Legislature(1999 - 2000)
03/19/1999 12:00 PM Senate BUD
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
JOINT COMMITTEE ON LEGISLATIVE BUDGET AND AUDIT
March 19, 1999
12:00 p.m.
MEMBERS PRESENT
Representative Gail Phillips, Chair
Representative Con Bunde
Representative Eric Croft
Representative Gary Davis
Representative Gene Therriault
Senator Randy Phillips, Vice Chair
Senator Sean Parnell
MEMBERS ABSENT
Representative Eldon Mulder
Senator Al Adams
Senator Rick Halford
Senator Drue Pearce
Senator Gary Wilken
COMMITTEE CALENDAR
APPROVAL OF MINUTES
EXECUTIVE SESSION
AUDIT REPORTS
ALASKA PERMANENT FUND CORPORATION (APFC)
WITNESS REGISTER
TOM MAHER, Legislative Assistant
to Representative Gail Phillips
Alaska State Legislature
Capitol Building, Room 411
Juneau, Alaska 99801
Telephone: (907) 465-6873
POSITION STATEMENT: Explained the clean-up process of the
minutes up for approval.
PAT DAVIDSON, Legislative Auditor
Division of Legislative Audit
State Office Building, Sixth Floor
Telephone: (907) 465-3830
POSITION STATEMENT: Inroduced audit reports.
JIM KELLY, Research and Liaison Officer
Alaska Permanent Fund Corporation
Department of Revenue
P.O. Box 25500
Juneau, Alaska 99802
Telephone: (907) 465-2059
POSITION STATEMENT: Presented draft legislation for committee
approval.
ACTION NARRATIVE
TAPE 99-2, SIDE A
Number 0001
CHAIR GAIL PHILLIPS called the Joint Committee on Legislative
Budget and Audit meeting to order at 12:00 p.m. Members present
at the call to order were Representatives Phillips, Bunde, Davis
and Therriault, and Senators Phillips and Parnell.
Representative Croft arrived prior to executive session [time not
specified].
APPROVAL OF MINUTES
Number 0081
CHAIR PHILLIPS announced the first order of business is approval
of minutes from previous Legislative Budget and Audit Committee
meetings. The first two sets of minutes are from meetings held
on March 16 and March 23, 1995.
SENATOR PHILLIPS made a motion for the approval of the March 16,
1995 and March 23, 1995, Legislative Budget and Audit Committee
minutes and asked unanimous consent.
CHAIR PHILLIPS asked if there was an explanation for the clean-up
on the minutes.
Number 0146
TOM MAHER, Legislative Assistant to Representative Gail Phillips,
Alaska State Legislature, stated that it was mainly for
housekeeping purposes. The tapes were run, the minutes were
transcribed, and he proofed them.
CHAIR PHILLIPS asked if there was any objection. There being
none, the minutes from the Legislative Budget and Audit Committee
meetings held March 16 and 23, 1995, were approved.
CHAIR PHILLIPS continued, stating that the next two minutes up
for approval are from the Legislative Budget and Audit Committee
meetings held January 18 and February 12, 1999.
Number 0217
SENATOR PHILLIPS made a motion for the approval of the January 18
and February 12, 1999, Legislative Budget and Audit Committee
minutes and asked unanimous consent. There being no objection,
the minutes from the Legislative Budget and Audit Committee
meetings held January 18 and February 12, 1999, were approved.
EXECUTIVE SESSION
Number 0217
SENATOR PHILLIPS made a motion, in accordance with Titles 24 and
44, to move to executive session for the purpose of discussing
audit reports which are held confidential by law. There being no
objection, the committee went into executive session at 12:10
p.m.
CHAIR PHILLIPS requested that Pat Davidson (Legislative Auditor),
David Teal (Director of Legislative Finance Division), and Tom
Maher (Legislative Budget and Audit Committee aide) attend the
executive session.
PAT DAVIDSON, Legislative Auditor, Division of Legislative Audit,
asked that the staff from the Division of Legislative Audit,
which included; Merle Jenson, Jim Griffin, and Nikki Rouget, also
attend executive session. [not recorded]
The committee resumed open session at 1:10 p.m.
AUDIT REPORTS
[release of audits not recorded]
SENATOR PHILLIPS made a motion to release the five final audits;
DCED/Alaska Public Utilities Commission, DHSS/Division of Alcohol
and Drug Abuse, DHSS/DFYS Follow-Up, DOC/Point MacKenzie
Rehabilitation Project, and DOTPF/DOE/UA/ACS-Art in Public
Places, and one preliminary audit; DOA/Travel and Compensation
Survey, to the public. There being no objection, it was so
ordered.
SENATOR PHILLIPS made a motion to release the five preliminary
audits; Department of Revenue, Department of Community and
Regional Affairs, DCRA/Pedro Bay Electrification Project,
DOE/Lower Yukon School District, and DCED/BSC Alaska Native
Corporations, to the agencies for response. There being no
objection, it was so ordered.
ALASKA PERMANENT FUND CORPORATION (APFC)
Number 0303
CHAIR PHILLIPS announced that the next order of business is a
presentation by the APFC on the draft legislation, pertaining to
increased permanent fund investment flexibility, sent on March 4,
1999, for committee consideration.
Number 0341
JIM KELLY, Research and Liaison Officer, APFC, Department of
Revenue, informed the committee that, in general, the APFC is
asking the Legislative Budget and Audit Committee to assist them
in reducing risk and increasing returns by providing the APFC
managers with increased investment flexibility. The bill that
the APFC is asking the committee to introduce does not make
sweeping changes, but instead, modernizes existing language,
gives APFC more investment tools and keeps the asset allocation
limitations, although slightly expanded, in place. The two
largest provisions in the bill would be, one, the elimination of
the $150 million limit and 100 percent ownership of real
property, and two, the creation of a 5 percent "basket clause"
which will allow the APFC to retain greater asset class
commitments than otherwise allowed and invest in individual
securities or instruments that are not on the "legal list".
Number 0500
REPRESENTATIVE CROFT asked if there are no limits in the "basket
clause."
MR. KELLY replied that there would be no limitations other than
the amount of the "basket clause", which is 5 percent.
REPRESENTATIVE CROFT requested clarification on the $150 million
real property limit.
MR. KELLY explained that when the APFC began investing in real
estate in 1983, when the legislature first authorized it, the
APFC could not own more than 40 percent of the property. In 1993
the APFC came to the legislature, saying that the property limit
was restricting their ability to make proper investment decisions
on the properties, and asked for 100 percent ownership in all
cases. The legislature responded, five years ago, by saying no,
to all cases; 100 percent on everything except if it's bigger
than $150 million than a 67 percent ownership limitation applies.
Over those five years the size of the fund has doubled and the
amount of money invested in real estate has increased. The
percentage of properties that APFC owns greater than 50 percent
on, which use to be zero, is now up to three-quarters and a
number of those the APFC has 100 percent ownership. The current
restiction limits the APFC's ability to negotiate on large
transactions, since competitors are aware that the APFC is
limited to 67 percent ownership. The people negotiating in a
"buy-sell" situation can negotiate a little harder than one would
like.
Number 0644
REPRESENTATIVE BUNDE referred to the 5 percent category without
limitation and to the idea of ardent Alaskans suggesting that the
APFC invest in Alaska real estate, Alaska businesses or other
schemes. He wondered how, without the prudent investor rule,
does the APFC plan on resisting those suggestions.
MR. KELLY explained that the APFC would not be without the
prudent investor rule, because the prudent investor rule still
applies to the "legal list" and would continue to apply to all
the investments that the APFC makes. The APFC would continue to
work with the Legislative Budget and Audit Committee and inform
the committee when the APFC is considering a new venture, which
is required by law.
REPRESENTATIVE BUNDE requested clarification on the 5 percent
restriction and whether the prudent investor rule would apply to
it, meaning that there would be restrictions on the 5 percent.
MR. KELLY replied, that is correct.
Number 0774
SENATOR PHILLIPS made a motion to introduce the draft legislation
[1-LS0500\D, Cook, 2/25/99].
CHAIR PHILLIPS asked if there was any objection. There being
none, the bill [1-LS0500\D, Cook, 2/25/99] will be introduced in
both the House and Senate at the request of the Legislative
Budget and Audit Committee. She announced that the next
Legislative Budget and Audit Committee meeting will be held
Friday, March 26, 1999, and the purpose of the meeting will be
the release of a preliminary audit.
ADJOURNMENT
Number 0805
CHAIR PHILLIPS adjourned the Joint Committee on Legislative
Budget and Audit at 1:25 p.m.
| Document Name | Date/Time | Subjects |
|---|