Legislature(2003 - 2004)
04/15/2003 07:02 AM House W&M
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS & MEANS
April 15, 2003
7:02 a.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Jim Whitaker, Co-Chair
Representative Norman Rokeberg
Representative Bruce Weyhrauch
Representative Peggy Wilson
Representative Max Gruenberg
Representative Carl Moses
MEMBERS ABSENT
Representative Cheryll Heinze
Representative Vic Kohring
OTHER LEGISLATORS PRESENT
Representative Dan Ogg
Representative Paul Seaton
Representative Reggie Joule
COMMITTEE CALENDAR
PERMANENT FUND: POMV METHODOLOGY
TAPES
03-5, SIDES(S) A & B
03-6, SIDE A
CO-CHAIR MIKE HAWKER convened the meeting of the House Special
Committee on Ways & Means at 7:02 a.m. Representatives Hawker,
Whitaker, Rokeberg, Weyhrauch, Wilson, Gruenberg, and Moses were
present at the call to order. Also in attendance were
Representatives Ogg, Seaton, and Joule.
SUMMARY OF INFORMATION
BOB STORER, Executive Director, and BOB BARTHOLOMEW, Chief
Operating Officer, Alaska Permanent Fund Corporation (APFC),
introduced themselves and described the APFC's resolution for a
proposed constitutional amendment to inflation-proof the
permanent fund.
MR. STORER and MR. BARTHOLOMEW explained the POMV (percentage of
market value) methodology. They described how the formula
approach was based on taking a five-year average of the total
fund value to determine the size of payouts from large
investment funds while still providing protection against
inflation. The proposed amendment limits the amount to be
appropriated to 5 percent. A 5 percent payout is at the high
end of what is achievable for the fund, is the maximum
sustainable payout rate that still maintains the fund's real
value and allows greater distributions over time than a higher
payout. The APFC expects an average annual return to be 8
percent. If 3 percent is retained for inflation, then 5 percent
would be available for distribution.
MR. STORER and MR. BARTHOLOMEW discussed the reasons why a POMV
formula is the most effective way to inflation-proof the fund.
They stated that setting a POMV distribution percentage (5
percent) assists the fund's investment policy by establishing a
specific return goal. It also implements a spending rule
similar to other large mature investment/endowment funds. The
POMV method more effectively smoothes the year-to-year payout
volatility and simplifies the inflation-proofing procedure.
This is very important to the economy and in budget planning.
There are other advantages to the POMV method. It preserves the
fund's purchasing power, maximizes distributions over the long-
term, minimizes fluctuations in annual payouts, and allows an
opportunity to update existing income and distribution statutes.
MR. STORER noted that the POMV methodology refers to the way in
which the APFC calculates the annual amount of monies available
to the legislature for appropriation. POMV includes unrealized
gains and losses in calculating net income. The current method
does not. The POMV method raises a few questions. Does the
APRC operating and investment expenses come out of the 5 percent
distribution? Is it necessary to maintain the principal and
earnings reserve distinction or convert the fund into a single
pool of money?
ANNOUNCEMENTS
There were no announcements.
COMMITTEE ACTION
The committee took no action.
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways & Means was adjourned at 9:00 a.m.
NOTE: The meeting was recorded and handwritten log notes were
taken. A copy of the tape(s) and log notes may be obtained by
contacting the House Records Office at State Capitol, Room 3,
Juneau, Alaska 99801 (mailing address), (907) 465-2214, and
after adjournment of the second session of the Twenty-Third
Alaska State Legislature this information may be obtained by
contacting the Legislative Reference Library at (907) 465-3808.
| Document Name | Date/Time | Subjects |
|---|