Legislature(2015 - 2016)HOUSE FINANCE 519
04/14/2016 08:30 AM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB196 | |
| SB210 | |
| HB81 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 81 | TELECONFERENCED | |
| + | SB 196 | TELECONFERENCED | |
| + | SB 210 | TELECONFERENCED | |
| += | HB 194 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR SENATE BILL NO. 196(FIN)
"An Act relating to the amount appropriated for power
cost equalization; relating to the use of certain
unexpended earnings from the power cost equalization
endowment fund; and providing for an effective date."
9:13:26 AM
SENATOR LYMAN HOFFMAN, SPONSOR, thanked the committee for
hearing the bill. He relayed that he had introduced the
bill due to ongoing dialogue about how to utilize the
excess earnings in the Power Cost Equalization (PCE) fund.
The legislation was designed to strengthen and save the PCE
fund. He recounted that the program existed for over 30
years and initially relied on general funds but evolved
into a true endowment that currently did not rely on
appropriations. Several years ago the legislature changed
the way the fund was invested due to the high rate of
return of 7 percent. He indicated that SB 196 addressed two
issues; how much could be taken from the earnings of the
fund and how excess earnings were dealt with. The
withdrawable amount was changed from 7 to 5 percent. He
elaborated that the legislation identified two ways the
excess earnings were made available; 50% not to exceed 30
million of the excess earnings were distributed to the
Community Assistance Program and 20% not to exceed 25
million were distributed to the Renewable Energy Fund, the
Bulk Fuel Revolving Loan Fund, and the Rural Power System
Upgrades. He pointed out that in the last 12 or so years
the earnings would have met the needs for PCE and the
provisions for excess earnings. He recounted that the
program funded up to the first 500 kilowatts of energy. He
spoke to the high power costs in rural areas. The program
only addressed the first 500 kilowatts and many residents
in urban Alaska utilized much more than that. He believed
it was good legislation that ensured the solvency of the
fund by changing the payout from 7 percent to 5 percent. In
addition, the bill reduced the dependency on General Fund
(GF) appropriations for the revenue sharing and rural
energy programs.
9:18:39 AM
Representative Gara spoke to lowering the payout and asked
whether the amount was taken from the corpus of the fund.
Senator Hoffman replied in the affirmative. Representative
Gara asked for the current total of the fund. Senator
Hoffman replied that the amount was approximately $1
billion. Representative Gara stated that 5 percent amounted
to $50 million. Senator Hoffman replied in the affirmative
and stated that currently PCE cost approximately $43
million. Representative Gara deduced that $7 million would
be available for excess funding. Senator Hoffman replied in
the affirmative.
9:21:21 AM
Representative Edgmon asked the sponsor to address how the
PCE program would remain the underlying purpose of the
endowment. He wondered about how bundling the items
together were mutually beneficial for all programs. Senator
Hoffman answered that the legislation authorized that the
first use of the funds were for PCE. He explained that if
the earnings were less than $43 million the earnings would
be depleted and the remainder would be taken out of the
corpus of the fund. He provided a scenario that in the
second year, if the fund earned 100 million then $43
million would pay PCE, the excess earnings would be
appropriated and the remainder would be deposited into the
corpus of the fund to protect it in case of lower than
expected earnings again in the future. The bill ensured
that the primary purpose was to protect the fund itself.
Senator Hoffman elaborated that bundling the items were
mutually beneficial by assisting the revenue sharing
program that would fund up to the 30 percent for rural and
urban Alaska and reduced the need for GF as well as assist
with other energy programs. He summarized that the bill
ensured a solid endowment for PCE and in good years offered
assistance to GF in the areas of energy and revenue
sharing.
9:24:20 AM
Co-Chair Neuman recounted that the PCE paid for the first
500 kilowatts of power. He asked what the average usage in
rural Alaska was. Senator Hoffman answered that average use
was between 500 and 600 kilowatts; many residents kept
usage at 500 kilowatts due to the high expense.
Representative Pruitt addressed the community assistance
portion. He asked whether the intent was that the bill
would help supplement the normal level of revenue sharing
funding or replace some of the GF appropriation. Senator
Hoffman answered that the intent was to relieve the
pressure on the general fund from the community revenue
sharing by replacing some GF. Representative Pruitt favored
the legislation and endorsed the renewable energy portion
of the bill.
9:26:18 AM
Representative Munoz asked about the 500 kilowatt
threshold. She asked whether the legislation raised the
threshold. Senator Hoffman replied in the negative. He
believed it was more important to protect the endowment.
Representative Kawasaki asked what the current PCE payout
was. Senator Hoffman replied the amount was $43 million.
Representative Kawasaki pointed to page 2 of FN 2 (CED) and
read the following analysis:
1) 50% or $30,000,000, whichever is less, to a
community revenue sharing or community assistance
fund;
2) 30% or $25,000,000, whichever is less, to the
renewable energy grant fund (AS 42.45.045), to the
bulk fuel revolving loan fund (AS 42.45.250), or for
rural power system upgrades; and …
Co-Chair Thompson noted that David Teal, Director,
Legislative Finance Division would be available to answer
fiscal note questions.
Representative Kawasaki did not think that much excess
funds would be available on a "6 percent draw." Senator
Hoffman answered that in past years the fund had earned 13
percent but also experienced losses. He noted that there
were years in the past that the earnings had been in the
double digits. Representative Kawasaki observed that Mr.
Teal had provided the actual PCE earnings rates (Power Cost
Equalization Endowment Fund - Impacts of SB 196 - (copy on
file). He was bewildered about the fund earning 24 percent
one year and negative 13 percent within two years. He asked
whether money had been added to increase the earnings rate.
Senator Hoffman answered that it did not matter if money
was added in relation to the earnings rate. He delineated
that in 2007 when the Four Dam Pool was sold $182.7
thousand was added to the fund. The last infusion had been
$400 million in 2012 in order to make it a true endowment.
A few years ago the fund had become a true endowment.
Representative Kawasaki was confused by the linkage between
SB 196 and SB 210 (Community Revenue Sharing/Assistance).
Senator Hoffman responded that there had been discussion
about combining the two bills, but due to the single topic
rule they had been introduced as two bills.
Representative Wilson stated that the two bill's linkage
made the current discussion difficult to follow. She
reiterated the provisions in SB 196 to confirm she
understood how the legislation worked. She surmised that
the committee needed to pay attention when SB 210 was
addressed due to the fact that the specific payouts or
whether any excess PCE funds were available in a given year
was based on a "good" or "bad year" in the stock market.
She noted that in a bad year no additional funds were
available for community sharing as all of the fund's
earnings were needed for PCE. She stated that the fund's
corpus was available to access for the PCE payout in a low
earnings year but not the other programs. Senator Hoffman
answered in the affirmative. He mentioned that in good
years 30 percent of the earnings would be added back to
replenish the corpus due to the fact that funds from the
corpus could be spent in bad years. Representative Wilson
clarified that in low earnings years the other programs
would not receive funding from the PCE endowment. Senator
Hoffman answered in the affirmative.
9:34:06 AM
Representative Gara spoke to a book by Willy Hensley
stating that electricity in rural Alaska brought "one of
the biggest transformations" to the bush. He believed that
the PCE "was an extension of that" and the provision to
spend excess funding on other state needs was historic. He
asked why the bill proposed depositing 30 percent of the
excess funds back into the corpus. Senator Hoffman restated
that the deposits were needed to replenish the fund when
money were withdrawn in low earning's years in order to
"protect" the corpus of the fund.
Senator Hoffman provided closing comments on the bill. He
felt that PCE made life better for residents in rural
Alaska. He thanked the committee for hearing the
legislation.
Co-Chair Thompson OPENED public testimony.
9:37:08 AM
SHIRLEY MARQUARDT, MAYOR, UNALASKA, spoke in support of the
bill. She thanked Senator Hoffman for his work on the bill.
She stated that PCE and revenue sharing were very important
to her region. She appreciated that the bill created a new
funding vehicle for revenue sharing, realizing the funding
would ebb and flow depending on the earnings in a given
year. She asked the legislature to help relieve some of the
financial strain on municipalities by finding more
alternative funding avenues for communities.
KATHIE WASSERMAN, ALASKA MUNICIPAL LEAGUE, testified in
support of the bill. She relayed her confidence and trust
in Senator Hoffman's custodial role over PCE and community
revenue sharing. She believed the legislation stabilized
the funds as best as possible under the state's current
fiscal crisis.
Co-Chair Thompson CLOSED public testimony.
CSSB 196(FIN) was HEARD and HELD in committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 194 CS WORKDRAFT FIN GH1060-S.pdf |
HFIN 4/14/2016 8:30:00 AM |
HB 194 |
| HB 81 CS WORKDRAFT vP.pdf |
HFIN 4/14/2016 8:30:00 AM |
HB 81 |
| House Members - SB 196ce.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| SB 196 Fin updated sectional.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| sb 196 Leg finance spread sheets.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| CSSB 210(FIN) AM - Sectional Analysis.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| CSSB 210(FIN) AM E.A.PDF |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| CSSB 210(FIN) AM Sponsor Statement.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| CSSB210(FIN) AM - Community Assistance Distribution.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |
| HB 81 Summary of Changes Pversion 8 March 2016.pdf |
HFIN 4/14/2016 8:30:00 AM |
HB 81 |
| 196 new sponsor statement.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 196 |
| 4 14 16 SB 210 by Borough.pdf |
HFIN 4/14/2016 8:30:00 AM |
SB 210 |