Legislature(2001 - 2002)

05/01/2002 04:44 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ 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.                                                                                                 
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects