Legislature(2003 - 2004)

01/29/2003 01:27 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   HOUSE FINANCE COMMITTEE                                                                                      
                      January 29, 2003                                                                                          
                          1:27 P.M.                                                                                             
                                                                                                                                
TAPE HFC 03 - 4, Side A                                                                                                         
TAPE HFC 03 - 4, Side B                                                                                                         
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Harris called the House Finance Committee meeting                                                                      
to order at 1:27 P.M.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Eric Croft                                                                                                       
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Gary Stevens                                                                                                     
Representative Bill Stoltze                                                                                                     
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator Ralph Seekins; William Corbus, Commissioner,                                                                            
Department of Revenue; Hans Roeterink, Executive Director,                                                                      
Alaska Science and Technology Foundation, Anchorage.                                                                            
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
None                                                                                                                            
                                                                                                                                
GENERAL SUBJECT(S):                                                                                                           
                                                                                                                                
                        APPOINTMENT:                                                                                          
                William Corbus, Commissioner,                                                                                   
                    Department of Revenue                                                                                       
                                                                                                                                
     FY04 State Revenue Forecast - Department of Revenue                                                                        
                                                                                                                                
                      AGENCY OVERVIEWS:                                                                                       
                    Department of Revenue                                                                                       
           Alaska Science & Technology Foundation,                                                                              
       Department of Community & Economic Development                                                                           
                                                                                                                                
The following overview was taken in log note format.  Tapes                                                                     
and handouts will be on file with the House Finance                                                                             
Committee through the 23rd Legislative Session, contact 465-                                                                    
2156. After the 23rd Legislative Session they will be                                                                           
available through the Legislative Library at 465-3808.                                                                          
                                                                                                                                
 LOG SPEAKER                DISCUSSION                                                                                      
                                                                                                                                
                            TAPE HFC 03 - 4, SIDE A                                                                        
 000 Co-Chair Harris        Convened the House Finance Committee                                                                
                            meeting at 1:27 P.M.  A roll call was                                                               
                            taken and all members were present.                                                               
 122 Co-Chair Harris        Referenced the sub-committee member list.                                                         
                                                                                                                                
                            Appointment Discussion  of William Corbus                                                         
                            Commissioner for Department of Revenue                                                         
 226 Co-Chair Harris        In accordance with AS 39.05.020, the                                                                
                            Finance Committee reviewed the                                                                      
                            qualifications of William Corbus,                                                                   
                            Governor's appointee  and recommends that                                                           
                            the name be forwarded  to a joint session                                                           
                            for consideration.                                                                                
 301 WILLIAM CORBUS,        Stated that he was honored that the                                                                 
      COMMISSIONER,         Governor had recommended him for the                                                                
      DEPARTMENT OF         position of Commissioner of the                                                                     
      REVENUE               Department of Revenue.                                                                            
 420 Commissioner Corbus  Provided background information on his                                                                
                            personal history  and investment banking.                                                           
                            Commissioner Corbus moved to Juneau in                                                              
                            1970.  Prior to  that, he worked on Wall                                                            
                            Street for four  years.  He added that he                                                           
                            had spent 32 years in the electric                                                                  
                            utility management  with Alaska Electric                                                            
                            Light & Power Company.  He referenced the                                                           
                            number of bank boards  that he served on                                                            
                            and added that he  had served on Governor                                                           
                            Knowles Highway Gas Pipeline.                                                                       
                            Additionally, he  noted that he has been                                                            
                            active on State, civic and charitable                                                               
                            activities and held  position on several                                                            
                            boards and commissions.                                                                           
 625 Co-Chair Harris        Observed situations statewide regarding                                                             
                            fiscal concerns of the State.                                                                     
 649 Commissioner Corbus  Commented that he was new on the job and                                                              
                            did not have specific recommendations.                                                              
                            He noted that he agreed with the                                                                    
                            Governor's suggestion  regarding the oil                                                            
                            and gas development and assured that                                                                
                            would be an area of focus.                                                                        
 721 Co-Chair Williams      Asked what the State could do to increase                                                           
                            revenues in order  to address fiscal gap                                                            
                            concerns.                                                                                         
 819 Commissioner Corbus  Reiterated that the Governor has                                                                      
                            mentioned oil.  He observed that later in                                                         
                            his testimony, he would review the                                                                  
                            revenue forecast. The petroleum industry                                                            
                            must to be encouraged to keep up their                                                              
                            level of investment.  He stated that he                                                             
                            would discuss what could encourage those                                                            
                            companies to make investments to sustain                                                            
                            production.  At present time, he had no                                                             
                            specifics.                                                                                        
920 Representative          Observed that Commissioner Corbus had an                                                            
      Hawker                extensive background on public utilities                                                            
                            administration and banking.  He requested                                                           
                            a broader elaboration regarding his                                                                 
                            qualifications to act as Commissioner of                                                            
                            the Department of Revenue.                                                                        
959 Commissioner Corbus  Replied that he has been following the                                                                 
                            State of Alaska's financial situation for                                                           
                            many years.  He advised that his                                                                    
                            experience on the Alaska Pension Board,                                                             
                            State Fiscal Policy Council and other                                                               
                            commissions.  He acknowledged that as far                                                           
                            as leading the Department of Revenue, it                                                            
                            would be a formidable task. He added that                                                           
                            he had filled leadership positions                                                                  
                            throughout his life.  He noted the                                                                  
                            qualifications of his staff.                                                                      
1148 Representative         Asked for an expansion on the roll that                                                             
      Hawker                the Department of Revenue would take in                                                             
                            the future as part of the new                                                                       
                            Administration.                                                                                   
1204 Commissioner Corbus  Responded that the mission of the                                                                     
                            Department of Revenue was to collect                                                                
                            money for the State and then invest it.                                                             
                            Commissioner Corbus noted that he was                                                               
                            more concerned with increasing the                                                                  
                            collections, which would increase                                                                   
                            revenues.                                                                                         
1250 Representative         stressed that Commissioner Corbus was                                                               
      Stoltze               very qualified for the position of                                                                  
                            Commissioner of Department of Revenue.                                                              
                            He requested for a brief discussion on                                                              
                            any foreseeable changes to the Permanent                                                            
                            Fund.                                                                                             
1328 Commissioner Corbus  Commented that the Permanent Fund had not                                                             
                            had a meeting since the Administration                                                              
                            came into office.  Commissioner Corbus                                                              
                            noted that he did know many of the Board                                                            
                            of Trustees and agreed with the                                                                     
                            allocation approach taken in the past.                                                            
1435 Representative         Inquired about Commissioner Corbus'                                                                 
      Stoltze               opinion on the endowment.                                                                         
1440 Commissioner Corbus  Replied at this time, he did not.                                                                   
1503 Representative Croft  Acknowledged that Commissioner Corbus was                                                            
                            qualified.  He addressed the State's                                                              
                            current fiscal issues.  He asked how long                                                           
                            longer the State would have with its'                                                               
                            current spending from the Capital Budget                                                            
                            Reserve (CBR).                                                                                    
 1603 Commissioner Corbus  Responded that the only information that                                                             
                            he had was the Fall revenue forecast as                                                             
                            prepared by the previous Administration.                                                            
                            Based on those projections, the CBR was                                                             
                            be exhausted by June, 2005.                                                                       
 1705 Representative Croft  Asked how can the State encourage new                                                               
                            money out of the oil industry, when the                                                             
                            State is on a "3-year" fiscal crash                                                                 
                            course.                                                                                           
 1740 Commissioner Corbus  Responded that he did not have an answer                                                             
                            to that at present time.  He commented                                                              
                            that it is being worked on at this time.                                                          
 1801 Representative Croft  Questioned that response.                                                                         
 1817 Representative        Commended Commissioner Corbus on his                                                                
      Foster                resume and experience.  He thanked Mr.                                                              
                            Corbus for his willingness to take the                                                              
                            position with the Administration.                                                                 
 1850 Co-Chair Harris       Stated that Commissioner Corbus would be                                                            
                            confirmed by the House Finance Committee                                                            
                            for the position of Commissioner of the                                                             
                            Department of Revenue.                                                                            
                                                                                                                                
                            OVERVIEW: DEPARTMENT OF REVENUE                                                                 
 1928 Vice-Chair Meyer      Called the Committee back to order and                                                              
                            noted that Co-Chair Williams and Co-Chair                                                           
                            Harris would be absent for the remainder                                                            
                            of the meeting and that he would be the                                                             
                            Chair.                                                                                            
 1957 Commissioner Corbus  Noted that the mission of the Department                                                             
                            was to collect State funds and invest                                                               
                            them.  Stated that there are seven                                                                  
                            divisions within the Department of                                                                  
                            Revenue. He listed each of those                                                                    
                            divisions:                                                                                          
                               · Administrative Services                                                                        
                               · Treasury                                                                                       
                               · Child Support Enforcement Division                                                             
                                 (CSED)                                                                                         
                               · Permanent Fund Division                                                                        
                               · State Bond Committee/Alaska                                                                    
                                 Municipal Bond Committee                                                                       
                               · Tax Division                                                                                   
                               · Alcohol Beverage Control Board (ABC)                                                         
 2053 Commissioner Corbus  Stated that there are approximately 450                                                              
                            full time employees working for the                                                                 
                            Department.  There is an overall budget                                                             
                            of approximately $70 million dollars.                                                               
                            Most of that money is a management fee                                                            
                            for the Permanent Fund and the Pension                                                              
                            Fund.  $12.5 million comes from General                                                             
                            fund appropriations.                                                                              
2113 Commissioner Corbus Listed the other entities within the                                                                   
                            Department of Revenue for administrative                                                            
                           purposes are:                                                                                        
                              · Permanent Fund Corporation                                                                      
                              · Alaska Housing Finance Corporation                                                              
                                 (AHFC)                                                                                         
                              · Mental Health Lands Trust                                                                     
2132 Commissioner Corbus Added that one of the important roles of                                                               
                            the Department was to prepare the semi-                                                             
                            annual revenue source book.                                                                       
2205 Commissioner Corbus  Explained that the Tax Division is broken                                                             
                            into 9 groups with 88 employees.  The                                                               
                            groups are:                                                                                         
                              · property tax                                                                                    
                              · oil property taxes                                                                              
                              · economic research                                                                               
                             · appeals                                                                                          
                              · Audit I group                                                                                   
                              · Audit 2 group                                                                                   
                              · Gaming group                                                                                    
                              · Administrative support                                                                          
                              · Information technology                                                                          
                              · Operations                                                                                      
                                                                                                                                
                            Oil and gas tax revenues amount to $945                                                             
                            million dollars for FY02.                                                                         
2241 Commissioner Corbus Child Support Enforcement Division (CSED)                                                              
                            - mission to establish paternity,                                                                   
                            determine monthly child support amount,                                                             
                            issuing withholding orders, collecting                                                              
                            and dispersing payments, and                                                                        
                            investigating cases of non compliance.                                                            
2332 Commissioner Corbus  Historical records indicate good progress                                                             
                            in handling complaints over the years.                                                            
2356 Commissioner Corbus  Addressed the Permanent Fund Dividend                                                                 
                            Division.  There are 59 permanent                                                                   
                            employees and 34 seasonal employees. He                                                             
                            noted the Division is making progress                                                               
                            with people filing applications on-line.                                                          
2449 Commissioner Corbus  Referenced the Treasury Division, which                                                               
                            consists of the investment staff, cash                                                              
                            management group and the controllers                                                                
                            group.  The Division is responsible for                                                             
                            managing $16 billion dollars.  About $10                                                            
                            billion dollars of that amount is the                                                               
                            defined benefit plan for the Alaska State                                                           
                            Investment Pension Board.  Approximately                                                          
                            $2 billion dollars  is for the defined                                                              
                            contributions of  the State.  The general                                                           
                            funds included to  about $1 billion                                                                 
                            dollars.  The Constitutional Budget                                                                 
                            Reserve fund totals about $2 billion                                                                
                            dollars and there  is various group funds                                                           
                            bringing the total to about $16 billion                                                             
                            dollars.  The Commissioner  of Department                                                           
                            of Revenue has fiduciary responsibility                                                             
                            for a portion of that money.  The other                                                             
                            $12 billion dollars, the ASPIB has the                                                              
                            fiduciary responsibility  for.  The                                                                 
                            Department of Revenue follows a defined                                                             
                            process for the  investment funds. The                                                              
                            investment options are important. He                                                                
                            added that outside consultants are used                                                             
                            to build market assumptions and establish                                                           
                            an asset allocation  mix, which follows a                                                           
                            mathematical model looking at the overall                                                           
                            return of the fund versus the risks                                                                 
                            associated with it.  The performance of                                                             
                            the fund is measured  through these                                                                 
                            benchmarks.                                                                                       
 2752 Commissioner Corbus  Commented that CSED and PFD touch more                                                               
                            Alaskans personally  than the other                                                                 
                            divisions.                                                                                        
 2819 Commissioner Corbus  He spoke to the Bond Committee.  That                                                                
                            Committee is responsible  for selling the                                                           
                            State's general obligation bonds and                                                                
                            administers the State's debt.  The Alaska                                                           
                            Municipal Bond Bank  helps communities to                                                           
                            settle tax-exempt bonds.                                                                          
 2913 Commissioner Corbus   Spoke to the Alcohol Control Board (ABC)                                                            
                            Board. He noted  that the Department does                                                           
                            not have much responsibility  for that                                                              
                            board.  The Governor  appoints that board                                                           
                            with staggered terms.   The Department                                                              
                            does not have much  responsibility for                                                              
                            that Board.  They  are responsible for                                                              
                            enforcing the State's  liquor laws.                                                                 
                            Commissioner Corbus  noted that he had                                                              
                            been the Chairman of the Governor's                                                                 
                            transition team.  He added that the                                                                 
                            Department is "well-run"  with many                                                                 
                            dedicated employees.                                                                              
 3030 Commissioner Corbus Concluded that he looked forward to                                                                   
                            working with the Legislature.                                                                     
 3046 Vice-Chair Meyer      Referenced the oil price forecast summary                                                           
                            contained in the packet.   (Copy on                                                                 
                            File).                                                                                            
 3109 Commissioner Corbus  Noted that he would highlight that                                                                   
                            handout later when he discussed the                                                                 
                            revenues forecast.                                                                                
3135 Representative         Asked if there was serious consideration                                                            
      Stoltze               moving Post Secondary Education out of                                                              
                            Department of Revenue.                                                                            
3136 Commissioner Corbus  Replied that he had not heard that                                                                    
                            discussed.  He noted that the Department                                                            
                            manages those funds for them, however,                                                              
                            they are the ones that make the                                                                     
                            investment decisions.                                                                             
3158 Representative         Referenced CSED noting that the sunset                                                              
      Stoltze               legislation was coming up.                                                                          
                            Representative Stoltze asked if there was                                                           
                            a change in philosophy between the                                                                  
                            administrations.                                                                                  
3125 Commissioner Corbus  Responded that legislation would be                                                                   
                            introduced to address the sunset.  Did                                                              
                            not know about the details of the                                                                   
                            philosophical issues.                                                                             
3241 Representative         Regarding CSED, he asked if PFD's were a                                                            
      Stoltze               big portion of that collection.                                                                   
3300 Commissioner Corbus  Explained that he had seen graphs                                                                     
                            indicating that collections increase at                                                             
                            the time of the distribution of the PFD.                                                          
3325 Representative         Asked about moving CSED into another                                                                
      Stoltze               department because of periodic                                                                      
                            enforcement issues.  He asked if there                                                              
                            had been any active consideration                                                                   
                            regarding that concern.                                                                           
3359 Commissioner Corbus  Replied that issue had been brought to                                                                
                            the attention of the Department and that                                                            
                            no decision had been made.  He noted that                                                           
                            he had not heard of the possibility of a                                                            
                            transfer to another department.                                                                   
3433 Vice-Chair Meyer       Thought that there are not enough ABC                                                               
                            inspectors.  He asked if there would be                                                             
                            new members added to that Board.                                                                  
3459 Commissioner Corbus  Replied that he did not know what was in                                                              
                            next year's budget.  He offered to get                                                              
                            back to the Committee regarding that                                                                
                            concern.                                                                                          
                                                                                                                                
                            DOR FORECAST PRICE FOR ANS CRUDE OIL                                                            
3612 Commissioner Corbus  Noted that the forecast document had been                                                             
                            prepared by the previous Administration.                                                            
                            (Copy on File).  The forecast is prepared                                                           
                           semi-annually.                                                                                     
3703 Commissioner Corbus  Discussed that the Department does                                                                    
                            actively consult members of the Industry                                                            
                            and other departments regarding the                                                                 
                            proposed numbers.  He added that within                                                             
                            the Department of Revenue, the tax                                                                  
                            Division plays a very important role.                                                             
3739 Commissioner Corbus  Noted that the Fall forecast this year                                                                
                            took a more optimistic out look at the                                                            
                            price of oil than  the previous forecasts.                                                          
                            For many years prior to this forecast,                                                              
                            the Department of Revenue was looking at                                                            
                            long run, the price being between $17.50                                                            
                            - $18.50 range.  That had been the average                                                          
                            since 1986 through 2002.  In the Fall                                                               
                            forecast, that was  switched and now looks                                                          
                            back over a shorter time period, 53                                                                 
                            months.  That placed  oil at $22 dollars a                                                          
                            barrel.  He stressed that was a                                                                     
                            significant change.  It was concluded                                                               
                            that OPEC had a  handle on controlling the                                                          
                            market management. Prior to that, the                                                               
                            feeling was that the discipline was not                                                             
                            there.  OPEC has  been responsible for the                                                          
                            success for the  past number of years.  He                                                          
                            highlighted the process                                                                           
 4040 Commissioner Corbus  Continued, transportation costs are                                                                  
                            estimated around $5 - $5.50 dollars per                                                             
                            barrel, which includes the tariff on the                                                            
                            taps, oil pipeline.  The price is then                                                              
                            predicted and the gross revenue is                                                                  
                            determined.  He  added that there are four                                                          
                            types of taxes are collected:                                                                       
                               · property taxes                                                                                 
                               · severance taxes                                                                                
                               · royalty taxes                                                                                  
                               · corporate income taxes                                                                       
 4148 Commissioner Corbus  Addressed production.  The estimated oil                                                             
                            in the ground is about 63 billion                                                                   
                            barrels.  To date,  14 billion barrels has                                                          
                            been taken out of  the ground and shipped                                                           
                            out. It is estimated  that by 2010, there                                                           
                            will be another  8.5 billion barrels will                                                           
                            be recovered.  That will require                                                                    
                            investment by the oil companies.                                                                  
 4302 Commissioner Corbus  Referenced Page 12, Table 1 in the                                                                   
                            handout.  (Copy on File).  The chart                                                                
                            provides the projected ANS Production                                                               
                            from discovered producing fields in the                                                             
                            millions of barrels.                                                                              
 4423 Representative Croft  Inquired if there would really be 8                                                                 
                            billion gallons by 2010.                                                                          
 4444 Commissioner Corbus  Indicated that was a mistake and that                                                                
                            number is the amount  that they ultimately                                                          
                            expect to recover.                                                                                
 4506 Commissioner Corbus  Stated that it is expected that there                                                                
                            will be 1 million barrels per day until                                                             
                            2007.  In 2008, there will be other oil                                                             
                            coming in from Pt.  Thompson.  By the year                                                          
                            2010, 27% of the production will come                                                               
                            from new sources that have been                                                                   
                            discovered and are not currently                                                                    
                            producing.  New discoveries could be made                                                           
                            and will add to production until after                                                              
                            2010.                                                                                             
4604 Commissioner Corbus  Addressed oil price.  He stated that the                                                              
                            price is reflected by the supply and the                                                            
                            demand, which affect the industry.  He                                                              
                            noted that included in the packet, is a                                                             
                            one-page sheet of the forecast for three                                                            
                            years.  (Copy on File).                                                                           
                                                                                                                                
                            TAPE HFC 03 - 4, Side B                                                                         
4635 Commissioner Corbus  Pointed out how in the fall of 2002, the                                                              
                            outlook for the price of oil has jumped.                                                          
4614 Commissioner Corbus  Addressed how the State of Alaska is                                                                  
                            currently doing with the price of oil.                                                              
                            Because of the strike in Venezuela, the                                                             
                            price has been cut adding the prospect of                                                           
                            war with Iraq.  In the forecast for FY03,                                                           
                            it is estimated that the average price is                                                           
                            up $1.25 per barrel.  That is good news                                                             
                            for the State Treasury.                                                                           
4444 Commissioner Corbus  Commented that the basic concern is the                                                               
                            unrestricted revenues.  Referenced Page                                                             
                            49 of the forecast.                                                                               
4344 Commissioner Corbus  Referred to Page 49, which illustrates                                                                
                            the unrestricted and restricted costs of                                                            
                            oil. Page 51, addresses the unrestricted                                                            
                            oil revenues.  The projected revenues                                                               
                            from 2003, of $1.468 billion trailing off                                                           
                            to $1.20 by 2010.                                                                                 
4237 Representative Croft  Questioned why NPRA was restricted.  He                                                              
                            referenced Page 49 - The use of                                                                     
                            "unrestricted" and "restricted".  He                                                                
                            questioned if the projected forecast had                                                            
                            ever been right.                                                                                  
4156 Commissioner Corbus  Acknowledged the question but did not                                                                 
                            know the answer but would get back to the                                                           
                            Committee regarding that concern.                                                                 
4109 Commissioner Corbus  Mentioned that other revenue source for                                                               
                            the State come from corporate income                                                                
                            taxes, and a myriad of other taxes such                                                             
                            as estate tax, alcohol tax, and earning                                                             
                            investment.                                                                                       
4000 Representative         Asked about the alcohol tax.  He asked                                                              
      Stoltze               how long until it actually "kicks in".                                                            
3936 Commissioner Corbus  Commented that he did not know but would                                                              
                            get back to the Committee regarding that                                                            
                            concern.  He referenced the non-oil                                                                 
                            revenues summarized on Pages 3 & 32 of                                                              
                           the Forecast.                                                                                      
3905 Vice-Chair Meyer       Observed that the estimate of oil revenue                                                           
                            is decreasing, while NPRA production is                                                           
                            increasing. He noted  that the price of                                                             
                            oil would have to be at $40 dollars per                                                             
                            barrel to balance  the budget gap.  The                                                             
                            forecast does not indicate anything close                                                           
                            to that.                                                                                          
 3732 Commissioner Corbus  Emphasized the need for new development                                                              
                            in time for the  development to come to                                                             
                            fruition.  The estimates do not include                                                             
                            new production.                                                                                   
 3623 Representative        Questioned if Commissioner Corbus did                                                               
      Whitaker              accepted the methodology and assumptions                                                            
                            used by the previous Administration. He                                                             
                            suggested that the current baseline was                                                             
                           unacceptable.                                                                                      
 3548 Commissioner Corbus  Stated that he did agree with the                                                                    
                            previous Administration's  assumptions,                                                             
                            however, emphasized that the new team is                                                            
                            just beginning their process.                                                                     
 3504 Representative Joule  Questioned the overall health of the                                                                
                            Teacher and Public Retirement System                                                                
                            (PERS & TERS).                                                                                    
 3409 Commissioner Corbus  Replied that he had not attended any                                                                 
                            board meetings of  that contingency but                                                             
                            acknowledged that there are some general                                                            
                            concerns because of the cuts to the stock                                                           
                            market.                                                                                           
 3337 Representative Croft  Asked if Alaska National Wildlife Refuge                                                            
                            (ANWR) could save the State if it came on                                                           
                            line 'tomorrow'.  Would it produce                                                                  
                            enough, before the State runs out of                                                                
                            money.                                                                                            
 3313 Commissioner Corbus  Commented that ANWR was not included in                                                              
                            the 2010 projection.  He stated that he                                                             
                            would get back to the Committee regarding                                                           
                            that concern.  Testimony concluded.                                                               
                                                                                                                                
                            Alaska Science and Technology Foundation                                                        
 3201 HANS ROETERINK,       Provided members with an information                                                                
      EXECUTIVE DIRECTOR, packet regarding Alaska Science and                                                                   
      ALASKA SCIENCE AND    Technology Foundation (ASTF).  (Copy on                                                             
     TECHNOLOGY            File). He provided a brief personal                                                                  
      FOUNDATION (ASTF)     history.                                                                                          
 2919 Mr. Roeterink         Noted that ASTF was funded in 1988 with                                                             
                            the goal to establish  a foundation and                                                             
                            economic base to grow the economy and as                                                            
                            a counterpoint against the erosion of                                                               
                            oil. There are three elements that must                                                             
                            be in place for growth:                                                                             
                               · Education                                                                                      
                               · Partners                                                                                       
                               · Projects/technology/knowledge                                                                
 2702 Mr. Roeterink         Observed that Alaska Manufactures'                                                                  
                            Association (AK/MA), one of their                                                                 
                            partners, has a mission to enhance the                                                              
                            fisheries.                                                                                        
2556 Mr. Roeterink          Stressed the need to create an                                                                      
                            environment that would allow growth for                                                             
                            the future. In order to move forward, the                                                           
                            State should pick areas that the State is                                                           
                            good at and use new technology, and                                                                 
                            telecommunications to enhance growth.                                                             
2319 Mr. Roeterink          Observed that lumber grading, SciFish and                                                           
                            Alaska FreshCut, an Anchorage company,                                                              
                            have benefited from that approach.                                                                
2153 Mr. Roeterink          Addressed how ASTF can help grow                                                                    
                            industry, through an efficient, clear                                                               
                            process.  Mr. Roeterink presented the                                                               
                            Committee with a list of projects that                                                              
                            ASTF has participated in. He explained                                                              
                            that the intent is to concentrate with                                                              
                            fewer projects with more direction and                                                              
                            monitoring.                                                                                       
1913 Mr. Roeterink          Spoke to funding.  He observed that the                                                             
                            Board approved 5% of the market value                                                               
                            concept to limit distributions, to                                                                  
                            protect a smooth distribution of monies                                                             
                            by ASTF in the future. He referred to                                                               
                            University funding by ASTF.  He observed                                                            
                            that $2.3 million dollars had been                                                                  
                            appropriated to the University.  He                                                                 
                            suggested that other sources be found in                                                            
                            order to continue that funding.                                                                   
1527 Representative         Asked for more information regarding                                                                
      Stoltze               University funding.                                                                               
1439 Mr. Roeterink          Explained that a $2 million dollar                                                                  
                            appropriation to the University does not                                                            
                            allow ASTF direction as to how the                                                                  
                            funding and how it would be spent.                                                                  
                            Research is key to moving forward.                                                                
1326 Representative Croft  Asked if ASTF was prohibited from taking                                                             
                            an equity position.                                                                               
1305 Mr. Roeterink          Responded that they are prohibited.                                                               
1255 Representative         Spoke in support of AK/MA. He thought                                                               
      Stevens               that was within the Department of                                                                   
                            Community and Economic Development                                                                  
                            Division.                                                                                         
1222 Mr. Roeterink          Explained that AK/MA was started by ASTF                                                            
                            and then "spun off". He noted that the                                                              
                            ASTF share of the funding has decreased                                                             
                            from 50% to 20% percent as the percentage                                                           
                            of their other funds has increased.                                                               
1023 Representative         Questioned if ASTF grants require a                                                                 
      Hawker                repayment.                                                                                        
957 Mr. Roeterink           Grantees must repay 1.5 percent if that                                                             
                            agency remains in the State. They pay                                                             
                            three times that amount if they leave the                                                           
                            State.                                                                                            
 928 Representative         He noted that the overhead rate is                                                                  
      Hawker                approximately 20 percent.  He asked if                                                              
                            community investment should be more or                                                              
                            less aggressive.                                                                                  
 841 Mr. Roeterink          Explained that core needs require 4 - 5                                                             
                            staff members. He noted that ASTF could                                                             
                            administer more money, if it were                                                                   
                            available, with their current staff.  He                                                            
                            stressed that the State needs growth                                                                
                            outside of oil.                                                                                   
 650 Representative         Summarized that Mr. Roeterink felt that                                                             
      Hawker                ASTF is operating efficiently.  He asked                                                            
                            the outstanding commitment for match                                                                
                            money by partners.                                                                                
 607 Mr. Roeterink          Estimated the outstanding commitments                                                               
                            total about $2 million dollars, leaving                                                             
                            approximately $1 to $1.2 million left for                                                           
                            investment this year. The funds are part                                                            
                            of the Permanent Fund.                                                                            
 521 Representative         Asked the total long-term liability for                                                             
      Whitaker              ASTF, currently allocated to programs.                                                            
 441 Mr. Roeterink          Did not know the exact amount but                                                                   
                            estimated between $3 - $5 million                                                                   
                            dollars. There are some long-term                                                                   
                            commitments that have been made.                                                                  
 419 Representative         Asked for more information on the success                                                           
      Stevens               of the surimi industry.                                                                           
 400 Mr. Roeterink          Noted that the surimi grantee has been                                                              
                            successful and is selling $70 to $80                                                                
                            million dollars of product per year. It                                                             
                            is a very successful endeavor.                                                                    
 360 ADJOURNMENT            The meeting was adjourned at 3:14 P.M.                                                            
                                                                                                                                

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