02/23/2012 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB178 | |
| SCR22 | |
| SCR19 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 178 | TELECONFERENCED | |
| *+ | SCR 22 | TELECONFERENCED | |
| *+ | SCR 19 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 23, 2012
9:02 a.m.
MEMBERS PRESENT
Senator Bill Wielechowski, Chair
Senator Joe Paskvan, Vice Chair
Senator Albert Kookesh
Senator Kevin Meyer
Senator Cathy Giessel
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 178
"An Act relating to the Alaska operating endowment fund; and
providing for an effective date."
- HEARD & HELD
SENATE CONCURRENT RESOLUTION NO. 22
Establishing and relating to the Alaska Arctic Policy
Commission.
- HEARD & HELD
SENATE CONCURRENT RESOLUTION NO. 19
Proclaiming September 24, 2012, to be United States Marshals
Day.
- MOVED SCR 19 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB 178
SHORT TITLE: ALASKA OPERATING ENDOWMENT FUND
SPONSOR(s): FINANCE
01/27/12 (S) READ THE FIRST TIME - REFERRALS
01/27/12 (S) STA, FIN
02/23/12 (S) STA AT 9:00 AM FAHRENKAMP 203
BILL: SCR 22
SHORT TITLE: ALASKA ARCTIC POLICY COMMISSION
SPONSOR(s): FINANCE BY REQUEST OF AK NORTHERN WATERS TASK FORCE
02/06/12 (S) READ THE FIRST TIME - REFERRALS
02/06/12 (S) STA, FIN
02/23/12 (S) STA AT 9:00 AM FAHRENKAMP 203
BILL: SCR 19
SHORT TITLE: PROCLAIMING UNITED STATES MARSHALS DAY
SPONSOR(s): DYSON
01/18/12 (S) READ THE FIRST TIME - REFERRALS
01/18/12 (S) STA
02/23/12 (S) STA AT 9:00 AM FAHRENKAMP 203
WITNESS REGISTER
SENATOR BERT STEDMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced SB 178 as co-chairman of the
Senate Finance Standing Committee, sponsor of the bill.
ANGELA RODELL, Deputy Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Addressed the fiscal note for SB 178.
WESTON EILER, Staff
Senator Burt Stedman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SCR 22 on behalf of the Senate
Finance Standing Committee.
SENATOR FRED DYSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SCR 19.
CHUCK KOPP, Staff
Senator Fred Dyson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on SCR 19 on behalf of the
sponsor.
ACTION NARRATIVE
9:02:37 AM
CHAIR BILL WIELECHOWSKI called the Senate State Affairs Standing
Committee meeting to order at 9:02 a.m. Present at the call to
order were Senators Giessel, Meyer, and Chair Wielechowski.
Senators Kookesh and Paskvan arrived shortly thereafter.
SB 178-ALASKA OPERATING ENDOWMENT FUND
9:03:58 AM
CHAIR WIELECHOWSKI announced that the first bill before the
committee was SB 178, which would create an Alaska Operating
Endowment Fund as a depository for the state's savings to
generate revenue for the benefit of future generations of
Alaskans.
SENATOR BERT STEDMAN, as co-chairman of the Senate Finance
Committee, sponsor of SB 178, introduced the bill. He said that
currently, Alaska has amassed excess billions of dollars in
liquidity outside of the Permanent Fund and has a unique
opportunity to create a fund source for future operations of the
state. Previous discussions, even five years ago, were about
when the legislature would withdraw funds from the Permanent
Fund for the operations of the state. He explained that the bill
would set aside $15 billion and allow a revenue stream of 4.5
percent to go into the general fund, if needed. In the future if
funds are needed, the legislature would have flexibility to meet
the needs of the state. The bill would also block future
legislators from taking billions out of savings and would force
future legislators to make tough decisions to reduce
expenditures. He summarized that the bill would permanently
protect the dividend stream of the Alaska Permanent Fund, help
guide future legislators in protecting the vast quantity of
Alaska's assets, and leave flexibility for future legislators to
appropriated funds, when needed, where they are needed.
9:08:44 AM
SENATOR STEDMAN addressed the Department of Revenue fiscal note,
which he said is large, but the legislature is already managing
those large amounts. He concluded by saying that it was time to
have this conversation in the legislature.
SENATOR GIESSEL referred to a chart in the members' packets. She
noted that point five on the chart says that future returns are
based on 2011 Callan capital market assumptions and median
expected returns. She questioned whether the Callan earnings
assumptions were high at 7.5 percent.
SENATOR STEDMAN explained that the basic allocation was 60
percent equities and 40 percent bonds. The forward expectations
from Callan in the financial markets have been lowered for the
next decade. By capping expenditures at 4.5 percent, anything
above that would be re-invested. Over time, on average, the
investment should be inflation proofed. Callan's concern is that
bond market yields have been so suppressed that when interest
rates rise, the bond market will have great losses. He said 4.5
percent payout was the starting discussion point and might be on
the low side.
SENATOR MEYER said he liked the concept of the bill and it
reminded him of the Percent of Market Value (POMV) bill in 2004.
He asked what oil price is being used in calculations for the FY
2012 and FY 2013 budgets. He did not know if tying up all
savings would be prudent if the price of oil drops. He wondered
if the state should try to reduce its debt first.
9:15:29 AM
SENATOR STEDMAN said the initial payout can be modified. There
is concern with break-even oil price and oil production. He
countered that the bill would force budget discipline. There is
more than $15 billion in cash which is open for discussion and
could be adjusted as the legislature sees fit. He maintained
that starting out with $15 billion would protect most of the
state's savings, but would provide the ability to build savings
outside of the endowment to help with the operating budget.
SENATOR STEDMAN maintained that the retirement system debt
obligations would have to be a separate discussion. There has to
be a balance. All large issues would be put on the table at the
same time and decisions made on how to deal with them.
SENATOR MEYER agreed that it does force fiscal responsibility.
He asked what oil price was used to determine the budget.
SENATOR STEDMAN said $109 per barrel was used for the projected
revenue stream. He said he would have to check on the break even
oil price, which he thought was around $80 per barrel. It would
be beneficial to the state to have a lower break even oil price.
SENATOR WIELECHOWSKI asked how secure the fund would be. He
wondered if in a year the legislature could modify the size of
the appropriation.
SENATOR STEDMAN stated that the fund would be in statute and
could be changed by future legislation. If could also become a
Constitutional Budget Amendment similar to the Permanent Fund.
He opined it would be a better policy discussion in the form of
a statute.
9:20:47 AM
SENATOR WIELECHOWSKI asked if it the bill is a dedicated fund
and if there could be a legal challenge about binding future
legislatures.
SENATOR STEDMAN replied that he had not sought a legal opinion;
however, it is not a dedicated fund because it draws from
general funds.
ANGELA RODELL, Deputy Commissioner, Department of Revenue,
addressed the fiscal note for SB 178, which has an appropriation
request for $3,150,000. She related that most of the money is
already being spent by other funds. She pointed out that the
asset allocation contemplated by the bill would require more
external management because more of the monies would be moved
into an equity position and then moved into a more active
external management position.
SENATOR MEYER summarized that the statutory reserve account
would go for a year or two with losses and then hope for gains
in the future. He asked if the debt ratio was good.
MS. RODELL said it was very good.
9:24:17 AM
SENATOR PASKVAN suggested using an "institutional prudent
investor fund" method. He commented on an article about true
risk over time where the real risk is in bonds, rather than
equities. He suggested concentrating more in equities.
SENATOR WIELECHOWSKI asked if the administration has a position
on the bill.
MS. RODELL said not at this time.
SENATOR WIELECHOWSKI understood that the money in the fiscal
note is currently being spent elsewhere.
MS. RODELL said that was correct.
SENATOR WIELECHOWSKI asked if any analysis was done to determine
whether the fund was a dedicated fund.
MS. RODELL said no.
SENATOR WIELECHOWSKI set SB 178 aside.
SCR 22-ALASKA ARCTIC POLICY COMMISSION
9:27:12 AM
SENATOR WIELECHOWSKI announced the consideration of SCR 22,
which would establish an Alaska Arctic Policy Commission to help
create a state Arctic policy and address the many issues raised
by a changing Arctic landscape.
WESTON EILER, staff, Senator Burt Stedman, presented SCR 22 on
behalf of the Senate Finance Committee. He read from the
following sponsor statement:
Senate Concurrent Resolution (SCR) 22 establishes the
Alaska Arctic Policy Commission within the legislative
branch. Over the course of two years, the 16-member
commission will engage state government, communities,
and stakeholders on northern waters and Arctic issues.
SCR 22 continues the legislature's work to establish
an official Arctic policy for the State of Alaska, and
address a diverse set of issues facing the state with
changes in the Arctic.
In January of 2012, the Alaskan Northern Waters Task
Force (ANWTF) presented its findings to the
legislature. The Task Force identified opportunities
and challenges in a changing Arctic, and made
recommendations in six policy areas: Governance, Oil
and Gas Development, Marine Transportation, Fisheries,
Infrastructure, and Research. The ANWTF Report is the
most detailed assessment of Arctic issues by the
legislature to date, but more work is needed to fully
assess the multitude of issues brought forward by the
Task Force and craft an official Arctic policy for
Alaska. Most Northern nations and territories already
have established Arctic policies to help address
changes and development in the Arctic region.
Alaska has an enormous stake in the Arctic and needs
to adopt a strategic and targeted Arctic policy.
Advancing Alaska's interest in the Arctic will require
sustained efforts by state government. This resolution
is a targeted next step to continue the legislature's
work in this area and help position Alaska at the
forefront of our nation's Arctic policy.
SENATOR GIESSEL thought the bill was a great idea. She referred
to page 3, line 14, item (G), and asked what "an association of
a local government" means.
MR. EILER explained that wording was included to allow for
flexibility for unorganized boroughs. All members would be
appointed jointly by the Speaker of the House and the Senate
President.
SENATOR GIESSEL questioned line 17, (I), the wording "one member
representing an international Arctic organization."
MR. EILER replied that the bill would allow for a representative
from one of the international stakeholder groups.
SENATOR WIELECHOWSKI set SCR 22 aside.
SCR 19-PROCLAIMING UNITED STATES MARSHALS DAY
9:32:40 AM
SENATOR WIELECHOWSKI stated that the next item before the
committee was SCR 19, which would proclaim September 24, 2012,
as United States Marshal's Day.
SENATOR FRED DYSON, sponsor of SCR 19, introduced the
resolution. He related that in 1789 the federal government
created the U.S. Marshal Service. After the Alaska Purchase, the
Marshals were given the job of law enforcement in Alaska. This
year is the 128th year of U.S. Marshal presence in Alaska. The
resolution would provide for a one-time-only U.S. Marshal's Day
to let people know about their contributions. Eight Marshals
have died in service to Alaska. U.S. Marshals work closely with
other Alaska law enforcement agencies.
CHUCK KOPP, staff to Senator Dyson, noted the significance of
the date. On September 24, 1789, Congress appointed the U.S.
Marshall Service.
9:35:25 AM
SENATOR WIELECHOWSKI asked for a motion to move SCR 19, version
M, from committee.
SENATOR PASKVAN moved to report SCR 19 from committee with
individual recommendations and the attached zero fiscal note.
SENATOR WIELECHOWSKI announced that without objection, SCR 19
was reported from the Senate State Affairs Standing Committee.
9:36:55 AM
There being no further business to come before the committee,
Chair Wielechowski adjourned the Senate State Affairs Standing
Committee at 9:36 a.m.
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