Legislature(2015 - 2016)
2016-01-19 House Journal
Full Journal pdf2016-01-19 House Journal Page 1455 HB 261 HOUSE BILL NO. 261 by the House Rules Committee by request of the Governor, entitled: "An Act relating to the investment, appropriation, and administration of the public school trust fund; and providing for an effective date." was read the first time and referred to the Education and Finance Committees. The following fiscal note(s) apply: 1. Zero, Dept. of Revenue The Governor's transmittal letter dated January 18, 2016, follows: "Dear Speaker Chenault: Under the authority of Article III, Section 18, of the Alaska Constitution, I am transmitting a bill relating to the investment, appropriation, and administration of the public school trust fund (AS 37.14.110). The bill proposes to modify how the public school trust fund under AS 37.14.110 is administered to generate monies that support the State's public school program. Under current law, the net income from the fund is made available for appropriation to support public schools. To facilitate appropriations of income, the public school trust fund is invested and administered in a manner that distinguishes between principal and income. As treasurer of the fund, the Commissioner of Revenue has responsibilities related to administration and reporting of the fund. 2016-01-19 House Journal Page 1456 Under the proposed bill, a percent of market value (POMV) approach will be established. First, on July 1 of each year, the Commissioner of Revenue will determine the monthly average market value of the fund for the previous three years. Under the POMV approach, five percent of the rolling three-year average of monthly market values will be available for appropriation to support public schools. The modified investment standard in the proposed bill maximizes the total return on investments derived from both capital appreciation and income. Furthermore, this POMV approach will provide a more stable and predictable revenue source for the State to support public schools. The investment standard also should encourage maximum total return on investments, and yet provide a conservative and stable return for the future. The substantive provisions in the proposed bill will not take effect until after a court provides instructions that the proposed modifications to the public school trust statutes do not violate the State's trust duties. This provision recognizes the need to wait for resolution of pending litigation respecting the public school trust fund. The current approach to administering the trust fund arises from a 1915 Act of Congress (48 U.S.C. § 353 (repealed 1959)) from which the public school trust fund originates. The 1915 Act required the Territory of Alaska to retain principal as a permanent fund. Only income generated by the fund was available to support public schools. These trust management provisions should not generally apply because the 1915 Act was repealed in the Alaska Statehood Act, excepting as applied to one section of land (48 U.S.C. prec. §21). The contingent effective date will resolve any questions about the modified approach to administering the public school trust fund and protect the State from additional breach of trust claims. I urge your prompt and favorable action on this measure. Sincerely, /s/ Bill Walker Governor"