03/31/2000 01:45 PM House FIN

HOUSE BILL NO. 18                                                                                                               
                                                                                                                                
An Act making a special appropriation from the earnings                                                                         
reserves account to the principal of the permanent                                                                              
fund; and providing for an effective date.                                                                                      
                                                                                                                                
Co-Chair Mulder MOVED to RESCIND previous action taken on                                                                       
passing HB 18 out of Committee.  Representative J. Davies                                                                       
OBJECTED.                                                                                                                       
                                                                                                                                
Representative Bunde asked for further discussion on the                                                                        
motion.  He noted that he was anxious with "locking away"                                                                       
access to money when faced with other challenges.                                                                               
                                                                                                                                
Co-Chair Mulder stated that the discussion could not occur                                                                      
without rescinding the motion.                                                                                                  
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Phillips, Austerman, Bunde, G. Davis, Foster,                                                                         
Therriault, Mulder                                                                                                              
OPPOSED:  J. Davies, Grussendorf                                                                                                
                                                                                                                                
Representative Moses and Representative Williams were not                                                                       
present for the vote.                                                                                                           
                                                                                                                                
The MOTION PASSED (7-2).                                                                                                        
                                                                                                                                
Co-Chair Mulder explained that there is sufficient resources                                                                    
remaining in the permanent fund reserve to not threaten the                                                                     
fund in the future.  Without an adequate balance in the                                                                         
earnings reserve account, if there was a prolonged or                                                                           
extended bare stock market, there would be a risk of not                                                                        
having available funds to actually pay a permanent fund                                                                         
dividend.  He stated that the $250 million dollar number                                                                        
would not threaten the dividend.                                                                                                
                                                                                                                                
Co-Chair Therriault asked the balance in the earnings                                                                           
reserve.  Co-Chair Mulder replied that $4.1 billion dollars                                                                     
remained in the earnings reserve. Representative J. Davies                                                                      
asked if that was actual cash.  Co-Chair Mulder understood                                                                      
that was unrealized gains.                                                                                                      
                                                                                                                                
CLARKE GRUENING, CHAIR, ALASKA PERMANENT FUND, JUNEAU,                                                                          
stated that there are two accountings kept at the fund.  One                                                                    
is the realized and the other is the unrealized earnings                                                                        
reserve.  The realized portion is invested like the rest of                                                                     
the fund.  It is part of the earnings reserve and mirrors                                                                       
the asset allocation of the entire fund.                                                                                        
                                                                                                                                
Representative J. Davies asked if that amount included the                                                                      
amount to be paid out in this year's dividend.  Mr. Gruening                                                                    
replied that is managed by the fund in coordination with                                                                        
Department of Revenue.                                                                                                          
                                                                                                                                
Representative J. Davies asked if there were sufficient                                                                         
funds to pay the current dividend.  Additionally, he                                                                            
questioned if something similar were adopted, would there be                                                                    
sufficient funds.  He noted that last year, testimony was                                                                       
heard that the account needed a $6 billion dollars reserve                                                                      
to act as a shock absorber.                                                                                                     
                                                                                                                                
Representative Grussendorf voiced concern with the "one up                                                                      
manship".  Co-Chair Therriault noted that there had been an                                                                     
amendment adopted to address Representative Grussendorf's                                                                       
concern during a previous meeting.                                                                                              
                                                                                                                                
Representative Phillips stated that she would oppose the                                                                        
legislation until there has been an opportunity to look at a                                                                    
long-range plan for the State.  She emphasized that passing                                                                     
such legislation would be bad policy.                                                                                           
                                                                                                                                
Co-Chair Mulder MOVED to report CS HB 18 (FIN) out of                                                                           
Committee with individual recommendations.  Representative                                                                      
J. Davies OBJECTED.                                                                                                             
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Phillips, Austerman, Bunde, Foster, Mulder,                                                                           
Therriault                                                                                                                      
OPPOSED:  J. Davies, G. Davis, Grussendorf                                                                                      
                                                                                                                                
Representative Williams and Representative Moses were not                                                                       
present for the vote.                                                                                                           
                                                                                                                                
The MOTION PASSED (6-3).                                                                                                        
                                                                                                                                
CS HB 18 (FIN) was reported out of Committee with a "do not                                                                     
pass" recommendation.