Legislature(2019 - 2020)BUTROVICH 205

02/26/2019 03:30 PM STATE AFFAIRS

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Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
            SENATE STATE AFFAIRS STANDING COMMITTEE                                                                           
                       February 26, 2019                                                                                        
                           3:35 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Mike Shower, Chair                                                                                                      
Senator John Coghill, Vice Chair                                                                                                
Senator Lora Reinbold                                                                                                           
Senator Peter Micciche                                                                                                          
MEMBERS ABSENT                                                                                                                
Senator Scott Kawasaki                                                                                                          
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 34                                                                                                              
"An Act  relating to  probation; relating  to a  program allowing                                                               
probationers to  earn credits for  complying with  the conditions                                                               
of  probation;  relating  to   early  termination  of  probation;                                                               
relating to  parole; relating to  a program allowing  parolees to                                                               
earn  credits  for  complying  with  the  conditions  of  parole;                                                               
relating to early termination of  parole; relating to eligibility                                                               
for discretionary  parole; relating  to good time;  and providing                                                               
for an effective date."                                                                                                         
     - HEARD & HELD                                                                                                             
SENATE BILL NO. 23                                                                                                              
"An Act  making special appropriations from  the earnings reserve                                                               
account  for  the  payment  of   permanent  fund  dividends;  and                                                               
providing for an effective date."                                                                                               
     - HEARD & HELD                                                                                                             
SENATE BILL NO. 24                                                                                                              
"An Act directing  the Department of Revenue to  pay dividends to                                                               
certain  eligible individuals;  and  providing  for an  effective                                                               
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB  34                                                                                                                  
SHORT TITLE: PROBATION; PAROLE; SENTENCES; CREDITS                                                                              
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
01/23/19       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/23/19       (S)       STA, FIN                                                                                               
02/07/19       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
02/07/19       (S)       Heard & Held                                                                                           
02/07/19       (S)       MINUTE(STA)                                                                                            
02/11/19       (S)       JUD REFERRAL ADDED AFTER STA                                                                           
02/12/19       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
02/12/19       (S)       Heard & Held                                                                                           
02/12/19       (S)       MINUTE(STA)                                                                                            
02/14/19       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
02/14/19       (S)       Heard & Held                                                                                           
02/14/19       (S)       MINUTE(STA)                                                                                            
02/19/19       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
02/19/19       (S)       Heard & Held                                                                                           
02/19/19       (S)       MINUTE(STA)                                                                                            
02/21/19       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
02/21/19       (S)       Heard & Held                                                                                           
02/21/19       (S)       MINUTE(STA)                                                                                            
02/26/19       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
BILL: SB  23                                                                                                                  
SHORT TITLE: APPROP:SUPP. PAYMENTS OF PRIOR YEARS' PFD                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
01/16/19       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/16/19       (S)       STA, FIN                                                                                               
02/05/19       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
02/05/19       (S)       Heard & Held                                                                                           
02/05/19       (S)       MINUTE(STA)                                                                                            
BILL: SB  24                                                                                                                  
SHORT TITLE: PFD SUPPLEMENTAL PAYMENTS                                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
01/16/19       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/16/19       (S)       STA, FIN                                                                                               
02/05/19       (S)       STA AT 3:30 PM BUTROVICH 205                                                                           
02/05/19       (S)       Heard & Held                                                                                           
02/05/19       (S)       MINUTE(STA)                                                                                            
WITNESS REGISTER                                                                                                              
JOHN SKIDMORE, Director                                                                                                         
Criminal Division                                                                                                               
Department of Law (DOL), Anchorage, Alaska                                                                                      
POSITION STATEMENT: Answered questions about SB 34.                                                                           
JENNIFER WINKELMAN, Director                                                                                                    
Division of Probation and Parole                                                                                                
Department of Corrections (DOC)                                                                                                 
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Answered questions about SB 34.                                                                           
JEFF EDWARDS, Director                                                                                                          
Parole Board                                                                                                                    
Department of Corrections (DOC)                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Answered questions about SB 34.                                                                           
KELLY GOODE, Deputy Commissioner                                                                                                
Department of Corrections (DOC)                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Testified on availability of crime                                                                        
BRUCE TANGEMAN, Commissioner                                                                                                    
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Answered questions about SB 23 and SB 24.                                                                 
ED KING, Chief Economist                                                                                                        
Office of Management and Budget (OMB)                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Answered questions about SB 23 and SB 24.                                                                 
ACTION NARRATIVE                                                                                                              
3:35:58 PM                                                                                                                    
CHAIR  MIKE  SHOWER  called the  Senate  State  Affairs  Standing                                                             
Committee meeting  to order at 3:35  p.m. Present at the  call to                                                               
order  were  Senators  Reinbold,  Coghill,  Micciche,  and  Chair                                                               
          SB  34-PROBATION; PAROLE; SENTENCES; CREDITS                                                                      
3:36:29 PM                                                                                                                    
CHAIR SHOWER announced the consideration of SENATE BILL NO. 34                                                                  
"An Act  relating to  probation; relating  to a  program allowing                                                               
probationers to  earn credits for  complying with  the conditions                                                               
of  probation;  relating  to   early  termination  of  probation;                                                               
relating to  parole; relating to  a program allowing  parolees to                                                               
earn  credits  for  complying  with  the  conditions  of  parole;                                                               
relating to early termination of  parole; relating to eligibility                                                               
for discretionary  parole; relating  to good time;  and providing                                                               
for an effective date."                                                                                                         
He noted that  SB 34 was sponsored by the  Senate Rules Committee                                                               
by  request of  the governor  and that  representatives from  the                                                               
Department  of  Law  and  Department   of  Corrections  would  be                                                               
available to answer questions.                                                                                                  
3:37:25 PM                                                                                                                    
JOHN  SKIDMORE, Director,  Criminal Division,  Department of  Law                                                               
(DOL),  Anchorage,  introduced  himself  and  offered  to  answer                                                               
JENNIFER WINKELMAN,  Director, Division of Probation  and Parole,                                                               
Department of  Corrections (DOC), Juneau, introduced  herself and                                                               
offered to answer questions.                                                                                                    
JEFF EDWARDS,  Director, Parole Board, Department  of Corrections                                                               
(DOC),  Anchorage,  Alaska,  introduced himself  and  offered  to                                                               
answer questions.                                                                                                               
3:38:12 PM                                                                                                                    
CHAIR SHOWER  said his goal was  to bring up any  amendments from                                                               
committee  members  on  Thursday  and   move  the  bill  out,  if                                                               
possible. He noted he was going  to handle his questioning of Mr.                                                               
Skidmore like a  sectional by going through  and asking questions                                                               
about the sections of concern.                                                                                                  
CHAIR  SHOWER said  that  in  Section 4,  page  3,  line 19,  the                                                               
commissioner  is  given  power  to  make  the  regulations  about                                                               
probationers. He  asked Mr.  Skidmore if he  had any  issues with                                                               
changing that  to allow the  Department of Law  (DOL), Department                                                               
of Corrections (DOC),  and the Department of  Public Safety (DPS)                                                               
to  collaborate   on  establishing   the  program   described  in                                                               
subsection (h).                                                                                                                 
3:40:05 PM                                                                                                                    
MR.  SKIDMORE   answered  that  Section   4  deals   with  earned                                                               
compliance credits. It's about how  to manage time accounting for                                                               
individuals who  are committed to the  Department of Corrections.                                                               
The regulations  for managing the  earned compliance  program are                                                               
therefore established  by the commissioner  of DOC  because those                                                               
individuals are within that  department's control. The Department                                                               
of Law  does not have  a role  in the supervision  of individuals                                                               
committed  to DOC.  The role  of the  Department of  Law for  the                                                               
development  of  any regulations  is  first  to consult  with  an                                                               
agency about any  policy objectives they want.  There are lawyers                                                               
assigned  to  the Department  of  Corrections  for that  purpose.                                                               
Second, any regulations  proposed by any entity  within the state                                                               
of Alaska  go through a  review by  DOL attorneys to  ensure that                                                               
the  drafting is  consistent with  other regulatory  or statutory                                                               
drafting. The  legal review is  not about specific  management of                                                               
those  individuals.  He  is  not  aware  of  any  role  that  the                                                               
Department  of   Public  Safety  plays  in   the  supervision  of                                                               
individuals  committed to  DOC or  in time  accounting. The  only                                                               
role he is aware of that  DPS plays in relation to Corrections is                                                               
the transportation of inmates for court hearings.                                                                               
3:42:09 PM                                                                                                                    
SENATOR  COGHILL recalled  discussion about  the regulations  for                                                               
earned  compliance  credits in  Section  4.  He referred  to  the                                                               
language that  states, "Nothing in this  subsection prohibits the                                                               
department from recommending to the  court the early discharge of                                                               
the probationer  as provided  in AS 12.55  and this  chapter." He                                                               
asked Mr. Skidmore to remind him of what is in AS 12.55.                                                                        
MR.  SKIDMORE   said  he'd   first  point   out  that   Title  33                                                               
specifically focuses  on the Department of  Corrections. AS 12.55                                                               
addresses  sentencing provisions  for criminal  conduct and  some                                                               
statutes  in that  chapter may  address authorized  conditions of                                                               
probation,  but  it  is mainly  about  sentencing  procedures  in                                                               
criminal cases.                                                                                                                 
3:43:32 PM                                                                                                                    
SENATOR MICCICHE  asked how DOL  arrived at 30 percent  credit vs                                                               
one-for-one in Section 4.                                                                                                       
MR. SKIDMORE  replied that the  federal government has  used that                                                               
ratio in recent legislation. That ratio  is also found in some of                                                               
the  studies  on earned  compliance  credit.  He doesn't  have  a                                                               
particular rationale other than it  is a common ratio that others                                                               
have used.  When they examined  the ratio of one-for-one,  the 50                                                               
percent reduction  seemed greater than  what was necessary.  A 30                                                               
percent  reduction seemed  appropriate. Many  aspects of  the law                                                               
look  at things  in thirds,  such as  discretionary or  mandatory                                                               
parole.  The natural  course is  to follow  what is  consistently                                                               
laid out  in statutory schemes about  how to look at  concepts of                                                               
how  much time  should be  reviewed  when there  is some  benefit                                                               
associated with it.                                                                                                             
SENATOR  MICCICHE said  that with  this change,  Mr. Skidmore  is                                                               
saying  he  supports  the  concept   that  compliance  should  be                                                               
rewarded, but one-for-one is too rich.                                                                                          
MR.  SKIDMORE  answered  that  is  accurate.  The  administration                                                               
concluded that providing incentives  or rewards for good behavior                                                               
makes sense. To  change or encourage behavior can be  done in two                                                               
ways.  One is  to provide  a reward  and the  other is  to punish                                                               
noncompliance.  This  section of  SB  34  attempts to  provide  a                                                               
SENATOR COGHILL  said that for  a committee discussion,  he would                                                               
look at  that as an  amendment because they are  changing several                                                               
structures of reward and sanctions.  His thinking is that what is                                                               
set out  is sufficient,  given that  sanctions have  changed, and                                                               
who can  get access  to these  benefits has  changed. That  was a                                                               
broad statement, but he wanted the  committee to know he would be                                                               
looking at that.                                                                                                                
3:46:55 PM                                                                                                                    
CHAIR SHOWER referenced Section  4, AS 33.05.020(h)(2)(A),(B) and                                                               
(C) and asked  what happens to credits if  a probationer violates                                                               
MR. SKIDMORE replied that the  penalties are twofold. First, they                                                               
would not  be rewarded the three-to-one  credit against probation                                                               
time. That is addressed in  Section 5, subsection (j). Second, if                                                               
a court assessed  a petition to revoke probation  and found there                                                               
was a  violation of probation,  then any accrued credits  to that                                                               
date would be lost.                                                                                                             
CHAIR  SHOWER  asked Mr.  Skidmore  to  speak to  the  difference                                                               
between a  violation and a  technical violation. For  example, if                                                               
someone forgot  an appointment, something  not nefarious,  how is                                                               
that  delineated  because  the  idea  is to  try  to  modify  bad                                                               
behavior but not penalize innocent mistakes.                                                                                    
MR.  SKIDMORE  responded that  the  statute  itself speaks  of  a                                                               
violation. In  this context for  violating probation,  that means                                                               
when a petition is filed with the  court and a person is found in                                                               
violation  of that.  There is  also a  concept of  administrative                                                               
sanctions.  When  a  probation  officer thinks  someone  has  not                                                               
followed the conditions  set out, the probation  officer can take                                                               
administrative action,  but that is not  imposing additional jail                                                               
time. That  is the intent  here. The violation for  which someone                                                               
would lose accrued  credit is a violation found by  the court. If                                                               
the committee  is concerned about that  delineation, he suggested                                                               
adding language  to make it clear  that this is only  a violation                                                               
found by the court and not something addressed administratively.                                                                
CHAIR SHOWER replied the committee may do that.                                                                                 
SENATOR MICCICHE said,  later in the bill,  under parole, Section                                                               
16,  the  words  "other  than  a  technical  violation  under  AS                                                               
33.16.215" were  removed. He asked  why it was not  clarified for                                                               
probation as well.                                                                                                              
3:51:34 PM                                                                                                                    
MR. SKIDMORE  answered that technical violation  is delineated in                                                               
that  section  of the  bill,  but  not  earlier. The  reason  for                                                               
removing the  term "technical  violation" is  that the  bill also                                                               
eliminates the concept  of placing caps for violation  of what is                                                               
known  as technical  violations,  both in  probation and  parole.                                                               
When  those  are  eliminated,  only  violation  is  left,  not  a                                                               
technical  or nontechnical  violation. Referring  to a  technical                                                               
violation at that point makes  it inconsistent or awkward to have                                                               
two different  terms being used.  Throughout the bill,  it should                                                               
simply  say  a "violation,"  something  found  by the  courts  or                                                               
parole  board,   not  something  addressed   administratively  by                                                               
probation officers.                                                                                                             
SENATOR  MICCICHE asked  if  the  removal in  Section  16 is  the                                                               
intent of the discussion in probation as well.                                                                                  
MR.  SKIDMORE  responded  that  is the  intent.  In  Section  16,                                                               
"technical  violation"  is  removed.   When  talking  about  what                                                               
happens for a  probation violation, he would refer  to Section 1.                                                               
The term technical violation is  removed throughout the bill. The                                                               
overall  intent in  the bill,  both in  probation and  parole, is                                                               
that  violations are  found by  the court  or parole  board, such                                                               
that there  is associated due  process and an offender  is placed                                                               
on notice  of the particular  condition. If there is  a contested                                                               
hearing, the  individual is entitled  to counsel, and there  is a                                                               
finding of fact  by an independent body that the  burden of proof                                                               
was  met,  and   the  violation  was  found.   That  entity  then                                                               
determines the  appropriate sanction to  impose. That is  what is                                                               
referred to  for the violations  throughout the bill,  either for                                                               
parole or probation.                                                                                                            
3:54:32 PM                                                                                                                    
CHAIR  SHOWER  asked  if  it   would  cause  problems  to  insert                                                               
"technical violation" in Section 4.                                                                                             
MR. SKIDMORE answered that if  the intent is to delineate between                                                               
a  type  of conduct  that  violates  a  condition  but is  not  a                                                               
violation found by the court  or parole board, he would recommend                                                               
using a term  other than "technical violation."  He would instead                                                               
be referring to  a violation found by the court  or parole board.                                                               
That makes it  clear that that due process is  associated with it                                                               
and who  it is who  needs to  find the violation.  Otherwise, you                                                               
are moving  away from  the description of  the type  of violation                                                               
that  would  be  associated  with   it.  Current  law  delineates                                                               
technical from  nontechnical by  saying a  nontechnical is  a new                                                               
criminal offense. The  problem with that has been  that the array                                                               
of technical  violations is  vast, ranging  from simply  being an                                                               
hour late reporting  to a probation officer  to consuming alcohol                                                               
or being in the presence of other felons.                                                                                       
Anything  that  is  not  a   new  crime  is  deemed  a  technical                                                               
violation, he said. That, too, is  a vast array of conduct and it                                                               
has to be  taken into consideration with  the underlying offense.                                                               
Simply identifying  conduct as  a technical  violation completely                                                               
ignores  how  that  particular  violation  is  associated  to  or                                                               
related to  the underlying criminal  charge for which  the person                                                               
was convicted.  That is one  of the  primary issues with  the way                                                               
that this was set up and designed, Mr. Skidmore said.                                                                           
3:57:38 PM                                                                                                                    
SENATOR  REINBOLD directed  attention  to Section  1 and  advised                                                               
that her  questions are about the  rights of the accused  and the                                                               
right to a speedy trial in  the Constitution. She said she wanted                                                               
to  motivate defendants  to get  to trial  and was  considering a                                                               
possible amendment on the credit  a defendant earns for jail time                                                               
pending their trial. She asked for his input.                                                                                   
MR. SKIDMORE asked  for clarification that she  was talking about                                                               
Section 1 of SB 34.                                                                                                             
SENATOR REINBOLD answered  yes, page 2, line 2,  which is current                                                               
MR. SKIDMORE  said this  provision in  AS 12.55.025(c)  refers to                                                               
when an  individual is  in custody  pending trial  or sentencing.                                                               
This is not  about providing credit, for  example, for electronic                                                               
monitoring,  treatment, or  any other  type of  release. This  is                                                               
when a person is in custody.  This provision would not provide an                                                               
incentive to delay trial because it  is credit for the time spent                                                               
in a hard bed, in a facility.                                                                                                   
4:00:18 PM                                                                                                                    
SENATOR REINBOLD asked  if anything in SB 34  would help motivate                                                               
defendants to get  to trial and stop pretrial  delays. This would                                                               
solve a problem  that existed before Senate Bill 91.  That is the                                                               
ultimate goal, she said.                                                                                                        
MR.  SKIDMORE advised  that SB  33 contains  provisions regarding                                                               
electronic monitoring,  treatment, and  limiting credit  that can                                                               
be earned pretrial.  SB 34 is focused on the  conduct that occurs                                                               
postconviction, after the  sentence is imposed, and  how they are                                                               
managing probation or  parole. Neither has an  impact on pretrial                                                               
delay. The  administration and the  Department of Law  agree with                                                               
her  goal,   but  the  appropriate   place  to  look   for  those                                                               
opportunities are in SB 33.                                                                                                     
4:01:56 PM                                                                                                                    
CHAIR SHOWER  directed attention to  subsection (i) in  Section 5                                                               
and  asked for  an explanation  of  why this  wasn't expanded  to                                                               
include  individuals  convicted  of  things  like  violent  crime                                                               
against  another or  multiple crimes  of  the same  offense or  a                                                               
serial offender. It  seems narrow to limit this  to a probationer                                                               
convicted of a sex offense, as defined in AS 12.63.100.                                                                         
4:02:47 PM                                                                                                                    
MR.  SKIDMORE  answered  that  the   concept  in  Section  5,  AS                                                               
33.05.020(i), is  about not reducing  the time a sex  offender is                                                               
on  probation. The  provision  is focused  in  that area  because                                                               
Alaska  manages and  supervises sex  offenders on  probation with                                                               
the containment  model. That  model has  been demonstrated  to be                                                               
very   effective  in   reducing   the  risk   of  sex   offenders                                                               
reoffending,  but it  is  not designed  for  someone who  commits                                                               
murder, arson,  drug distribution, or another  felony assault. It                                                               
is focused on sex offenders.                                                                                                    
He  said you  are asking  whether  there are  certain crimes  for                                                               
which the  legislature or  society at large  does not  believe an                                                               
individual should have  their period of probation  reduced. SB 34                                                               
does not  address that, but the  bill could be amended  if that's                                                               
something  the committee  wanted to  address. He  reiterated that                                                               
subsection  (i)  focuses  solely  on  the  containment  model  of                                                               
treatment to ensure  it was not reduced in  its timeframe because                                                               
that could reduce its effectiveness.                                                                                            
4:05:11 PM                                                                                                                    
SENATOR  COGHILL stated  support  for Section  5, which  provides                                                               
that  probationers forfeit  credit  if  they violate  conditions.                                                               
That is one reason  why he would like to go  back to the day-for-                                                               
day model because the disincentive  becomes as significant as the                                                               
incentive. That is something he would be watching.                                                                              
CHAIR  SHOWER  referenced  the deleted  language  in  Section  6,                                                               
paragraph  (4)  and asked  Mr.  Skidmore  to explain  what  "give                                                               
receipts for  money collected and  make at least  monthly returns                                                               
of it" refers to.                                                                                                               
MR.   SKIDMORE   replied   the   paragraph   is   talking   about                                                               
administrative  sanctions  and  records  of  probation  work.  He                                                               
suggested that Ms.  Winkelman may know if  probationers are asked                                                               
to  do  some  kind  of  work in  the  community  and  under  what                                                               
circumstances money would be collected.                                                                                         
CHAIR SHOWER, noting that Ms.  Winkelman was shaking her head no,                                                               
said he'd  like an answer on  what that means and  why the entire                                                               
paragraph was deleted.                                                                                                          
4:07:56 PM                                                                                                                    
MR. SKIDMORE  responded that paragraph  (4) and paragraph  (6) in                                                               
Section 6 talk  about the program of  administrative sanctions in                                                               
a  way that  is more  formulistic  than was  used previously.  He                                                               
     The  idea was  to  allow the  Department of  Correction                                                                    
     probation  officers to  use some  sort of  incentive as                                                                    
     they deemed appropriate, but  this eliminating a formal                                                                    
     concept   of  administrative   sanctions  was   saying,                                                                    
     'You're  not required  to use  administrative sanctions                                                                    
     earlier.' Let  me give you  an example. And  I'll defer                                                                    
     to Ms. Winkelman  on this as well if I  get any of this                                                                    
     information incorrect.  But for  example, we  know that                                                                    
     under Senate Bill 91,  there were approximately between                                                                    
     five and  700 petitions  to revoke probation  that were                                                                    
     filed  each month  since January  of 2017.  And if  you                                                                    
     take  that   and  multiply  it   out  over   the  whole                                                                    
     timeframe, you get  approximately 14,000 petitions that                                                                    
     are  filed.   When  you  look  at   the  administrative                                                                    
     sanctions,  we   know  that  there  were   over  21,000                                                                    
     administrative sanctions  during roughly the  same time                                                                    
     span. The  idea is that, yes,  administrative sanctions                                                                    
     may have  a place, but  the way  in which it  is listed                                                                    
     here in  statute, and in  fact now,  the administrative                                                                    
     sanctions  happen  far  more frequently  than  you  are                                                                    
     having to  petition to revoke  probation. And  it makes                                                                    
     it difficult to  compare the pre-SB 91  to what happens                                                                    
     in SB 91  because if you simply, for  instance, were to                                                                    
     say  that the  number of  petitions filed  are reduced,                                                                    
     you've completely  ignored those  21,000 administrative                                                                    
     sanctions that  were imposed. So, the  concept here was                                                                    
     that the  way it is  written in statute is  more robust                                                                    
     than what  is necessary, which is  why those references                                                                    
     in the statutes  are eliminated. And it is  left to the                                                                    
     discretion  of  the  Department of  Corrections  as  to                                                                    
     where it's appropriate to utilize those.                                                                                   
CHAIR SHOWER asked if DOC had any follow-up.                                                                                    
4:10:35 PM                                                                                                                    
MS.  WINKELMAN agreed  with Mr.  Skidmore. She  said the  idea is                                                               
that SB 34  is returning the discretion to  probation officers to                                                               
be able to react to a  violation based on the person's risk needs                                                               
and not by being bound by something in statute.                                                                                 
4:10:59 PM                                                                                                                    
CHAIR SHOWER  asked if she  saw any unintended  consequences that                                                               
would limit the PO's ability to take appropriate action.                                                                        
MS. WINKELMAN answered no.                                                                                                      
SENATOR COGHILL  said that is a  policy call. The bill  is trying                                                               
to  set   up  a  series   of  administrative  actions   to  allow                                                               
individuals to work  and be productive because they  are going to                                                               
be required to  start paying restitution. This is  lifted from AS                                                               
33.05.020(g)  and he  intended to  look and  see if  that is  the                                                               
operative part.  He recalled that  that was the intention  of the                                                               
4:12:24 PM                                                                                                                    
CHAIR SHOWER, noting  that "temporary" is not  defined in Section                                                               
7, page  5, line  28, asked  if a  limit should  be set.  He also                                                               
asked  if victims  should be  notified if  a probation  officer's                                                               
caseload  is greater  than 75.  He subsequently  ascertained that                                                               
Mr. Skidmore was  not looking at the CS, version  M, and asked if                                                               
DOC could offer an explanation.                                                                                                 
MS.  WINKELMAN  said  that  giving  an  example  of  a  temporary                                                               
situation might  be helpful.  In some of  their rural  areas, one                                                               
probation officer  is assigned to  a unit. For example,  there is                                                               
one probation  officer in Kotzebue.  From time to time,  not only                                                               
is the officer supervising a  caseload of felons, but the officer                                                               
will also be  writing presentencing reports on folks  that are in                                                               
the  system for  a short  period of  time. The  officer writes  a                                                               
presentencing report for  the court. They are  sentenced based on                                                               
that  and then  go into  custody, so  they are  on the  officer's                                                               
caseload  for a  temporary amount  of  time. She  could see  some                                                               
staffing issues  with regard  to that. Whether  or not  to define                                                               
"temporary" would  be a  policy call.  The second  question about                                                               
notifying victims and courts would be a policy call.                                                                            
SENATOR  COGHILL asked  what the  average  probation caseload  is                                                               
MS. WINKELMAN  said it depends  on the area and  staffing levels,                                                               
but she guessed between 50 and 60.                                                                                              
SENATOR COGHILL noted that another  bill will give new duties. He                                                               
asked  if  this  limitation  is going  to  create  temporary  and                                                               
extraordinary circumstances  under pretrial. The bill  puts a cap                                                               
on it here but adding new  duties in another bill is something to                                                               
think about, he said.                                                                                                           
MS. WINKELMAN said  DOC has been thinking about that  with SB 33,                                                               
the pretrial functions, and their caseloads.                                                                                    
SENATOR COGHILL said that would create a roadblock for him.                                                                     
4:17:03 PM                                                                                                                    
CHAIR  SHOWER  mentioned  the concern  about  victims  not  being                                                               
notified and  asked if in  Section 10,  it would be  advisable to                                                               
add  the  term  "victim" to  AS  33.16.090(b)(3)(B)(ii),  because                                                               
there have been cases of victims not being notified.                                                                            
MS. WINKELMAN  answered that  she believes  that adding  the term                                                               
"victim"  there would  be sufficient.  Because this  is a  parole                                                               
matter, she wondered if Mr. Edwards had anything to add.                                                                        
4:19:28 PM                                                                                                                    
CHAIR SHOWER asked if DOC is  making sure mechanisms are in place                                                               
so that victims know when parole and probation is happening.                                                                    
MR. EDWARDS  said the department  does have a new,  strict policy                                                               
about  victim notification  requirements specifically  related to                                                               
parole  notifications. Adding  that language  to that  section of                                                               
the statute is a policy decision.                                                                                               
CHAIR  SHOWER  asked DOC  to  make  the  committee aware  of  any                                                               
loopholes they bill is missing.                                                                                                 
MS. WINKELMAN echoed Mr. Edwards.  DOC does have a relatively new                                                               
and robust victim notification policy,  driven by Senate Bill 91.                                                               
She opined that  it does a good job of  ensuring that victims are                                                               
CHAIR  SHOWER replied  fair enough,  but he  wanted to  make sure                                                               
because of the stories that have come up.                                                                                       
4:21:24 PM                                                                                                                    
SENATOR  MICCICHE  reminded  the  committee that  SB  34  removes                                                               
serious  crimes  from  discretionary parole,  which  was  allowed                                                               
under Senate  Bill 91.  This is  a return  to pre-Senate  Bill 91                                                               
law. Crimes that  would not be eligible  for discretionary parole                                                               
include: non-sex  class A felonies,  Robbery I, Assault  I, Arson                                                               
I;  B  felonies if  the  person  had  one  or more  prior  felony                                                               
convictions;  C felonies  if the  person  had two  or more  prior                                                               
felony convictions; B  and C felonies, Sexual  Assault II, Sexual                                                               
Abuse  of a  Minor  II, distribution  of  child pornography.  The                                                               
foregoing  victim-rich crimes  are  ineligible for  discretionary                                                               
CHAIR SHOWER said  he just wanted to make sure  nothing is missed                                                               
and it's on  the record. He read the provision  in Section 10, AS                                                               
33.16.090(b)(5), on page 8, lines  15-18, regarding when somebody                                                               
can be considered  for release on discretionary  parole. He asked                                                               
if release  after one-fourth of  the active term  of imprisonment                                                               
was too light, and why one-third or one-half was not considered.                                                                
MS. WINKELMAN  said one-fourth  was pre Senate  Bill 91  law. She                                                               
deferred further comment to Mr. Edwards or Mr. Skidmore.                                                                        
MR. EDWARDS said  he did not have that information.  It's the way                                                               
it has been since he's been around, almost 20 years.                                                                            
CHAIR SHOWER asked Mr. Skidmore if he had anything to add.                                                                      
MR. SKIDMORE said  one-fourth has been in statute  for quite some                                                               
time, but he doesn't know  how that number was originally chosen.                                                               
Referring to  victim notification, he said  AS 33.013(a) requires                                                               
notification  of victims  when an  individual is  discharged from                                                               
parole. That  was added in  2017. He encouraged Chair  Showers to                                                               
verify whether the stories he has  heard occurred pre or post the                                                               
2017 law.                                                                                                                       
CHAIR  SHOWER said  fair  point.  This is  just  making sure  the                                                               
committee isn't missing any holes.                                                                                              
SENATOR  REINBOLD  said  she   too  questioned  consideration  of                                                               
discretionary  parole after  one-quarter  of the  active term  of                                                               
imprisonment. She asked  what other states do  on average because                                                               
one-quarter seemed.                                                                                                             
MR. SKIDMORE  said he  did not  know about  other states'  use in                                                               
that regard.  It's been  in statute  in Alaska  for more  than 20                                                               
SENATOR REINBOLD  asked him to  follow up with  information about                                                               
whether discretionary  parole is common and  if consideration for                                                               
discretionary  parole  is common  after  just  one-fourth of  the                                                               
prison term.                                                                                                                    
CHAIR SHOWER said  there was a similar law passed  at the federal                                                               
level, and  he didn't want  to run  into a problem  with anything                                                               
regarding federal supremacy.                                                                                                    
4:26:05 PM                                                                                                                    
SENATOR MICCICHE asked,  referring to what he  said earlier about                                                               
eliminating certain  crimes for discretionary parole,  what types                                                               
of  crime remain  eligible for  discretionary parole.  That might                                                               
help the committee with the one-quarter consideration.                                                                          
MR. SKIDMORE  agreed with Senator Micciche's  earlier description                                                               
of  the  crimes that  would  not  be eligible  for  discretionary                                                               
parole.  The larger  concepts  of what  would  be eligible  would                                                               
include robbery  and assault which  are in Title 11,  Chapter 41,                                                               
and considered person  crimes. Arson is classified  as a property                                                               
crime but is included here because  of its serious nature and the                                                               
harm  to others.  Theft and  criminal  mischief are  the sort  of                                                               
things  that immediately  come to  mind,  he said.  Escape I  and                                                               
misconduct  involving  weapons  in   the  first  degree  are  not                                                               
eligible  for discretionary  parole, but  lower levels  of escape                                                               
and lower levels of misconduct  involving weapons are. This would                                                               
leave  most  of  the  drug   trafficking  offenses  eligible  for                                                               
discretionary parole.  The limitation for repeat  offenders means                                                               
this is  focused on the  first-time felony offenders,  not repeat                                                               
felony offenders.  He said a  first-time property  offender would                                                               
be the generic description he would provide.                                                                                    
SENATOR MICCICHE  clarified that  even a relatively  serious drug                                                               
trafficking,  first-time offender  would  still  be eligible  for                                                               
MR.   SKIDMORE  answered   yes;   as   currently  drafted   those                                                               
individuals  would  be  eligible  for  discretionary  parole.  As                                                               
currently drafted,  property and  drug offenses are  not included                                                               
in the statute.                                                                                                                 
4:28:50 PM                                                                                                                    
SENATOR  MICCICHE  requested  some  detail  on  what  those  drug                                                               
trafficking  crimes  might  look  like  so  the  committee  could                                                               
consider whether  or not to  include them in crimes  not eligible                                                               
for discretionary parole.                                                                                                       
MR.  SKIDMORE  said he  would  provide  that information  to  the                                                               
SENATOR  REINBOLD said  she did  not  get an  affirmative or  not                                                               
about  whether he  would investigate  whether  other states  have                                                               
discretionary parole and what the standard is for time served.                                                                  
CHAIR SHOWER  asked Mr. Skidmore  if his staff could  report that                                                               
MR. SKIDMORE said he'd try.                                                                                                     
SENATOR  COGHILL  mentioned  the   roll-back  in  the  number  of                                                               
offenders  who would  be eligible  for  discretionary parole.  He                                                               
said he would  need to know how many had  been eligible under the                                                               
old law  who will  not be  under the  new law  and how  many were                                                               
failures at whatever level. "The 'Why  do we do this?' as we went                                                               
into it, we  were incentivizing a lot of  behavior. We've changed                                                               
that behavior modification,"  he said. He said he  wanted to know                                                               
what the effect of that  behavior modification had been. He asked                                                               
how many  failures there were  for those on  discretionary parole                                                               
and what were the failures.                                                                                                     
MR. SKIDMORE said  the administration will work on  that with all                                                               
the departments.                                                                                                                
4:31:34 PM                                                                                                                    
SENATOR MICCICHE asked  if this is a total repeal  of Senate Bill                                                               
91 on discretionary parole.                                                                                                     
MR. SKIDMORE  answered that he would  need to review all  of that                                                               
bill  to see  if  there  are sections  that  are  not changed  by                                                               
discretionary  parole. The  primary parole  components of  Senate                                                               
Bill 91 are repealed by SB 34, but  he couldn't say if it was 100                                                               
percent. Geriatric  parole is not changed.  Administrative parole                                                               
has   been  revoked.   SB  34   repeals  who   is  eligible   for                                                               
discretionary parole.  The factors are repealed.  The eligibility                                                               
for  it  is  repealed.  The   early  termination  of  parole  for                                                               
recommendation is  repealed. The earned compliance  credit is not                                                               
a 100 percent  repeal. It changes it from 30  days violation free                                                               
for  30 days  credit  to one  day violation  free  to three  days                                                               
credit. The sanctions that can  be imposed for parole violations,                                                               
the good  time calculations, all  of those things,  are repealed.                                                               
He said his quick review suggests  that about 95 percent of it is                                                               
4:33:25 PM                                                                                                                    
CHAIR SHOWER read the language  in Section 21, AS 44.19.645(g)(3)                                                               
and asked if anyone had the definition of "risk level."                                                                         
MR. SKIDMORE deferred to the  Department of Corrections to define                                                               
risk level  in the context  of admitting and  placing individuals                                                               
in DOC.                                                                                                                         
MS. WINKELMAN explained that DOC  does a risk-needs assessment on                                                               
all   offenders  that   come  into   the  system.   There  is   a                                                               
classification risk  level to determine  where an inmate  will be                                                               
housed  in the  facility. There  is  also a  risk-needs done  for                                                               
supervision, which  drives how often  the probation  officer (PO)                                                               
sees  the  person  in  the  field.  A  risk-level  assessment  is                                                               
attached to every offender in the system.                                                                                       
4:34:52 PM                                                                                                                    
SENATOR COGHILL said:                                                                                                           
     This is a reporting mechanism.  What we're trying to do                                                                    
     is  figure how  many people  have come  and gone,  what                                                                    
     were the  issues. So this  takes the  one-day snapshot.                                                                    
     We've  actually  given   them  risk-level  requirements                                                                    
     which  are  now  being  repealed.  We're  changing  the                                                                    
     pretrial and some  of the probation issues.  So it will                                                                    
     be interesting to me to see  how that all fits into it.                                                                    
     This is all probation/parole,  but it is the Department                                                                    
     of Corrections that is supposed  to report these things                                                                    
     on   these   different   outcomes   on   pretrial,   on                                                                    
     probation/parole.  For example,  they are  deleting the                                                                    
     requirement   to   take   the  precase   and   postcase                                                                    
     resolution   on  the   probationers/parolees  submitted                                                                    
     solely  for technical  violations. So  we're saying  we                                                                    
     don't want  to know that.  Well, I don't  know. Because                                                                    
     of technical  violation changes in  here, I  don't know                                                                    
     what that  all is going  to mean.  This is a  report so                                                                    
     that  we will  have information  based on  what they've                                                                    
     been doing. So as I've looked at this section, I'm not                                                                     
     100 percent sure that we're helping ourselves.                                                                             
CHAIR SHOWER  asked DOC what  the change  in the law  would cause                                                               
them to do as far as reporting.                                                                                                 
MS. WINKELMAN replied that the risk  level will still be in place                                                               
for  any inmate  in their  facility, as  well as  an offender  on                                                               
supervision,  probation  or parole.  They  did  risk levels  pre-                                                               
Senate Bill  91 and  will continue  to do  so. The  pretrial risk                                                               
assessment is different. That was  a risk assessment given to the                                                               
courts to  determine whether they  were going to be  released. SB                                                               
33 repeals the pretrial assessment.                                                                                             
4:37:29 PM                                                                                                                    
SENATOR REINBOLD referenced  Section 21 and asked  if the working                                                               
group  the  Department  of  Corrections  is  directed  to  report                                                               
quarterly to is the Criminal Justice Working Group.                                                                             
MS. WINKELMAN  said yes; she  understands that the  working group                                                               
is the  Alaska Criminal Justice  Commission and DOC  is providing                                                               
the commission this information.                                                                                                
SENATOR  REINBOLD  asked  if this  information  is  available  to                                                               
legislators.  She noted  that Senator  Costello continues  to ask                                                               
and not receive  certain data on arrests.  She identified someone                                                               
in the audience who knew what she was referring to.                                                                             
CHAIR SHOWER asked Ms. Goode to put herself on the record.                                                                      
4:38:46 PM                                                                                                                    
KELLY  GOODE,  Deputy  Commissioner,  Department  of  Corrections                                                               
(DOC),  Anchorage,   advised  that   she  had  been   to  Senator                                                               
Reinbold's office and  explained that the data  she has requested                                                               
is protected because  of the information it contains.  It went to                                                               
the university under an agreement,  but it cannot be distributed.                                                               
DOC wants  to work with legislators  and when there is  data they                                                               
can share, they will.                                                                                                           
SENATOR  REINBOLD expressed  frustration that  legislators aren't                                                               
getting the  data they need  to show that  crime is still  a very                                                               
serious issue.                                                                                                                  
MS. GOODE  said she understands  the committee wants  numbers and                                                               
data, and she'll see what can be found that will help.                                                                          
SENATOR REINBOLD  said that  if the working  group gets  it, then                                                               
they  as  legislators  should  get  it,  even  if  they  have  to                                                               
eliminate names  or whatever  they have  to do.  If it  is public                                                               
information, there are some rules there too.                                                                                    
MS. GOODE restated  that she would do some research  that and get                                                               
back to the committee.                                                                                                          
CHAIR SHOWER  echoed Senator Reinbold's sentiment.  The committee                                                               
needs information  if it is  going to make decisions  about which                                                               
direction  to   go.  "Crime  up,   crime  down.   Recidivism  up,                                                               
recidivism down. How do we know?" he said.                                                                                      
4:41:24 PM                                                                                                                    
CHAIR SHOWER held SB 34 in committee.                                                                                           
        SB  23-APPROP:SUPP. PAYMENTS OF PRIOR YEARS' PFD                                                                    
                 SB  24-PFD SUPPLEMENTAL PAYMENTS                                                                           
4:42:30 PM                                                                                                                    
CHAIR  SHOWER announced  the consideration  of SB  23 and  SB 24,                                                               
both sponsored  by the Senate  Rules Committee at the  request of                                                               
the governor. He  noted that the committee members  should have a                                                               
report  [February   16,  2019,  letter  to   the  committee  from                                                               
Commissioner Tangeman] that has  some information relating to the                                                               
permanent  fund  and the  dividend.  He  said the  committee  was                                                               
looking for a refresher on these  bills before looking at the new                                                               
information. He  wanted the committee  members familiar  with the                                                               
bills again  because he  wanted amendments  to be  submitted over                                                               
the next  week so they  could get  public testimony and  move the                                                               
bills out of committee.                                                                                                         
4:44:01 PM                                                                                                                    
BRUCE  TANGEMAN,  Commissioner,   Department  of  Revenue  (DOR),                                                               
Anchorage, Alaska, introduced himself.                                                                                          
BILL MILKS, Assistant Attorney General,  Department of Law (DOL),                                                               
Juneau, Alaska, introduced  himself and said he  was available to                                                               
answer questions                                                                                                                
ED KING, Chief Economist, Office  of Management and Budget (OMB),                                                               
Juneau,  Alaska,   introduced  himself  and  offered   to  answer                                                               
4:44:26 PM                                                                                                                    
COMMISSIONER TANGEMAN said SB 23 and  SB 24 are being referred to                                                               
as  the Backpay  PFD  bills. The  purpose is  to  make whole  the                                                               
dividend  amounts from  Fiscal  Year  (FY) 16,  17,  and 18.  The                                                               
governor's bill proposes  to pay out those amounts  over the next                                                               
three years. The  governor views it as a three-year  issue with a                                                               
three-year  solution. Instead  of  drawing the  full amount  down                                                               
from  the earnings  reserve to  pay  back the  amount, which  DOR                                                               
estimates to be $1.9 to $2  billion total, the proposal is to pay                                                               
the full amount out over the next three years.                                                                                  
COMMISSIONER  TANGEMAN  said the  simple  mechanics  are that  if                                                               
someone  received  a dividend  in  FY16  and qualifies  in  FY19,                                                               
$1,061  would be  added  to that  person's  dividend. If  someone                                                               
received a dividend  in FY17 and qualifies in  FY21, $1,289 would                                                               
be  added  to  that  person's dividend.  If  someone  received  a                                                               
dividend in FY18 and qualifies in  FY22, $1,328 would be added to                                                               
that  person's   dividend.  The   justification  is   that  while                                                               
dividends were  not paid out in  full over the past  three years,                                                               
the  balance  of  those  dividend amounts  sat  in  the  earnings                                                               
reserve. That  account saw a ten  percent return one year  and 12                                                               
percent  another, so  some healthy  revenue was  earned from  the                                                               
money that did  sit there. Governor Dunleavy  believes that money                                                               
is owed to  the citizens of Alaska who qualified  for a dividend.                                                               
Allowing it  to also  sit in  the earnings  reserve for  the next                                                               
three years is  an opportunity to earn more revenue  to defer the                                                               
total cost of about $2 billion.                                                                                                 
COMMISSIONER TANGEMAN  said there  were several questions  at the                                                               
last presentation  that he could  walk through. He asked  how the                                                               
committee wanted to proceed.                                                                                                    
CHAIR  SHOWER  asked  for  the   30,000  feet  view  of  the  new                                                               
information. The purpose  was to get the members up  to speed and                                                               
review the latest numbers and any changes.                                                                                      
COMMISSIONER TANGEMAN deferred to Mr. King.                                                                                     
4:47:19 PM                                                                                                                    
ED KING, Chief Economist, Office  of Management and Budget (OMB),                                                               
said one  of the  first questions  was how  the mechanics  in the                                                               
changes  of  the   fund  would  play  out.  He   put  together  a                                                               
transactional report  [on page  1] showing  the transfers  out of                                                               
the earnings reserve and the  transfers into the earnings reserve                                                               
as earnings are realized. The  left-hand column is the status quo                                                               
without SB 23 passing. The  right-hand column shows the financial                                                               
impacts of  SB 23. He was  trying to illustrate that  although $2                                                               
billion will  be drawn  out of  the account,  in addition  to the                                                               
Percent of Market  Value (POMV), income also goes  into the fund.                                                               
He was addressing  the issue of whether there is  enough money in                                                               
the  account  to fund  both  general  fund obligations  and  this                                                               
proposed payback.                                                                                                               
CHAIR SHOWER  said he wanted  to make this crystal  clear because                                                               
the committee went  around and around with this the  last time it                                                               
was  brought up.  This  would be  akin to  having  $20,000 in  an                                                               
account. Adding $4,100 brings it  up to $24,100. Taking the money                                                               
out for  the dividend brings the  account back to a  little under                                                               
$20,000. There was  a lot of confusion because they  are not just                                                               
taking several  billion out [of the  fund]. They would not  be at                                                               
$16 billion or, in his example,  with $16,000 in the account. The                                                               
account is close to where it  started because income is added and                                                               
subtracted.  It is  close to  a  wash. He  asked if  that was  an                                                               
accurate description.                                                                                                           
MR. KING answered yes.                                                                                                          
CHAIR SHOWER  said he wanted to  keep from going as  far down the                                                               
spin as last time.                                                                                                              
MR. KING  said the question  continues on  page 2 with  regard to                                                               
how the account balances would change  over time. He's shown in a                                                               
stacked  bar chart  the three  different parts  of the  fund, the                                                               
principal  account,  the earnings  reserve  account  (which is  a                                                               
holding account  for the earnings),  and the  unrealized account.                                                               
That is  appreciation on assets  that are  held by the  fund, but                                                               
not sold  yet. The money  can't be spent;  it's like equity  in a                                                               
house.  That  equity doesn't  sit  in  a checking  account  until                                                               
someone sells  the house. It shows  that in either case,  with or                                                               
without  this bill,  the fund  is  projected to  grow and  remain                                                               
healthy. It  should not be  confused with  the fact, as  shown on                                                               
the next page,  that the ERA balance is projected  to decline. It                                                               
should not be  confused with the idea that the  entire fund is in                                                               
4:50:31 PM                                                                                                                    
SENATOR REINBOLD  said it is hard  for her to imagine  that there                                                               
is going to be growth. A  lot of these are risky investments. She                                                               
doesn't want a  Pollyanna view, but this chart is  "you are going                                                               
to have your cake and eat it too" thinking.                                                                                     
COMMISSIONER TANGEMAN  said that  is a  good, healthy  concern to                                                               
have. Both  the dividend  calculation and  POMV calculation  is a                                                               
five-year  average.  DOR  used  a  five-year  average  to  absorb                                                               
corrections  in  the market.  While  they  are not  projecting  a                                                               
correction in the  market, the assumptions by  the Permanent Fund                                                               
account for things like that. It  is part of the Alaska Permanent                                                               
Fund Corporation's estimated 6.555  percent return. There will be                                                               
market  corrections.  That is  why  they  are using  a  five-year                                                               
average for both the POMV and permanent fund dividend.                                                                          
4:51:46 PM                                                                                                                    
CHAIR SHOWER said  that on page 3, the red  bar, which represents                                                               
SB  23 passing,  shows the  ERA balance  declining over  time. He                                                               
asked why  they showed the blue  bar, which represents SB  23 not                                                               
passing, also  going down.  He thought they  should be  seeing an                                                               
increase if SB 23 does not pass.                                                                                                
4:52:08 PM                                                                                                                    
MR. KING said he put the other charts  on page 2 to show there is                                                               
a difference  between the  entire fund balance  vs. just  the ERA                                                               
balance. The  way that the  mechanisms currently work,  with POMV                                                               
and inflation proofing and the  Permanent Fund projections, there                                                               
isn't enough  earnings to satisfy  all the requirements.  The ERA                                                               
balance  is  declining, even  with  the  status quo  because  the                                                               
principal account  is growing. The  money is not  evaporating. It                                                               
is migrating  to the other  account. The  reason why the  red bar                                                               
declines more  quickly is because  when there is a  smaller asset                                                               
base, there are smaller earnings;  the inflation proofing balance                                                               
does not  change because the  principal account is  the principal                                                               
account,  regardless,  and  the  inflation  proofing  requirement                                                               
doesn't change, but  the POMV number does. The  entire balance of                                                               
the account changes with those dynamics.                                                                                        
CHAIR  SHOWER asked,  when talking  about the  difference between                                                               
the ERA to  the principal balance, how that is  reinvested or how                                                               
that ends  up back  in. He  asked him to  describe for  the folks                                                               
back home why  he sees that blue bar increasing.  He said you did                                                               
a good  job explaining  the Earnings  Reserve Account  itself and                                                               
he'd like the same thing for  the process with the permanent fund                                                               
principal, the corpus itself.                                                                                                   
MR.  KING responded  that the  principal account  of the  fund is                                                               
protected  by  the  constitution.  It  receives  deposits  of  25                                                               
percent  or more  of all  royalties the  state collects.  All the                                                               
earnings on  that principal account  flow into a  holding account                                                               
called  the earnings  reserve. When  the  legislature decides  it                                                               
wants  to protect  some of  those earnings,  they move  the money                                                               
into the  principal account in  order to protect that  money from                                                               
future appropriations.  The statute  requires a transfer  of that                                                               
kind  to account  for inflation  proofing. The  principal account                                                               
increases   because   of   royalties  and   inflation   proofing.                                                               
Historically,  when   the  Earnings   Reserve  Account   has  had                                                               
additional funds  in it, the  legislatures of the past  have done                                                               
special appropriations to move that money.                                                                                      
4:54:42 PM                                                                                                                    
SENATOR  MICCICHE said  he heard  what Mr.  King is  saying about                                                               
assuming a 6.55 percent total  return and a 6.4 percent statutory                                                               
return. He asked  if he injected a 2008 into  his modeling, which                                                               
would take some time to  recover from, especially in the earnings                                                               
reserve,  where   they  had  that   down  very  close   to  zero,                                                               
uncomfortably  close to  zero. He  said  he doesn't  see that  in                                                               
MR. KING replied that it is  not in here because it is portraying                                                               
the  average return  used by  the Permanent  Fund Corporation  to                                                               
demonstrate the fund. As DOR  does their Monte Carlo simulations,                                                               
they   look   at   different  iterations   that   include   these                                                               
corrections. A 2008-type correction  happens once every ten years                                                               
or so. Then  there are years of 20 percent  growth. When there is                                                               
volatility  of  negative 18  percent  in  one  year and  plus  22                                                               
percent in  another year, the  fund is saying in  its projection,                                                               
that over time  it results in a 6.5 percent  return. He said he'd                                                               
show  those iterations  in Finance  to show  how that  volatility                                                               
plays  out. In  some situations,  the permanent  fund only  grows                                                               
with inflation  and in other  situations, the fund grows  to over                                                               
$100 billion.  They don't  know which world  they will  be living                                                               
in, so they have to make a guess and play to those average.                                                                     
SENATOR MICCICHE said he understands  and looks forward to seeing                                                               
those. He  has an investment account  and over 40 years  has seen                                                               
the worst of the worst and  the best of the best. Every committee                                                               
that deals  with SB  23 and  SB 24  becomes a  finance committee.                                                               
Normally  the   committee  is  policy  related,   but  it's  very                                                               
difficult in  this case. He  asked Mr.  King if he  could provide                                                               
these charts with more granularity.                                                                                             
CHAIR SHOWER  asked him  to break  the charts  down for  the next                                                               
4:57:33 PM                                                                                                                    
SENATOR  REINBOLD echoed  Senator Micciche's  comments about  the                                                               
need for more  granular data. She said Mr. King  said this is the                                                               
average return the corporation is using  and she wants to know if                                                               
statistically,  it  is  based  on  what  happened  in  the  past,                                                               
including  2008. He  said they  will have  to guess  and play  to                                                               
averages  and she  wants  to know  what formula  he  is using  to                                                               
MR.  KING replied  that  the  corporation uses  what  it calls  a                                                               
geometric  mean.  It  is  the average  of  all  future  projected                                                               
returns. The  fund uses a  consultant to generate  those returns.                                                               
The history  of the fund,  including the 2008 correction  and the                                                               
bad years in  the early 2000s, is overwhelmed by  the really good                                                               
year. Last year's  return was 10.74 percent. Some  years have had                                                               
a return  of 22 percent. The  average return of the  40-year fund                                                               
history is over  9 percent. The fund is looking  forward to a 6.5                                                               
percent return.  The corporation  is providing  a number  that is                                                               
more conservative  than the  historic performance  would suggest,                                                               
but it probably has good reasons for doing that.                                                                                
MR. KING said  that because of the way that  interest works, a 10                                                               
percent return and  a 10 percent loss are  not equivalent because                                                               
of  the  way  compounding  works. The  arithmetic  mean  is  also                                                               
important.  The corporation's  6.5 percent  geometric mean  works                                                               
out  to about  a  7.65  percent arithmetic  mean.  When they  are                                                               
running  simulations, they  are  ending up  with situations  with                                                               
better returns that more closely  relate to historic performance,                                                               
with  some occasional  corrections.  The  standard deviation  the                                                               
corporation is using  is quite wide. They are trying  to pin down                                                               
whether that  distribution makes the  most sense for  running the                                                               
CHAIR SHOWER asked that since they  were running out of time, was                                                               
there anything else to highlight.                                                                                               
5:00:38 PM                                                                                                                    
MR.  KING  replied that  they  appreciate  that there  are  risks                                                               
associated  with  the  fund  balance,   whether  they  take  this                                                               
additional  draw or  not.  It is  an  important conversation.  He                                                               
would like to  highlight that the governor's opinion  is that the                                                               
money that he is talking about  repaying to the people should not                                                               
be in the fund at all.  That is an important conversation to have                                                               
at a later date.                                                                                                                
MR. KING  pointed out that  the bill  needs a correction  for the                                                               
FY22  number.  Where it  reads  1,328,  it  should be  1,388.  He                                                               
thanked Legislative Finance for identifying that.                                                                               
SENATOR MICCICHE  said he is looking  at the reality at  how they                                                               
are paying  bills today and  how he  is expecting that  they will                                                               
pay the bills at the end of the  session. He asked if it would be                                                               
helpful if he plugged in some  assumptions, so they don't have to                                                               
model on  a wide  band. If  they would like  to meet,  he thought                                                               
they could  model a few specific  numbers and see how  that looks                                                               
over time. They  cannot assume what the legislature  could do. He                                                               
is  worried about  that because  it  would create  stress on  the                                                               
earning reserve  and potentially the  corpus itself. If  they got                                                               
together, he might  be able to help DOR streamline  their work on                                                               
modeling stress testing.                                                                                                        
SENATOR  REINBOLD  said she  wanted  to  reiterate the  need  for                                                               
better granular data. These charts  are not working for her. They                                                               
need to be historically accurate  and include the POMV, including                                                               
the unstructured draw with SB 23  and how they are modeling those                                                               
projections.  This   is  a  sensitive   issue.  The   people  are                                                               
listening.  The populist  view  is pay  them  all back,  everyone                                                               
wants their money. They cannot get  it wrong. However, it must be                                                               
a  permanent  fund  for  future generations.  She  asked  DOR  to                                                               
provide the  committee with  good data  because this,  along with                                                               
the crime legislation, is being watched closely.                                                                                
5:03:40 PM                                                                                                                    
CHAIR SHOWER held SB 23 and SB 24 in committee.                                                                                 
5:04:16 PM                                                                                                                    
There being  no further  business to  come before  the committee,                                                               
Chair  Shower   adjourned  the  Senate  State   Affairs  Standing                                                               
Committee at 5:04 p.m.                                                                                                          

Document Name Date/Time Subjects
SB 34 Transmittal Letter.pdf SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SB 34
M.pdf SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SB 34
SB 34 Version m
sb34 version m
SB 34 - Probation and Parole Sectional.pdf SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SB 34
SB 34 Highlights.pdf SJUD 3/8/2019 1:30:00 PM
SSTA 2/7/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SB 34
SB0034-1-2-012319-LAW-N.PDF SSTA 2/21/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SB 34
SB0034-2-2-012319-COR-Y.PDF SSTA 2/21/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SB 34
SB0034-3-2-012319-COR-Y.PDF SSTA 2/21/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SB 34
SB91-GOA Bills Matrix 1-30-19.pdf SSTA 2/26/2019 3:30:00 PM
SB 23 TL - Senate President.pdf SSTA 2/26/2019 3:30:00 PM
SB0023A.PDF SSTA 2/5/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SSTA 3/5/2019 3:30:00 PM
SSTA 3/7/2019 3:30:00 PM
SSTA 3/12/2019 3:30:00 PM
SB 23
SB23 Sectional.pdf SSTA 2/5/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SSTA 3/5/2019 3:30:00 PM
SSTA 3/7/2019 3:30:00 PM
SSTA 3/12/2019 3:30:00 PM
SB 23
SB 24 TL - Senate President.pdf SSTA 2/5/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SSTA 3/5/2019 3:30:00 PM
SB 24
SB0024A.PDF SSTA 2/5/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SSTA 3/5/2019 3:30:00 PM
SB 24
SB24 Sectional.pdf SSTA 2/5/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SSTA 3/5/2019 3:30:00 PM
SSTA 3/7/2019 3:30:00 PM
SSTA 3/12/2019 3:30:00 PM
SB 24
SB 24 Fiscal Note.PDF SSTA 2/5/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SSTA 3/5/2019 3:30:00 PM
SSTA 3/7/2019 3:30:00 PM
SSTA 3/12/2019 3:30:00 PM
SB 24
SB 23 and 24 presentation.pptx SSTA 2/5/2019 3:30:00 PM
SSTA 2/26/2019 3:30:00 PM
SSTA 2/28/2019 3:30:00 PM
SSTA 3/5/2019 3:30:00 PM
SSTA 3/7/2019 3:30:00 PM
SSTA 3/12/2019 3:30:00 PM
SB 23
SB 24
DOR S STA Letter.2.26.2019.pdf SSTA 2/26/2019 3:30:00 PM
DOR committee response questions