04/27/1996 09:50 AM Senate FIN

                                                                               
  HOUSE BILL NO. 525                                                           
                                                                               
       An Act designating  certain permissible investments  by                 
       the  Alaska  Permanent  Fund  Corporation  in   taxable                 
       municipal or state  debt securities and corporate  debt                 
       securities; changing the allocation  limits on domestic                 
       and  nondomestic  government and  corporate securities,                 
       nondomestic  corporate  promissory notes,  domestic and                 
       nondomestic  corporate  stocks, and  taxable government                 
       debt securities; and providing for an effective date.                   
                                                                               
  Co-chairman  Halford directed that HB  525 be brought on for                 
  discussion.     REPRESENTATIVE  TERRY  MARTIN   came  before                 
  committee.   He explained  that the  bill was  introduced by                 
  House Finance on behalf of the Legislative Budget and  Audit                 
  Committee.   The Representative noted  that the  flexibility                 
  sought by the board of trustees  of the permanent fund stems                 
  from an evaluation of the five fiduciary programs in Alaska.                 
                                                                               
                                                                               
  Senator Rieger advised that he spoke with representatives of                 
  the  permanent  fund  and  asked if  they  would  object  to                 
  increasing the percentage set forth at Page 2, Line 18, from                 
  50  to 60 percent.   They  indicated they  would not.   That                 
  would make  asset allocation  a bit  more  permissive.   Co-                 
  chairman Halford voiced his understanding it would allow for                 
  60  percent  to be  placed  in  stocks.   In  response to  a                 
  question  from  the  Co-chairman  concerning  need  for  the                 
  increase, Senator Rieger explained  that investments "are up                 
  against the limit."   The reason bracketed language is being                 
  removed is because the board  is having difficulty achieving                 
  the   asset   allocations   recommended    by   specialists.                 
  Representative  Martin   noted  that   the  permanent   fund                 
  corporation  has no  objection to  the change but  wishes to                 
  remain  neutral.    He  requested  that,  for  the  sake  of                 
  expediency,  the  percentage  remain  at  50 percent.    Co-                 
  chairman  Halford  voiced  reluctance  to  make  the  change                 
  without additional  background information.   Senator Rieger                 
                                                                               
                                                                               
  said that failure  to effect the increase would merely "hold                 
  down overall returns."                                                       
                                                                               
  Senator Sharp asked if language within Section 4 would lower                 
  the present  grade of  investment that  could be  purchased.                 
  LINDA  SNOW,   aide  to  Representative   Martin,  responded                 
  affirmatively.  She said that the lowest grade of investment                 
  that can currently be made is A.  Investment grade  (BBB) is                 
  one grade lower.  The proposed bill allows for investment in                 
  BBB.                                                                         
                                                                               
  Senator Rieger MOVED for passage  of HB 525 with  individual                 
  recommendations.  No  objection having  been raised, HB  525                 
  was REPORTED OUT of  committee with a zero fiscal  note from                 
  the  Dept.  of  Revenue.    Co-chairman Frank  and  Senators                 
  Phillips,  Rieger, and Zharoff  signed the  committee report                 
  with a "do  pass" recommendation.   Co-chairman Halford  and                 
  Senators Donley and Sharp signed "no recommendation."