00 CS FOR HOUSE BILL NO. 278(FIN) 01 "An Act relating to accrued actuarial liabilities of government retirement systems; 02 relating to the Alaska Municipal Bond Bank Authority; permitting the Alaska 03 Municipal Bond Bank Authority or a subsidiary of the authority to assist state and 04 municipal governmental employers by issuing bonds and other commercial paper to 05 enable the governmental employers to prepay all or a portion of the governmental 06 employers' shares of the unfunded accrued actuarial liabilities of retirement systems 07 and authorizing governmental employers to contract with and to issue bonds, notes, or 08 commercial paper to the authority or its subsidiary corporation for that purpose; and 09 providing for an effective date." 10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 11  * Section 1. AS 14.25.070 is amended by adding a new subsection to read: 12 (d) An employer may prepay all of the employer's share of any accrued 01 actuarial liability to the plan in a lump sum. The commissioner of administration may, 02 by regulation, permit an employer to prepay a portion of the employer's share of any 03 accrued actuarial liability in a lump sum and establish a minimum amount for the 04 lump sum payment of a portion. The administrator shall charge to the employer 05 appropriate and reasonable administrative costs to the plan attributable to a lump sum 06 payment that are not greater than administrative costs applied to other employer 07 contributions. If an employer is grouped with any other employer in accounting for 08 contributions and the employer makes a lump sum payment, the lump sum payment 09 shall be held separately and accounted for in accordance with regulations adopted by 10 the commissioner. The regulations must provide for crediting to each lump sum 11 payment account all earnings and losses received from investment of that lump sum 12 payment. The lump sum payment shall be used solely to offset contributions under this 13 section required of the employer that made the lump sum payment, taking into account 14 earnings and losses from its investment. A payment made by an employer under this 15 subsection, together with all earnings and losses from investment of that payment, 16 may not be considered in calculating that employer's share of any discretionary 17 payment authorized by the state that benefits multiple employers. 18  * Sec. 2. AS 29.47 is amended by adding a new section to read: 19 Sec. 29.47.480. Accrued actuarial liabilities of retirement systems. (a) A 20 municipality, or two or more municipalities jointly, may enter into a lease or other 21 contractual agreement with a trustee or the Alaska Municipal Bond Bank Authority or 22 a subsidiary of the authority under which the authority, subsidiary, or trustee will issue 23 certificates of participation or contractual obligations to prepay each participating 24 municipality's share of the accrued actuarial liabilities of retirement systems. Bonds, 25 notes, commercial paper, certificates of participation, or contractual obligations issued 26 by the trustee or the Alaska Municipal Bond Bank Authority or a subsidiary of the 27 authority must be secured and payable as provided in the agreement. The agreement 28 may provide for lease reserves or other reserves and for protective covenants. 29 (b) Amounts paid by a participating municipality under a lease or other 30 agreement entered into under this section, together with proceeds of the bonds, notes, 31 commercial paper, certificates of participation, or contractual obligations, and interest 01 or earnings, may be pooled into one or more funds or accounts, including one or more 02 debt service funds. The assets in any of the funds or accounts may be pledged to the 03 holders of the bonds, notes, commercial paper, certificates of participation, or 04 contractual obligations. 05 (c) A municipality may enter into a funds diversion agreement with a state 06 agency regarding payment of money on behalf of the municipality that may be applied 07 to the payment of a lease or other contractual obligation of the municipality in 08 connection with bonds, notes, commercial paper, certificates of participation, or 09 contractual obligations issued under this section. The funds diversion agreement must 10 provide, subject to any conditions set out in the agreement, that all or a portion of the 11 funds otherwise payable to the municipality by the state agency shall be paid directly 12 to the trustee, Alaska Bond Bank Authority, or subsidiary that issued the bonds, notes, 13 commercial paper, certificates of participation, or contractual obligations to satisfy, in 14 whole or part, the municipality's obligations to the trustee, authority, or subsidiary. If, 15 for any reason, a state agency that has entered into a funds diversion agreement is not 16 able to make a payment to the trustee or the Alaska Municipal Bond Bank Authority 17 or its subsidiary as provided under the funds diversion agreement, the state agency 18 shall give notice of that fact to the municipality within 30 days after a determination is 19 made that the agency will not make the payment. A funds diversion agreement is 20 irrevocable and must remain in effect until the municipality's obligations in connection 21 with the bonds, notes, commercial paper, certificates of participation, or contractual 22 obligations are satisfied. Nothing in this subsection or in a funds diversion agreement 23 entered into under this subsection obligates the state or a state agency to pay any 24 amount to or on behalf of a municipality that the municipality is not otherwise entitled 25 to receive or to make any payments of principal or interest on the bonds, notes, 26 commercial paper, certificates of participation, or contractual obligations. 27  * Sec. 3. AS 39.35.100(b)(3) is amended to read: 28 (3) A separate account for each employer shall be maintained. The 29 account shall be credited with contributions of the employer. Except as provided in  30 AS 39.35.270(d), this [THIS] account shall be charged with the employer's actuarial 31 charge for pension, death benefits, and other benefits paid under this plan to or on 01 behalf of the employee of the employer. Except as provided in AS 39.35.270(d),  02 after [AFTER] an allowance for interest credited to employee contribution accounts 03 and employee savings accounts, the investment income of the pension fund shall be 04 allocated to the retirement reserve account and to each employer asset share account 05 according to the ratio that the average of the assets in the account as of the beginning 06 and as of the end of the fiscal year bears to the total of the average balance of the 07 retirement reserve account and all employer accounts. 08  * Sec. 4. AS 39.35.100(b)(4) is amended to read: 09 (4) An expense account shall be maintained for the plan. Except as  10 provided in AS 39.35.270(d), this [THIS] account shall be charged with all 11 disbursements representing administrative expenses incurred by the plan. At the end of 12 the year, the expense account shall be allocated to each employer in accordance with 13 (3) of this subsection. Expenditures from this account shall be included in the 14 governor's budget for each fiscal year and are subject to approval by the legislature. 15  * Sec. 5. AS 39.35.270 is amended by adding a new subsection to read: 16 (d) An employer may prepay all of the employer's share of any accrued 17 actuarial liability to the plan in a lump sum. The commissioner may, by regulation, 18 permit an employer to prepay a portion of the employer's share of any accrued 19 actuarial liability in a lump sum and establish a minimum amount for the lump sum 20 payment of a portion. The commissioner shall charge to the employer appropriate and 21 reasonable costs to the plan attributable to a lump sum payment that are not greater 22 than administrative costs applied to other employer contributions. If an employer 23 makes a lump sum payment, the lump sum payment shall be held separately and 24 accounted for in accordance with regulations adopted by the commissioner. The 25 regulations must provide for crediting to each lump sum payment account all earnings 26 and losses received from investment of that lump sum payment. The lump sum 27 payment shall be used solely to offset contributions under this section required of the 28 employer that made the lump sum payment, taking into account earnings and losses 29 from its investment. A payment made by an employer under this subsection, together 30 with all earnings and losses from investment of that payment, may not be considered 31 in calculating that employer's share of any discretionary payment authorized by the 01 state that benefits multiple employers. 02  * Sec. 6. AS 44.85.010 is amended to read: 03 Sec. 44.85.010. Legislative policy. (a) It is the policy of the state to  04 (1) [TO] foster and promote by all reasonable means the provision of 05 adequate capital markets and facilities for borrowing money by municipalities in the 06 state to finance capital improvements or for other authorized purposes, to assist these 07 municipalities in fulfilling their capital needs and requirements by use of borrowed 08 money within statutory interest rate or cost of borrowing limitations, to the greatest 09 extent possible to reduce costs of borrowed money to taxpayers and residents of the 10 state, and equally to encourage continued investor interest in the purchase of bonds or 11 notes of municipalities as sound and preferred securities for investment; 12 (2) [TO] encourage municipalities to continue their independent 13 undertakings and financing of capital improvements and other authorized purposes 14 and to assist them by making capital funds available at reduced interest costs for 15 orderly financing of capital improvements and other purposes especially during 16 periods of restricted credit or money supply, particularly for those municipalities not 17 otherwise able to borrow for capital needs; 18 (3) [TO] assist municipalities to provide for adequate insurance 19 coverage by authorizing the Alaska Municipal Bond Bank Authority to issue 20 negotiable or nonnegotiable revenue bonds, notes, or certificates of participation either 21 directly or through an entity it may create for the purpose of providing a self-insurance 22 program for municipalities or municipal joint insurance arrangements organized under 23 AS 21.76; 24 (4) assist governmental employers to prepay all or a portion of  25 their share of unfunded accrued actuarial liabilities of retirement systems in an  26 effort to reduce their costs of satisfying their contractual obligations to provide  27 retirement and other benefits to public employees through the issuance of bonds,  28 notes, or commercial paper by the bond bank authority or by a subsidiary  29 corporation created by the bond bank authority under AS 44.85.085. 30 (b) The legislature further declares that 31 (1) the exercise of the powers of the state in the interest of its 01 municipalities and in the interest of public employees of the state and of its  02 municipalities is required to further and implement the policies declared in (a) of this 03 section by authorizing the creation of a state bond bank authority as a body corporate 04 and politic that will have full powers to borrow money and to issue its bonds and notes 05 to make capital funds available for borrowing by municipalities and for borrowing  06 by or on behalf of governmental employers, by authorizing governmental  07 employers to contract with the bond bank authority or with a subsidiary created  08 under AS 44.85.085 for the purpose of reducing future costs of providing  09 retirement and other benefits to employees, and by granting broad powers to the 10 bond bank authority to carry out the declared policies, which are in the public interest 11 of the state and its taxpayers and residents; 12 (2) state funds should be applied or authorized to be paid to a state 13 bond bank authority only to provide adequate assurance and security to the holders of 14 the bonds or notes of the bond bank authority; 15 (3) the bond bank authority should conduct its operations to provide 16 the lowest rates in terms of borrowing to municipalities as is consistent with a self- 17 supporting operation with no expectation of subsidization with state funds; the 18 legislature does not intend that the bond bank authority be utilized as a means to 19 finance municipalities beyond their capability to meet repayment schedules and debt 20 service requirements of bonds or notes;  21 (4) the bond bank authority or its subsidiary should conduct its  22 operations to provide the lowest rates in terms of borrowing to governmental  23 employers under AS 44.85.085 and 44.85.086 as is consistent with a self- 24 supporting operation with no expectation of subsidization with state funds; the  25 legislature does not intend that the bond bank authority or its subsidiary be  26 utilized as a means to finance governmental employers under AS 44.85.085 and  27 44.85.086 beyond their capability to meet repayment schedules and debt service  28 requirements of bonds, notes, commercial paper, or contractual obligations to the  29 bond bank authority or its subsidiary. 30  * Sec. 7. AS 44.85.080 is amended to read: 31 Sec. 44.85.080. Powers of bond bank authority. The bond bank authority 01 may 02 (1) sue and be sued; 03 (2) adopt and alter an official seal; 04 (3) make and enforce bylaws and regulations for the conduct of its 05 business and for the use of its services and facilities; 06 (4) maintain an office at any place in the state; 07 (5) acquire, hold, use, and dispose of its income, revenues, funds, and 08 money; 09 (6) acquire, rent, lease, hold, use, and dispose of other personal 10 property for its purposes; 11 (7) subject to AS 44.85.100(b), borrow money and issue its negotiable 12 bonds or notes and provide for and secure their payment, provide for the rights of their 13 holders and purchase, hold and dispose of any of its bonds or notes; 14 (8) fix and revise from time to time and charge and collect fees and 15 charges for the use of its services or facilities; 16 (9) accept gifts or grants from the United States, or from any 17 governmental unit or person, firm, or corporation, carry out the terms or provisions or 18 make agreements with respect to the gifts or grants, and do all things necessary, 19 useful, desirable, or convenient in connection with procuring, accepting, or disposing 20 of the gifts or grants; 21 (10) do anything authorized by this chapter, through its officers, 22 agents, or employees or by contracts with a person; 23 (11) make, enter into, and enforce all contracts necessary, convenient, 24 or desirable for the purposes of the bond bank authority or pertaining to a loan to a 25 political subdivision, a purchase or sale of municipal bonds or other investments, or 26 the performance of its duties and execution of any of its powers under this chapter; 27 (12) purchase or hold municipal bonds at prices and in a manner the 28 bond bank authority considers advisable, and sell municipal bonds acquired or held by 29 it at prices without relation to cost and in a manner the bond bank authority considers 30 advisable; 31 (13) invest funds or money of the bond bank authority not required at 01 the time of investment for loan to political subdivisions for the purchase of municipal 02 bonds, in the same manner as permitted for investment of funds belonging to the state, 03 except as otherwise provided in this chapter; 04 (14) prescribe the form of application or procedure required of a 05 political subdivision for a loan or purchase of its municipal bonds, fix the terms and 06 conditions of the loan or purchase, and enter into agreements with political 07 subdivisions with respect to loans or purchases; 08 (15) render services to a political subdivision in connection with a 09 public or private sale of its municipal bonds, including advisory and other services, 10 and charge for services rendered; 11 (16) charge for its costs and services in review or consideration of a 12 proposed loan to a political subdivision or purchase by the bond bank authority of 13 municipal bonds of the political subdivision, whether or not the loan is made or the 14 municipal bonds purchased; 15 (17) fix and establish terms and provisions with respect to a purchase 16 of municipal bonds by the bond bank authority, including date and maturities of the 17 bonds, provisions as to redemption or payment before maturity, and any other matters 18 which in connection with the purchase are necessary, desirable, or advisable in the 19 judgment of the bond bank authority; 20 (18) procure insurance against any losses in connection with its 21 property, operations, or assets in amounts and from insurers as it considers desirable; 22 (19) to the extent permitted under its contracts with the holders of 23 bonds or notes of the bond bank authority, consent to modification of the rate of 24 interest, time and payment of installment of principal or interest, security or any other 25 term of a bond or note, contract or agreement of any kind to which the bond bank 26 authority is a party; 27 (20) by regulation, create a new entity or new entities for the purpose 28 of issuing negotiable or nonnegotiable revenue bonds, notes, or certificates of 29 participation to finance a self-insurance program for municipalities or municipal joint 30 insurance arrangements organized under AS 21.76 or to provide assistance to  31 governmental employers under AS 44.85.085(a); the powers, duties, and 01 membership of the new entity or entities shall be limited to the powers, duties, and 02 membership of the authority and stated in the regulation; the new entity or entities 03 shall each be a public corporation and an instrumentality of the state with the same 04 legal existence and continuing succession as the bond bank authority; and 05 (21) do all acts and things necessary, convenient, or desirable to carry 06 out the powers expressly granted or necessarily implied in this chapter. 07  * Sec. 8. AS 44.85 is amended by adding new sections to read: 08 Sec. 44.85.085. Creation of subsidiary corporation. (a) The bond bank 09 authority may create one or more subsidiary corporations for the following purposes: 10 (1) providing financial and other assistance to governmental employers 11 to enable the governmental employers to reduce their costs of providing retirement 12 and other benefits to their employees by prepaying all or a portion of their shares of 13 the unfunded accrued actuarial liabilities of retirement systems; 14 (2) receiving payments and providing servicing for payments to or 15 from participating governmental employers; and 16 (3) performing other duties and providing other services as the 17 subsidiary corporation considers necessary or desirable to further the purposes set out 18 in (1) and (2) of this subsection. 19 (b) The bond bank authority may incorporate under AS 10.20.146 - 10.20.166 20 a subsidiary corporation created under (a) of this section. The bond bank authority 21 may transfer assets of the bond bank authority to the subsidiary corporation and may 22 agree to secure bonds, notes, commercial paper, or other obligations of the subsidiary 23 corporation with a reserve fund established under AS 44.85.270. 24 (c) A subsidiary corporation created under (a) of this section may borrow 25 money and issue bonds, notes, commercial paper, or other obligations as evidence of 26 that borrowing and may have all the powers of the bond bank authority that the bond 27 bank authority grants to it. The provisions of AS 44.85.130 - 44.85.170 and 44.85.270 28 - 44.85.390 apply to the subsidiary corporation and to bonds, notes, commercial paper, 29 or other obligations issued by the subsidiary corporation. Unless otherwise provided 30 by the bond bank authority, the debts, liabilities, and obligations of the subsidiary 31 corporation are not the debts, liabilities, or obligations of the bond bank authority. 01 (d) The staff of the bond bank authority serves as staff of a subsidiary 02 corporation created under (a) of this section. The bond bank authority shall determine 03 the membership or the process for selecting the membership of the board of directors 04 of the subsidiary corporation. The bond bank authority may permit some or all of its 05 directors to serve on the board of directors of the subsidiary corporation. 06 Sec. 44.85.086. Powers of subsidiary corporation. A subsidiary corporation 07 created under AS 44.85.085 has the following powers in addition those granted to it 08 under AS 44.85.085(c): 09 (1) to make loans to and enter into contracts with governmental 10 employers; 11 (2) to incur debt in furtherance of its purposes in the form of bonds, 12 notes, commercial paper, or other forms as the subsidiary corporation considers 13 appropriate; 14 (3) to secure its debt with a pledge of any assets that are available to 15 the subsidiary corporation for the purpose, including identified revenue and 16 contractual payments from participating governmental employers, and the general 17 assets and revenue of the subsidiary corporation; and 18 (4) to enter into contracts with underwriters, bond counsel, financial 19 advisors, accountants, actuaries, and other contractors to provide assistance as the 20 subsidiary corporation considers desirable to accomplish its purposes. 21  * Sec. 9. AS 44.85.100(b) is amended to read: 22 (b) The bond bank authority shall include in the report required by (a) of this 23 section an estimate of the amount of revenue bonds of the bond bank authority to be 24 issued during the fiscal year following the fiscal year in which the report is submitted. 25 Other than refunding bonds and other than bonds, notes, commercial paper, or  26 other obligations issued under AS 44.85.086 and 44.85.180(a)(5), the [THE] bond 27 bank authority may not issue revenue bonds [, OTHER THAN REFUNDING 28 BONDS,] in excess of $75,000,000 during any fiscal year beginning after June 30, 29 1981, unless the legislature, by law, approves the estimate required by this subsection 30 for that fiscal year. 31  * Sec. 10. AS 44.85.180(a) is amended to read: 01 (a) Subject to AS 44.85.100(b), the bond bank authority may issue its bonds or 02 notes in principal amounts that it considers necessary to provide funds for any 03 purposes under this chapter, including 04 (1) the purchase of municipal bonds; 05 (2) the making of loans through the purchase of municipal bonds, 06 notes, or certificates of participation secured by an agreement between the bond bank 07 authority and a municipality or a municipal joint insurance arrangement organized 08 under AS 21.76; 09 (3) the payment, funding, or refunding of the principal of, or interest or 10 redemption premiums on, bonds or notes issued by it whether the bonds or notes or 11 interest to be funded or refunded have or have not become due; 12 (4) the establishment or increase of reserves to secure or to pay bonds 13 or notes or interest on bonds or notes and all other costs or expenses of the bond bank 14 authority incident to and necessary or convenient to carry out its corporate purposes 15 and powers;  16 (5) assisting governmental employers to prepay all or a portion of  17 their share of the unfunded accrued actuarial liabilities of retirement systems,  18 with security as the bond bank authority considers reasonable. 19  * Sec. 11. AS 44.85.180(c) is amended to read: 20 (c) Notwithstanding the provisions of (a) and (b) of this section, the total 21 amount of bond bank authority bonds and notes outstanding at any one time [, 22 EXCEPT BONDS OR NOTES ISSUED TO FUND OR REFUND BONDS OR 23 NOTES,] may not exceed $500,000,000. This subsection does not apply to (1)  24 bonds or notes issued to fund or refund bonds or notes; (2) bonds, notes,  25 commercial paper, and other obligations issued under AS 44.85.086 or  26 44.85.180(a)(5).  27  * Sec. 12. AS 44.85.410(a)(5) is amended by adding a new paragraph to read: 28 (8) "governmental employer" means the State of Alaska or a 29 municipality or other state or municipal governmental entity within the state, including 30 an agency, instrumentality, district, school district, public corporation, department, 31 division, or other subdivision of the state or of a municipality, in its capacity as an 01 employer. 02  * Sec. 13. This Act takes effect immediately under AS 01.10.070(c).