Legislature(2019 - 2020)SENATE FINANCE 532

02/04/2019 09:00 AM FINANCE

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Audio Topic
09:01:48 AM Start
09:03:52 AM State Debt Overview and Credit Ratings
10:49:29 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ State Debt Overview & Credit Ratings by TELECONFERENCED
Commissioner Bruce Tangeman, Department of
Revenue & Deven Mitchell, State Investment
-- Presentation Below Postponed to 2/5/2019 --
+ Savings Accounts & Budget Reserves by TELECONFERENCED
Pam Leary, Director, Treasury Division,
Department of Revenue
                 SENATE FINANCE COMMITTEE                                                                                       
                     February 4, 2019                                                                                           
                         9:01 a.m.                                                                                              
9:01:48 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stedman called the Senate Finance Committee                                                                            
meeting to order at 9:01 a.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Senator Natasha von Imhof, Co-Chair                                                                                             
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Click Bishop                                                                                                            
Senator Peter Micciche                                                                                                          
Senator Donny Olson                                                                                                             
Senator Mike Shower                                                                                                             
Senator Bill Wielechowski                                                                                                       
Senator David Wilson                                                                                                            
MEMBERS ABSENT                                                                                                                
Senator Lyman Hoffman                                                                                                           
ALSO PRESENT                                                                                                                  
Deven Mitchell, State Investment Officer, Department of                                                                         
Revenue; Senator Cathy Giessel.                                                                                                 
^STATE DEBT OVERVIEW and CREDIT RATINGS                                                                                       
9:03:52 AM                                                                                                                    
DEVEN  MITCHELL,  STATE  INVESTMENT OFFICER,  DEPARTMENT  OF                                                                    
REVENUE,  gave a  brief history  of  his qualifications  and                                                                    
experience.  He  discussed  the presentation,  "2019  Credit                                                                    
Review  and   State  Debt  Summary"   (copy  on   file).  He                                                                    
highlighted slide 2, "Debt Affordability Analysis":                                                                             
     Annual analysis required by AS 37.07.045 to be                                                                             
     delivered by January 31                                                                                                    
    Discusses credit ratings current levels and history                                                                         
     Relies upon debt ratios limit of 5 percent for state                                                                       
     debt and 8 percent when combined with municipal debt                                                                       
     that the state supports                                                                                                    
             With SB  26 change  to revenue  generation, and                                                                    
          uncertainty  about  available revenue  in  future,                                                                    
          reductions of 1 percent  to debt ratio limits have                                                                    
          been made                                                                                                             
    Identifies currently authorized, but unissued debt                                                                          
     Establishes refinancing parameters                                                                                         
     Determines a long term debt capacity at current rating                                                                     
     Discusses, but doesn't define a capacity for short                                                                         
     term debt                                                                                                                  
Co-Chair   Stedman   wondered  why   SB   26   was  of   any                                                                    
Mr.  Mitchell replied  that  SB 26  created  the percent  of                                                                    
market  value  (POMV)  transfer   from  the  Permanent  Fund                                                                    
Earnings Reserve  Account (ERA). He  stated that for  FY 19,                                                                    
it resulted in a significant increase in UGF revenue.                                                                           
Mr.  Mitchell   discussed  slide   3,  "January   2018  Debt                                                                    
Affordability Analysis."                                                                                                        
9:09:57 AM                                                                                                                    
Co-Chair Stedman asked about the two far right columns.                                                                         
Mr. Mitchell  replied that  the percentage  of UGF  that was                                                                    
committed  to the  projected special  payment  on behalf  of                                                                    
Public  Employees'  Retirement  System  (PERS)  and  Techers                                                                    
Retirement  System (TRS).  The  state determined  in SB  26,                                                                    
that it  was in  the best  interest of  the system  to limit                                                                    
employers contributions  for TRS  to 22 percent  of payroll.                                                                    
The actuary went  through an analysis of  the funding levels                                                                    
and  the  expectations  of  payouts  for  participants  that                                                                    
resulted  in an  actuarily  calculated rate  that should  be                                                                    
paid to make up that balance over a finite timeframe.                                                                           
Mr.  Mitchell   looked  at  slide  4,   "January  2018  Debt                                                                    
Affordability Analysis."                                                                                                        
Co-Chair Stedman  wondered how the dividend  calculation was                                                                    
handled in the 5.25 percent draw.                                                                                               
Mr. Mitchell only examined the  UGF revenue. He did not look                                                                    
at expenses.                                                                                                                    
Senator Micciche  noted the discussion  of the  reduction of                                                                    
one  percent to  debt ratio  limits due  to the  increase in                                                                    
available    revenue,   and    wondered   who    made   that                                                                    
Mr.  Mitchell  replied that  it  was  Department of  Revenue                                                                    
Senator Micciche supported the conservative approach.                                                                           
9:15:00 AM                                                                                                                    
Co-Chair von  Imhof appreciated the examination  of the POMV                                                                    
structured  draw.  She  said  that  PERS  and  TRS  was  not                                                                    
considered "debt" but was a real debt to the state.                                                                             
Senator  Wielechowski queried  the  projected  PFD, and  the                                                                    
split between PFDs and fund transfers.                                                                                          
Co-Chair Stedman  also requested the distortion  that may be                                                                    
explicit, if the PFD was not accounted in any regard.                                                                           
Mr. Mitchell  replied that  he did  not make  assumptions or                                                                    
projections about expenditures. He  focused on the resources                                                                    
available to the state in the Revenue Sources Book.                                                                             
Co-Chair  Stedman  wanted  to  follow  the  statutes,  which                                                                    
dictated that the state pay the dividend.                                                                                       
Mr.  Mitchell   agreed  to  provide  that   information.  He                                                                    
wondered whether that should be presented as percentage.                                                                        
Co-Chair  Stedman felt  that the  left-hand column  could be                                                                    
used, and would change the percentages on the screen.                                                                           
Mr. Mitchell agreed that it would look different.                                                                               
Co-Chair  Stedman  stressed  that  the  conversation  should                                                                    
include the statutory obligation to pay a dividend.                                                                             
9:20:03 AM                                                                                                                    
Mr. Mitchell completed discussion of slide 4.                                                                                   
Co-Chair  Stedman wondered  whether  it  included paying  to                                                                    
dividend to meet the debt capacity.                                                                                             
Mr. Mitchell  replied in the  negative, and was a  matter of                                                                    
what the money would be spent toward.                                                                                           
Co-Chair  Stedman  understood  that  Alberta  was  currently                                                                    
facing trillions of dollars in  debt. He did not want Alaska                                                                    
to look like Alberta.                                                                                                           
Co-Chair  von  Imhof  stated  that   when  looking  at  debt                                                                    
capacity,  there was  an examination  of how  much cash  was                                                                    
available to cover the debt.  She remarked that there should                                                                    
be a discussion  about whether the state  actually that cash                                                                    
flow had, because of the PFD required under statute.                                                                            
Senator Shower  remarked that budget  would have  a specific                                                                    
Senator Micciche felt  that the column needed  to be changed                                                                    
for Alaska to be in line UGF forecast.                                                                                          
9:25:19 AM                                                                                                                    
Mr.  Mitchell  stated he  felt  it  was a  good  discussion,                                                                    
because it  was not  his job  to determine  the size  of the                                                                    
Co-Chair Stedman announced that the  PFD amount would not be                                                                    
zero, but probably less than $3000.                                                                                             
Mr. Mitchell highlighted slide 5, "Debt Capacity":                                                                              
     Projected annual unrestricted revenue increase of                                                                          
     approximately $3.1 billion in FY 2019 vs FY 2018                                                                           
     Shift is primarily due to SB 26 and categorization of                                                                      
     Permanent Fund earnings transfer as Unrestricted                                                                           
     General Fund Revenue                                                                                                       
     Historically,  PF  earnings  have  been  classified  as                                                                    
     restricted  by  custom  rather than  unrestricted,  and                                                                    
     these  earnings  may,  in  whole  or  part,  revert  to                                                                    
            Due to uncertainty of UGF in future years,                                                                          
          reductions of 1 percent to debt ratio limits have                                                                     
          been made                                                                                                             
     Projected  ratios are  below  reduced  ratio limits  in                                                                    
     both categories for the forecast period                                                                                    
     Increased  capacity  of   approximately  $1.5  to  $1.6                                                                    
     billion to total capacity of $1.9-2.0 billion                                                                              
     For  every $100  million of  recurring revenue  that is                                                                    
     added  at  this  point  we   expect  a  current  market                                                                    
     increase in long term debt capacity of $60-$70 million                                                                     
Co-Chair von Imhof assumed the converse was true.                                                                               
Mr. Mitchell replied in the affirmative. He furthered that                                                                      
the debt load did not change, rather it was related to the                                                                      
volatile revenue.                                                                                                               
Senator Micciche surmised that including the statutory                                                                          
requirement for the PFD, the $3.2 billion may change the                                                                        
decision on the self-imposed cap.                                                                                               
Mr. Mitchell replied that it would, because so much                                                                             
uncertainty related to the PFD number.                                                                                          
9:29:15 AM                                                                                                                    
Mr. Mitchell addressed slide 7, "State of Alaska Credit                                                                         
Ratings and Recent History Agency Views":                                                                                       
     FY  2010-2014    high  levels  of unrestricted  general                                                                    
     fund  revenue greatly  exceed budgetary  needs, growing                                                                    
     reserve positions,  pre-funding of budget  items, large                                                                    
     capital  budgets, highest  credit  ratings with  stable                                                                    
     outlook. Upgraded to highest credit ratings.                                                                               
     FY  2015-2017   significantly  diminished  unrestricted                                                                    
     general  fund, use  of  pre-fundings, Statutory  Budget                                                                    
     Reserve  and Constitutional  Budget Reserve  to balance                                                                    
     budget,  reductions to  capital and  operating budgets,                                                                    
     discontinuation  of  following  statutory  formula  for                                                                    
     determining Permanent Fund  Dividends, consideration of                                                                    
     various   tax  proposals,   consideration  of   use  of                                                                    
     earnings of  the Permanent Fund to  pay for government,                                                                    
     State   downgraded  four   times   followed  by   three                                                                    
     additional downgrades in FY 2018.                                                                                          
     FY   2018-2019  rating   stabilization,  shifting   the                                                                    
     state's  credit  analysis  towards an  endowment  model                                                                    
     rather  than   the  state   models  that   rely  almost                                                                    
     exclusively on annual tax and fee collection.                                                                              
Mr. Mitchell highlighted slide 8, "Recent Financial                                                                             
Market/Credit Rating Challenges":                                                                                               
    Investors False Perceptions on the State of Alaska:                                                                         
     Alaska's Economy Totally Reliant on  Oil and is in Free                                                                    
          ? In 2016 the oil  and gas sector represents about                                                                    
          13  percent  of  Alaska's GDP  ($6.75  billion  of                                                                    
          $50.7 billion  GDP) and  represented approximately                                                                    
          4 percent of employment                                                                                               
          ?  Oil and  gas  is the  only  industry in  Alaska                                                                    
          whose  GDP is  less  in 2016  than  in 2012  while                                                                    
          other sectors have  experienced moderate declines,                                                                    
          stability or growth                                                                                                   
          ? The State  of Alaska does not  currently rely on                                                                    
          the  broader economy  for revenue  as there  is no                                                                    
          broad based tax in Alaska                                                                                             
          ?  The  State  benefits   from  the  national  and                                                                    
          international economy  through the  investments of                                                                    
          the Permanent  Fund in securities of  national and                                                                    
          international firms                                                                                                   
     Reserves are Dwindling                                                                                                     
          ? The  reserve position of Alaska  at 6/30/2017 is                                                                    
          above the 6/30/2015 position                                                                                          
          ? Permanent  Fund Earnings Reserve  increased $4.2                                                                    
          billion from FY 2016 to FY 2017                                                                                       
          ?  Often  discussed  draws on  reserves  (SBR  and                                                                    
          CBRF)  have  been  offset  by  deposits  into  the                                                                    
          Earnings Reserve                                                                                                      
          ?  The  Net  Position  of Alaska  increased  as  a                                                                    
          result of FY 2017 activity                                                                                            
          ?  The  Net Position  of  Alaska  is projected  to                                                                    
          increase in each of the next nine years                                                                               
     The State Won't be Able to Balance its Budget.                                                                             
          ? SB26 was passed                                                                                                     
          ?  Expenditures  have been  significantly  reduced                                                                    
          and may be reduced further                                                                                            
          ? In  2017 and 2018  the Governor  and Legislature                                                                    
          have   ignored    the   statutory    formula   for                                                                    
          determining the                                                                                                       
          Permanent  Fund  Dividend and  inflation  proofing                                                                    
          ? Just like  the CBRF the Earnings  Reserve of the                                                                    
          Permanent   Fund  may   be  appropriated   without                                                                    
          statutory change                                                                                                      
          ? Alaska's  oil and  gas tax credit  structure has                                                                    
          been changed                                                                                                          
          ?  Considering available  revenues  to the  State,                                                                    
          the budget has been in balance                                                                                        
9:35:46 AM                                                                                                                    
Co-Chair Stedman wondered how many other states owned their                                                                     
own subsurface and created the wealth to the state like                                                                         
Mr. Mitchell did not know.                                                                                                      
Co-Chair Stedman stated that Alaska was the only state that                                                                     
was owned by the people. He stated that Alberta was similar                                                                     
to Alaska.                                                                                                                      
9:37:12 AM                                                                                                                    
Senator Bishop commented that                                                                                                   
9:37:58 AM                                                                                                                    
Mr. Mitchell replied //                                                                                                         
9:38:09 AM                                                                                                                    
Senator Micciche //                                                                                                             
9:38:51 AM                                                                                                                    
Co-Chair Stedman //                                                                                                             
9:39:03 AM                                                                                                                    
Mr. Mitchell //                                                                                                                 
9:39:12 AM                                                                                                                    
Mr. Mitchell addressed slide 9, "Alaska's Economy Has Been                                                                      
More Stable than U.S."                                                                                                          
9:40:53 AM                                                                                                                    
Senator Shower //                                                                                                               
9:41:01 AM                                                                                                                    
Mr. Mitchell //                                                                                                                 
9:41:38 AM                                                                                                                    
Mr. Mitchell highlighted slide 10, "Alaska's Economy is                                                                         
Diversified by Our Endowment":                                                                                                  
     .notdef The Alaska Permanent   Fund   Provides   Alaska                                                                  
     Unparalleled Revenue Source Diversification                                                                                
     .notdef As of March 31, 2018 Alaska's Permanent Fund                                                                     
     endowment had an unaudited total fund balance of $64.6                                                                     
          o The State's Permanent  Fund Revenue is generated                                                                    
          from the national and world economies                                                                                 
          o  The Permanent  Fund does  not rely  on Alaska's                                                                    
          economy  for   revenue  generation      prohibited                                                                    
          o   The    APFC   Board    independently   directs                                                                    
          investments  and has  established a  10-year total                                                                    
          return projection of 6.50 percent                                                                                     
          o  The Permanent  Fund owns  shares  in more  than                                                                    
          3,000 corporations around the world                                                                                   
          o  Fixed  Income  holdings  include  both  US  and                                                                    
          International securities                                                                                              
          o  The Real  Estate allocation  provides inflation                                                                    
          protection and enhanced diversification worldwide                                                                     
     .notdef Investment income has tended to be countercyclical                                                               
     to oil, the source of the State's other largest                                                                            
     revenue stream                                                                                                             
9:43:08 AM                                                                                                                    
Mr. Mitchell looked at slide 11, "CBRF/SBR Balance and                                                                          
Credit Rating Timeline."                                                                                                        
9:44:01 AM                                                                                                                    
Co-Chair von Imhof //                                                                                                           
9:45:32 AM                                                                                                                    
Mr. Mitchell replied that the described scenario would most                                                                     
likely result in some form of report that would be negative                                                                     
in nature.                                                                                                                      
9:47:10 AM                                                                                                                    
Co-Chair von Imhof //                                                                                                           
9:47:49 AM                                                                                                                    
Mr. Mitchell                                                                                                                    
9:49:08 AM                                                                                                                    
Co-Chair Stedman //                                                                                                             
9:49:12 AM                                                                                                                    
Mr. Mitchell //                                                                                                                 
9:49:52 AM                                                                                                                    
Mr. Mitchell highlighted slide 12, "CBR/SBR and PR Earnings                                                                     
Reserve Balances Timeline."                                                                                                     
9:50:30 AM                                                                                                                    
Co-Chair Stedman //                                                                                                             
9:50:44 AM                                                                                                                    
Mr. Mitchell //                                                                                                                 
9:51:48 AM                                                                                                                    
Co-Chair Stedman //                                                                                                             
9:52:26 AM                                                                                                                    
Mr. Mitchell agreed.                                                                                                            
9:52:31 AM                                                                                                                    
Mr. Mitchell addressed slide 13, "State of Alaska Available                                                                     
Reserves Balance Timeline."                                                                                                     
9:52:50 AM                                                                                                                    
Co-Chair von Imhof //                                                                                                           
9:54:03 AM                                                                                                                    
Co-Chair Stedman //                                                                                                             
9:54:33 AM                                                                                                                    
Mr. Mitchell //                                                                                                                 
9:55:41 AM                                                                                                                    
Co-Chair Stedman //                                                                                                             
9:55:52 AM                                                                                                                    
Senator Micciche //                                                                                                             
9:56:29 AM                                                                                                                    
Mr. Mitchell //                                                                                                                 
9:57:10 AM                                                                                                                    
Senator Micciche //                                                                                                             
9:57:30 AM                                                                                                                    
Co-Chair Stedman //                                                                                                             
9:57:32 AM                                                                                                                    
Co-Chair von Imhof //                                                                                                           
9:58:17 AM                                                                                                                    
Mr. Mitchell agreed.                                                                                                            
9:58:22 AM                                                                                                                    
Mr. Mitchell discussed slide 14, "State of Alaska Credit                                                                        
Ratings and Recent History Agency Views."                                                                                       
9:59:25 AM                                                                                                                    
Mr. Mitchell displayed slide 16, "State Debt Obligation                                                                         
     .notdef All Forms of State Debt are Authorized First by law                                                              
       May be a one-time  issuance amount or a not-to-exceed                                                                    
     issuance limit in statute                                                                                                  
       General  obligation bonds must then  also be approved                                                                    
     by a majority of voters                                                                                                    
          ? General obligation bonds are the only debt                                                                        
          secured by full faith credit and taxing authority                                                                     
     .notdef All State Debt must be structured and authorized by                                                              
     the State Bond Committee                                                                                                   
        Includes   general  obligation  bonds,   subject  to                                                                    
     appropriation issues, and state revenue bonds                                                                              
     .notdef The State Bond Committee determines method  and                                                                  
     timing  of  debt issues  to  best  utilize the  state's                                                                    
     credit and  debt capacity while meeting  the authorized                                                                    
     projects cash flow needs                                                                                                   
 .notdef The State has established other debt obligations                                                                     
       Reimbursement Programs                                                                                                   
     ?  The  School Debt  Reimbursement  Program  or HB  528                                                                  
     .notdef Not currently authorized  for   new  debt   and                                                                  
     periodically partially funded                                                                                              
       Retirement Systems                                                                                                       
     ?  Unfunded actuarially  assumed  liability (UAAL)  for                                                                  
     defined   benefit  employees   is  guaranteed   by  the                                                                    
     ? Annual  payments on  the UAAL  of other  employers is                                                                  
     reflected as State debt in the CAFR                                                                                        
     ? Some flexibility in how payments are made                                                                              
10:03:22 AM                                                                                                                   
Mr. Mitchell addressed slide 17, "Total Debt in Alaska at                                                                       
June 30, 2018."                                                                                                                 
10:04:00 AM                                                                                                                   
Co-Chair Stedman //                                                                                                             
10:04:06 AM                                                                                                                   
Mr. Mitchell continued with slide 17.                                                                                           
10:08:05 AM                                                                                                                   
Co-Chair von Imhof //                                                                                                           
10:08:21 AM                                                                                                                   
Senator Bishop //                                                                                                               
10:08:33 AM                                                                                                                   
Mr. Mitchell /                                                                                                                  
10:08:58 AM                                                                                                                   
Co-Chair Stedman //                                                                                                             
10:09:17 AM                                                                                                                   
Mr. Mitchell /                                                                                                                  
10:09:24 AM                                                                                                                   
Co-Chair Stedman //                                                                                                             
10:09:40 AM                                                                                                                   
Mr. Mitchell discussed slide 18, "Total Debt in Alaska at                                                                       
June 30, 2018."                                                                                                                 
10:11:34 AM                                                                                                                   
Senator Bishop //                                                                                                               
10:12:00 AM                                                                                                                   
Mr. Mitchell //                                                                                                                 
10:12:03 AM                                                                                                                   
Senator Bishop //                                                                                                               
10:12:16 AM                                                                                                                   
Co-Chair Stedman //                                                                                                             
10:12:35 AM                                                                                                                   
Mr. Mitchell //                                                                                                                 
10:14:10 AM                                                                                                                   
Co-Chair Stedman //                                                                                                             
10:14:22 AM                                                                                                                   
Co-Chair von Imhof //                                                                                                           
10:15:03 AM                                                                                                                   
Co-Chair Stedman //                                                                                                             
Mr. Mitchel //                                                                                                                  
10:18:07 AM                                                                                                                   
Senator Wielechowski //                                                                                                         
10:18:25 AM                                                                                                                   
Co-Chair Stedman //                                                                                                             
10:18:38 AM                                                                                                                   
Mr. Mitchell looked at slide 19, "State Debt Obligations                                                                        
     Annual Position as of June 30                                                                                              
     .notdef Balance outstanding peaked in 2016 at $1,919.9                                                                   
     .notdef Declining principal balances in every year (50                                                                   
     percent repaid by 2026)                                                                                                    
     .notdef $110 million of unissued general obligation bond                                                                 
Senator  Wielechowski wanted  to correlate  the numbers.  He                                                                    
looked at  page 17, which  had total State  Moral Obligation                                                                    
of $1.897 billion. He wondered  whether that correlated with                                                                    
the total on page 19.                                                                                                           
Mr. Mitchell  replied in  the negative.  He shared  that the                                                                    
moral  obligations were  not paid  by the  general fund.  He                                                                    
remarked that they were backstopped at the general fund.                                                                        
10:20:45 AM                                                                                                                   
Senator Wielechowski  asked for a correlation  between pages                                                                    
17 and 18.                                                                                                                      
Mr. Mitchell replied  that the state debt  would be included                                                                    
on the $724  million, and the state supported  debt of $24.2                                                                    
million  would be  included. He  stated the  remaining debts                                                                    
that would be included.                                                                                                         
Co-Chair  Stedman  agreed  for   a  table  format  of  those                                                                    
Senator Wielechowski  wondered how much more  debt the state                                                                    
could issue.                                                                                                                    
Mr. Mitchell replied that it was uncertain.                                                                                     
Mr.  Mitchell  addressed  slide 20,  "Current  General  Fund                                                                    
Annual Payment Obligation":                                                                                                     
     .notdef GF Payment peaked in 2018 at $225.2 million                                                                      
     .notdef Declining payment in every year (50 percent of peak                                                              
     in 2029)                                                                                                                   
 .notdef PERS/TRS special funding payments grow every year                                                                    
     .notdef PERS/TRS special funding is many times all other                                                                 
     state commitments                                                                                                          
     .notdef Existing Authorizations for $300 million for Knik                                                                
     Arm Crossing, $110 GO bonds, $1.5 billion POB                                                                              
10:25:32 AM                                                                                                                   
Co-Chair Stedman  noted that  there was  a request  for runs                                                                    
from the actuary to deal with the PERS/TRS obligation.                                                                          
Mr. Mitchell looked at slide  21, "Existing State Short Term                                                                    
Debt Obligation Alternatives":                                                                                                  
     .notdef Bond Anticipation Notes (AS 37.15.300-390)                                                                       
       May be used when long term debt is authorized by law                                                                     
       While  short term, it  is expected to be  a precursor                                                                    
     of long term debt                                                                                                          
       May be  used to avoid negative  carry in construction                                                                    
     funds,  better  match  long-lived  projects  and  their                                                                    
     financing, or as an additional budget management tool                                                                      
       Directly impacts long term debt affordability                                                                            
     .notdef Revenue Anticipation Notes (AS 43.08.010)                                                                        
       May borrow  money when it becomes  necessary in order                                                                    
     to  meet   appropriations  for   any  fiscal   year  in                                                                    
     anticipation  of the  collection  of  the revenues  for                                                                    
     that year                                                                                                                  
       All  notes and  interest thereon  shall be  paid from                                                                    
     revenue by the  end of the fiscal  year next succeeding                                                                    
     the year in which the notes were issued                                                                                    
        May be  tax-exempt if  a bona  fide revenue  deficit                                                                    
     occurs during the fiscal year                                                                                              
     ? Earnings  of the  Permanent Fund and  other available                                                                  
     fund earnings, will need to  be included in determining                                                                    
     if a revenue deficit occurs                                                                                                
       The State has not used since the late 1960's                                                                             
Mr.  Mitchell   discussed  slide  23,   "Authorized  Bonding                                                                    
10:30:04 AM                                                                                                                   
Co-Chair  Stedman recalled  that  the initial  issue to  not                                                                    
have  a timeframe,  and felt  that it  should be  timed out.                                                                    
Therefore, there was some concern  about the amount of funds                                                                    
to  issue without  any  legislative  input. The  legislature                                                                    
then took  action He  remarked that there  was the  issue of                                                                    
tax credits  that were due  by the state, and  issuing bonds                                                                    
and  then paying  those bonds  off. He  remarked that  there                                                                    
would be discussions about that issue.                                                                                          
Senator Wielechowski queried the impact  of the state of the                                                                    
failure to pay those tax credit bonds once they are issued.                                                                     
Co-Chair Stedman further requested the appropriator risk.                                                                       
Mr.  Mitchell  noted  that  it would  be  categorized  as  a                                                                    
subject   to  appropriation   obligation,  similar   to  the                                                                    
certificate of  participation program. He stated  that there                                                                    
was a  commitment to seek  an appropriation every  year, but                                                                    
not required  by law  to make  the appropriation.  He stated                                                                    
that, in  the instance of a  failure to pay, there  would be                                                                    
an  expectation   that  the  state's  credit   rating  would                                                                    
10:35:28 AM                                                                                                                   
Co-Chair Stedman understood  the appropriation risk, related                                                                    
to the payments of the tax credit.                                                                                              
Mr. Mitchell  stated that it  was a fundamental risk  of the                                                                    
Senator Wielechowski  stressed that  there was a  statute in                                                                    
place, and  the state had never  not paid, and felt  that it                                                                    
would not affect its credit rating.                                                                                             
10:36:35 AM                                                                                                                   
AT EASE                                                                                                                         
10:38:58 AM                                                                                                                   
10:39:14 AM                                                                                                                   
Mr. Mitchell  stated that there  would be a  debt commitment                                                                    
made  that  should  mirror  the  additional  work  that  was                                                                    
currently authorized.  He stated that over  time the reality                                                                    
of oil price fluctuating would  change what would be paid in                                                                    
future years.                                                                                                                   
Co-Chair Stedman  stressed that there were  various requests                                                                    
of information that he still  hoped to examine the statutory                                                                    
requirement and what was actually paid.                                                                                         
10:49:29 AM                                                                                                                   
The meeting was adjourned at 10:49 a.m.                                                                                         

Document Name Date/Time Subjects
020419 State Investment Funds Update Version 2.1.2019.pdf SFIN 2/4/2019 9:00:00 AM
State Investment Funds
020419 DOR. SFC.Debt Presentation 1-30-2019.pdf SFIN 2/4/2019 9:00:00 AM
State Debt Summary
020519 FY18 AMBBA Financials FINAL AU.pdf SFIN 2/4/2019 9:00:00 AM
Debt Summary
020519 Copy of UGF Updated - Less Dividends 2.4.2019.pdf SFIN 2/4/2019 9:00:00 AM
Debt Summary
020519 updates after presentation - DOR SFC Debt Presentation 1-30-2019.pptx SFIN 2/4/2019 9:00:00 AM
Debt Summary