that the question  to be answered is, Is it                                                               
necessary  to put  something in  the  constitution?   He gave  an                                                               
example:  Article  8 is titled "Natural Resources."   In 1955-56,                                                               
there was  no idea that Alaska  would have "big" oil.   Article 8                                                               
is  the basis  for the  wealth of  Alaska; it  implemented policy                                                               
directives with specific requirements;  and one of the directives                                                               
required  public  notice.    He   cited  a  lawsuit  against  the                                                               
Department  of Natural  Resources (DNR)  for issuing  hundreds of                                                               
permits for water  rights and drill sites  without public notice;                                                               
each  site was  a separate  issue; the  case went  to the  Alaska                                                               
Supreme  Court  [Moore v.  State,  1976].    He quoted  from  the                                                             
decision, which  read in part,  "No disposals or leases  of state                                                               
lands, or interests  therein, shall be made  without prior notice                                                               
and other  safeguards ...."   He maintained  that a  short simple                                                               
phrase or  sentence represents constitutional law;  otherwise the                                                               
legislature  will   become  involved   in  minutia,   and  future                                                               
legislators will have to "clean up  the mess."  He stated that it                                                               
is    the   legislature's    responsibility   to    decide   what                                                               
constitutional  amendments  should go  before  the  people for  a                                                               
vote;   the  constitution   requires  two-thirds   vote  of   the                                                               
membership of each  house to do so.   He asserted that  it is not                                                               
the  governor's  responsibility  or the  Alaska  Supreme  Court's                                                               
responsibility to decide what goes  before the people for a vote.                                                               
He said, "Think  of it in terms  of not just one  election or two                                                               
elections;  think of  it that  this  is for  your children,  your                                                               
grandchildren, and their grandchildren.                                                                                         
                                                                                                                                
3:41:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FIELDS referred  to committee discussion of HJR  5 - the                                                               
proposed  constitutional  amendment  on taxation  -  which  would                                                               
deprive  Alaskans  of  the  authority   to  pass  initiatives  by                                                               
requiring legislative approval of  taxation passed by initiative.                                                               
He asked  for comment on  the constitutional  delegates' thinking                                                               
on  retaining  the  ability  of the  people  to  institute  taxes                                                               
through the initiative process.                                                                                                 
                                                                                                                                
MR. HARRISION  replied that the  delegates were  ambivalent about                                                               
the initiative process.  On the  one hand, they granted the power                                                               
[to the  people]; however,  on the other  hand, they  trusted the                                                               
legislature to do the right thing in  the long run.  He said that                                                               
they gave the  legislature the authority to  repeal an initiative                                                               
in two years.                                                                                                                   
                                                                                                                                
MR. FISCHER asserted that the  constitutional amendment under HJR                                                               
5,  which  would  require  approval by  the  legislature  for  an                                                               
initiative to be  enacted, would be unconstitutional.   He stated                                                               
that the initiative  is the exercise of legislative  power by the                                                               
people.                                                                                                                         
                                                                                                                                
3:44:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STORY asked Mr. Fischer  to comment on two issues.                                                               
The first  is that many people  feel that currently the  state is                                                               
overspending, hence  the proposed constitutional  amendment under                                                               
HJR 7.   The  second is that  the constitutional  convention gave                                                               
great  power  to  the  governor  for  vetoing  the  work  of  the                                                               
legislature.                                                                                                                    
                                                                                                                                
MR. FISCHER relayed  that he was in the legislature  in 1982 when                                                               
the statutory formula  for the permanent fund  dividend (PFD) was                                                               
adopted into  law.   He reiterated that  to reference  statute in                                                               
the constitution, as  proposed under HJR 6, is  preposterous.  He                                                               
maintained that  it is the  responsibility of the  legislature to                                                               
abide by  the constitution and  its own laws; the  legislature is                                                               
not responsible for  what happened four, three, or  two years ago                                                               
ignoring state  laws.  He said,  "Don't make it worse  by putting                                                               
details like  that into the  constitution, because in one  way or                                                               
another,  it's not  going to  work."   He mentioned  that if  the                                                               
state had these [proposed] amendments  in the constitution during                                                               
the construction  of the Trans-Alaska Pipeline,  state government                                                               
would have been incapable of responding to the constant changes.                                                                
                                                                                                                                
MR. FISCHER  offered that behind  the proposals is a  strategy of                                                               
reducing the  wealth of  the people of  Alaska; applied  into the                                                               
future,  they would  impoverish Alaska;  it would  be a  downhill                                                               
spiral.    He said  that  the  prohibition  of  a change  in  tax                                                               
structure  without a  vote of  the people  - tax  structures that                                                               
were not created  by a vote of the people  but by the legislature                                                               
- would freeze today's structure for the future.                                                                                
                                                                                                                                
3:49:29 PM                                                                                                                    
                                                                                                                                
MR. FISCHER relayed  that Bob Bartlett played a  larger role than                                                               
anyone else in  securing statehood for Alaska.   Mr. Fischer read                                                               
from his  book, Alaska's Constitutional Convention,  which quotes                                                             
Bob Bartlett in his keynote  address to the convention as follows                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     This moment will  be a critical one  in Alaska's future                                                                    
     history.   Development  must   not  be   confused  with                                                                    
     exploitation  at this  time. The  financial welfare  of                                                                    
     the future state and the  well-being of its present and                                                                    
     unborn  citizens depend  upon  the wise  administration                                                                    
     and oversight  of these developmental activities.   Two                                                                    
     very  real dangers  are present.  The  first, and  most                                                                    
     obvious, danger is that of  exploitation under the thin                                                                    
     disguise  of   development.  The  taking   of  Alaska's                                                                    
     mineral  resources  without   leaving  some  reasonable                                                                    
     return for the support  of Alaska governmental services                                                                    
     and the  use of all  the people  in Alaska will  mean a                                                                    
     betrayal in the administration  of the people's wealth.                                                                    
     The   second   danger   is  that   outside   interests,                                                                    
     determined to  stifle any  development in  Alaska which                                                                    
     might  compete with  their  activities elsewhere,  will                                                                    
     attempt  to  acquire  great areas  of  Alaska's  public                                                                    
     lands in order NOT to  develop them until such time as,                                                                    
     in  the  omnipotence and  the  pursuance  of their  own                                                                    
     interests, they see fit.                                                                                                   
                                                                                                                                
MR. FISCHER relayed that a good  example of the second concern is                                                               
as follows:  Point Thomson oil  and gas field was discovered near                                                               
the  Arctic  National  Wildlife  Refuge  (ANWR),  and  ExxonMobil                                                               
Corporation (Exxon)  "sat on" the  resource for 30  years because                                                               
it had interests elsewhere.   Governor Frank Murkowski threatened                                                               
to cancel the leases unless it developed the resource.                                                                          
                                                                                                                                
MR.  FISCHER  gave an  example  of  the  first caution  that  Mr.                                                               
Bartlett gave to  the convention:  Senate Bill  21 [passed during                                                               
the  Twenty-Eighth Alaska  State  Legislature, 2013-2014,  signed                                                               
into law 5/21/13] reduced the  state's revenue from oil extracted                                                               
from  the  state's resources.    "Every  day, every  week,  every                                                               
month, every  year that people of  Alaska are not getting  a fair                                                               
share of the oil [wealth] ...."   He quoted former Governor Wally                                                               
Hickel, who  said, "It's our  oil."   Alaska should get  a proper                                                               
return.    He maintained  that  if  the constitutional  amendment                                                               
[under HJR  5] - relating to  changes in taxes -  is approved, it                                                               
would  freeze the  existing tax  structure and  not allow  future                                                               
legislatures future actions.   The barrier to change  it would be                                                               
huge; and therefore, the people of  Alaska may not get their fair                                                               
share of the resource taken.                                                                                                    
                                                                                                                                
3:54:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  mentioned  that  Alaska's  constitution                                                               
provides  a  [veto]  override  threshold  for  budget  bills  and                                                               
appropriation  bills of  three-quarters  [vote]  and an  override                                                               
threshold  for non-appropriation  bills of  two-thirds.   He said                                                               
that  most  other  states  have   a  uniform  override  threshold                                                               
regardless  of the  bills  being policy  or  appropriations.   He                                                               
asked what  the thinking was  of the framers of  the constitution                                                               
in  providing a  different  and higher  threshold for  overriding                                                               
line item vetoes on  appropriation bills versus non-appropriation                                                               
bills.                                                                                                                          
                                                                                                                                
MR.  FISCHER said  that  he does  not  know.   He  said that  the                                                               
quotation  from   the  chairman  of  the   Alaska  Constitutional                                                               
Convention  Committee  on  the  Executive  Branch  was  that  the                                                               
delegates  are putting  together a  constitution that  includes a                                                               
strong executive.   The  fiscal structure  of the  state dictates                                                               
that  appropriations   and  the  budget  are   the  legislature's                                                               
responsibility; a  strong governor  has strong  veto power.   Mr.                                                               
Fischer stated that he does  not recall the issue being discussed                                                               
on  the floor  of  the constitutional  convention  and he  didn't                                                               
notice the distinction.  He  said that the convention wanted each                                                               
branch of  state government  to be as  strong and  independent as                                                               
possible - as  effective as possible.  He  mentioned the proposed                                                               
constitutional   amendment  [under   SJR  3,   relating  to   the                                                               
membership of the Alaska Judicial  Council] that would change the                                                               
membership  of  the  judicial  council.     He  stated  that  the                                                               
membership  of  the  judicial  council was  designed  in  a  very                                                               
deliberate process  to be  a non-partisan,  non-political, merit-                                                               
based selection of judges and  justices.  The proposal to subject                                                               
the  attorney  appointees  to the  legislative  approval  process                                                               
would politicize  the future  judiciary of  the State  of Alaska.                                                               
He  maintained  that  the  design of  the  judicial  council  was                                                               
intentional, and he reiterated that  the emphasis was on a strong                                                               
legislature, a  strong executive, and  a strong judiciary.   As a                                                               
territory,  Alaskans  had no  authority  over  themselves or  the                                                               
territory.                                                                                                                      
                                                                                                                                
3:59:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  asked  for  Mr.  Fischer's  advice  for                                                               
drafting a  proposed constitutional amendment.   He asked whether                                                               
there  have been  amendments successfully  incorporated into  the                                                               
constitution that are good examples of that style of drafting.                                                                  
                                                                                                                                
MR.  FISCHER  replied that  a  process  is  needed along  with  a                                                               
committee of  reviewers.   He offered  that Gordon  Harrison, who                                                               
has studied  the constitution, written  about it, and  worked for                                                               
the legislature,  knows the internal  and external  processes and                                                               
could write [a constitutional amendment].   He emphasized that it                                                               
is the  responsibility of  the legislature  to put  the amendment                                                               
before the people  - not the governor's responsibility.   He said                                                               
that in  2022, Alaskans  will vote on  the question,  Shall there                                                               
being  a constitutional  convention?   In  1979, the  legislature                                                               
established  a joint  committee to  prepare for  the question  in                                                               
1982;  it  sponsored research  to  provided  information [to  the                                                               
voters].   He maintained that it  would take work to  provide the                                                               
pros and  cons and a decent  foundation [for voters to  make that                                                               
decision].                                                                                                                      
                                                                                                                                
4:03:40 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FIELDS expressed  his  appreciation  for Mr.  Fischer's                                                               
testimony and perspective.                                                                                                      
                                                                                                                                
[HJR 5, HJR 6, and HJR 7 were held over.]                                                                                       
                                                                                                                                
4:06:18 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:06 p.m. to 4:20 p.m.                                                                       
                                                                                                                                
        HB 139-AK PERM. FUND CORP. PROCUREMENT EXEMPTION                                                                    
                                                                                                                                
4:20:14 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS   announced  that  the  next   order  of                                                               
business  would be  HOUSE  BILL  NO. 139,  "An  Act providing  an                                                               
exemption from the state procurement  code for the acquisition of                                                               
investment-related services  for assets managed  by the  Board of                                                               
Trustees of the Alaska Permanent Fund Corporation."                                                                             
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  opened  public  testimony  on  HB  139.                                                               
After  ascertaining that  no  one wished  to  testify, he  closed                                                               
public testimony.                                                                                                               
                                                                                                                                
REPRESENTATIVE STORY expressed her support for HB 139.                                                                          
                                                                                                                                
4:21:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOPKINS  moved to report  HB 139 out  of committee                                                               
with individual recommendations and  the accompanying zero fiscal                                                               
note.   There being no  objection, HB  139 was reported  from the                                                               
House State Affairs Standing Committee.                                                                                         
                                                                                                                                
^PRESENTATION(S):  Permanent Fund 101                                                                                           
              PRESENTATION(S):  Permanent Fund 101                                                                          
                                                                                                                              
4:21:36 PM                                                                                                                  
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  announced  that   the  final  order  of                                                               
business  would  be  a  presentation   by  Angela  Rodell,  Chief                                                               
Executive Officer, Alaska Permanent Fund Corp.                                                                                  
                                                                                                                                
4:21:54 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease at 4:22 p.m.                                                                                      
                                                                                                                                
4:22:44 PM                                                                                                                    
                                                                                                                                
ANGELA  RODELL, Chief  Executive Officer,  Alaska Permanent  Fund                                                               
Corporation  (APFC), began  the presentation  on "Permanent  Fund                                                               
101"  with slide  2,  entitled  "1969 The  Debate  Begins."   She                                                               
stated that 1969  was the year that Alaska  received $900 million                                                               
in Prudhoe  lease sale  bonuses.   At that time  - which  was ten                                                               
years  after  statehood  -  the  state's  budget  was  only  $173                                                               
million.    It   was  a  time  when  the   state  had  tremendous                                                               
infrastructure needs;  and it had figured  out how to tap  into a                                                               
very important resource for those needs.                                                                                        
                                                                                                                                
MS.  RODELL   continued  with  slide  3,   entitled  "The  Alaska                                                               
Permanent Fund," and reviewed the  timeline of events, which read                                                               
as follows:                                                                                                                     
                                                                                                                                
     1976 Alaska  voters approve a  Constitutional Amendment                                                                    
     establishing the Permanent Fund.                                                                                           
     1977  Permanent  Fund  receives its  first  deposit  of                                                                    
     constitutionally dedicated oil revenues; $734,000.                                                                         
     1980   The  Alaska   Permanent   Fund  Corporation   is                                                                    
     established to manage and invest the Fund.                                                                                 
     2019 The Fund now has  over $64 billion in assets under                                                                    
     management.                                                                                                                
                                                                                                                                
MS.   RODELL   turned   to  slide   3,   entitled   "The   Alaska                                                               
Constitution,"  and  noted  the  simplicity and  brevity  of  the                                                               
language in the constitutional amendment  that created the Alaska                                                               
Permanent Fund.   It was  passed by a  vote of 75,588  to 38,518.                                                               
The amendment read as follows:                                                                                                  
                                                                                                                                
     Alaska Constitution Article IX, Section 15                                                                                 
     Section 15. Alaska Permanent Fund                                                                                          
                                                                                                                                
     At  least  twenty-five  percent of  all  mineral  lease                                                                    
     rentals,  royalties,  royalty  sale  proceeds,  federal                                                                    
     mineral revenue  sharing payments and  bonuses received                                                                    
     by the state  shall be placed in a  permanent fund, the                                                                    
     principal  of  which  shall  be  used  only  for  those                                                                    
     income-producing  investments  specifically  designated                                                                    
     by law as eligible  for permanent fund investments. All                                                                    
     income from  the permanent fund  shall be  deposited in                                                                    
     the general fund unless otherwise provided by law.                                                                         
                                                                                                                                
                                                                                                                                
4:25:23 PM                                                                                                                    
                                                                                                                                
MS. RODELL moved to slide  4, entitled "APFC's Mission & Vision,"                                                               
and offered  that the  mission of  APFC was  put into  statute in                                                               
1980, the year of inception.   She reviewed the slide, which read                                                               
as follows:                                                                                                                     
                                                                                                                                
     APFC's Mission                                                                                                             
     To manage and  invest the assets of  the permanent fund                                                                    
     and other funds designated by law.                                                                                         
                                                                                                                                
     APFC's Vision                                                                                                              
     To deliver sustained,  compelling investment returns as                                                                    
     the   United   States'  leading   sovereign   endowment                                                                    
    manager,   benefitting    all   current    and   future                                                                     
     generations of Alaskans.                                                                                                   
        square4 Reflects statutory language and intent as well as                                                               
          Board and staff aspirations.                                                                                          
        square4 Emphasizes maximizing returns in   a   fully                                                                    
          sustainable manner.                                                                                                   
        square4 Underscores the intention for the Fund to be a                                                                  
          perpetual resource for the State of Alaska.                                                                           
        square4 Embodies core values of Integrity, Stewardship,                                                                 
          and Passion.                                                                                                          
                                                                                                                                
MS. RODELL  referred to  slide 5,  entitled "Board  of Trustees,"                                                               
which read as follows:                                                                                                          
                                                                                                                                
     As  the  fiduciaries,  the  Trustees  have  a  duty  to                                                                    
     Alaskans  in  assuring  that   the  Permanent  Fund  is                                                                    
     managed  and  invested  in  a  manner  consistent  with                                                                    
     legislative findings: AS 37.13.020.                                                                                        
                                                                                                                                
        square4 The Fund should provide a means of conserving a                                                                 
          portion of the state's revenue from mineral                                                                           
          resources to benefit all generations of Alaskans.                                                                     
                                                                                                                                
        square4 The Fund's goal should be to maintain safety of                                                                 
          principal while maximizing total return.                                                                              
                                                                                                                                
        square4 The Fund should be used as a savings  device                                                                    
          managed to allow the maximum use of disposable                                                                        
          income from the Fund for the purposes designated                                                                      
          by law.                                                                                                               
                                                                                                                                
MS.  RODELL added  that there  is no  mention of  investing to  a                                                               
specific  liability,  to a  specific  dividend  amount, or  to  a                                                               
specific purpose.                                                                                                               
                                                                                                                                
MS. RODELL  introduced the next  topic on slide 7,  entitled "The                                                               
Fund," and  explained that the  [permanent] fund is  comprised of                                                               
two  accounts of  money.    She moved  on  to  slide 8,  entitled                                                               
"Principal," to  discuss the  first account.   The slide  read as                                                               
follows:                                                                                                                        
                                                                                                                                
        square4 The Principal is constitutionally established and                                                               
          permanently protected; it can only be used for                                                                        
          income-producing investments.                                                                                         
                                                                                                                                
        square4 The Principal is built through royalty deposits,                                                                
          inflation    proofing,     and    other    special                                                                    
          appropriations.                                                                                                       
                                                                                                                                
MS.  RODELL identified  the contributions  to the  principal over                                                               
the years:   $16.9 billion came from  the constitutional deposits                                                               
[from mineral  reserves]; $16.2 billion was  transferred from the                                                               
earnings  reserve  account  (ERA)  for  inflation  proofing;  and                                                               
special  appropriations  from  ERA  and  the  general  fund  (GF)                                                               
contributed a total of $7.1 billion.                                                                                            
                                                                                                                                
4:28:23 PM                                                                                                                    
                                                                                                                                
MS.  RODELL   relayed  the  information  on   slide  9,  entitled                                                               
"Contributions to Principal," which read as follows:                                                                            
                                                                                                                                
     Royalty Deposits  AS 37.13.010(a)(1) and (a)(2)                                                                            
        square4 The constitutionally minimum required 25% of                                                                    
          royalty proceeds.                                                                                                     
        square4 The statutorily mandated deposits of 50% for                                                                    
          leases after 1979.                                                                                                    
                                                                                                                                
     Inflation Proofing  AS 37.13.145(c)                                                                                        
        square4 The inflation proofing projection is based upon                                                                 
          estimates for deposits into the Principal of the                                                                      
          Fund and the projected inflation rate as                                                                              
          calculated per statue.                                                                                                
                                                                                                                                
MS.  RODELL   clarified,  "It's  is  a   one-year  calendar  year                                                               
inflation  assumption   against  what  the  expectation   of  the                                                               
principal balance being at the end of the year."                                                                                
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS referred  to the  special appropriations                                                               
mentioned   on  slide   8  and   mentioned  that   currently  the                                                               
legislature  is considering  special appropriations.   He  asked,                                                               
"Do you  have familiarity with  past special  appropriations from                                                               
the  ERA  to  the  principal  of the  permanent  fund,  and  what                                                               
motivated those transfers from previous legislatures?"                                                                          
                                                                                                                                
MS. RODELL responded that approximately  $4.2 billion of the $7.1                                                               
billion was from  the ERA; the balance of $2.9  billion came from                                                               
GF.   She offered  that she  did not  know the  motivation behind                                                               
those   appropriations   but   suggested   that   there   was   a                                                               
[legislative] practice of "sweeping"  the balance of the earnings                                                               
back into  the corpus of the  fund rather than leaving  it behind                                                               
in the  ERA - once the  permanent fund dividends (PFDs)  had been                                                               
dispersed.                                                                                                                      
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  asked what  the legislature did  to take                                                               
precautions in  the event of  a poorly performing market,  if the                                                               
ERA was not replenished with new earnings.                                                                                      
                                                                                                                                
MS.  RODELL suggested  the possibility  that the  legislature had                                                               
not considered that scenario; however,  she stated that she could                                                               
not  speak   to  the  reasoning  behind   historical  legislative                                                               
actions.  She expressed her belief  that when the fund was viewed                                                               
as  just earnings  to  be used  for the  dividend,  there was  no                                                               
expectation  of  a balance  or  concern  for money  for  [future]                                                               
dividends.                                                                                                                      
                                                                                                                                
4:31:36 PM                                                                                                                    
                                                                                                                                
MS. RODELL  referred to  the chart  in slide 9  to point  out the                                                               
effects of the  decline in royalty deposits due  to the declining                                                               
price  of oil  and  production:   in 2016,  2017,  and 2018,  the                                                               
royalty appropriation in excess of  25 percent was rolled back to                                                               
the  mandated 25  percent;  and the  inflation  transfer did  not                                                               
occur.   She continued with  slide 9, under  "Inflation Proofing"                                                               
which read as follows:                                                                                                          
                                                                                                                                
        square4 The Legislature appropriated FY19 inflation                                                                     
          proofing estimated to be $942 million on June                                                                         
          30th, 2019.                                                                                                           
        square4 The FY20 inflation proofing amount is estimated                                                                 
          to be $943 million, the actual amount will be                                                                         
          calculated at the end of the fiscal year. $1.4                                                                        
         billion for FY16-FY18 remains unappropriated.                                                                          
                                                                                                                                
MS. RODELL turned to slide  10, entitled "Statutory Net Income AS                                                               
37.13.140,"  and explained  that statutory  net income  describes                                                               
the mechanism by  which money is moved from the  principal to the                                                               
ERA.    She  reminded  the   committee  that  the  constitutional                                                               
language only  dictates that all  income from the  permanent fund                                                               
shall  be deposited  into GF.   In  1997, the  generally accepted                                                               
accounting  principles were  changed  to include  the concept  of                                                               
unrealized gains and  losses in the definition of income.   It is                                                               
at  that time  that  the legislature  adopted  the definition  of                                                               
statutory  net income  to recognize  the  difficulty of  spending                                                               
unrealized gains and losses; the  gains and losses are "on paper"                                                               
and  not "cash  in  the bank."   The  definition  allows APFC  to                                                               
calculate income  in terms  of net gains  and losses,  which then                                                               
become statutory  net income.   She stated that these  funds move                                                               
into  the  ERA and  are  subject  to  appropriation by  a  simple                                                               
majority vote.                                                                                                                  
                                                                                                                                
MS. RODELL  referred to the chart  on slide 10 to  point out that                                                               
the statutory  net income  has fluctuated  over the  years [2013-                                                               
2018].   Statutory net  income - gain  or loss -  is a  result of                                                               
investment activity only:  receipt  of interest coupons on bonds;                                                               
rental income  on real estate  investments; the sale of  an asset                                                               
that  has achieved  its maximum  value in  order to  reinvest the                                                               
money.   She said that in  2018, there was an  extraordinary sale                                                               
of a real estate asset  that generated an all-time high statutory                                                               
net income  of $6.3 billion.   She added  that APFC has  not sold                                                               
assets to deliver a certain outcome, such as a dividend.                                                                        
                                                                                                                                
4:35:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS   asked  for   an  explanation   of  the                                                               
difference between realized gains and unrealized gains.                                                                         
                                                                                                                                
MS. RODELL  answered that unrealized  gains and losses  reflect a                                                               
change in market value.                                                                                                         
                                                                                                                                
REPRESENTATIVE HOPKINS added his  understanding that net realized                                                               
gains reflect assets sold off, which  are moved into the ERA; the                                                               
unrealized gains stay in the corpus.                                                                                            
                                                                                                                                
MS. RODELL  explained that each  investment is bought  with funds                                                               
from the ERA  and the principal on a pro  rata basis depending on                                                               
the  value  of each  account;  the  unrealized  gain is  used  to                                                               
reimburse  the  ERA  and the  principal  proportionally  for  the                                                               
amounts that each contributed to  the cost of the investment; the                                                               
net  gain  is  added  to  the ERA.    She  maintained  that  this                                                               
demonstrates  the   importance  of   inflation  proofing   -  the                                                               
principal does not benefit from its investment activity.                                                                        
                                                                                                                                
REPRESENTATIVE  HOPKINS  asked why  the  gains  are not  realized                                                               
proportionally as well.                                                                                                         
                                                                                                                                
MS.  RODELL answered  that the  constitutional  language is  very                                                               
clear that all income shall go to the general fund.                                                                             
                                                                                                                                
MS.  RODELL  moved  on  to   slide  11,  entitled  "Assets  Under                                                               
Management in billions," which demonstrates  the change in assets                                                               
under  management over  the past  five  years nine  months.   The                                                               
principal has stayed  relatively stable - at about  $46 billion -                                                               
over the period despite the  smaller deposits of royalty and lack                                                               
of inflation  proofing in 2016,  2017, and  2018.  She  said that                                                               
the principal includes unrealized gains.   The ERA has grown over                                                               
the same period from $6.2 billion  in fiscal year 2014 (FY 14) to                                                               
$18.4 billion as of the first nine months of FY 19.                                                                             
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  asked whether the variation  in the size                                                               
of  the  principal  is  singularly  attributed  to  variation  in                                                               
unrealized gains.                                                                                                               
                                                                                                                                
MS. RODELL responded yes.                                                                                                       
                                                                                                                                
4:39:11 PM                                                                                                                    
                                                                                                                                
MS. RODELL  referred to slide  12, entitled "Values,"  to compare                                                               
the FY 18 values  of the two funds - the principal  and the ERA -                                                               
with  those  as of  the  first  nine months  of  FY  19.   Alaska                                                               
collected $300  million in royalties over  the nine-month period;                                                               
the principal increased from $40.2  billion to $40.5 billion; and                                                               
the associated unrealized  gain was $5.6 billion.  At  the end of                                                               
FY 18, there  was $13.7 billion of realized earnings  in the ERA;                                                               
the associated unrealized gain was  $2.4 billion; and the percent                                                               
of market  value (POMV) draw  to fund  FY 19 activities  was $2.7                                                               
billion.  She pointed out that as  of March 31, 2019, the ERA had                                                               
$16.1  billion   in  realized  earnings  plus   $2.3  billion  in                                                               
unrealized  gains.   Out of  the $16.1  billion, APFC  is already                                                               
setting  aside $2.9  billion for  the  FY 20  POMV draw,  leaving                                                               
behind approximately $13.2 billion.                                                                                             
                                                                                                                                
MS. RODELL  turned to  slide 13, entitled  "Use of  Fund Earnings                                                               
from ERA  Since Inception," and  said that the  slide illustrates                                                               
converting  a non-renewable  resource, such  as natural  resource                                                               
development,  into  a  renewable  resource  for  the  benefit  of                                                               
Alaskans  in a  multitude of  ways.   Out of  the ERA,  since its                                                               
inception 42 years  ago, APFC has paid $27.8  billion in dividend                                                               
transfers,   GF  appropriations,   and   Alaska  capital   income                                                               
transfers.  She  reminded the committee that only  $16 billion in                                                               
royalties  have come  into the  fund to  generate this  activity.                                                               
Transfers from the  ERA to the principal - the  $4 billion in ERA                                                               
special appropriations  and inflation  proofing - has  totaled an                                                               
additional  $20.6  billion.   She  concluded  that from  the  $16                                                               
billion in  royalties that  was saved,  APFC has  generated $48.4                                                               
billion in activity between savings  and economic activity in the                                                               
distribution  throughout  the  state.   In  addition,  there  are                                                               
unspent realized earnings in the ERA of $13.7 billion.                                                                          
                                                                                                                                
CO-CHAIR  FIELDS  asked  for  the  best  way  to  articulate  the                                                               
tradeoff  that exists  regarding draining  the ERA  to pay  for a                                                               
dividend today versus the future value of the funds.                                                                            
                                                                                                                                
MS. RODELL responded that it  is important to distinguish between                                                               
a transfer to the principal  versus a payment; the recognition is                                                               
that money  in the principal  will continue to generate  the same                                                               
return  that the  principal  is generating  today.   She  stated,                                                               
"That income flow of ... a  little over $2 billion is still going                                                               
to happen.  It just doesn't happen and compound the ERA."                                                                       
                                                                                                                                
CO-CHAIR FIELDS clarified his question:   "What's the opportunity                                                               
cost of taking close to $2  billion out of the ERA and dispersing                                                               
it  versus leaving  it  in the  permanent fund,  such  as in  the                                                               
principal, where  it can earn  returns?"   He said that  he would                                                               
like his daughter to receive healthy PFDs long into the future.                                                                 
                                                                                                                                
MS. RODELL  replied that it  is similar  to saving for  a child's                                                               
college education versus  buying school supplies:   both are very                                                               
important; the school  supplies are important for  today but they                                                               
only last  one school  year; the  college education  is something                                                               
the child will use throughout  his/her career and into adulthood.                                                               
She maintained  that as Alaskans  contemplate the  tradeoff, they                                                               
need  to recognize  what is  important  today, but  also what  is                                                               
important for their children in the future.                                                                                     
                                                                                                                                
4:44:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  mentioned  the many  discussions  among                                                               
legislators as to the appropriate amount  to hold in the ERA.  He                                                               
asked  Ms.  Rodell  to  speak  to  the  considerations  that  she                                                               
recommends the legislature  keep in mind when  deciding the right                                                               
amount of funds to keep in the ERA.                                                                                             
                                                                                                                                
MS.  RODELL  opined  that   intergenerational  equality  must  be                                                               
considered; it speaks to the  permanent fund belonging to all the                                                               
people of  Alaska.  She  said that the challenge  for legislators                                                               
is  to determine  how to  "think through  that."   She maintained                                                               
that the  state has a  very important  role in people's  lives in                                                               
Alaska; Alaskans rely  on the state for many  services; they rely                                                               
on the state  for quality education, public  safety, clean water,                                                               
roads, and much  more.  She asserted that  the decision regarding                                                               
how  much to  spend for  the benefit  of every  Alaskan currently                                                               
alive versus those yet to come is a difficult one.                                                                              
                                                                                                                                
CO-CHAIR KREISS-TOMKINS asked,  "Why have an ERA?  ... What would                                                               
be lost if the ERA were merged into the principal?"                                                                             
                                                                                                                                
MS. RODELL referred to the  constitutional language and said that                                                               
there  must be  an accounting  for the  income and  a receptacle.                                                               
The GF  is the  receptacle.  She  stated that  the constitutional                                                               
language creating  the ERA  could be repealed;  there could  be a                                                               
monthly settlement  with annual  transfers of  income to  GF; and                                                               
this was the procedure in the early  years of the fund.  She said                                                               
that  in terms  of  what would  be  lost, the  ERA  would not  be                                                               
invested  in the  same way  as  the principal;  that vehicle  for                                                               
investment would  not be available.   The challenge for  the APFC                                                               
Board of Trustees would be  asset allocation of the principal and                                                               
coping with  big market losses.   Because the principal  can't be                                                               
spent, money  would not  be transferred  to GF  during a  time of                                                               
considerable losses;  APFC would  need to  wait until  the market                                                               
recovered.  She said that in  the years after 2009, the permanent                                                               
fund was  able to rebuild  from the  losses incurred in  2007 and                                                               
2008.                                                                                                                           
                                                                                                                                
REPRESENTATIVE STORY asked for a  recommendation of the "cushion"                                                               
that would be advisable for the ERA.                                                                                            
                                                                                                                                
MS. RODELL  stated that  APFC does not  have a  recommendation on                                                               
the amount that should remain in the ERA.                                                                                       
                                                                                                                                
4:49:35 PM                                                                                                                    
                                                                                                                                
MS.  RODELL stated  that the  information on  slide 14,  entitled                                                               
"Uses  of  Corporate  Activity,"  ties what  APFC  does  to  what                                                               
Alaskans depend on it to do.   She relayed the information, which                                                               
read as follows [original punctuation provided]:                                                                                
                                                                                                                                
        square4 The ERA is established in Alaska Statutes as an                                                                 
          account  to hold  the realized  earnings from  the                                                                    
          Permanent  Fund's  investment  portfolio,  and  is                                                                    
          subject to legislative appropriation.                                                                                 
        square4 SB 26, CH 16 SLA 18 established a POMV rules                                                                    
          based   structure  for   Fund   withdrawals      a                                                                    
          percentage  of the  average  market  value of  the                                                                    
          Fund  for  the first  five  of  the preceding  six                                                                    
          fiscal years.                                                                                                         
        square4 Inflation Proofing AS 37.13.145 (c) protects the                                                                
          future value  of the  Principal by  transferring a                                                                    
          portion  of  the  earnings  to  the  Principal  to                                                                    
          maintain  the  long  term  sustainability  of  the                                                                    
          Fund.                                                                                                                 
        square4 APFC's operations and investment management of                                                                  
          the Fund's assets are supported by the ERA.                                                                           
        square4 Agencies working on the collection of royalties                                                                 
          also receive appropriations from the ERA.                                                                             
                                                                                                                                
MS.  RODELL referred  to  the  chart on  slide  14  to relay  the                                                               
following information:  In FY  19, APFC activities and investment                                                               
decisions  generated  $2.7 billion  as  POMV;  it generated  $942                                                               
million for inflation  proofing, which was moved from  the ERA to                                                               
the  principal;  the  APFC operations  budget  was  $18  million;                                                               
investment  fees were  slightly  over $150  million; APFC  funded                                                               
$2.6 million  to the Department  of Law  (DOL) and $6  million to                                                               
the  Department   of  Natural  Resources  (DNR)   for  collecting                                                               
royalties;  and $94.5  thousand  was paid  to  the Department  of                                                               
Revenue (DOR).   MS. RODELL pointed out the FY  20 approved House                                                               
operating budget appropriations on the chart.                                                                                   
                                                                                                                                
MS. RODELL turned to slide 15, entitled  "POMV - SB 26, CH 16 SLA                                                               
18," which read as follows:                                                                                                     
                                                                                                                                
     Percent of Market Value:                                                                                                 
      Draw of the average market value of the Fund for the                                                                      
     first five of the preceding six fiscal years, subject                                                                      
     to annual appropriation by the Legislature.                                                                                
                                                                                                                                
        square4 5.25% - Effective July 1, 2018 (FY19)                                                                           
             square4 FY19 5.25% POMV = $2.7 billion                                                                             
             square4 FY20 5.25% POMV = $2.9 billion                                                                             
        square4 FY21 5.25% POMV = $3.1 billion estimate                                                                         
        square4 5.0% - Effective July 1, 2021 (FY22)                                                                            
                                                                                                                                
MS. RODELL added that there is  a one-year lag in the calculation                                                               
of  POMV, which  allows both  APFC and  the legislature  to plan:                                                               
the  legislature  knows  the  amount  of  revenue  available  for                                                               
budgeting;  and  APFC  can   plan  investment  strategies  around                                                               
liquidating money when needed.                                                                                                  
                                                                                                                                
CO-CHAIR FIELDS asked Ms. Rodell to  explain how a draw in excess                                                               
of the  POMV will reduce  the value of  PFDs over time;  in other                                                               
words the question is, Why does  taking more money out of the ERA                                                               
and permanent fund today reduce the  amount of money that is paid                                                               
out in PFDs in future years?                                                                                                    
                                                                                                                                
MS. RODELL explained that when money  is taken out, there is less                                                               
money to  invest, therefore,  less opportunity  for the  money to                                                               
generate earnings.   She said  that the possibility is  that over                                                               
time,  as  the  permanent  fund  is spent  down,  there  is  less                                                               
invested and insufficient earnings to pay dividends.                                                                            
                                                                                                                                
4:53:49 PM                                                                                                                    
                                                                                                                                
CO-CHAIR KREISS-TOMKINS  asked whether without the  one-year lag,                                                               
the POMV would  be calculated using the average  of the preceding                                                               
six fiscal years  instead of the first five of  the preceding six                                                               
fiscal years.                                                                                                                   
                                                                                                                                
MS. RODELL answered that according  to current statutes, earnings                                                               
are  calculated based  on five  years ending  June 30;  the fifth                                                               
year's balance on the market value  would not be known until June                                                               
30, 2019.   She maintained that  without the lag, there  would be                                                               
volatility and uncertainty in the draw from the fund.                                                                           
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  mentioned  the  budget  passed  by  the                                                               
Senate  with a  $1.2 billion  deficit; drawing  on the  ERA is  a                                                               
possible  source  of money  to  balance  the  budget.   He  asked                                                               
whether drawing  on the ERA  would go against the  POMV structure                                                               
that the legislature has established.                                                                                           
                                                                                                                                
MS.  RODELL  stated  that  Senate  Bill  26  [passed  during  the                                                               
Thirtieth Alaska  State Legislature,  2017-2018, and  signed into                                                               
law 6/27/18],  established rules for  APFC such that  anything in                                                               
excess  of a  5.25 percent  POMV  draw -  in excess  of the  $2.9                                                               
billion  -  would  go  against the  agreement  made  through  the                                                               
passage of Senate Bill 26.                                                                                                      
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  asked  what  effect it  would  have  on                                                               
APFC's  approach  to managing  assets,  if  the legislature  does                                                               
break the POMV structure by taking  more money than it should out                                                               
of the permanent fund.                                                                                                          
                                                                                                                                
MS. RODELL replied  that if APFC were faced with  investing to an                                                               
unknown  liability, it  would have  to take  a more  conservative                                                               
investment allocation.   She explained that APFC is  focused on a                                                               
long-term view:   "it's not  about what's available on  July 1st,                                                               
it's about making sure that there  is a resource there for a very                                                               
long period  of time -  in perpetuity;  it's why it's  called the                                                               
permanent fund."   She stated  further that to  create permanence                                                               
for future  generations and with  uncertainty in the  draws, APFC                                                               
must consider separate  allocations.  She said that  the ERA does                                                               
not  have  its own  strategy  or  investment  mandate; it  is  an                                                               
account  collecting income.   She  encouraged the  legislature to                                                               
give  direction to  the  board of  trustees, if  it  wants to  go                                                               
against  Senate Bill  26.   The  mandate of  the  trustees is  to                                                               
invest all  the funds for  the permanent benefit of  Alaskans; it                                                               
is  difficult to  plan  for unstructured  draws  and balance  the                                                               
long-term  illiquid  investment  strategy with  the  shorter-term                                                               
highly liquid more conservative strategy.                                                                                       
                                                                                                                                
4:58:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS  asked  for  confirmation  that  if  the                                                               
legislature  takes more  than  the 5.25  percent  under the  POMV                                                               
structure, it would  create uncertainty for APFC  in managing the                                                               
permanent fund assets  and result in less earnings due  to a more                                                               
conservative approach in investment favoring liquid assets.                                                                     
                                                                                                                                
MS. RODELL responded, "That is an accurate summary."                                                                            
                                                                                                                                
REPRESENTATIVE LEBON  asked for  comment on quarterly  payouts of                                                               
PFDs instead of annual payouts.   He said that public comment has                                                               
informed him that the PFD is  used to purchase the necessities of                                                               
life.                                                                                                                           
                                                                                                                                
MS. RODELL answered  that the question of  the operational effect                                                               
of quarterly  payouts is  better directed  to the  Permanent Fund                                                               
Dividend  Division  and  DOR.    She  maintained  that  quarterly                                                               
payouts  would not  have  any  effect on  APFC  from  a cash  and                                                               
investment management perspective.                                                                                              
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS mentioned  that  there are  difficulties                                                               
with quarterly payments for the division.                                                                                       
                                                                                                                                
5:01:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STORY  asked for confirmation that  in addition to                                                               
using  more conservative  investment strategies,  an unstructured                                                               
draw  would  reduce  the  fund   due  to  less  money  generating                                                               
interest.                                                                                                                       
                                                                                                                                
MS. RODELL answered, "That is correct."                                                                                         
                                                                                                                                
REPRESENTATIVE STORY  asked the  amount of investment  money lost                                                               
for every $1 billion taken out of the fund.                                                                                     
                                                                                                                                
MS. RODELL replied  that pulling $1 billion out of  the fund, not                                                               
only  loses  the percent  return  on  that  $1 billion,  but  the                                                               
compounded interest generated by reinvested earnings.                                                                           
                                                                                                                                
5:03:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   HANNAN   stated   that  when   the   legislature                                                               
previously discussed  Senate Bill 26,  creating the POMV  draw at                                                               
5.25  percent  for  the  first  three fiscal  years,  it  was  in                                                               
conjunction with  having an additional  revenue stream  for state                                                               
operations  through  a  progressive  income tax  -  to  be  fully                                                               
implemented [in  FY 22],  when the  POMV dropped  to a  5 percent                                                               
draw.  She offered  that it is now the second  fiscal year of the                                                               
5.25 percent  POMV draw,  and the  legislature has  not discussed                                                               
additional revenue streams.  She asked  how long a 5 percent draw                                                               
could be sustained before APFC became concerned.                                                                                
                                                                                                                                
MS. RODELL answered that due  to the variables of state spending,                                                               
she cannot  offer an  opinion.   She relayed  that the  board has                                                               
endorsed  a 5  percent POMV  draw since  2003; it  is comfortable                                                               
with that level draw.                                                                                                           
                                                                                                                                
CO-CHAIR KREISS-TOMKINS clarified that  the income tax failed the                                                               
Senate in 2017; therefore, Senate  Bill 26 was passed without any                                                               
immediate promise of [additional] revenue.                                                                                      
                                                                                                                                
MS.  RODELL  moved  on  to   the  topic  on  slide  16,  entitled                                                               
"Investment of the Fund."  She  reviewed the bullets on slide 17,                                                               
entitled "Allocation Structure," which read as follows:                                                                         
                                                                                                                                
        square4 The asset allocation structure is organized by                                                                  
          growth and income strategies, as well as                                                                              
          liquidity objectives.                                                                                                 
        square4 This strategic categorization   provides   a                                                                    
          framework for ensuring that investment return                                                                         
          targets   are   commensurate    with   the   risks                                                                    
          undertaken.                                                                                                           
                                                                                                                                
MS. RODELL stated  that "growth" strategies are  comprised of the                                                               
following:  tradeable highly liquid  public equities - or stocks;                                                               
and  illiquid investments  - private  equity, absolute  return or                                                               
hedge  funds,   and  allocation  strategies  -   which  are  risk                                                               
mitigation strategies  for liquidity  or foreign  exchange needs.                                                               
She discussed  "income" strategies as follows:   tradeable liquid                                                               
fixed income  plus - or bonds  - and cash; and  illiquid assets -                                                               
direct  real estate  and infrastructure  investments.   These are                                                               
assets that it would take considerable time to sell.                                                                            
                                                                                                                                
5:07:00 PM                                                                                                                    
                                                                                                                                
MS.  RODELL referred  to slide  18, entitled  "Diversified Assets                                                               
and  Returns," and  emphasized the  importance  of a  diversified                                                               
portfolio  to  mitigate  risk.    Prior  to  2005,  there  was  a                                                               
statutory  list of  permitted investments;  in 2005,  the statute                                                               
was  repealed,  and the  Prudent  Investor  Rule was  instituted.                                                               
Currently  the portfolio  is  distributed  across many  different                                                               
asset  classes; in  recent years,  risk has  declined as  returns                                                               
have increased.                                                                                                                 
                                                                                                                                
MS. RODELL  reviewed the performance  of the asset  classes since                                                               
FY 16,  as shown on  the chart on slide  18:  private  equity and                                                               
special opportunities  - APFC's largest growth  generator; public                                                               
equities -  reflecting 11  years of a  "bull" market;  total fund                                                               
returns;  infrastructure   and  income   opportunities;  absolute                                                               
return; real estate; asset allocation; and fixed income plus.                                                                   
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS asked  whether  the  private equity  and                                                               
special opportunities asset  would be most affected  under a POMV                                                               
overdraw.                                                                                                                       
                                                                                                                                
MS. responded yes,  the value of private equity  comes from being                                                               
able to make  a 7-15-year commitment; without being  able to make                                                               
those  long-term commitments,  money would  need to  be moved  to                                                               
more liquid asset classes with lower levels of return.                                                                          
                                                                                                                                
CO-CHAIR  KREISS-TOMKINS   commented  that  if   the  legislature                                                               
creates  uncertainty by  overspending, the  permanent fund  would                                                               
earn less money.                                                                                                                
                                                                                                                                
MS. RODELL  responded that  the board of  trustees would  need to                                                               
take that into serious consideration.                                                                                           
                                                                                                                                
REPRESENTATIVE HOPKINS  referred to  slide 17  and asked  for the                                                               
difference between growth and income.                                                                                           
                                                                                                                                
MS. RODELL explained  that growth assets are ones  that change in                                                               
underlying  value  and  the  value   increases  as  a  result  of                                                               
scalability.    She  gave  the  example of  an  investment  in  a                                                               
business:  the business increases  in value; the valuation of the                                                               
business  is  marked   up  based  on  its   ability  to  increase                                                               
distribution and  increase its business propositions.   Income is                                                               
money  generated each  month  -  such as  with  real estate;  the                                                               
underlying value  of the asset  is not increasing due  to changes                                                               
in the business plan of the underlying asset.                                                                                   
                                                                                                                                
5:12:06 PM                                                                                                                    
                                                                                                                                
MS. RODELL  turned to  slide 19, entitled  "Where We  Invest," to                                                               
demonstrate  investments  around the  world.    The APFC  invests                                                               
globally, not  just in  the U.S.,  by looking  at the  effects of                                                               
global  economic activity.   She  stated that  the median  age in                                                               
Africa is 19;  the median age in  India is 29; the  median age in                                                               
the U.S.  is 38.   Growth comes  from large populations  of young                                                               
workers  coming into  the economy;  it is  important to  look for                                                               
investment  opportunities  outside  the U.S.  where  growth  will                                                               
occur.  The  return on those investments comes back  to Alaska to                                                               
benefit the state.                                                                                                              
                                                                                                                                
REPRESENTATIVE HOPKINS  asked about the APFC  investing in Alaska                                                               
and whether there are limits on that.                                                                                           
                                                                                                                                
MS. RODELL  relayed that the  statutes specify that the  APFC can                                                               
only invest in  Alaska for financial commercial  reasons; and the                                                               
investments  must generate  returns  as good  as  or better  than                                                               
investments outside  of Alaska.  She  said that there is  a limit                                                               
to  the opportunities  in Alaska  for investment.   The  board of                                                               
trustees  believes   it  is  important  to   find  and  encourage                                                               
investment in  Alaska.   In September 2018,  APFC set  aside $200                                                               
million  for  an  emerging  manager  program  to  fund  and  seed                                                               
investment managers  to look  for companies  in which  to invest;                                                               
the program  created a  one-step removal from  APFC to  provide a                                                               
clean   non-political   review   process  associated   with   the                                                               
investments.  The  board also targeted an aspirational  goal of 5                                                               
percent  of the  overall fund  invested  either in  Alaska or  in                                                               
Alaska-based businesses,  even if  the investment was  outside of                                                               
Alaska.                                                                                                                         
                                                                                                                                
REPRESENTATIVE HOPKINS asked whether the  5 percent goal has been                                                               
achieved.                                                                                                                       
                                                                                                                                
MS.  RODELL  responded  that  about  2 percent  of  the  fund  is                                                               
invested in  managers in Anchorage -  McKinley Capital Management                                                               
and  Alaska Permanent  Capital Management  - and  APFC owns  real                                                               
estate  in Juneau.    She  stated that  the  2  percent does  not                                                               
include  any money  managed directly  by APFC  staff.   She added                                                               
that  including the  fixed  income  portfolio managed  internally                                                               
would bring the  percentage of the fund that is  being managed in                                                               
Alaska up to 25 percent.                                                                                                        
                                                                                                                                
REPRESENTATIVE HOPKINS clarified that  Ms. Rodell is referring to                                                               
money managed  in Alaska  - for  the 5 percent  goal -  not money                                                               
invested in Alaska.                                                                                                             
                                                                                                                                
MS. RODELL  answered, "That is correct."   She added that  it can                                                               
include money invested in Alaska.                                                                                               
                                                                                                                                
REPRESENTATIVE  HOPKINS   asked  whether  the   consideration  of                                                               
limiting  funds  invested  in  Alaska to  spark  its  economy  is                                                               
because it  would not provide a  buffer in the event  the state's                                                               
economy suffered.                                                                                                               
                                                                                                                                
MS. RODELL agreed.   She reiterated the  importance of geographic                                                               
diversification for investment.                                                                                                 
                                                                                                                                
5:16:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEBON  asked Ms.  Rodell  to  describe a  typical                                                               
investment in Alaska.                                                                                                           
                                                                                                                                
MS.  RODELL  responded  that  investment  in  Alaska  could  mean                                                               
investment  in  an  Alaska business,  investment  in  equity,  or                                                               
investment in private debt.  She  explained that there is a layer                                                               
of debt that  is too big or  risky for banks, but  not big enough                                                               
to  access  the  corporate  bond  market.    She  said  there  is                                                               
opportunity  to  invest  in  that   private  debt  market.    She                                                               
maintained that the  challenge in Alaska is  that investments are                                                               
small, and  because investments are  labor intensive,  the amount                                                               
of work is the same no matter  the amount of money invested.  She                                                               
asserted that  given its  limited resources,  APFC must  focus on                                                               
"generating the  biggest bang  for the  buck," which  would favor                                                               
the $50  million investment outside  of Alaska over  the $500,000                                                               
investment in Alaska.                                                                                                           
                                                                                                                                
REPRESENTATIVE  LEBON offered  that the  lending capacity  of the                                                               
Alaska  banking  community,  the  Alaska  Industrial  Development                                                               
Authority  (AIDEA), and  the Alaska  Housing Finance  Corporation                                                               
(AHFC) is robust in meeting the needs of the state.                                                                             
                                                                                                                                
MS. RODELL agreed.                                                                                                              
                                                                                                                                
REPRESENTATIVE  VANCE  mentioned   that  nothing  stimulates  the                                                               
Alaska economy  like distribution  of the PFD;  therefore, direct                                                               
investment   in  Alaska   is  unnecessary   when  dividends   are                                                               
distributed to Alaskans.                                                                                                        
                                                                                                                                
5:20:01 PM                                                                                                                    
                                                                                                                                
MS. RODELL continued  with slide 20, entitled  "Management of the                                                               
Fund," which read as follows:                                                                                                   
                                                                                                                                
       The Board of Trustees continue to work towards an                                                                        
       optimal mix of in-house versus external management                                                                       
     capabilities based on resources and opportunities.                                                                         
                                                                                                                                
     In-House Management Allows for:                                                                                            
        square4 Alignment of investment goals and mandates                                                                      
        square4 Increased flexibility  in    timing/tactical                                                                    
          decisions                                                                                                             
        square4 Lower fees with investment benefit of active                                                                    
          management                                                                                                            
                                                                                                                                
MS. RODELL said that since FY  16, APFC has been able to increase                                                               
internal management  from 34  percent to  40 percent;  funds were                                                               
appropriated  by  the   legislature  for  a  total   of  14  more                                                               
positions.                                                                                                                      
                                                                                                                                
CO-CHAIR KREISS-TOMKINS referred to the  table on slide 14, which                                                               
specifies  $18 million  appropriated for  APFC operations  [in FY                                                               
19] and $150 million appropriated  for APFC investment management                                                               
fees.  He said that regarding the  60-40 split for FY 18 shown on                                                               
slide 20,  $18 million  is used  to manage  40 percent  of assets                                                               
internally  and $150  million is  used  to manage  60 percent  of                                                               
assets externally.   He asked for comment on  the efficiencies of                                                               
in-house management versus external management.                                                                                 
                                                                                                                                
MS. RODELL  clarified that  although APFC  may have  the internal                                                               
resources  to make  investment decisions,  it does  not have  the                                                               
resources  to do  the ongoing  due diligence  day-to-day.   As an                                                               
example,  for  real  estate,  APFC  uses  property  managers  and                                                               
investment managers to  monitor the investments daily.   She said                                                               
that  APFC   has  managed  its   fixed  income   portfolio  since                                                               
inception; the portfolio represents  22 percent of the allocation                                                               
and is  the responsibility  of five individuals.   If  those five                                                               
individuals were  replaced by external  managers, there  would be                                                               
an  immediate  increase of  $15  million  to the  investment  fee                                                               
budget.  She offered that because  the fund is growing, fees will                                                               
grow; however, they  have been relatively stable  on a percentage                                                               
basis.                                                                                                                          
                                                                                                                                
5:25:18 PM                                                                                                                    
                                                                                                                                
MS.   RODELL   turned   to   slide   21,   entitled   "Awards   &                                                               
Accomplishments,"  and  noted  that  all APFC  employees  are  in                                                               
Juneau.  She reviewed the  awards and accomplishments, which read                                                               
as follows:                                                                                                                     
                                                                                                                                
        square4 Marcus Frampton, CIO, named one of Private Equity                                                               
          International's 40 under 40 Future Leaders of                                                                         
          Private Equity                                                                                                        
                                                                                                                                
        square4 Jared Brimberry, Senior Portfolio Manager was                                                                   
          selected as one of Private Debt Investor's (PDI)                                                                      
          Rising Stars 2019                                                                                                     
                                                                                                                                
        square4 Selected as North American Limited Partner of the                                                               
         Year for 2018 by Private Equity International                                                                          
                                                                                                                                
        square4 APFC received dual  nominations   for   2018                                                                    
          Partnership of the Year for Institutional                                                                             
          Investor's Allocators' Choice Awards and won the                                                                      
          award for our Capital Constellation Partnership:                                                                      
             square4 Private Market  Partnership,    Capital                                                                    
               Constellation - won                                                                                              
             square4 Public Market Partnership, Middle East                                                                     
               Africa South Asia (MEASA) Fund with McKinley                                                                     
               Capital - nominated                                                                                              
                                                                                                                                
        square4 PEI's Private Debt Magazine recognized APFC in                                                                  
          their inaugural 30 Most Influential Investors in                                                                      
          Private Credit                                                                                                        
                                                                                                                                
        square4 Recognized as North American Private Equity                                                                     
          Institutional Limited Partner Investor of the                                                                         
         Year for 2017 by Private Equity International                                                                          
                                                                                                                                
        square4 Awarded Institutional Investor's Sovereign Wealth                                                               
          Fund of the Year in Hedge Fund Investments in                                                                         
          2017                                                                                                                  
                                                                                                                                
MS.  RODELL maintained  that the  awards and  accomplishments are                                                               
important  for generating  excitement around  the permanent  fund                                                               
and attracting  business; they demonstrate  that APFC is  good at                                                               
what it does  and is the partner  of choice for many  people.  In                                                               
addition,  APFC  can  be  selective  in  investment  choices  and                                                               
ultimately generate better returns.                                                                                             
                                                                                                                                
MS.  RODELL  moved on  to  slide  22,  entitled "Fund  Value  and                                                               
Returns," to point  out the growth of the fund  over time despite                                                               
unstable  market   returns.    She   mentioned  that   the  graph                                                               
demonstrates that  APFC is  invested for  the long-haul;  it must                                                               
withstand  some   very  volatile  conditions;  but   the  overall                                                               
trajectory is  positive.  Since  2005, when APFC  could diversify                                                               
the portfolio into a many  different asset classes, the growth of                                                               
the fund greatly accelerated.                                                                                                   
                                                                                                                                
MS.  RODELL referred  to  slide 23,  entitled  "Fiscal Year  2018                                                               
Performance  as of  June  30th,  2018," to  focus  on the  5-year                                                               
performance  of  the fund,  which  returned  8.91 percent.    She                                                               
compared  that percentage  to the  "Passive  Index Benchmark"  of                                                               
6.81  percent, which  is  the  rate of  return  if  the fund  was                                                               
invested in index funds - 60  percent stock, 20 percent bonds, 10                                                               
percent  real estate  (RE), and  10  percent treasury  inflation-                                                               
proofed securities  (TIPs).  She  maintained that  the statistics                                                               
show  that there  is value  in  having active  management of  the                                                               
fund.    She  said  that   the  "Performance  Benchmark"  is  the                                                               
benchmark  against  which the  managers  are  measured for  their                                                               
respective asset classes.  The  benchmark was 7.55 percent, which                                                               
indicates  that  the actions  made  by  APFC staff  generated  an                                                               
additional  1.4 percent  in value  for the  5-year period;  and 1                                                               
percent of $65 billion is  approximately $60 million.  She stated                                                               
that  the "Total  Fund Return  Objective" is  the Consumer  Price                                                               
Index  (CPI)  plus  5  percent  -  that  is,  keeping  pace  with                                                               
inflation and earning a steady growth  of 5 percent.  Over the 5-                                                               
year  period that  rate was  6.54 percent;  the APFC  performance                                                               
exceeded that rate as well.                                                                                                     
                                                                                                                                
5:32:00 PM                                                                                                                    
                                                                                                                                
MS. RODELL moved on to  slide 24, entitled "Value Generated," and                                                               
relayed the following information:                                                                                              
                                                                                                                                
     FY 18                                                                                                                      
     Revenues                           $ 5,671,500,000                                                                         
     Operating/Investment Expenses      $ 138,800,000                                                                           
                                                                                                                                
      Value Generated Per Day (based on 251 active trading                                                                    
     days through FY18)                                                                                                       
     Total Fund               $ 5.67B/251 = $22.6M per day                                                                      
     Statutory Net Income     $ 6.3B/251 = $25.2 M per day                                                                      
                                                                                                                                
     APFC staff is actively engaged in making direct                                                                            
     investments and overseeing our external manager                                                                            
     partnerships:                                                                                                              
        square4 APFC = 57PFT, 2PPT, 2 Summer Interns                                                                            
        square4 28 External Public Equities Managers                                                                            
        square4 5 Real Estate Advisors                                                                                          
        square4 Private Markets Partnerships:                                                                                   
             square4 Fund to Fund/Co-Investments/Direct                                                                         
               Investments                                                                                                      
                                                                                                                                
MS.   RODELL  referred   to   slide   25,  entitled   "Additional                                                               
Resources,"  and  mentioned  that  there   is  a  great  deal  of                                                               
information available on the APFC website - www.apfc.org.                                                                       
                                                                                                                                
5:33:38 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
State Affairs Standing Committee meeting was adjourned at 5:34                                                                  
p.m.                                                                                                                            

Document Name Date/Time Subjects
Permanent Fund 101 APFC Presentation.pdf HSTA 5/7/2019 3:00:00 PM
Permanent Fund 101 - APFC Presentation