Legislature(2015 - 2016)BELTZ 105 (TSBldg)
02/17/2015 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Alaska Maritime Workforce Development Plan | |
| SB41 | |
| SB33 | |
| SB34 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | SB 41 | TELECONFERENCED | |
| *+ | SB 33 | TELECONFERENCED | |
| *+ | SB 34 | TELECONFERENCED | |
SB 34-PCE ENDOWMENT FUND INVESTMENT
2:23:25 PM
CHAIR COSTELLO announced the consideration of SB 34. "An Act
relating to investment of the power cost equalization endowment
fund; and providing for an effective date."
2:23:41 PM
PAM LEARY, Director, Division of Treasury, Department of Revenue
(DOR) explained that the fund purpose is to annually fund the
power cost equalization endowment fund and the rural electric
capitalization fund, and to reimburse the cost of managing the
fund. The amount that can be appropriated is seven percent of
the monthly average of the fund for the previous three fiscal
years. The annual appropriation is used to fund the cost of
energy in areas that are experiencing high energy costs.
The fund was established in 2000 with a $100 million
appropriation from the Constitutional Budget Reserve. It
received an additional $89.6 million in 2002 from the proceeds
of the Four Dam Pool project. There were two additional
appropriations: one in 2007 for $182.7 million and the second in
2012 for $400 million. On January 31, 2015 the fund had a
balance of $950.7 million.
SB 34 removes the 7 percent stated nominal return target from
statute and allows the revenue commissioner to invest the fund
at potentially a lower rate while still meeting the objectives
of the program. The bill has a zero fiscal note and additional
funds will not be required to continue to manage the fund.
2:23:45 PM
GARY BADER, Chief Investment Officer, Trusts and Portfolio
Management, Department of Revenue (DOR) advised that the goal is
to achieve the highest rate of return with the lowest risk
possible. Current law directs the revenue commissioner to
achieve a specific return without regard to risk. He directed
attention to the page in the packet titled 2015 Capital Market
Expectations from Callan Associates that estimates what is
likely to be achieved over the next ten years in the capital
market. It demonstrates that in order to achieve a 7 percent
return, the commissioner of revenue would have to adopt an asset
allocation that is almost entirely equities. The projected risk
or standard deviation means it could drop 20 percent to 30
percent in one year. That is very risky and no way to run an
investment program, he said.
He summarized that SB 34 would allow the commissioner to meet
the goals of the program without having to try to achieve a 7
percent nominal return.
2:30:49 PM
SENATOR STEVENS asked if the fund has achieved 7 percent in
recent history.
MR. BADER answered yes; the fund has done very well. He offered
to follow up with the numbers.
CHAIR COSTELLO asked the genesis of the legislation.
MR. BADER replied this legislation has been proposed before and
supported by previous commissioners.
2:32:03 PM
CHAIR COSTELLO announced she would hold SB 34 in committee.