Legislature(1993 - 1994)
04/14/1994 08:00 AM House STA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
April 14, 1994
8:00 a.m.
MEMBERS PRESENT
Representative Al Vezey, Chairman
Representative Pete Kott, Vice-Chairman
Representative Bettye Davis
Representative Gary Davis
Representative Harley Olberg
MEMBERS ABSENT
Representative Jerry Sanders
Representative Fran Ulmer
COMMITTEE CALENDAR
*HR 9: Protecting the lifestyle of pachyderms and
other exotic animals.
MOVED FROM COMMITTEE WITH DO PASS
RECOMMENDATIONS
HB 375: "An Act relating to investments of the
permanent fund in certain limited
partnerships each of whose principal purpose
is investment in securities of public or
private companies; and providing for an
effective date."
HELD IN COMMITTEE
SB 303: "An Act relating to voter eligibility, voter
registration, and voter registration
agencies; and providing for an effective
date."
HELD IN COMMITTEE
HB 482: "An Act making permanent a temporary
requirement relating to the provision of
employment information to the state."
HELD IN COMMITTEE
(*First public hearing)
WITNESS REGISTER
CARL BRADY, Trustee
Alaska Permanent Fund Corporation
Brady & Company
1031 West Fourth Ave.
Anchorage, AK 99517
Phone: 276-5617
POSITION STATEMENT: Addressed HB 375
BILL SCOTT, Executive Director
Alaska Permanent Fund Corporation
801 10th St.
Juneau, AK 99801
Phone: 465-2047
POSITION STATEMENT: Answered questions on HB 375
DAVID GOTTSTEIN, President
Dynamic Research Group
P.O. Box 112729
Anchorage, AK 99511
Phone: 346-1797
POSITION STATEMENT: Supported HB 375
RALPH SEEKINS, Chairman
Board of Trustees
Alaska Permanent Fund Corporation
1625 Old Steese
Fairbanks, AK 99701
Phone: 452-1991
POSITION STATEMENT: Supported HB 375
LAURA GLAISER, Elections
Office of the Lieutenant Governor
P.O. Box 110015
Juneau, AK 99811
Phone: 465-4084
POSITION STATEMENT: Addressed SB 303 for the Lieutenant
Governor's Office, Sponsor
MARY GAY, Director
Child Support Enforcement Division
Department of Revenue
550 W. 7th, Suite 312
Anchorage, AK 99501-3556
Phone: 269-6800
POSITION STATEMENT: Addressed HB 482
LARAINE DERR, Deputy Commissioner, Treasury
Department of Revenue
P.O. Box 110400
Juneau, AK 99811-0400
Phone: 465-4880
POSITION STATEMENT: Answered questions on HB 482
PREVIOUS ACTION
BILL: HR 9
SHORT TITLE: PROTECTING LIFESTYLES OF PACHYDERMS
SPONSOR(S): STATE AFFAIRS BY REQUEST
JRN-DATE JRN-PG ACTION
04/06/94 3154 (H) READ THE FIRST TIME/REFERRAL(S)
04/06/94 3154 (H) STATE AFFAIRS
04/14/94 (H) STA AT 08:00 AM CAPITOL 102
BILL: HB 375
SHORT TITLE: PERMANENT FUND INVESTMENTS - LTD PARTNERS
SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE BUDGET AND AUDIT
JRN-DATE JRN-PG ACTION
01/14/94 2066 (H) READ THE FIRST TIME/REFERRAL(S)
01/14/94 2066 (H) STATE AFFAIRS, FINANCE
03/05/94 (H) STA AT 08:00 AM CAPITOL 102
03/05/94 (H) MINUTE(STA)
04/14/94 (H) STA AT 08:00 AM CAPITOL 102
BILL: SB 303
SHORT TITLE: UNIFORM VOTER REGISTRATION SYSTEM
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
02/11/94 2792 (S) READ THE FIRST TIME/REFERRAL(S)
02/11/94 2792 (S) STA, JUD, FIN
02/11/94 2792 (S) FNS PUBLISHED (DPS,GOV,DHSS-3,
DCRA)
02/11/94 2792 (S) ZERO FISCAL NOTE PUBLISHED
(DOE)
02/11/94 2793 (S) GOVERNOR'S TRANSMITTAL LETTER
03/02/94 3027 (S) STA RPT 4NR
03/02/94 3027 (S) ZERO FN PUBLISHED (REV)
03/02/94 3027 (S) PREVIOUS FNS (DPS, GOV, DHSS-3,
DCRA)
03/02/94 3027 (S) PREVIOUS ZERO FN (DOE)
03/02/94 3038 (S) JUD REFERRAL WAIVED Y11 N9
02/22/94 (H) MINUTE(STA)
03/02/94 (S) STA AT 9:00 AM BUTROVICH RM 205
03/02/94 (S) MINUTE(STA)
03/15/94 3212 (S) FIN RPT 1DP 1DNP 5NR
03/15/94 3212 (S) PREVIOUS FNS (DPS, GOV, DHSS-3,
DCRA)
03/15/94 3212 (S) PREVIOUS ZERO FNS (DOE, DOR)
03/15/94 (S) FIN AT 08:30 AM SENATE FIN 518
03/18/94 (S) RLS AT 00:00 AM FAHRENKAMP
ROOM 203
03/18/94 (S) MINUTE(RLS)
03/28/94 3373 (S) RULES RPT 1CAL 2NR 3/28/94
03/28/94 3375 (S) READ THE SECOND TIME
03/28/94 3376 (S) ADVANCED TO THIRD READING UNAN
CONSENT
03/28/94 3376 (S) READ THE THIRD TIME SB 303
03/28/94 3376 (S) PASSED Y11 N8 E1
03/28/94 3376 (S) EFFECTIVE DATE PASSED Y19 N- E1
03/28/94 3377 (S) MILLER NOTICE OF
RECONSIDERATION
03/30/94 3415 (S) RECONSIDERATION NOT TAKEN UP
03/30/94 3416 (S) TRANSMITTED TO (H)
03/31/94 3102 (H) READ THE FIRST TIME/REFERRAL(S)
03/31/94 3103 (H) STATE AFFAIRS, FINANCE
04/05/94 (H) STA AT 08:00 AM CAPITOL 102
04/05/94 (H) MINUTE(STA)
04/14/94 (H) STA AT 08:00 AM CAPITOL 102
BILL: HB 482
SHORT TITLE: EMPLOYMENT INFO PROVIDED TO THE STATE
SPONSOR(S): REPRESENTATIVE(S) HANLEY,Ulmer
JRN-DATE JRN-PG ACTION
02/14/94 2377 (H) READ THE FIRST TIME/REFERRAL(S)
02/14/94 2377 (H) STATE AFFAIRS
03/15/94 (H) STA AT 08:00 AM CAPITOL 102
03/15/94 (H) MINUTE(STA)
03/22/94 (H) STA AT 08:00 AM CAPITOL 102
03/22/94 (H) MINUTE(STA)
04/14/94 (H) STA AT 08:00 AM CAPITOL 102
ACTION NARRATIVE
TAPE 94-47, SIDE A
Number 000
CHAIRMAN AL VEZEY called the meeting to order at 8:03 a.m.
Members present were REPRESENTATIVES KOTT, G. DAVIS, OLBERG
and B. DAVIS. A quorum was present.
HR 9 - PROTECTING LIFESTYLES OF PACHYDERMS
CHAIRMAN VEZEY opened HR 9 for discussion. He stated HR 9
encourages the Governor to grant an extension for Moxie the
elephant.
Number 043
REPRESENTATIVE GARY DAVIS moved to pass HR 9 from committee
with individual recommendations and attached zero fiscal
note.
Number 050
CHAIRMAN VEZEY asked the committee secretary to call the
roll.
IN FAVOR: REPRESENTATIVES VEZEY, KOTT, B. DAVIS, G.
DAVIS, OLBERG.
ABSENT: REPRESENTATIVES ULMER, SANDERS.
MOTION PASSED
HB 375 - PERMANENT FUND INVESTMENTS - LIMITED PARTNERSHIPS
CHAIRMAN VEZEY opened HB 375 for discussion.
Number 078
CARL BRADY, TRUSTEE, ALASKA PERMANENT FUND CORPORATION
(APFC), introduced himself and BILL SCOTT, EXECUTIVE
DIRECTOR, APFC, who joined him at the table. He addressed
the proposed amendment to HB 375.
The amendment reads as follows:
*Sec 1. AS.13.120(g) is amended by adding a new paragraph
to read:
(21) Notwithstanding 37.13.120(i), equity
investments may comprise more than five percent of the
stock of a corporation only through an interest in a
partnership, or ownership in a collective investment
vehicle, under the following conditions:
(A) the Fund shall not own more than a
60% interest in a partnership or collective
investment vehicle;
(B) the aggregate investment of the
Fund under this paragraph may not exceed five
percent of the total investments of the Fund;
(C) at no time may the Fund own
directly or indirectly, through a
corporation, partnership or collective
investment vehicle, more than 5% of any
entity which has substantial oil and gas
operation in the State of Alaska;
(D) appropriate policies and
procedures for investments under this section
shall be reviewed and approved annually by
the Board of Trustees.
MR. BRADY stated the success of permanent fund's investments
is primarily attributed to diversification, or asset
allocation; attributing 90 percent of most funds success to
asset allocation. He expressed markets do, however,
fluctuate. He likened APFC's assets to a pyramid, whereby
the further they horizontally diversify in other classes,
the more safety brought to the principal of the
corporation's assets.
MR. BRADY explained APFC is requesting authority to invest
into more than five percent of any one individual equity.
When the fund had $3 billion, more than five percent of a
Fortune 500 company or blue chip stock, would have been a
significant amount of money. Five percent of smaller
capitalization stocks may only be $8-$10 billion. APFC
believes owning more than five of a particular equity would
be more beneficial.
MR. BRADY addressed alternative investment strategies.
There are over 200 of public and private entities that have
them. He noted Oregon and Washington have over $1.5 billion
each in alternative investments, or with institutional
investors. The APFC would limit itself to no more than 60
percent in a partnership with other institutional investors.
APFC has been fortunate because the bull market has been
very good to its stocks in the past; however, this is no
longer the case. APFC is now losing some of its unrealized
gains. Therefore, the horizontal horizon of the pyramid
needs to be broadened to cover the fluctuations in the
market in the future. He noted APFC international and
global stocks are working in this way, whereas they are
outperforming their U.S. domestic stocks.
MR. BRADY commented the language provides there would not be
double exposure on oil and gas, for example. APFC would not
be purchasing stocks principally dealing with oil and gas in
Alaska. APFC will spend a lot of time selecting who it
intends to co-invest with. HB 375 is important now.
CHAIRMAN VEZEY asked where the proposed amendment goes.
REPRESENTATIVE HARLEY OLBERG interjected he believed the
amendment was a proposed committee substitute.
CHAIRMAN VEZEY inquired if MR. BRADY was suggesting the
draft language for the proposed change to a CSHB 375 was to
replace all the wording in the existing HB 375.
Number 191
BILL SCOTT, EXECUTIVE DIRECTOR, APFC, responded that was
correct. He stated the proposed amendment is a replacement
of the original language, which accomplishes the same thing.
The suggested change describes the investment more clearly.
Number 195
CHAIRMAN VEZEY questioned if there was an AS 13.120.
Number 200
REPRESENTATIVE OLBERG noticed the "37" was missing from the
statute number. The correct statute is AS 13.37.120.
Number 203
MR. BRADY stated the original language dealt more with
vehicle, as opposed to the investment.
Number 206
MR. SCOTT clarified the correct statute is AS 13.37.120.
There had been a typing error in the amendment. He noted
there would also need to be a new title. He suggested, "An
Act relating to equity investments of the permanent fund."
Number 208
CHAIRMAN VEZEY commented he did not understand the wording
in the original HB 375; however, it would now be replaced.
He questioned if the proposed change still dealt with the
same subject.
Number 222
MR. SCOTT responded the original HB 375 emphasized the
vehicle, rather than the investment. He related to limited
partnerships and how they got a "bad name" from the tax
shelters of the 1980s. This has caused a misunderstanding.
The intent of the committee substitute is to clarify what
the investment will be. The investment would probably be
handled through a "limited partnership" vehicle. If the
APFC was able to own more than five percent of a corporation
they would be able influence the corporate activities by
improving its management and changing policies. These
changes would improve the corporation's operating profits,
thereby increasing the value of the stock. The APFC expects
to gain extra earnings from the investment through the
appreciation of the stock.
Number 276
MR. BRADY explained co-investors would be investing with
managers. He stated these institutional managers would
select the stock and involve themselves in the activities
MR. SCOTT mentioned. Alternative investments typically
return higher rates with greater risk, therfore diligence in
the investment is as critical.
MR. BRADY referred back to the point of diversification. He
stated currently, the fund's unrealized gains, "paper
profits," have eroded to nearly $1 billion due to the 9-10
percent reduction in the markets. The intent is to
redistribute the money into other areas that have had and
continue to have a large degree of success. He noted most
investors have this class in their portfolios; however, only
a small percent. APFC limited the amendment to propose only
five percent of the fund, and no more than 60 percent of the
partnership.
Number 303
CHAIRMAN VEZEY clarified APFC would like to be able to
invest more than five percent in an equity. He inquired why
APFC was limiting itself to only 60 percent of a
partnership, implying they would not be dealing with less
than nine percent of an equity.
Number 316
MR. BRADY replied more than five percent of ABC stock. He
noted, of the pool of stocks with the institutional
investor, APFC would not own more than 60 percent.
Number 319
CHAIRMAN VEZEY responded correct. He commented if the APFC
had no more than 60 percent interest in a fund, the fund
would have to own practically 10 percent of an equity before
APFC would have five percent.
Number 325
MR. SCOTT answered correct. He said the fund, however,
might only buy 20 or 30 percent of a company. They would
then have sufficient to influence management and improvement
of the total operating characteristics of the company. If
APFC owned 60 percent of that fund, they would effectively
own 12 percent of a company. He noted the existing statute
only allows the APFC to own five percent of a company. This
is the reason for the restrictive language in the proposed
committee substitute.
Number 337
CHAIRMAN VEZEY agreed there was a lot of restrictive
language. He inquired if the APFC was interested in
expanding its investments to more than five percent of an
equity.
MR. SCOTT answered as a single investment, no.
Number 343
CHAIRMAN VEZEY repeated the intent of the proposed
legislation.
MR. SCOTT added there are investment managers who specialize
in managing these investments daily and they have been
extremely successful. APFC would like to share in the
success.
CHAIRMAN VEZEY stated he was concerned that as returns tend
to fall, the managers will tend to take higher risks to keep
their returns up to historic levels. Specifically, pension
funds.
Number 365
MR. SCOTT pointed out "pension funds have no restrictions in
their enabling..."
Number 367
MR. BRADY explained APFC was not working from a legal list.
They are working from a prudent investor list. He felt APFC
has a philosophical difference than most investors. It
would be very difficult for APFC to be much different from
the market place because they are so diversified. APFC has
a certain amount of money in "very, very, very conservative
cash." On the other hand, APFC has its international/global
stocks and real estate. The structure of the change is very
similar to their real estate. He pointed out, for the first
time in a long time, real estate outperformed all other
asset classes this last quarter.
Number 383
CHAIRMAN VEZEY referred to the restrictions of the proposal.
He clarified the APFC would not invest more than five
percent of the fund's assets in the total class.
Number 391
MR. SCOTT answered in this type of investment, correct.
Number 394
MR. BRADY added over 50 percent is in fixed income, or
bonds. Real estate is six-seven percent.
Number 396
CHAIRMAN VEZEY clarified in this type of investment, in
total, APFC would not exceed five percent.
MR. SCOTT replied of the fund, correct.
Number 399
CHAIRMAN VEZEY stated the strategy is a diversification of a
rather small portion of the portfolio.
MR. SCOTT said correct.
Number 401
MR. BRADY stated in their Ketchikan meetings last fall, they
entered into securities lending as an additional class.
This is authorized; however, they had not been doing it. He
noted has produced $800,000 to $1 million since it was
started a couple months ago. APFC wants to continue
diversification as the fund continues to grow at $80-100
million a month in income.
Number 416
REPRESENTATIVE OLBERG inquired of the total number of assets
the fund has today.
MR. SCOTT answered about $15 billion.
Number 418
REPRESENTATIVE OLBERG pointed out five percent would exactly
be "chunk change" - $750 million.
Number 419
MR. BRADY said correct. He added it would be very difficult
for the APFC to get anywhere near that amount of money at
the onset. The asset allocation targets are hard to meet
with the income flowing at the rate that it is. The targets
cannot be met as fast as the revenue is coming in. APFC
needs percentages to make everything add up to 100 in their
totals.
Number 428
CHAIRMAN VEZEY read subparagraph (C) of the amendment and
said it was complicated. He stated APFC's opportunity to
participate with a venture capital firm, who was going to do
an exploration well in Alaska, would be almost nonexistent.
Number 437
MR. BRADY responded APFC would not participate in the deal
if the firm had an oil and gas producer in Alaska in the
fund. APFC might end up with more than five percent and
they feel it would be doubling their exposure, noting their
core source is royalty revenue. He noted, as royalty
revenue goes down, presumably the value of their stock would
follow.
Number 444
CHAIRMAN VEZEY felt this contradicted the intent of
investing the state's wealth back into Alaska.
MR. BRADY agreed, in that regard. Referring to this asset
class, APFC owns a considerable amount of stocks with oil
and gas operations in Alaska in their domestic equity
portfolio. He believed ARCO, Exxon and Union Oil are stocks
in that portfolio; however, they are not even near five
percent.
Number 456
CHAIRMAN VEZEY referred to mining and timber also. He
stated by APFC standards, five percent of AMEX Gold would
not be a major investment. He guessed $400-500 million.
Number 461
REPRESENTATIVE G. DAVIS corrected gold and timber are not
oil and gas.
Number 462
CHAIRMAN VEZEY clarified subparagraph (C) is limited to oil
and gas. He questioned why APFC would want to restrict its
opportunities to invest in Alaska. He appreciated, however,
the prudent investor attitude about investing in oil and gas
prospects in Alaska.
Number 472
MR. BRADY stated he believed the primary purpose was not to
let it go. They do not want to invest in stocks which they
are already getting their core source of income from. They
fear if the price of oil were to go down the value of the
stock would follow. This is a safety concern.
Number 479
CHAIRMAN VEZEY commented he did not believe it was true that
royalty was the APFC's core source of income anymore.
MR. SCOTT answered not anymore.
Number 482
CHAIRMAN VEZEY added oil has been converted into another
form of wealth.
MR. BRADY stated their investment income is superceding the
royalty income now.
Number 484
REPRESENTATIVE OLBERG questioned if royalties were not still
the single largest source of income.
Number 486
MR. SCOTT answered no, not for the APFC. He said their
bottom line is more in a couple of months than they receive
all year from royalties. He said CHAIRMAN VEZEY was
correct.
Number 490
REPRESENTATIVE OLBERG commented he was more concerned with
how the APFC invests, not where. He has never felt the APFC
"had a special charge" to invest in Alaska. The quality of
investments is much more important than the geographic
location.
Number 495
CHAIRMAN VEZEY replied he had trouble putting into statute
that APFC would basically stay out of oil and gas operations
in Alaska.
MR. SCOTT responded only with respect to this vehicle.
Number 501
MR. BRADY said they could provide lists of stocks doing
business in Alaska that are domicile elsewhere, but their
revenue comes from Alaska.
Number 503
CHAIRMAN VEZEY stated HB 375 would involve APFC with a
managing partner that had a substantial equity interest and
effective management influence. He questioned if this much
restriction needed to be in statute. Are the Board of
Trustees trusted enough to not have it in statute?
Number 517
MR. BRADY replied that was a good point. Their debate on HB
375 resulted in the conservatism. He noted they have a very
good board; however, trustees do come and go.
Number 528
REPRESENTATIVE BETTYE DAVIS referred to subparagraph (C) of
the proposed change. She asked if (C) could be deleted,
thereby having it done in regulations rather than in
statute. She noted the proposed amendment is supposed to be
a committee substitute to the original HB 375. Subparagraph
(C) does not have to be included.
Number 535
MR. SCOTT commented the deletion would not affect the intent
of the legislation.
Number 537
CHAIRMAN VEZEY questioned why HB 375 had a $200,000 fiscal
note.
MR. SCOTT answered consultants and advisors will need to be
hired to screen any investment of this type made by the
APFC. They approach each investment with due caution,
therefore an independent analysis will be done.
Number 552
CHAIRMAN VEZEY said he was still trying to learn how the
APFC accounts to the legislature.
Number 556
MR. SCOTT responded the legislature approves their budget
just as it does for other departments.
Number 557
CHAIRMAN VEZEY pointed out there are general moneys and
program receipts.
Number 559
MR. SCOTT clarified they are funded by program receipts.
APFC expects the expense impact would be far offset by
potential gains.
Number 568
CHAIRMAN VEZEY asked if the APFC would be objectionable to
the deletion of subparagraph (C).
Number 573
MR. BRADY said he did not believe so. They put subparagraph
(C) in for two reasons. First, so APFC would carefully
watch to not double their exposure. Second, it made APFC
more politically comfortable because it clarified the
proposal came from the board itself, and not the
Administration. He stated there had been questions as to
whether alternative investments would include water
pipelines, etc... He answered no. Sub-paragraph (C) would
dispel any concerns.
(REPRESENTATIVE OLBERG left the meeting at 8:38 a.m.)
Number 593
REPRESENTATIVE G. DAVIS asked if there was similar language
in present statute in other areas where the APFC is limited.
MR. SCOTT answered their only limitation in real estate is
that it must be within the U.S. Other than that, not
really.
Number 598
MR. BRADY mentioned institutional grade and code.
Number 600
REPRESENTATIVE G. DAVIS commented he thought it might be
policy that certain percentages were to be invested in
certain areas. He inquired if this was in statute or
policy.
Number 602
MR. BRADY clarified within institutional grade there is
residential, industrial, commercial, etc... He noted
certain things are not done because they do not think it is
wise.
Number 606
CHAIRMAN VEZEY inquired if there was a companion bill in the
Senate.
MR. BRADY answered yes, SB 244 moved out of Senate State
Affairs yesterday.
Number 610
REPRESENTATIVE B. DAVIS asked if the bill that passed the
Senate State Affairs Committee was the new committee
substitute.
MR. BRADY affirmed REPRESENTATIVE B. DAVIS.
Number 618
CHAIRMAN VEZEY asked if there was a motion to adopt the
committee substitute, version E to HB 375.
Number 619
REPRESENTATIVE B. DAVIS so moved, and noted that she wanted
to delete subsection (C), page 1.
CHAIRMAN VEZEY asked the committee secretary to call the
roll.
IN FAVOR: REPRESENTATIVES VEZEY, KOTT, B. DAVIS, G.
DAVIS.
ABSENT: REPRESENTATIVES ULMER, SANDERS, OLBERG.
MOTION PASSED
Number 627
REPRESENTATIVE KOTT clarified the committee substitute to HB
375, less subsection (C) had been adopted.
Number 630
REPRESENTATIVE B. DAVIS asked what the title change would
be.
MR. SCOTT suggested the title be, "An Act relating to equity
investments of the permanent fund."
CHAIRMAN VEZEY asked why this title would be suggested.
MR. SCOTT answered the title on the original HB 375 does not
quite fit; therefore, the new title would simplify the
description of the intent. He noted the original title
emphasized limited partnerships which was not the thrust of
the bill.
Number 644
CHAIRMAN VEZEY said CSHB 375 would be held in committee so
legal services could prepare a title. He advised it was
very late in the legislative process and the actual chance
of CSHB 375 passing this session was slim.
Number 658
DAVID GOTTSTEIN, PRESIDENT, DYNAMIC RESEARCH GROUP,
supported CSHB 375. He noted the permanent fund had
expanded its scope of investments over the years. He felt
the great market Alaska had been experiencing for the last
10-12 years was coming to an end. Therefore, from a risk
management perspective, they would have to become even
smarter to accomplish smaller returns because interests
rates are not as high. He felt CSHB 375 would allow APFC to
expand, while acting prudently. He concurred with MR. SCOTT
that it is not necessarily appropriate to get bogged down in
the vehicle. Making sure the investment is good and priced
right is the most important. CSHB 375 would allow premium
returns while managing the risk appropriately with partners.
Number 683
RALPH SEEKINS, CHAIRMAN, BOARD OF TRUSTEES, supported CSHB
375. He clarified APFC was not trying to get more
sophisticated, rather more profitable. He said the oil and
gas restriction was a political limitation.
TAPE 94-47, SIDE B
Number 000
MR. SEEKINS estimated some of the restrictions presently on
the APFC has cost the people of the state of Alaska between
$300-400 million. He noted the APFC is restricted by law to
a very small portion of the universe of corporate securities
as an example. APFC is limited to AA or better, of the five
percent, in the A category. There are certain good
investments which the APFC cannot buy. He explained the
only way "to own those A stocks is to be that five percent,
or have an AA move down."
MR. SEEKINS stated part of his mandate on the Board of
Trustees is to return the best possible return for the
people of the state of Alaska. He felt if they did get this
additional class available to them, they would not fill it
very quickly because they would be looking for the prudent
investment. He noted if ten packages were bought, eight may
be bad. Therefore, this is where the political risk comes
in. Those two would be put on the front page even if a
"killing" was made on the other eight. APFC wants to
balance this problem.
MR. SEEKINS expressed APFC felt without moving farther to
the upper right on the risk factor, they can move farther up
on the profit factor. They are seeking a balance. APFC is
also not trying to put the legislature farther out on the
"political limb" than it already is.
SB 303 - UNIFORM VOTER REGISTRATION SYSTEM
Number 116
CHAIRMAN VEZEY opened SB 303 for discussion.
CHAIRMAN VEZEY called for a recess at 8:55 a.m. The meeting
resumed at 9:02 a.m.
Number 120
LAURA GLAISER, ELECTIONS, OFFICE OF THE LIEUTENANT GOVERNOR,
addressed SB 303. She referred to CHAIRMAN VEZEY's question
about whether the legislature could change the law and go
back to where a person would not have to register to vote
for federal elections. Currently, Alaska state law only
allows this to be done for the President. She answered
Virginia Ragle, Assistant Attorney General, Department of
Law, spoke with the Department of Justice (DOJ) and they
again would not commit to whether they will allow the change
or file suit. DOJ mentioned one state had gone back and
changed the language of its laws so a person did not have to
be registered for federal elections and made it retroactive
to April 11, 1993, even though the change was just enacted.
DOJ did not look on this favorably.
Number 156
CHAIRMAN VEZEY said he questioned if it might be cheaper to
go to a dual standard. He felt the federal government was
trying to use the National Voter Registration Act (NVRA) of
1993 to tell Alaska how to regulate federal elections, which
they do not have the authority to do outside of court
authority.
Number 183
MS. GLAISER responded she felt the Lt. Governor viewed NVRA
as it was directed to the Division of Elections. She stated
it is extremely expensive to have two dual systems,
therefore CHAIRMAN VEZEY was correct is assuming the federal
government is forcing Alaska to accept that which they want
for the federal government laws. She noted it is easier to
conform state law to pick up the provisions in NVRA.
Number 197
CHAIRMAN VEZEY clarified it would be easier to remove the
requirements for registration for federal elections as we
currently do with presidential elections.
Number 199
MS. GLAISER said correct; however, NVRA says the state
cannot do that. She noted one state has tried to go
retroactive and that another has just tried to change that
provision. DOJ is still not committing as to how they would
pursue these changes; however, they gave the impression that
a lawsuit would ensue.
Number 207
CHAIRMAN VEZEY stated the next federal election would be
November 1996. He questioned if Alaska should be in a rush
to resolve this problem.
Number 213
MS. GLAISER replied the only rush is that Alaska is supposed
to be in compliance with NVRA by January 1, 1995.
Compliance by 1995 would ensure the federal election in 1996
would be working under NVRA.
Number 226
CHAIRMAN VEZEY said due to a lack of a quorum the committee
could not take action on SB 303. He stated parts of SB 303
strike him as strange. He wondered how the courts would
look upon a law that said it is legal to do something if it
was on the books before a certain date, but it is not legal
if it was not.
CHAIRMAN VEZEY held SB 303 in committee.
Number 241
REPRESENTATIVE G. DAVIS related to additional work caused by
the mandates in federal laws and asked if there has been an
extension on the January 1, 1995, deadline.
MS. GLAISER replied January 1, 1995, is the only date they
were given. No extension has been granted.
Number 260
REPRESENTATIVE G. DAVIS inquired, should Alaska not be in
compliance, what additional cost might be incurred to the
Division of Elections relating to question ballots or a
lawsuit by a voter. Has the cost of elections increased
substantially as the population has increased.
MS. GLAISER answered she was not aware of the cost of
elections or question ballots increasing as the population
increases. She felt SB 303 would not change this. The
question ballot is important because it is considered a
"fail safe" within federal law.
Number 280
CHAIRMAN VEZEY asked for MS. GLAISER to prepare some of the
information she received from Virginia Ragle so as a report
might be added to the file.
HB 482 - EMPLOYMENT INFORMATION PROVIDED TO THE STATE
CHAIRMAN VEZEY opened HB 482 for discussion.
Number 295
MARY GAY, DIRECTOR, CHILD SUPPORT ENFORCEMENT DIVISION,
DEPARTMENT OF REVENUE, addressed HB 482. She stated HB 482
requires employers with 20 or more employees, to report new
hires to the Child Support Enforcement Division (CSED). The
original legislation enacted three years ago, contained a
sunset clause. The original legislation had been proposed
because CSED obtained a federal improvement demonstration
grant to determine whether employer recording of new hires
would increase the effectiveness of collections in child
support. She said the first year the program was limited to
only the largest employers of the largest number of
obligors. The first year resulted in $753,000 in
collections, of which $200,000 was directly associated to
the additional information from the employers.
MS. GAY noted prior to the legislation, the only method CSED
had to obtain information as to whether an obligor was
employed was whether the person gave them the information or
through Department of Labor (DOL) records. The quarterly
reports required by the DOL are only done at the end of
ninety days. The employer does not have to submit them
until thirty days later; therefore, by the time the
information is accessible to CSED it is already four months
old. Quite often the employee has moved on to another job
and the CSED misses the opportunity to collect the child
support.
MS. GAY commented the second year CSED collected from
seasonal employers. Seasonal employers are easily missed by
the CSED. In the second year, including the first year
target group, CSED collected in excess of $3 million, of
which $625,000 was directly attributed to the legislation.
MS. GAY commented in the third year, the target group will
be analyzed according to the occupation. CSED will try to
determine which occupations obligors are most commonly
employed in, then target those occupations.
Number 348
CHAIRMAN VEZEY asked if the employer reporting requirements
were also applicable to labor unions and hiring halls.
MS. GAY replied she thought the labor unions might have been
included in immediate wage withholding. HB 482 regards
employers.
CHAIRMAN VEZEY inquired if hiring halls were required to
notify CSED monthly of dispatches.
Number 359
MS. GAY said she was not sure, but she did not think so.
Hiring halls do not pay the wages.
Number 367
CHAIRMAN VEZEY said he had thought they were also required
to make the support. He commented the additional
information makes collections much easier. The reporting is
at the employer's expense and inconvenience. He felt
employers should be given recognition for doing a tremendous
service at no cost to the state. He suggested employers be
compensated for their efforts.
Number 379
MS. GAY responded current law states a dollar can be removed
from the wages of the employee for the employer report. She
said she did not know if there was federal match
participation, whereby payment by the CSED would be an
allowable expenditure for the federal match.
Number 386
CHAIRMAN VEZEY mentioned the cost to the employer to account
for the $1 deduction would be considerably more than $1.
Number 388
LARAINE DERR, DEPUTY COMMISSIONER, TREASURY, DEPARTMENT OF
REVENUE, answered questions on HB 482. She stated from her
research, the sunset clause was put into the legislation
three years ago because of a compromise. The dollar
deduction and the sunset were part of the compromise so that
if the program was not working in three years it could be
repealed, or if there was significant cost impact to the
employers it could be fixed at this time. From her
knowledge, the $1 has not been under criticism.
Number 404
CHAIRMAN VEZEY said he had not heard from anyone doing the
$1 deduction. The $1 deduction was not worth it to the
employers. He pointed out they are claiming the legislation
is saving the state a lot of money on welfare payments;
however, it is actually taxing the resources of the
employers. The accounting process in the payroll is
expensive. HB 482 would expand the project and go down the
scale of employers. He felt employers would get more angry
because they would have to work harder for the state.
Number 424
MS. GAY reiterated the stages the program has gone through
because it is a study. CSED does not want to put an undue
burden on the employers. They do not intend to continue to
request an employer with little turnover in employees to
turn in the information. She emphasized the federal
government feels the program is very worthwhile and there is
legislation currently before Congress to require all states
to enact laws, whereby employers would report the new hires.
HB 482 would prevent confusion among the employers and the
cost involved with starting and stopping the process.
Number 449
CHAIRMAN VEZEY questioned the clause in statute that
penalizes employers a 100 percent civil penalty for not
witholding moneys if they have been notified of an employee
with an obligation to the CSED. He stated the employee,
once terminated, could come back to work in the future and
the witholding order is still enforced until released by a
court order. He could not recall any court order releasing
any witholding order he has. He felt the 100 percent
penalty did not foster a good relationship between the state
and the employer. He found it offensive and believed it
could be corrected easily.
CHAIRMAN VEZEY stated he had written a letter to Laraine
Derr with suggestive wording.
Number 469
MS. GAY replied CHAIRMAN VEZEY has the opportunity.
Number 478
MS. DERR did not recall receiving the letter.
Number 490
REPRESENTATIVE G. DAVIS referred to the 1-3 ratio. He asked
if the CSED was looking to extend the demonstration project
or put the inclusions of the project into statute.
Number 496
MS. GAY replied CSED would like to extend the project, even
though the federal grant was only for three years. They
want to keep the money coming in on a steady basis so the
custodial parents can plan for their financial obligations.
This would reduce the claims for public assistance.
Number 504
REPRESENTATIVE G. DAVIS referred to the target ratio, 1-3
collected for each dollar spent on the program. He asked if
the 1-3 target was met.
Number 509
MS. GAY answered she had lost the report of those figures on
the airplane to Juneau. She said $250,000, of the total
$750,000, was directly attributed to the program the first
year. This is approximately 1-3.
Number 515
REPRESENTATIVE G. DAVIS inquired as to the anticipated cost
of the program.
Number 517
MS. GAY responded CSED did not attach a fiscal note to HB
482. The federal government granted approximately $250,000
a year for the project. She noted CSED had extra steps to
go through to meet the reporting requirements, etc.,....
required by the federal grant. She said there was a
specific cost involved to determine what the gains were
attributed to.
Number 526
REPRESENTATIVE G. DAVIS clarified the demonstration received
$250,000 in federal grants and realized $200,000.
Number 528
MS. GAY said, in the first year.
Number 530
REPRESENTATIVE G. DAVIS inquired if this number was total or
state share.
Number 532
MS. GAY answered total. She said 50 percent would be
attributed to AFDC, of which 50 percent would be state and
50 percent would be federal. Therefore, $50,000 directly
attributed to general fund moneys to the state.
Number 534
REPRESENTATIVE G. DAVIS stated from a cost benefit
standpoint the program might break even. The grant required
CSED to do extra controls that might cost extra if the
program was a state program. Employees would still be
needed.
Number 545
MS. DERR pointed out in the second year, CSED gained
$621,000. She stated the $250,000 from the first year grant
was basically for set up charges. As the study progressed,
the pay collections increased.
Number 550
MS. GAY commented in the first year report extrapolated from
the existing data, estimated potential collections could
reach $7.5 million by expanding the program to the universe
of employers.
(REPRESENTATIVE OLBERG rejoined the meeting at 9:30 a.m.)
Number 555
CHAIRMAN VEZEY stated he would forward the letter to MS.
DERR again. He said the committee would try to bring HB 482
up again on Saturday.
ADJOURNMENT
CHAIRMAN VEZEY, having no more business before the
committee, adjourned the meeting at 9:33 a.m.
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