Legislature(2017 - 2018)
2017-02-13 House Journal
Full Journal pdf2017-02-13 House Journal Page 0243 HB 119 HOUSE BILL NO. 119 by the House Rules Committee by request of the Governor, entitled: "An Act relating to the dividends from the Alaska Industrial Development and Export Authority; relating to the meaning of 'mark-to-market fair value,' 'net income,' 'project or development,' and 'unrestricted net income' for purposes of the Alaska Industrial Development and Export Authority; and providing for an effective date." was read the first time and referred to the Labor & Commerce and Finance Committees. The following fiscal note(s) apply: 1. Zero, Dept. of Commerce, Community, & Economic Development The Governor's transmittal letter dated February 10 follows: "Dear Speaker Edgmon: Under the authority of Article III, Section 18, of the Alaska Constitution, I am transmitting a bill relating to the Alaska Industrial Development and Export Authority (AIDEA) annual dividend payments to the State. The bill is intended to clarify or modify accounting matters that affect the calculation of AIDEA's dividends. The overall intent of the bill is to have AIDEA's dividends better reflect the cash-based realized net income of the funds from which AIDEA's dividends are paid. 2017-02-13 House Journal Page 0244 Under AS 44.88.088, AIDEA is required to pay a dividend each year of between 25 and 50 percent of the "net income" for each of its statutorily-created funds, but not more than the total "unrestricted net income" of each fund. The terms "net income" and "unrestricted net income" are defined in AS 44.88.088 as meaning the change in net position of each fund as reported in AIDEA's audited financial statements each year, excluding consideration of certain designated items. The bill would modify the excluded items that are not considered in determining the change in the net position of each of AIDEA's funds. Specifically, the bill proposes to eliminate from consideration in calculating AIDEA's dividends: (1) impairment losses on a project or development to the extent financed with State or federal grants or appropriations; (2) any current or future mark-to-market fair value based accounting requirements imposed by the Government Accounting Standards Board (GASB) such as those in Statements No. 31 and No. 72; and, (3) non-cash accounting entries related to retirement obligations such as those required under GASB Statement No. 68. The proposed change to the language on losses in AS 44.88.172 is meant to remove the restriction that the loss must occur with respect to a development project. Under current law, AIDEA may finance different types of projects and developments, not just development projects. Instead of restricting consideration to losses only to development projects, the bill amends the language on excluding consideration of losses to tie the losses to the use of State or federal grants or appropriations to finance a project or development. The amended language in the bill means that, when an investment in a project or development is made with State or federal grants or appropriations, a loss as to that investment will not be compounded by having AIDEA's dividend to the State reduced because of it. At the same time, however, a loss on a project or development funded by AIDEA's own cash will be reflected in the calculation of the dividend. The bill's amendments directed at GASB Statements No. 31, No. 72, and No. 68 are meant to exclude unrealized "paper" gains or losses AIDEA must record in its financial statements from impacting AIDEA's dividends. Under GASB Statements No. 31 and No. 72, 2017-02-13 House Journal Page 0245 AIDEA must make accounting entries based on the mark-to-market values of its investments at the close of its fiscal year each year. Given the vagaries of the market, these values can and likely will fluctuate significantly from year to year. Under GASB Statement No. 68, AIDEA must make accounting entries for fluctuating actuarial computations on pension obligations. The accounting entries AIDEA must make to comply with these GASB statements do not reflect the actual results of AIDEA's operations, which should be the basis for its dividend to the State. The accounting required by these GASB statements may cause great fluctuations from year to year in the net income of AIDEA's funds. Removing these accounting adjustments from the dividend calculation would stabilize AIDEA's dividend payment to the State and improve predictability as to the amount of the annual dividends. I urge your prompt and favorable action on this measure. Sincerely, /s/ Bill Walker Governor"