Legislature(2001 - 2002)
05/01/2002 04:44 PM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 311(HES)
"An Act relating to the public school trust fund, the Alaska
children's trust, and the Alaska heritage endowment fund; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
ZACH WARWICK, staff to Senator Gene Therriault, informed the
Committee that this legislation would provide methods to "better
manage" the Public School Trust Fund, the Alaska Heritage Endowment
Fund, and the Alaska Children's Trust. He reminded the Committee
that State statute originally established two fund components for
each of the three funds: a principle account and a net income
account along with the stipulation that any fund appropriations be
made from the net income account. He continued that this
appropriation mandate resulted in the funds being invested in
endeavors with a guaranteed income rather than in those that
appreciate in value. He stated that investments that appreciate in
value are generally higher yielding and "could make the trust funds
much more useful for what they were originally designed for."
Mr. Warwick stated that this legislation would allow the
appropriations to be based on market value rather than on net
income, would direct the Commissioner of the Department of Revenue
"to invest the assets in a manner that would yield at least five
percent real rate of return over time," and would require the
Department to provide an annual fund value and appropriations
report to the Legislature.
Mr. Warwick referred the Committee to grant language specified in
Section 17, subsection (d) located on page 7, line 17 of the bill,
that would limit the Alaska Children's Trust Fund grants to one per
organization per year in addition to specifying that the grant be
used to fund projects within a specific locale in the State.
NEIL SLOTNICK, Deputy Commissioner, Treasury Division, Department
of Revenue stated that the Department supports this bill as it
would make these funds consistent with other State administered
endowments such as the Arctic Winter Games endowment and the Power
Cost Equalization (PCE) endowment "which are managed at a five
percent of value payout." He stated "it's good policy" to have all
the State's endowments managed in similar fashion, as it allows for
the Department to manage "on a basis of total return not on
different types of returns;" it allows for automatic inflation
proofing; "and for a smooth, reliable payout with the five percent
of market payout each year."
JOHN JENKS, Chief Investment Officer, Treasury Division, Department
of Revenue, stated, "this bill really does allow the investment
decision to be made in the best interest of these long-term funds,"
which would allow for more productive funds with "the expectation"
of an increase of over half a percent return over the long term. He
informed the Committee this increase could amount to several
million dollars a year over time. He asserted that the explicit
language for inflation proofing the funds is important.
Senator Austerman asked for clarification that any earnings
produced from the endowment are deposited into the fund and are
included in the total when determining the five percent of the
fund's value.
Mr. Jenks replied, "yes, that is correct."
Senator Austerman stated; therefore, that of that total, five
percent could be used for funding purposes. He asked the Department
the current value of each of the three funds.
Mr. Slotnick listed the Public School Trust value at approximately
$275 million; the Alaska Children's Fund is approximately $9
million; and the value of the Alaska Heritage Endowment fund "is
relatively small" with a value "in the hundreds of thousands."
Senator Austerman asked if the Legislature appropriates general
funds to the Public School Trust fund.
Mr. Slotnick replied State statute specifies that monies in the
Public School Fund must be spent on educational purposes; however,
he would need to verify whether the Fund receives appropriations
from the general fund.
CAROL BRICE, Chair, Children's Trust Fund, testified via
teleconference from Fairbanks to voice concern that the grant
language in Section 17, subsection (d) of this legislation
restricting grant monies to fund projects "within a municipality or
a regional education attendance area or an unincorporated
community…" is contrary to what "has been the practice." She stated
the receiving one grant in a twelve month period is not a problem;
however, prohibiting grant monies to fund programs such as the
Norton Sound Health Corporation Parenting Program that operates
programs in 36 villages, is of concern.
MARILYN EGGLESTON, Grant Writer, Resource Center for Parents &
Children (RCPC), testified via teleconference from Fairbanks to
voice that the new language would negatively affect a RCPC program
to produce three parenting videos for distribution to numerous
small rural communities throughout Alaska.
Ms. Brice interjected that most of the grants support private, non-
profit entities, and she asked why the Legislature would want to
eliminate projects that have a statewide benefit. She stated that
resource networking provided by entities such as the RCPC enable
"small resources" to have a large reach. She urged the Committee to
omit the restrictive language requiring "a project to be located in
one community or municipality."
Senator Austerman clarified that Ms. Brice contends the language is
restrictive because it mandates that a program must operate in one
municipality.
Ms. Brice reiterated that the language is restrictive as it limits
funds "to a single project within a municipality." She stressed
that many programs applying for these grants "have a large reach"
and this language puts those programs at "a disadvantage."
Senator Wilken asked Ms. Brice what issue might have prompted this
language to be included in this bill.
Ms. Brice responded she did not know why the language was
introduced to the bill.
COLEEN TURNER, Director, RCPC, testified via teleconference from
Fairbanks to voice concern about the language limiting projects to
a specific area. She urged the Committee to write an amendment to
this legislation, as the current wording is "problematic."
Mr. Warwick stated that the language in question was introduced at
the request of Senator Green due to some Alaska Children's Trust
grant awards "she was in objection to."
CHERIE PAUL, Program Manager, Alaska Children's Trust, informed the
Committee that Senator Green's concern was prompted by grants the
Alaska Children's Trust had awarded to the Alaska Public Radio
network to fund child abuse and neglect parenting messages aired on
statewide public radio. She stated that the Alaska Children's Trust
worked with a variety of agencies to write the messages and paid
the public radio network to produce and air the messages over a
three-year period.
Senator Wilken asked how much money these grants amounted to.
Ms. Paul stated that the first year's funding amounted to $49,000
that was strictly for airtime, "and the other two years was just
under $30,000."
Co-Chair Donley asked the percentage of "total expenditures" of the
Alaska Children's Trust fund.
Ms. Paul responded that total grant awards have ranged between
$330,000 and $365,000 per year during the past five years.
Co-Chair Donley calculated that the public radio network grants
amounted to approximately 10 percent of the annual allocated grant
total.
Senator Wilken asked the witness to suggest alternate language that
could address Senator Green's concerns while allowing for the
flexibility suggested by Ms. Brice.
Ms. Paul preferred that the Board of Directors for the Children's
Trust Fund suggest language alternatives. She expressed that the
"sole purpose" of the Children's Trust is to deliver child abuse
and neglect prevention messages, and the Board feels that is what
they "should do, that is what the statutes mandate us to do, and I
think that over the years, we have done the best job possible in
allocating our dollars."
Senator Wilken recommended that further discussions should occur to
address Senator Green's concerns and "yet not hamstring the Trust
from doing things statewide."
The bill was HELD in Committee.
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