Legislature(2019 - 2020)SENATE FINANCE 532

03/27/2019 09:00 AM FINANCE

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Audio Topic
09:01:29 AM Start
09:03:02 AM SB55
09:31:17 AM SB61
09:57:37 AM Discussion on Permanent Fund Dividend Calculation
10:56:13 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 55 TEMP. APPOINTMENTS TO COURT OF APPEALS TELECONFERENCED
Heard & Held
-- Public Testimony <Time Limit May Be Set> --
+ SB 61 COMM FISHERMEN'S FUND:VESSEL OWNER CLAIMS TELECONFERENCED
Heard & Held
-- Public Testimony <Time Limit May Be Set> --
+ Discussion on Permanent Fund Dividend Calculation TELECONFERENCED
<Item Above Added to Agenda>
+ Bills Previously Heard/Scheduled TELECONFERENCED
SENATE BILL NO. 61                                                                                                            
                                                                                                                                
     "An Act relating to claims against protection and                                                                          
     indemnity insurance policies of vessel owners."                                                                            
                                                                                                                                
9:31:17 AM                                                                                                                    
                                                                                                                                
SENATOR GARY STEVENS, SPONSOR, presented the legislation.                                                                       
                                                                                                                                
Co-Chair von Imhof  noted that there was one  section of the                                                                    
bill.                                                                                                                           
                                                                                                                                
9:33:45 AM                                                                                                                    
                                                                                                                                
TIM LAMKIN,  STAFF, SENATOR GARY STEVENS,  discussed the one                                                                    
section of the bill.                                                                                                            
                                                                                                                                
Senator Micciche declared a conflict of interest.                                                                               
                                                                                                                                
9:35:30 AM                                                                                                                    
                                                                                                                                
Mr. Lamkin  directed to  the fact sheet  (copy on  file). He                                                                    
pointed  to   page  3  which  he   felt  provided  important                                                                    
information.                                                                                                                    
                                                                                                                                
Senator Bishop declared a potential conflict of interest.                                                                       
                                                                                                                                
Senator  Hoffman  stated  that  the also  had  a  commercial                                                                    
fishing permit.                                                                                                                 
                                                                                                                                
Senator  Wilson  stated  that  the  also  had  a  commercial                                                                    
fishing permit.                                                                                                                 
                                                                                                                                
Senator Shower  noted that there  was no cost to  the state,                                                                    
but queried the small impact in the fiscal note.                                                                                
                                                                                                                                
Senator Stevens  stated that he  no longer had  a commercial                                                                    
fishing permit.                                                                                                                 
                                                                                                                                
Mr. Lamkin noted that the  insurance claims were decreasing,                                                                    
but because  of the deductible increase  therefore reflected                                                                    
a modest fiscal note covered by the fund itself.                                                                                
                                                                                                                                
9:38:20 AM                                                                                                                    
                                                                                                                                
RENEE   ALWARD,  FISHERMAN'S   FUND  ADVISORY   AND  REPEALS                                                                    
COUNCIL,  HOMER (via  teleconference), spoke  in support  of                                                                    
the legislation                                                                                                                 
                                                                                                                                
9:40:27 AM                                                                                                                    
                                                                                                                                
BOB  KEHOE, EXECUTIVE  DIRECTOR, PURSE  SEINE VESSEL  OWNERS                                                                    
ASSOCIATION, testified in support of the bill.                                                                                  
                                                                                                                                
Senator  Wielechowski queried  the number  of vessel  owners                                                                    
with PNI insurance.                                                                                                             
                                                                                                                                
Mr.  Kehoe replied  that he  speculated that  there was  not                                                                    
much data on that issue.                                                                                                        
                                                                                                                                
9:44:21 AM                                                                                                                    
                                                                                                                                
FRANCES  LEACH,  EXECUTIVE  DIRECTOR,  UNITED  FISHERMEN  OF                                                                    
ALASKA, spoke in support of the bill.                                                                                           
                                                                                                                                
Senator  Olson  queried what  amount  was  referred to  when                                                                    
discussing a claim.                                                                                                             
                                                                                                                                
Ms. Leach  replied that  the average  claim depended  on the                                                                    
injury.                                                                                                                         
                                                                                                                                
Co-Chair von Imhof OPENED public testimony.                                                                                     
                                                                                                                                
Co-Chair von Imhof CLOSED public testimony.                                                                                     
                                                                                                                                
9:48:11 AM                                                                                                                    
                                                                                                                                
GREY MITCHELL, DIRECTOR,  DIVISION OF WORKER'S COMPENSATION,                                                                    
DEPARTMENT  OF LABOR  AND WORKFORCE  DEVELOPMENT, introduced                                                                    
himself.                                                                                                                        
                                                                                                                                
Senator  Wielechowski queried  the benefits  available to  a                                                                    
commercial  fisherman with  no  insurance,  and the  maximum                                                                    
allowable under the Fisherman's Fund.                                                                                           
                                                                                                                                
Mr. Mitchell  replied that the  Fisherman's Fund  provided a                                                                    
benefit  of up  to $10,000  for medical  costs, which  could                                                                    
include travel costs related to medical treatment.                                                                              
                                                                                                                                
Senator  Wielechowski queried  any data  regarding how  many                                                                    
fisherman were injured and were not provided benefits.                                                                          
                                                                                                                                
Mr.  Mitchell replied  that the  number of  claims that  the                                                                    
fund receives was approximately 300 per year.                                                                                   
                                                                                                                                
Senator Olson  wondered how  many claims  had been  paid out                                                                    
on.                                                                                                                             
                                                                                                                                
Mr. Mitchell agreed to provide that information.                                                                                
                                                                                                                                
Co-Chair  von  Imhof  announced   that  questions  could  be                                                                    
submitted to her office, consolidated, and distributed.                                                                         
                                                                                                                                
Senator Bishop explained the fiscal note.                                                                                       
                                                                                                                                
Mr.  Mitchell  announced  that  the  fund  currently  had  a                                                                    
balance of over $11 million.                                                                                                    
                                                                                                                                
SB  61  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
9:53:05 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:57:26 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
^DISCUSSION on PERMANENT FUND DIVIDEND CALCULATION                                                                            
                                                                                                                                
9:57:37 AM                                                                                                                    
                                                                                                                                
Co-Chair  von   Imhof  announced  that  the   committee  was                                                                    
evaluating many different inputs simultaneously.                                                                                
                                                                                                                                
10:00:13 AM                                                                                                                   
                                                                                                                                
Co-Chair  von  Imhof   discussed  the  presentation,  "POMV,                                                                    
Percent of Market Value" (copy  on file). She explained that                                                                    
the slide showed the mathematics related to the POMV.                                                                           
                                                                                                                                
Co-Chair  Stedman  wondered  why there  were  the  different                                                                    
percentages, and  why they were averaged  rather than taking                                                                    
a previous number. He queried the history of the structure.                                                                     
                                                                                                                                
Co-Chair von Imhof  replied that the reason  for the numbers                                                                    
would  be discussed  later in  the presentation.  She stated                                                                    
that the intent  was to create a  controlled and disciplined                                                                    
draw on  the Permanent Fund.  She stated that the  5 percent                                                                    
was used because most of the  similar funds in the world saw                                                                    
a 4 percent to 5 percent draw on the market value.                                                                              
                                                                                                                                
Co-Chair  Stedman surmised  that  historical market  returns                                                                    
were used to determine the percentages.                                                                                         
                                                                                                                                
10:06:13 AM                                                                                                                   
                                                                                                                                
Co-Chair von  Imhof replied  that the  5 percent  rate would                                                                    
not change how  the fund was managed. She  stated that there                                                                    
were  funds around  the world  that had  a lower  percentage                                                                    
draw.                                                                                                                           
                                                                                                                                
Co-Chair Stedman wondered whether  the lookback would smooth                                                                    
out some predictability.                                                                                                        
                                                                                                                                
                                                                                                                                
Co-Chair von  Imhof replied that  the 5-year lookback  was a                                                                    
conservative  approach.  She  stated   that  she  wanted  to                                                                    
provide a predictable draw amount.                                                                                              
                                                                                                                                
Senator Bishop  reiterated that there were  many discussions                                                                    
about  the statutory  draw amount.  He recalled  discussions                                                                    
about the predictable budget draw.  The effective rate could                                                                    
theoretically be 4.25 percent.                                                                                                  
                                                                                                                                
Co-Chair  von Imhof  replied that  was correct  in a  rising                                                                    
market condition.                                                                                                               
                                                                                                                                
10:10:04 AM                                                                                                                   
                                                                                                                                
Co-Chair  von  Imhof  looked  at  slide  2,  "Statutory  PFD                                                                    
Calculation:  FY 2020  example." She  noted that  there were                                                                    
three statutes.                                                                                                                 
                                                                                                                                
Co-Chair  Stedman wondered  whether  the  income was  fairly                                                                    
constant. He  wondered why the previously  slide showed $1.2                                                                    
billion in the  ERA, and then 2019 showed  $18.9 billion. He                                                                    
wondered whether  those numbers affected the  ability to pay                                                                    
the dividend.                                                                                                                   
                                                                                                                                
Co-Chair  von Imhof  noted  the sum  of  previous five  year                                                                    
statutory income  and the  big jump from  2017 to  2018 from                                                                    
$3.2   billion  to   $6.3  billion.   She  stated   that  it                                                                    
demonstrated high volatility.                                                                                                   
                                                                                                                                
Co-Chair Stedman  noted that  2010 had  $1.2 billion  in the                                                                    
ERA.  He recalled  that there  was  a concern  in 2009  that                                                                    
there would  not be funds  available to have a  dividend. He                                                                    
recalled   a  concern   about  the   Permanent  Fund   being                                                                    
aggressive in the management of  their assets to assure that                                                                    
they had  the funds  to pay  a dividend.  He noted  that the                                                                    
concerns were  addressed at  the time.  He wanted  to ensure                                                                    
that it would not happen again.                                                                                                 
                                                                                                                                
10:15:08 AM                                                                                                                   
                                                                                                                                
Co-Chair von Imhof shared a historical perspective.                                                                             
                                                                                                                                
Co-Chair von Imhof  highlighted slide 3, "Split  of the POMV                                                                    
draw."                                                                                                                          
                                                                                                                                
Co-Chair  Stedman understood  that  there  may be  favorable                                                                    
resource  markets,  and  there  may  be  a  surplus  on  the                                                                    
recurring  revenue.   Therefore,  the  draw  would   not  be                                                                    
necessary.                                                                                                                      
                                                                                                                                
10:20:26 AM                                                                                                                   
                                                                                                                                
Co-Chair von Imhof  noted that it highlighted  the fact that                                                                    
keeping the draw flexible was important to the program.                                                                         
                                                                                                                                
Co-Chair   von  Imhof   addressed  slide   4,  "FY   19  UGF                                                                    
Expenditures."                                                                                                                  
                                                                                                                                
Co-Chair Stedman  remarked that there was  a forecasted draw                                                                    
of $300 million in the current year to make ends meet.                                                                          
                                                                                                                                
Co-Chair von  Imhof highlighted  slide 5,  "What is  the PFD                                                                    
and Budget Interplay?"                                                                                                          
                                                                                                                                
     Break even: It appears the state could pay about a                                                                         
     $1000 check with flat funding.                                                                                             
                                                                                                                                
     Caution: More  cuts may not necessarily  mean a biggest                                                                    
     dividend  because   the  state  should   consider  past                                                                    
     underfunding  of  capital,  Mr. Grasser:  leaky  school                                                                    
     roofs, damaged bridges, aging infrastructure.                                                                              
                                                                                                                                
10:26:13 AM                                                                                                                   
                                                                                                                                
Senator  Wilson expressed  concern paying  the dividend.  He                                                                    
did not see  any discussions about more  than 50/50, because                                                                    
that  would   require  additional  statues  passed   in  the                                                                    
legislature. He stressed that the  focus should only be on a                                                                    
50/50.                                                                                                                          
                                                                                                                                
Co-Chair von Imhof noted that  no bills were introduced, but                                                                    
she felt that it was important to show the interplay.                                                                           
                                                                                                                                
Senator  Wielechowski stressed  that  SB 26  did not  change                                                                    
anything, and  the legislature always had  authority to draw                                                                    
from the ERA. He noted that the  bill put a cap on it of 5.2                                                                    
percent. He stressed that the  dividend statute that defined                                                                    
its specific amount. He felt  that if the legislature wanted                                                                    
to ignore the statute, the statute must be changed.                                                                             
                                                                                                                                
Co-Chair  Stedman   noted  the  substantial  risk,   so  the                                                                    
conversation was important.                                                                                                     
                                                                                                                                
Co-Chair von Imhof acknowledged that  there was money in the                                                                    
ERA, so the percentage split discussions could take place.                                                                      
                                                                                                                                
10:34:38 AM                                                                                                                   
                                                                                                                                
Senator Hoffman remarked  that it was not the  intent of the                                                                    
committee to "raid" the Permanent Fund.                                                                                         
                                                                                                                                
Co-Chair Stedman  remarked that  it was important  to ensure                                                                    
that  the money  not  be  spent, so  there  should be  raids                                                                    
blocked.                                                                                                                        
                                                                                                                                
Senator  Wielechowski   felt  that   it  was   an  important                                                                    
discussion.  He  wanted to  discuss  whether  the state  was                                                                    
getting its fair share of its resources.                                                                                        
                                                                                                                                
Senator  Micciche   felt  that   the  discussion   was  only                                                                    
conceptual.                                                                                                                     
                                                                                                                                
Co-Chair  von  Imhof  replied  that   it  was  a  conceptual                                                                    
conversation.                                                                                                                   
                                                                                                                                
Senator Micciche  did not  feel that  it was  appropriate to                                                                    
discuss  things that  were untrue,  because the  state's oil                                                                    
tax in the year prior was close to 44 percent.                                                                                  
                                                                                                                                
Co-Chair  Stedman remarked  that the  budget components  had                                                                    
been  assigned to  the  members of  the  committee to  chair                                                                    
their subcommittees.                                                                                                            
                                                                                                                                
10:42:01 AM                                                                                                                   
                                                                                                                                
Senator Hoffman remarked  that he was a  strong proponent of                                                                    
SB 26 .                                                                                                                         
                                                                                                                                
Co-Chair von Imhof  surmised that 56 villages  had their own                                                                    
specific needs. She wondered whether  the dividend should be                                                                    
in the constitution, rather than education and health care.                                                                     
                                                                                                                                
Senator Hoffman  wanted to  resolve the  issue once  and for                                                                    
all.                                                                                                                            
                                                                                                                                
10:48:29 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stedman remarked  that  the process  should be  to                                                                    
discuss the concept and to have a draft bill refined.                                                                           
                                                                                                                                
Senator Bishop stated that Alaska was a very rich state,                                                                        
and stressed that the state was not broke.                                                                                      
                                                                                                                                
Senator Shower echoed Senator Hoffman's comments about a                                                                        
solution to keep the PFD out of politics.                                                                                       
                                                                                                                                
Co-Chair von Imhof did not feel that future generations                                                                         
should be financially obligated.                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
SB61 Sectional Version A.pdf SFIN 3/27/2019 9:00:00 AM
SL&C 3/5/2019 1:30:00 PM
SB 61
SB61 Sponsor Statement 02.27.19.pdf SFIN 3/27/2019 9:00:00 AM
SL&C 3/5/2019 1:30:00 PM
SB 61
SB 61 Fishermens Fund - Research Fact Sheet - 03.01.19.pdf SFIN 3/27/2019 9:00:00 AM
SL&C 3/5/2019 1:30:00 PM
SB 61
SB 61 Support Letter UFA.pdf SFIN 3/27/2019 9:00:00 AM
SL&C 3/5/2019 1:30:00 PM
SB 61
SB 61 Support Letter PSVOA.pdf SFIN 3/27/2019 9:00:00 AM
SL&C 3/5/2019 1:30:00 PM
SB 61
SB 61 Support Letter SEAFA.pdf SFIN 3/27/2019 9:00:00 AM
SL&C 3/5/2019 1:30:00 PM
SB 61
SB 55 - Sectional Summary.pdf SFIN 3/27/2019 9:00:00 AM
SJUD 3/11/2019 1:30:00 PM
SB 55
SB 55 - Sponsor Statement.pdf SFIN 3/27/2019 9:00:00 AM
SJUD 3/11/2019 1:30:00 PM
SB 55
SB 55 - Explanation of Changes, Version A to B.pdf SFIN 3/27/2019 9:00:00 AM
SB 55
032719 Senate Finance POMV Split Presentation March 27.2019.pdf SFIN 3/27/2019 9:00:00 AM
Permanent Fund Divdend
SB 61 DOL Worker's Compensation Sen Fin Question 3-27.pdf SFIN 3/27/2019 9:00:00 AM
SB 61
SB 55 - 4.1.2019 Courts Response.pdf SFIN 3/27/2019 9:00:00 AM
SB 55