04/06/1994 08:25 AM Senate FIN

  HB 450:        An  Act  relating  to  investment  pools  for                 
                 public   entities;   and  providing   for  an                 
                 effective date.                                               
                                                                               
                 Dave Rose,  financial advisor  to the  Alaska                 
                 Municipal League Investment  Pool and  former                 
                 chair of  the Permanent  Fund, testified  via                 
                 teleconference from  Anchorage.   HB 450  was                 
                 REPORTED  OUT of committee  with a "due pass"                 
                 and  a zero  fiscal  note  for Department  of                 
                 Commerce & Regional Affairs.  (Companion bill                 
                 SB 359 was held in committee.)                                
                                                                               
                                                                               
  HOUSE BILL NO. 450:                                                          
                                                                               
       An  Act   relating  to  investment  pools   for  public                 
       entities; and providing for an effective date.                          
                                                                               
  CO-CHAIR FRANK announced that SB 359 and its companion bill,                 
  HB 450 were before the committee.  He invited David  Rose to                 
  testify via teleconference.                                                  
                                                                               
  DAVID ROSE, financial advisor to the Alaska Municipal League                 
  Investment Pool,  and former  chair of  the Permanent  Fund,                 
  testified via teleconference  from Anchorage.  He  said that                 
  AS 37.23 empowered  cities and boroughs within Alaska  to be                 
  able to pool their  money and co-invest.  Some  reasons were                 
  to preserve principle, enhance yield, provide liquidity, and                 
  secure some professional funds management.  Currently, there                 
  was one pool in existence and  that was the Alaska Municipal                 
  League Investment Pool.   Currently  28 cities and  boroughs                 
  belong  to  the  pool  and 19  have  money  currently  under                 
  investment, with a  balance of approximately  $32M.  SB  359                 
  and HB 450 attempted to make some technical changes in order                 
  to enhance the  yield for cities  and boroughs.  He  assured                 
  the committee it would  not involve the state nor  any funds                 
  via a fiscal note.                                                           
                                                                               
  Mr.  Rose went  on to  say that  the bill  had  three active                 
  sections.   Section 1 qualified  AS 37.23.020 to  permit the                 
  purchase of floating  rate securities provided there  was an                 
  annual rate  reset.   These floating  rate securities  would                 
  allow the pool  to earn  additional money.   Section 1  also                 
  qualified language which permitted  the purchase of "Yankee"                 
                                                                               
                                                                               
  securities,  or  purchases  from unrated  branches  of rated                 
  banks.                                                                       
                                                                               
  Section 2 was  a new section  and explicitly authorized  the                 
  lending of securities provided that collateral was received.                 
  There had been  a request that the  legislation specifically                 
  authorize this although  it seemed to  be covered under  the                 
  prudent investor rule.                                                       
                                                                               
  Section  3 removed a restriction  that limited the amount of                 
  bank paper that may be held at the 30 percent level.  The 30                 
  percent  restriction  severely   restricted  the  pool  when                 
  investing in banks.                                                          
                                                                               
  Mr. Rose felt the amendments  were technical but allowed the                 
  pool to increase earnings on its money.                                      
                                                                               
  In  answer  to Senator  Kerttula,  Mr.  Rose  said that  the                 
  existing legislation was  created about three years  ago and                 
  the restrictions were based more on  a mutual fund basis and                 
  needed to be adjusted for the existing market.                               
                                                                               
  In answer to Co-chair Frank, Mr. Rose confirmed that on page                 
  3,  line 11, those items would  not be contained in the pool                 
  portfolio.                                                                   
                                                                               
  Senator Kelly  MOVED for  passage of HB  450 from  committee                 
  with individual recommendations.  No  objection being heard,                 
  it  was REPORTED OUT  of committee with  a "do  pass," and a                 
  zero fiscal note for the  Department of Commerce &  Regional                 
  Affairs.   Co-chair  Frank,  Senators  Sharp, Jacko,  Kelly,                 
  Rieger and Kerttula signed "do pass."