Legislature(1995 - 1996)
04/25/1995 04:38 PM Senate STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SSTA - 4/25/95
TAPE 95-20, SIDE A
Number 001
SB 143 AHFC TRANSFERS TO GENERAL FUND; BONDS
CHAIRMAN SHARP calls the Senate State Affairs Committee to order at
4:38 p.m. and brings up SB 143 as the first order of business
before the committee. The chairman calls the first witness.
Number 020
DAN FAUSKE, Executive Director, Alaska Housing Finance Corporation,
testifying from Anchorage, thinks SB 143 represents a significant
accomplishment, in that it would establish a prudent, manageable
transfer of cash from AHFC to the state. It will also enable the
corporation to issue bonds for University of Alaska deferred
maintenance. Mr. Fauske notes he has submitted to the committee a
press release from Standard & Poors (S&P) in support of the
arrangement set out in SB 143.
Number 095
BILL HOWE, Deputy Commissioner, Department of Revenue, distributes
to committee members a draft copy of the agreement between the
Commissioner of the Department of Revenue and AHFC. This agreement
lists the proposed amounts of money that will be transferred from
AHFC to the state. The amounts are: $70,000,000 in FY 1996, and
$50,000,000 for FY 1997-FY 2000. Mr. Howe states AHFC and the
Department of Revenue both feel this is a fair agreement.
MR. HOWE informs the committee that if this agreement is approved,
S&P will remove AHFC from a credit watch.
Number 155
SENATOR RANDY PHILLIPS asks if other scenarios have been explored.
Number 160
MR. FAUSKE replies other amounts and scenarios were discussed. But
this was the agreement which was reviewed most extensively.
SENATOR RANDY PHILLIPS asked if S&P is looking for stability.
MR. FAUSKE responds that they are looking for stability and
predictability.
SENATOR RANDY PHILLIPS thinks it would be predictable for the
legislature to take $235,000,000 right now, and not take anything
else in the future. Are there any other scenarios S&P would
approve?
MR. HOWE believes S&P does not want to see more than the total
amount the corporation earns per year taken out in any one year.
However, he thinks there is some flexibility as to how much comes
out when.
Number 215
SENATOR RANDY PHILLIPS asks what happens if AHFC's bond rating is
downgraded.
MR. FAUSKE responds that if the bond rating went from AA to A, it
would cost an additional $13,200,000 over the life of the bond.
SENATOR RANDY PHILLIPS asked what the impact would be to individual
borrowers.
Number 235
MR. FAUSKE replies it would raise mortgage rates by a half to a
full percent.
Number 240
MR. HOWE adds that there are several larger risks seen by the
administration than having the bond rating drop from AA to A.
First, is the risk of ratings being withdrawn on outstanding bonds.
That would have the effect of turning them into junk bonds.
Secondly, the administration is concerned that AHFC will be unable
to float new bonds.
Number 265
CHAIRMAN SHARP thinks the legislature will have to give assurances
regarding how much money will be withdrawn, and when it will be
withdrawn. Hopefully we can arrive at a solution that will offer
stability, while still returning some money to the general fund.
Number 295
WENDY REDMAN, University of Alaska, urges passage of SB 143.
Number 320
SENATOR LEMAN makes a motion to discharge SB 143 from the Senate
State Affairs Committee with individual recommendations.
CHAIRMAN SHARP, hearing no objection, orders SB 143 released from
committee with individual recommendations.
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