04/22/2021 01:30 PM House FINANCE

HOUSE BILL NO. 92                                                                                                             
                                                                                                                                
     "An  Act  relating  to  borrowing  in  anticipation  of                                                                    
     revenues;  relating  to   revenue  anticipation  notes;                                                                    
     relating to  line of  credit agreements;  and providing                                                                    
     for an effective date."                                                                                                    
                                                                                                                                
1:37:59 PM                                                                                                                    
                                                                                                                                
Co-Chair  Merrick indicated  that the  committee last  heard                                                                    
the bill on April 16, 2021.                                                                                                     
                                                                                                                                
LUCINDA  MAHONEY, COMMISSIONER,  DEPARTMENT OF  REVENUE (via                                                                    
teleconference), asked  committee members and the  public to                                                                    
seriously consider the bill.                                                                                                    
                                                                                                                                
1:38:36 PM                                                                                                                    
                                                                                                                                
Co-Chair Merrick OPENED public testimony.                                                                                       
                                                                                                                                
1:38:49 PM                                                                                                                    
                                                                                                                                
Co-Chair Merrick CLOSED public testimony.                                                                                       
                                                                                                                                
Co-Chair Merrick invited Ms. Pam  Leary to review the fiscal                                                                    
note with OMB component number 121.                                                                                             
                                                                                                                                
1:39:35 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:41:32 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Merrick turned to the fiscal note review.                                                                              
                                                                                                                                
1:41:43 PM                                                                                                                    
                                                                                                                                
PAM  LEARY,  DIRECTOR,   TREASURY  DIVISION,  DEPARTMENT  OF                                                                    
REVENUE    (via    teleconference),   reviewed    the    new                                                                    
indeterminate  fiscal note  for  the  Department of  Revenue                                                                    
(DOR) appropriated  to Taxation and Treasury.  She explained                                                                    
that the  proposed legislation updated  AS 43.08  to clarify                                                                    
that  borrowing  in   anticipation  of  revenue  collections                                                                    
included  employing  other  forms  of  short-term  borrowing                                                                    
strategies such as line of  credit agreements in addition to                                                                    
revenue  anticipation notes.  Fees paid  would be  offset by                                                                    
allowing  state funds  to continue  to be  invested, earning                                                                    
returns,  rather  than being  borrowed  to  cover cash  flow                                                                    
needs. The new fiscal  note was indeterminant. She furthered                                                                    
that  it  was  currently   unknown  how  much  interest  the                                                                    
borrowing mechanisms  would carry and the  associated costs,                                                                    
but the division anticipated an offset to the costs.                                                                            
                                                                                                                                
Representative  Thompson deduced  that  the  state would  be                                                                    
paying a fee  to access a line of credit.  Ms. Leary replied                                                                    
that he was correct.  Representative Thompson asked what the                                                                    
fees would be. Ms. Leary  responded that the information was                                                                    
provided in the PowerPoint (copy  on file) provided on April                                                                    
16, 2021. The  fees ranged from .08 percent  to .055 percent                                                                    
based on  a 12  month estimate on  a hypothetical  amount of                                                                    
$100 million. There would be  some associated costs with the                                                                    
line of  credit no  matter what vehicle  chosen or  terms of                                                                    
the loan.                                                                                                                       
                                                                                                                                
1:44:22 PM                                                                                                                    
                                                                                                                                
Representative  LeBon  referenced   the  two  loan  options:                                                                    
capitol market products and bank  market funded products. He                                                                    
asked whether  one product group  would be easier  to obtain                                                                    
in  terms of  the mechanics  of placing  the line  of credit                                                                    
versus the  other. He thought  securing a revolving  line of                                                                    
credit would be  the quickest and easiest way  to secure the                                                                    
line of credit.                                                                                                                 
                                                                                                                                
1:45:08 PM                                                                                                                    
                                                                                                                                
Mr. Leary stated that Representative  LeBon was correct. She                                                                    
indicated that there was a  structure that could be accessed                                                                    
with  a bank  versus a  syndicate  that would  take time  to                                                                    
develop.  Representative  LeBon  thought  that  the  banking                                                                    
option would  be cheaper, quicker, and  easier to establish.                                                                    
He commented  that a  revolving line of  credit was  able to                                                                    
renew annually. Ms. Leary replied  that it was not clear yet                                                                    
whether  the  state would  choose  a  line  of credit  or  a                                                                    
different financing mechanism. However,  from a general cash                                                                    
flow  perspective  the department  would  choose  a line  of                                                                    
credit with some sort of annual renewal.                                                                                        
                                                                                                                                
Co-Chair  Merrick  indicated  that amendments  were  due  by                                                                    
6:00pm.