Legislature(1993 - 1994)

03/12/1994 08:00 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
             HOUSE STATE AFFAIRS STANDING COMMITTEE                            
                         March 12, 1994                                        
                            8:00 a.m.                                          
  MEMBERS PRESENT                                                              
  Representative Al Vezey, Chairman                                            
  Representative Pete Kott, Vice Chairman                                      
  Representative Bettye Davis                                                  
  Representative Gary Davis                                                    
  Representative Harley Olberg                                                 
  Representative Jerry Sanders                                                 
  Representative Fran Ulmer                                                    
  MEMBERS ABSENT                                                               
  COMMITTEE CALENDAR                                                           
  *HB 512:       "An Act relating to the awarding of attorney                  
                 fees and costs in civil actions to a                          
                 prevailing party in a civil action in which                   
                 the losing party is a public interest                         
                 litigant; and amending Alaska Rules of Civil                  
                 Procedure 79 and 82."                                         
                 PASSED OUT OF COMMITTEE                                       
  *HB 494:       "An Act changing the Alaska State Pension                     
                 Investment Board to the Alaska Pension                        
                 Investment Authority and relating to the                      
                 authority; and providing for an effective                     
                 PASSED OUT OF COMMITTEE                                       
  HB 450:        "An Act relating to investment pools for                      
                 public entities; and providing for an                         
                 effective date."                                              
                 PASSED OUT OF COMMITTEE                                       
  *HB 369:       "An Act relating to state leases and to state                 
                 lease-purchase and lease-financing                            
                 agreements, and repealing a legislative                       
                 authorization previously given for                            
                 acquisition of a facility through a lease-                    
                 purchase agreement; and providing for an                      
                 effective date."                                              
                 PASSED OUT OF COMMITTEE                                       
  HB 342:        "An Act extending the termination date of the                 
                 Alaska Tourism Marketing Council."                            
                 NOT HEARD                                                     
  (*First public hearing)                                                      
  WITNESS REGISTER                                                             
  REPRESENTATIVE AL VEZEY, Chairman                                            
  House State Affairs Committee                                                
  Alaska State Capitol, Room 102                                               
  Juneau, AK  99811-0460                                                       
  Phone:  465-3719                                                             
  POSITION STATEMENT:  Addressed HB 512                                        
  DAVID HARDING, Staff                                                         
  Representative Eileen MacLean                                                
  Alaska State Capitol, Room 507                                               
  Juneau, AK  99811-0460                                                       
  Phone:  465-4833                                                             
  POSITION STATEMENT:  Addressed HB 494 for Representative                     
                       MacLean, Sponsor                                        
  BILL CORBUS, Chairman                                                        
  Alaska State Pension Investment Board                                        
  612 W. Willoughby                                                            
  Juneau, AK  99801                                                            
  Phone:  586-2222                                                             
  POSITION STATEMENT:  Supported HB 494                                        
  GAIL R. OBA, Vice Chairman                                                   
  Alaska State Pension Investment Board                                        
  10615 Main Tree                                                              
  Anchorage, AK  99516                                                         
  Phone:  276-1550                                                             
  POSITION STATEMENT:  Supported HB 494                                        
  DARREL REXWINKEL, Commissioner                                               
  Department of Revenue                                                        
  P.O. Box 110400                                                              
  Juneau, AK  99811-0400                                                       
  Phone:  465-2300                                                             
  POSITION STATEMENT:  Supported HB 494                                        
  ROBERT D. STORER, Chief Investment Officer                                   
  Department of Revenue                                                        
  P.O. Box 110405                                                              
  Juneau, AK  99811-0405                                                       
  Phone:  465-4399                                                             
  POSITION STATEMENT:  Supported HB 494                                        
  STEVE MCPHETRES, Executive Director                                          
  Alaska Council on School Administration                                      
  326 4th Ave. #404                                                            
  Juneau, AK  99801                                                            
  Phone:  586-9702                                                             
  POSITION STATEMENT:  Supported HB 494                                        
  CLAUDIA DOUGLAS                                                              
  NEA Alaska                                                                   
  114 Seward St.                                                               
  Juneau, AK  99801                                                            
  Phone:  586-3090                                                             
  POSITION STATEMENT:  Supported HB 494                                        
  JOHN BITNEY, Staff                                                           
  Representative Ron Larson                                                    
  Alaska State Capitol, Room 502                                               
  Juneau, AK  99811-0460                                                       
  Phone:  465-3878                                                             
  POSITION STATEMENT:  Addressed HB 450 for Representative                     
                       Larson, Co-Chairman of the House                        
                       Finance Committee                                       
  DAVE ROSE, Principal                                                         
  Alaska Permanent Management Company                                          
  Financial Advisor, Alaska Municipal League Investment Pool                   
  900 W. 5th Ave. #701                                                         
  Anchorage, AK  99501-2029                                                    
  Phone:  272-7575                                                             
  POSITION STATEMENT:  Commented on HB 450                                     
  KENT SWISHER, Executive Director                                             
  Alaska Municipal League                                                      
  217 2nd St.                                                                  
  Juneau, AK  99801                                                            
  Phone:  586-1325                                                             
  POSITION STATEMENT:  Answered questions on HB 450                            
  DUGAN PETTY, Director                                                        
  General Services Division                                                    
  Department of Administration                                                 
  P.O. Box 110210                                                              
  Juneau, AK  99811-0210                                                       
  Phone:  465-2250                                                             
  POSITION STATEMENT:  Addressed HB 369                                        
  PREVIOUS ACTION                                                              
  BILL:  HB 512                                                                
  SPONSOR(S): STATE AFFAIRS                                                    
  JRN-DATE     JRN-PG               ACTION                                     
  02/28/94      2550    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/28/94      2551    (H)   STATE AFFAIRS, JUDICIARY                         
  03/12/94              (H)   STA AT 08:00 AM CAPITOL 102                      
  BILL:  HB 494                                                                
  SPONSOR(S): REPRESENTATIVE(S) MACLEAN                                        
  JRN-DATE     JRN-PG               ACTION                                     
  02/14/94      2380    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/14/94      2380    (H)   STATE AFFAIRS, FINANCE                           
  03/12/94              (H)   STA AT 08:00 AM CAPITOL 102                      
  BILL:  HB 450                                                                
  SPONSOR(S): FINANCE                                                          
  JRN-DATE     JRN-PG               ACTION                                     
  02/09/94      2315    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/09/94      2315    (H)   STATE AFFAIRS, FINANCE                           
  02/24/94              (H)   STA AT 08:00 AM CAPITOL 102                      
  03/12/94              (H)   STA AT 08:00 AM CAPITOL 102                      
  BILL:  HB 369                                                                
  JRN-DATE     JRN-PG               ACTION                                     
  01/14/94      2061    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  01/14/94      2062    (H)   STATE AFFAIRS, FINANCE                           
  03/12/94              (H)   STA AT 08:00 AM CAPITOL 102                      
  BILL:  HB 342                                                                
  SHORT TITLE: EXTEND TOURISM MARKETING COUNCIL                                
  SPONSOR(S): REPRESENTATIVE(S) KOTT,Hudson,Ulmer                              
  JRN-DATE     JRN-PG               ACTION                                     
  01/03/94      2017    (H)   PREFILE RELEASED                                 
  01/10/94      2017    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  01/10/94      2017    (H)   L&C, STATE AFFAIRS, FINANCE                      
  01/20/94              (H)   L&C AT 03:00 PM CAPITOL 17                       
  01/20/94              (H)   MINUTE(L&C)                                      
  01/21/94      2122    (H)   L&C RPT  6DP                                     
  01/21/94      2122    (H)   DP: MACKIE, HUDSON, WILLIAMS,                    
  01/21/94      2122    (H)   DP:  PORTER, GREEN                               
  01/21/94      2122    (H)   -ZERO FISCAL NOTE (DCED)                         
  01/21/94      2122    (H)   REFERRED TO STATE AFFAIRS                        
  03/12/94              (H)   STA AT 08:00 AM CAPITOL 102                      
  ACTION NARRATIVE                                                             
  TAPE 94-28, SIDE A                                                           
  Number 000                                                                   
  CHAIRMAN AL VEZEY called the meeting to order at 7:58 a.m.                   
  Members present were REPRESENTATIVES KOTT, SANDERS, G.                       
  DAVIS, OLBERG, AND B. DAVIS.  A quorum was present.                          
  HB 512 - COURT COSTS/ATTORNEY FEES:  PREVAILING PARTY                        
  CHAIRMAN VEZEY opened HB 512, introduced by the House State                  
  Affairs Committee, for discussion.                                           
  VICE CHAIRMAN KOTT was given control of the gavel so                         
  CHAIRMAN VEZEY could address HB 512.                                         
  codifies the legislature's intent in passing SCR 4.  He                      
  noted SCR 4 was a recommendation to the Supreme Court, and                   
  HB 512 would make the same action into law.  The House                       
  passed HB 512 by a 33 to 4 vote.                                             
  Number 045                                                                   
  REPRESENTATIVE GARY DAVIS inquired why the original SCR 4                    
  was not in bill form.                                                        
  Number 053                                                                   
  CHAIRMAN VEZEY responded that a resolution requires a                        
  majority vote to pass the legislature and a bill changing a                  
  court rule requires a two-thirds vote.  He believed the                      
  original sponsor of SCR 4 had felt a two-thirds vote was not                 
  attainable.  He emphasized HB 512 would not pass without a                   
  two-thirds vote.                                                             
  Number 070                                                                   
  CHAIRMAN VEZEY moved to pass HB 512 from committee with                      
  individual recommendations.                                                  
  Number 073                                                                   
  VICE CHAIRMAN PETE KOTT recognized the motion and asked the                  
  committee secretary to call the roll.                                        
  IN FAVOR:      VEZEY, KOTT, B. DAVIS, G. DAVIS, SANDERS,                     
  ABSENT:        ULMER                                                         
  The House State Affairs Committee passed HB 512, with                        
  individual recommendations.                                                  
  VICE CHAIRMAN KOTT returned control of the gavel to CHAIRMAN                 
  HB 494 - ALASKA PENSION INVESTMENT AUTHORITY                                 
  CHAIRMAN VEZEY opened HB 494 for discussion.                                 
  Number 099                                                                   
  SPONSOR, addressed HB 494.  He stated HB 494 will lead to                    
  greater long-term financial stability, and more appropriate                  
  lines of authority for the state's pension investment                        
  system.  With HB 494, the Alaska State Pension Investment                    
  Board (ASPIB) would be moved out of the Department of                        
  Revenue (DOR), and reconstituted as a separate authority.                    
  This separation will allow employees of the Pension                          
  Authority to focus solely on the investment of the $7                        
  billion in PERS, TRS, and SBS funds they manage.  The                        
  Treasury Division, DOR, will be able to focus on other                       
  functions, including the management of cash balances in the                  
  general fund.  New positions would be created, but the DOR                   
  analysis shows the net result would be an annually general                   
  fund gain of $10 million or more.  He thought the private                    
  sector would agree with the gain created by HB 494 and the                   
  state should follow suit.                                                    
  MR. HARDING explained there would be a political                             
  consideration, in addition to the fiscal consideration.  The                 
  current ASPIB structure and its' membership has a smooth                     
  relationship with the DOR; however, he noted there could be                  
  problems in the future.  Presently, the ASPIB makes                          
  decisions which are carried out solely by people would work                  
  for the commissioner of Revenue.  He expressed the current                   
  structure was not stable and people would be better served                   
  if it was improved.                                                          
  (REPRESENTATIVE ULMER arrived at 8:10 a.m.)                                  
  MR. HARDING outlined an amendment REPRESENTATIVE MACLEAN                     
  proposed for HB 494, due to an oversight in drafting.  Page                  
  2, line 20, would be amended to read, "council and the                       
  executive director," and "Department of Revenue" would be                    
  deleted.  This amendment would make HB 494 consistent                        
  throughout in its separation of the Pension Authority from                   
  the DOR.                                                                     
  Number 211                                                                   
  CHAIRMAN VEZEY clarified that on page 2, line 20, the                        
  "Department of Revenue" would be deleted.  He questioned the                 
  connection between the expenditures and the revenues in the                  
  fiscal note.                                                                 
  Number 221                                                                   
  MR. HARDING could not answer and deferred the question to                    
  another witness.                                                             
  Number 232                                                                   
  BOARD, supported HB 494.  He stated the ASPIB has                            
  approximately $7 billion in assets for which it has                          
  fiduciary responsibility.  There are approximately 57,000                    
  beneficiaries, retired or current.                                           
  MR. CORBUS stated the ASPIB was created by the passage of HB
  329 in 1992.  Trustees consist of two members of the Public                  
  Employee's Pension System, two members from the Teacher's                    
  Retirement System, three members appointed by the Governor                   
  and the commissioner of Revenue.  As of December 31, 1993,                   
  the ASPIB has $6.8 billion in defined benefits, $150 million                 
  in defined contribution moneys, and $900 million dollars in                  
  the Supplemental Benefits program.  MR. CORBUS stated as of                  
  December 31, 1993, the ASPIB had returns in excess of 14                     
  percent, which is greater than that earned by the permanent                  
  MR. CORBUS explained HB 494 was proposed because the current                 
  structure of the ASPIB maintains that the staff works for                    
  the commissioner of Revenue, not the ASPIB.  The ASPIB has                   
  fiduciary responsibility for these large sums of money,                      
  however, they do not have the authority to retain or let go                  
  any of the staff.  He expressed it was essential, for the                    
  future, for the ASPIB to be able to manage their staff.                      
  MR. CORBUS stated a separate authority should be created                     
  with the same Board of Directors, and they should have the                   
  ability to hire an executive director and manage their own                   
  MR. CORBUS said the ASPIB unanimously passed a resolution in                 
  an effort toward this separation, which has led to the                       
  introduction of HB 494.                                                      
  Number 315                                                                   
  BOARD, commented on HB 494.  She stated HB 494 merely                        
  substitutes the executive director and employees in the                      
  proposed authority, for the commissioner of Revenue.  She                    
  noted there are no increases in benefits for any of the                      
  planned beneficiaries, and there would not be any embedded                   
  costs for either the employers or the employees.  The ASPIB                  
  believes this will provide a better structure for managing                   
  the funds for which they have fiduciary responsibility.                      
  MS. OBA stated the staff of the DOR conducted a survey to                    
  confirm the fiduciary responsibility and structure of large                  
  public retirement funds.  Five questions were asked of 46                    
  participants, and all of these public funds have assets of                   
  over $5 billion.  The participants were selected from a                      
  Pensions & Investments publication.  Questions were as                       
  1)  In regard to investment of pension funds, who is the                     
  2)  If a board is their subcommittee?                                        
  3)  If an individual is a position elected or appointed?                     
  4)  To whom does the chief administrative officer report?                    
  5)  To whom do investments staff report?                                     
  MR. OBA explained the survey indicated that 37 of the 46                     
  pension funds had boards with fiduciary responsibility and                   
  staff reporting directly to the administrative officer,                      
  hired by the board.  Only six had sole fiduciaries, either                   
  state treasurers or chief financial officers, with staff                     
  reporting directly to them.  Of these six, four were elected                 
  and two were appointed.  The Oregon PERS, New York City, and                 
  the ASPIB were the only three of the 36 pension funds which                  
  had boards where the staff reported directly to the                          
  treasurer or another individual.                                             
  Number 366                                                                   
  CHAIRMAN VEZEY stated he would like a copy of the ASPIB                      
  Number 370                                                                   
  MR. CORBUS replied he would provide CHAIRMAN VEZEY with one.                 
  Number 373                                                                   
  CHAIRMAN VEZEY asked if the term "participants" in relation                  
  to 57,000 meant beneficiaries, both currently employed and                   
  MR. CORBUS affirmed CHAIRMAN VEZEY.                                          
  Number 380                                                                   
  CHAIRMAN VEZEY asked the number of people currently retired                  
  and receiving benefits.                                                      
  MR. CORBUS did not know.                                                     
  Number 382                                                                   
  CHAIRMAN VEZEY asked MR. CORBUS to explain what would happen                 
  in the change from a board to a corporate structure.  He                     
  believed staff would be transferred without change and                       
  questioned why operating costs would increase.                               
  MR. CORBUS deferred the question to DARREL REXWINKEL.                        
  Number 399                                                                   
  CHAIRMAN VEZEY asked if the current structure allows the                     
  commissioner of Revenue to exert undue influence upon his                    
  Number 409                                                                   
  MR. CORBUS answered the ASPIB feels that potential exists.                   
  Number 412                                                                   
  MS. OBA rephrased the commissioner of Revenue did not have                   
  undue influence, but a future commissioner might thwart the                  
  implementation of ASPIB policies.                                            
  Number 425                                                                   
  CHAIRMAN VEZEY asked DARREL REXWINKEL to be the next                         
  individual to testify.                                                       
  Number 434                                                                   
  commented on HB 494.  He stated the separation as proposed                   
  in HB 494 was considered in 1991 as SB 18, but it was                        
  ultimately vetoed for two reasons; board composition and the                 
  cost of creating a separate corporation.  In 1992, SB 329                    
  was passed which created a balance investment board which                    
  took care the board composition.  He noted the cost is still                 
  a problem in creating a separate authority; however, both SB
  18 and SB 329 passed with a substantial majority.  MR.                       
  REXWINKEL clarified the resolution passed by the ASPIB was a                 
  motion to request legislation to create a separate                           
  MR. REXWINKEL addressed the two fiscal notes for HB 494.                     
  One was for revenue operations or treasury management, and                   
  the other is for the investment board.  He explained the                     
  discrepancy with the addition of employees without an                        
  increase in workload.  The ASPIB advisory council deduced                    
  the board was very close to being fiduciarily irresponsible                  
  due the already low amount of staff they have.  He assumed                   
  if the ASPIB had more staff they could generate more revenue                 
  for the state.  He noted HB 494 would force the increase in                  
  cost, which would give the DOR the capability to add                         
  revenues to the State of Alaska.  Currently, staff is                        
  divided between different duties.   With HB 494, however,                    
  the employees would be solely focused on the investment                      
  management process.  He added with $7 billion, the cost of                   
  $497,000 for the investment board, would amply be covered                    
  even with 1/100th of a percent increase in earnings,                         
  $700,000.  He stated the 1993 ASPIB returns, which were in                   
  excess of 14 percent, landed them in the top eight percent                   
  of an independent performance measurement firm hired by the                  
  Pension Board.                                                               
  MR. REXWINKEL stated the ASPIB is concerned because they                     
  would like the increased returns to continue.  Increasing                    
  the funded status of the programs helps reduce the employer                  
  contribution rate, thereby providing a cost savings to the                   
  state of Alaska and all of the participating employers.                      
  MR. REXWINKEL referred to an organizational chart.  The                      
  Permanent Fund program has 27 positions in their FY 95                       
  budget, therefore the amount of positions required in HB 494                 
  would still be relatively light.  He accounted for some of                   
  the additional cost in the expansion of work space necessary                 
  to accommodate more employees.  They are not being charged                   
  for the current space in the State Office Building, but new                  
  space would have to be acquired by the ASPIB.                                
  MR. REXWINKEL agreed with the fiscal note for treasury                       
  operations costing $398,000, with a net increase of about                    
  seven positions.  The Treasury Division would need these                     
  positions because the present positions, which are more                      
  dedicated toward the pension funds, would go away.                           
  Investment officers would also have to be added to focus on                  
  the cash flow requirements of Alaska.  As these officers                     
  coordinate with the agencies, determining the nature of the                  
  cash flow, they would be able to invest further out on the                   
  yield curve achieving incremental returns.  He emphasized an                 
  incremental return of one basis point with the $7 billion                    
  would equal $700,000.  The portfolio staff believes $10                      
  million would be the minimum increase they could return to                   
  the nonpension fund moneys.  He pointed out the actual                       
  figures could run $10-30 million.                                            
  MR. REXWINKEL stated the ASPIB and the DOR would have                        
  reciprocal functions, whereby if one system were to go down,                 
  they could share the other operative one.  He stated the                     
  example of the DOR's reciprocal relationship it shares with                  
  the Permanent Fund Division with respect to data processing.                 
  Number 565                                                                   
  CHAIRMAN VEZEY assumed some of the current DOR employees                     
  would become employees of the new corporation.                               
  Number 569                                                                   
  MR. REXWINKEL replied CHAIRMAN VEZEY was correct.                            
  Number 570                                                                   
  CHAIRMAN VEZEY clarified the employees would be paid for by                  
  the ASPIB out of pension funds.                                              
  Number 572                                                                   
  MR. REXWINKEL affirmed CHAIRMAN VEZEY, and noted there would                 
  be a net increase of about one half of a full-time                           
  equivalent position in the Pension Board.  The fiscal note,                  
  however, states it would increase by one.                                    
  Number 578                                                                   
  CHAIRMAN VEZEY stated, regarding the ASPIB, DOR, fiscal                      
  note, FY 95 operating expenditures would be $497,000 and                     
  capital expenditures would be $388,000, to set up the                        
  office.  He clarified all of the money would come from the                   
  pension system.                                                              
  Number 581                                                                   
  MR. REXWINKEL affirmed CHAIRMAN VEZEY, and stated there                      
  would be no general fund money.                                              
  Number 590                                                                   
  CHAIRMAN VEZEY examined the Treasury Management, DOR, fiscal                 
  note and made clear MR. REXWINKEL stated positions would be                  
  added in the Treasury Division to make up for losing those                   
  Number 594                                                                   
  MR. REXWINKEL agreed and clarified a couple of additional                    
  positions would be added to the Treasury Division to provide                 
  portfolio management individuals.  A total of eight                          
  positions would be added.                                                    
  Number 598                                                                   
  CHAIRMAN VEZEY asked if under component #1961 a total of                     
  eight people would  leaving the DOR and transferring to                      
  MR. REXWINKEL stated he thought there be more employees                      
  leaving, because most employees in the Treasury Division,                    
  except in cash management, are allocated between treasury                    
  general fund moneys and pension fund moneys.  A lot of                       
  positions and costs are being divided amongst different                      
  program categories so that programs pay for their                            
  appropriate share of the function.  He clarified the pension                 
  funds could not be charged anymore than the services they                    
  are receiving.  The positions were divided by their                          
  percentage of work, therefore; the ASPIB, DOR, fiscal note                   
  reads one position would be added because of this analysis.                  
  Number 627                                                                   
  CHAIRMAN VEZEY clarified the net result would be eight                       
  additional positions.                                                        
  Number 629                                                                   
  MR. REXWINKEL stated yes, but it would really amount to                      
  seven full-time equivalent employees.  He pointed the added                  
  positions to Treasury would provide for better cash                          
  management and more positive returns.                                        
  Number 650                                                                   
  CHAIRMAN VEZEY believed the pension funds should be self                     
  supporting.  He asked if the new authority would have                        
  approximately the equivalent of eight full-time employees.                   
  Number 655                                                                   
  MR. REXWINKEL corrected, by referring to the organizational                  
  chart, the new authority would have 20 employees.  Treasury                  
  Division would be left with 17 positions total.  He                          
  clarified cash management individuals would process                          
  warrants, maintain bank accounts, and run the regular                        
  treasury functions.                                                          
  Number 663                                                                   
  CHAIRMAN VEZEY examined the $278,000 increase to the DOR for                 
  the separation.                                                              
  Number 670                                                                   
  MR. REXWINKEL explained the cost was minor compared to this                  
  opportunity to earn more money.  The state would not want to                 
  invest short-term money "long", need it, and then have to                    
  sell the securities and realize the loss.                                    
  Number 683                                                                   
  CHAIRMAN VEZEY stated general fund moneys definitely need to                 
  be short-term.                                                               
  MR. REXWINKEL continued the difference between a 30-day                      
  investment compared to a 180-day investment could be                         
  substantial with relation to the current interest                            
  Number 687                                                                   
  REPRESENTATIVE HARLEY OLBERG clarified at the present time                   
  the DOR has 29 employees working on both pensions and                        
  Number 690                                                                   
  MR. REXWINKEL replied REPRESENTATIVE OLBERG was                              
  approximately correct.                                                       
  Number 691                                                                   
  REPRESENTATIVE OLBERG clarified 20 of those positions would                  
  leave the DOR, and they would add 7 positions to the 8-9                     
  remaining positions after the transfer.                                      
  Number 694                                                                   
  MR. REXWINKEL responded the exact number would depend upon                   
  the decision by the investment board and who they hire as                    
  the executive director.  The exact transfer amount would                     
  depend upon the negotiations.                                                
  TAPE 94-28, SIDE B                                                           
  Number 000                                                                   
  REPRESENTATIVE OLBERG asked, referring to the Treasury                       
  Division within the DOR, if most divisions had a director.                   
  Number 011                                                                   
  MR. REXWINKEL responded no, instead a director, the DOR                      
  sequentially has a commissioner, deputy commissioner,                        
  comptroller, debt manager, cash manager, and portfolio                       
  manager.  The portfolio manager would go under the cash                      
  manager in the revised organization chart.  The deputy                       
  commissioner also functions in child support.  He noted the                  
  deputy commissioner is somewhat elevated from a director                     
  because of the importance of the treasury function.  Those                   
  positions just under the deputy commissioner he said could                   
  be termed as directors.                                                      
  MR. REXWINKEL pointed out the impressiveness of the FY 93                    
  return of approximately $150 million more than what all the                  
  employers in the state paid into the pension fund.                           
  Increasing returns will reduce costs two years in the                        
  REPRESENTATIVE OLBERG clarified Treasury would only manage                   
  the general fund.  He asked if the basis point values were                   
  based only on that amount.                                                   
  Number 071                                                                   
  MR. REXWINKEL responded yes, but on top of the general fund                  
  there are more funds within the general investment fund.                     
  Number 075                                                                   
  CHAIRMAN VEZEY noted there is a difference between the                       
  general fund and the general investment fund.                                
  Number 076                                                                   
  MR. REXWINKEL confirmed CHAIRMAN VEZEY.                                      
  Number 078                                                                   
  REPRESENTATIVE OLBERG clarified the $10 million increment is                 
  based on the general investment fund and has nothing to do                   
  with pensions.                                                               
  Number 081                                                                   
  MR. REXWINKEL said REPRESENTATIVE OLBERG was correct, the                    
  general investment and a few other minor funds.                              
  Number 086                                                                   
  REPRESENTATIVE FRAN ULMER commented this change has been                     
  worked on for nearly four years.  She mentioned, in                          
  reference to the veto letter from June 1991, that MR.                        
  REXWINKEL's past principle objection dealt with the                          
  philosophical concept of shared fiduciary responsibility, as                 
  opposed to money.  She quoted the Governor as saying, "It                    
  appears the real purpose of SB 18 is to create shared                        
  fiduciary responsibility.  Shared fiduciary boards have been                 
  involved in imprudent and questionable actions throughout                    
  the country."  She asked why he had changed his mind when                    
  faced with HB 494.                                                           
  Number 114                                                                   
  MR. REXWINKEL answered, in the past, one of the major                        
  concerns was the board composition.  The bill that passed in                 
  1992 created an eight member board, four appointed by the                    
  Governor and four elected by the beneficiaries.  He felt                     
  this was a good board composition.  He related to the survey                 
  MS. OBA outlined, and noticed out of 46 participants, 36 had                 
  boards and only 6 still had a sole fiduciary.  He noted                      
  these funds were operating well.  MR. REXWINKEL stated as he                 
  has worked  with the board and it has been successful, it                    
  has become apparent the board needs to have their own staff                  
  to prevent their policies from being thwarted by a future                    
  commissioner.  He is better educated about the board and the                 
  cost structure for incremental returns now.                                  
  Number 168                                                                   
  REPRESENTATIVE ULMER clarified that MR. REXWINKEL is                         
  persuaded that the money needed to provide the management is                 
  justified in terms of the likely improved result.                            
  MR. REXWINKEL said REPRESENTATIVE ULMER was correct, and the                 
  money was also for the board to carry out their fiduciary                    
  Number 177                                                                   
  REPRESENTATIVE ULMER referenced the Governor's 1991 veto                     
  letter and how it specified the lack of benefit to the                       
  beneficiaries for the amount of money that would be spent.                   
  The letter also relates to the imprudent investments as the                  
  result of shared fiduciary responsibilities.  She                            
  understood, however, MR. REXWINKEL's reasoning for his                       
  change in opinion.                                                           
  Number 190                                                                   
  MR. REXWINKEL commented there have been public funds which                   
  have made inappropriate investments, but the sole fiduciary                  
  problem was resolved in 1992 when SB 329 was passed and a                    
  board was formed.  The situation in 1991, where the                          
  commissioner of Revenue was the sole fiduciary, is much                      
  different than the current structure.                                        
  MR. REXWINKEL stated the pension fund has had relatively                     
  good returns, and excellent returns over the past two years.                 
  The ASPIB fixed income portfolio managers have been in the                   
  top 25 percent continuously over the last five years.  He                    
  pointed out equity management is improving.  The benefits                    
  from the substantial invested moneys should continue for the                 
  beneficiaries.  What is good for the beneficiaries, is also                  
  good for the state and participating employers.                              
  Number 230                                                                   
  REPRESENTATIVE ULMER felt deferred compensation was                          
  remaining status quo.  She asked if it would continue to be                  
  managed by the new corporation.                                              
  MR. REXWINKEL replied deferred compensation would also be                    
  managed by the investment board, so it will be active.  He                   
  noted there are now 6-7 alternatives for the participating                   
  employees to invest in with a substantially reduced cost, by                 
  cooperation from the Department of Administration.  He felt                  
  the lack of education may be a problem because the employees                 
  do not know of the risk factors.                                             
  MR. REXWINKEL did not believe there would be very much                       
  opposition to HB 494.  He stated some people thought the                     
  permanent fund should be separated, instead of the pension                   
  authority.  He explained the difference between a permanent                  
  fund mandate and a pension fund mandate.  With a pension                     
  mandate, the moneys have to be handled in the best interest                  
  of the beneficiaries and there is an obligation for benefits                 
  to be paid as they come due.  In comparison to the permanent                 
  fund, the pension funds have a long-term perspective without                 
  a legal list, a prudent expert rule of investment, a                         
  different basis of accounting, a different group of                          
  constituency and they are able to generate better returns.                   
  Number 313                                                                   
  REVENUE, commented on HB 494.  He stated the shape in the                    
  normal yield curve in fixed income securities, is normally                   
  positive, i.e., the longer the maturity, the higher the                      
  expected rate of return.  Those who can afford to invest in                  
  a longer maturity would be served.  The benefits of better                   
  cash flow analysis, which will add incremental returns, will                 
  come in these ways: 1) keeping a minimum amount of cash on                   
  hand, which is typically the lowest rate of return in a                      
  normal yield curve environment; and 2) the staff will be                     
  able take additional maturity risk on the entire portfolio,                  
  with their gained information.                                               
  Number 357                                                                   
  CHAIRMAN VEZEY mentioned the change in their accounting                      
  method for evaluating its assets in terms of its fixed                       
  income securities, the ASPIB underwent in 1992.  He asked if                 
  he was correct.                                                              
  MR. REXWINKEL responded the market basis of accounting has                   
  always been used for the pension funds.                                      
  Number 364                                                                   
  MR. STORER stated the procedure of computing income, how the                 
  income is distributed into an index, was reevaluated on July                 
  1, 1993.                                                                     
  Number 369                                                                   
  CHAIRMAN VEZEY remembered the accounting method was changed                  
  in 1993 starting fiscal year 1992.                                           
  Number 372                                                                   
  MR. REXWINKEL clarified CHAIRMAN VEZEY's information could                   
  be found in the Actuarial Evaluation Report.  He noted the                   
  DOR disagreed with their evaluation of assets.                               
  Number 373                                                                   
  CHAIRMAN VEZEY pointed out the two reports did not agree on                  
  the amount of assets.                                                        
  Number 374                                                                   
  MR. REXWINKEL made clear the DOR assets are accounted for on                 
  a market value basis, compared to the permanent fund's                       
  report accounting for cost.  The actuarial report is                         
  smoothed out so the one year investment performance does not                 
  have a tremendous annual effect on the pension contributions                 
  made by the participating employers.  He said the actuaries                  
  changed some of their evaluations because they agreed with                   
  the DOR that they were not at the proper market rate in                      
  their analysis.                                                              
  Number 389                                                                   
  REPRESENTATIVE OLBERG asked if the DOR could report on any                   
  given day the balance and composition of the general fund.                   
  Number 391                                                                   
  MR. STORER replied the DOR could report with market yield of                 
  every security.                                                              
  REPRESENTATIVE OLBERG inquired if the annual yield of the                    
  general investment fund was tracked separately so the rate                   
  fluctuations were apparent.                                                  
  Number 397                                                                   
  MR. STORER answered the DOR tracks not only on an annual                     
  basis, but also on a monthly basis.                                          
  Number 400                                                                   
  REPRESENTATIVE OLBERG assured the benefits of HB 494 would                   
  be seen in less than a year.                                                 
  Number 402                                                                   
  MR. STORER affirmed the benefits would be apparent in less                   
  than a year; however, in incremental portions, not the full                  
  $10 million.                                                                 
  Number 407                                                                   
  CHAIRMAN VEZEY introduced STEVE MCPHETRES as the next                        
  individual to testify.                                                       
  ADMINISTRATORS, supported HB 494.  He stated the Alaska                      
  Council of School Administrators wanted to ensure there will                 
  be stable amounts of money for the benefit programs in the                   
  future.  From their analysis, HB 494 would provide this                      
  stability, therefore they are in support.                                    
  Number 438                                                                   
  REPRESENTATIVE G. DAVIS asked what people the Teachers                       
  Retirement System (TRS) included.                                            
  MR. MCPHETRES answered, from his organization the TRS                        
  includes all the principals, business managers, special                      
  education directors, district level people and                               
  Number 445                                                                   
  REPRESENTATIVE OLBERG questioned if a superintendent's                       
  retirement varied from a teacher's retirement.                               
  MR. MCPHETRES responded the retirement for both                              
  superintendents and teachers are based on the same                           
  Number 451                                                                   
  REPRESENTATIVE OLBERG questioned if both groups were lumped                  
  into the same plan, or if MR. MCPHETRES was only                             
  representing one group.                                                      
  CHAIRMAN VEZEY clarified MR. MCPHETRES was before the                        
  committee representing the Alaska Council on School                          
  Administrators.  He clarified their organization consists of                 
  700 members which are members of the TRS.  He believed the                   
  TRS has five pension programs covered by the board.                          
  CLAUDIA DOUGLAS, PRESIDENT NEA ALASKA, supported HB 494.                     
  NEA Alaska, representing both the TRS and the Public                         
  Employees Retirement System (PERS), supported changing the                   
  ASPIB to the Alaska Pension Investment Authority.  She                       
  emphasized HB 494 has potential for enhanced financial                       
  stability, continuity, better accountability, member                         
  confidence and enhanced member economic security.                            
  Number 480                                                                   
  CHAIRMAN VEZEY stated there were two separate issues in HB
  494; creating the authority and setting the staff level.  He                 
  recognized REPRESENTATIVE MACLEAN's amendment                                
  recommendation, whereby on page 2, line 20, a period would                   
  be inserted after "director," and the words "and the                         
  Department of Revenue" would be deleted.  He stated this                     
  amendment did seem to be the original intent of the drafter;                 
  however, "and the Department of Revenue" had failed to get                   
  Number 493                                                                   
  REPRESENTATIVE B. DAVIS so moved the amendment.                              
  Number 493                                                                   
  CHAIRMAN VEZEY asked the committee secretary to call the                     
  IN FAVOR:      VEZEY, KOTT, ULMER, B. DAVIS, G. DAVIS,                       
                 SANDERS, OLBERG.                                              
  CHAIRMAN VEZEY announced the amendment to HB 494 had passed.                 
  Number 501                                                                   
  REPRESENTATIVE ULMER moved HB 494 be passed from committee                   
  as amended with individual recommendations, asking unanimous                 
  Number 504                                                                   
  CHAIRMAN VEZEY clarified the bill which the committee was                    
  acting on would be a committee substitute, reflecting the                    
  amendment.  He modified REPRESENTATIVE ULMER's motion to                     
  reflect the correction.  He asked the committee secretary to                 
  call the roll.                                                               
  IN FAVOR:      VEZEY, KOTT, ULMER, B. DAVIS, G. DAVIS,                       
                 SANDERS, OLBERG.                                              
  CHAIRMAN VEZEY announced CSHB 494 passed from the House                      
  State Affairs Committee.                                                     
  CHAIRMAN VEZEY called a recess at 9:15 a.m.  The meeting                     
  reconvened at 9:20 a.m.  REPRESENTATIVES G. DAVIS and OLBERG                 
  were present.                                                                
  HB 450 - INVESTMENT POOLS FOR PUBLIC ENTITIES                                
  Number 524                                                                   
  CHAIRMAN VEZEY opened HB 450, sponsored by the HOUSE FINANCE                 
  COMMITTEE, for discussion.                                                   
  CHAIRMAN HOUSE FINANCE COMMITTEE, addressed HB 450 for the                   
  sponsor.  Beginning four years ago, through the Alaska                       
  Municipal League (AML), various political subdivisions                       
  approached the legislature.  They strove for statutory                       
  authority so they could have the ability to pull together                    
  their cash assets, providing better returns for their                        
  investments.  In 1992, SB 374 was passed by the legislature                  
  which enabled these subdivisions to pull their assets                        
  together, and also provided guidelines in the types of                       
  investments they should make.  MR. BITNEY stated this system                 
  is now in place and various political subdivisions,                          
  municipalities, school districts, and "REAAs" across the                     
  state, are now beginning to incorporate into the system to                   
  provide better investment management.                                        
  (REPRESENTATIVES KOTT and SANDERS rejoined the meeting at                    
  9:25 a.m.)                                                                   
  MR. BITNEY explained REPRESENTATIVE LARSON had been made                     
  aware that the AML was examining additional ways to improve                  
  the investments.  After consultation, the AML brought                        
  forward the recommendations to REPRESENTATIVE LARSON, and                    
  they were drafted into what is now HB 450.                                   
  (REPRESENTATIVE ULMER rejoined the meeting at 9:27 a.m.)                     
  Number 562                                                                   
  commented on HB 450.  He said the AML pool presently                         
  consists of 27 different municipalities throughout Alaska,                   
  holding $33,282,000.  MR. ROSE functions as an extension of                  
  AML staff to monitor the investment pool, deal with the                      
  cities, and supervise J.P. Morgan, the banking custodian,                    
  and supervise the Templeton Franklin organization, doing the                 
  actual investing.  He ensures that state statute and policy                  
  of AMLIP is followed.  MR. ROSE commented state statute                      
  merely enables cities to form a pool, and there is not any                   
  actual state involvement.                                                    
  MR. ROSE outlined the amendments HB 450 would set forth in                   
  the statutes.  First, additional language would be added so                  
  the pool would be able to acquire floating rate securities,                  
  as long as the rate was reset within each annual period.                     
  Current statute requires the pool not to invest in any                       
  security with a maturity of more than 13 months.  This would                 
  enable the cities to reach a greater return.  The second                     
  amendment, dealing with debt that is rated A, is corrective                  
  language to ensure dollar denominated obligations issued by                  
  U.S. branches of a foreign banks.  He noted the problem that                 
  all debt, particularly debt issued by bank branches located                  
  within the U.S. but are from foreign banks, are typically                    
  not rated at all.  The AMLIP interpreted, as long as the                     
  parent bank is rated A, the child bank operating within the                  
  U.S. is also rated A.  The third amendment deals with                        
  securities lending.  He related to the "prudent investor                     
  rule," whereas if all institutions of a like type engage in                  
  securities lending, it is a norm.  He explained PERS, TRS                    
  and the permanent fund lends securities; however, they also                  
  do not have specific wording in statute allowing this.  The                  
  AMLIP felt uncomfortable lending securities, although it is                  
  a norm of the "prudent investor rule" because they with so                   
  many entities.  He expressed the statute should specifically                 
  address the empowerment to lend securities by the AMLIP.                     
  The fourth amendment waives the restriction that the AMLIP                   
  is not able to purchase more than 30 percent of the                          
  portfolio in stock, CDs, or issuance of the banking                          
  industry.  This waiver would make the AMLIP consistent with                  
  other money market funds throughout the country.  MR. ROSE                   
  stated these four amendments would create better returns for                 
  the cities, while not adding risk to the investments.                        
  Number 649                                                                   
  CHAIRMAN VEZEY referred to the floating rate fixed income                    
  instruments, and felt the amendment would not exist unless                   
  it would offer a higher yield than short-term instruments.                   
  MR. ROSE affirmed CHAIRMAN VEZEY.                                            
  Number 657                                                                   
  CHAIRMAN VEZEY referred to page 2, section 1, which states,                  
  "an A rating by one of the national recognized rating                        
  services."  He mentioned the names of Standard and Poors,                    
  and Moodys, as rating services he knew of, and asked of                      
  others MR. ROSE might know about.                                            
  (REPRESENTATIVE ULMER left the meeting at 9:30 a.m.)                         
  MR. ROSE added there was also Fitch, but Standard and Poors,                 
  and Moodys were the organizations typically used by the                      
  Number 662                                                                   
  CHAIRMAN VEZEY announced REPRESENTATIVES ULMER and B. DAVIS                  
  had left the meeting.  He believed Standard and Poors, and                   
  Moodys do not use the same scale.                                            
  MR. ROSE responded there were some differences, but having                   
  reached investment grade B, AA, or better, they fall into                    
  line.  Below investment grade there are more differences.                    
  Number 668                                                                   
  CHAIRMAN VEZEY inquired if there had been a failure of a                     
  fixed rate instrument rated B, AA, or higher since the                       
  rating agencies began.                                                       
  MR. ROSE replied, particularly on the corporate side, an AA                  
  purchase could change overnight to BA, then six months later                 
  it could continue to C or D in default.                                      
  Number 675                                                                   
  CHAIRMAN VEZEY understood the instruments rate changes, but                  
  was under the assumption there has never been a default on                   
  an instrument rated BB or higher.                                            
  Number 678                                                                   
  MR. ROSE suspected there has been.                                           
  Number 679                                                                   
  CHAIRMAN VEZEY stated he was trying to relate to the                         
  standard of fiducial responsibility addressed in HB 450.                     
  Number 680                                                                   
  MR. ROSE responded the life of an average security is                        
  between 60-100 days.  If a security was found and bought at                  
  an A level, the maturity life would be so short that by the                  
  time an agency would downgrade or default the security, they                 
  would not be affected because it would have already been                     
  cleared.  He noted the average life of the total aggregated                  
  portfolio on February 28 was 81 days.                                        
  Number 690                                                                   
  CHAIRMAN VEZEY clarified Standard and Poors, and Moodys, are                 
  comparable in an A rating.                                                   
  Number 697                                                                   
  MR. ROSE affirmed CHAIRMAN VEZEY.  He continued, the state                   
  and the permanent fund engage in securities lending without                  
  specific legislative authority, because it is a convention                   
  of the industry.  The AMLIP believed having the securities                   
  lending authority in statute would provide "solace for the                   
  small cities."                                                               
  TAPE 94-29, SIDE A                                                           
  Number 000                                                                   
  REPRESENTATIVE G. DAVIS asked if the 13 months in investing                  
  would carry over into lending.                                               
  MR. ROSE answered all of the securities in the portfolio can                 
  be lent, including floating rates, CDs or bills.                             
  Number 018                                                                   
  REPRESENTATIVE G. DAVIS repeated his question.                               
  MR. ROSE replied the securities can be lent for any length                   
  of time, but the average life of a maturity is 81 days,                      
  therefore they will usually be lent for less.                                
  Number 025                                                                   
  CHAIRMAN VEZEY asked why someone would want to borrow a                      
  security with a life expectancy of less than 81 days.                        
  MR. ROSE responded most securities lending only lasts for 2-                 
  3 days, when a broker sells something they do not have, or                   
  short, they have to borrow a security from someone to be                     
  able to deliver what they do not have to the buyer.                          
  Generally 102 percent collateral is put up in cash, a fee is                 
  paid to the lender, and then they buy it on the market and                   
  replace it in the lender's portfolio.                                        
  Number 042                                                                   
  CHAIRMAN VEZEY stated lending the securities would be a                      
  source of income for the AMLIP because they receive a fee.                   
  Number 043                                                                   
  MR. ROSE affirmed CHAIRMAN VEZEY.  He stated one year, when                  
  he was with the permanent fund, they earned $5.3 million by                  
  lending out securities.  This $5.3 million was enough to                     
  cover the total administrative cost of the permanent fund at                 
  that time.                                                                   
  Number 051                                                                   
  CHAIRMAN VEZEY questioned the quality of the collateral in                   
  terms of cash.                                                               
  Number 057                                                                   
  MR. ROSE replied if the collateral is not cash, then it                      
  would be a like instrument of the same range of maturity.                    
  If a 30-day treasury bill was being lent, they could give                    
  the AMLIP a 60-day treasury bill as collateral.  The                         
  borrower has to deliver a specific instrument because that                   
  is what they sold to someone.                                                
  Number 067                                                                   
  CHAIRMAN VEZEY did not understand what was being deleted in                  
  section 3.  He clarified the requirement would be deleted                    
  which says the AMLIP cannot put more than 30 percent of its                  
  investments in one instrument.                                               
  Number 078                                                                   
  MR. ROSE stated he had also had trouble interpreting the                     
  change.  He explained the AMLIP wanted to be able to invest                  
  in an industry, such the banking industry.  The banking                      
  industry is not a single security or single company.                         
  CHAIRMAN VEZEY felt the wording was rather broad.                            
  MR. ROSE stated attorneys had been uneasy when the AMLIP had                 
  more than 30 percent in the banking industry, as a whole.                    
  The AMLIP thought the best solution would be do delete the                   
  30 percent restriction.                                                      
  Number 099                                                                   
  CHAIRMAN VEZEY clarified the intent of the restriction was                   
  to prohibit the AMLIP from putting 30 percent of its funds                   
  into a security or an industry.                                              
  MR. ROSE agreed.  He pointed out, not being able to put 30                   
  percent of the AMLIP assets in banks totally was very                        
  restrictive.  Putting more than five percent in each bank                    
  would lower the percentage for other invested in other                       
  Number 128                                                                   
  CHAIRMAN VEZEY introduced KENT SWISHER as the next                           
  individual to testify.                                                       
  Number 131                                                                   
  REPRESENTATIVE G. DAVIS asked MR. SWISHER if the AML had a                   
  answered questions on HB 450.  He replied to REPRESENTATIVE                  
  G. DAVIS, that HB 450 was the request of the AMLIP Board,                    
  which is a separate board of largely elected local officials                 
  and finance officers.  He noted the AML Board is aware of                    
  and knowledgeable about HB 450.                                              
  Number 147                                                                   
  CHAIRMAN VEZEY stated he would like to take action on HB
  450, but it did not have a fiscal note.                                      
  Number 153                                                                   
  MR. BITNEY reminded the committee HB 450, as it stands, did                  
  not apply to any state agencies.  Therefore, no state                        
  agencies have submitted a fiscal note.  The House Finance                    
  Committee intended a zero fiscal note for HB 450 and asked                   
  if the House State Affairs Committee could prepare this                      
  fiscal note.                                                                 
  Number 168                                                                   
  CHAIRMAN VEZEY submitted to the committee that they prepare                  
  a zero fiscal note for HB 450, so it may be attached to the                  
  packet.  He asked the committee secretary to call the roll                   
  on his motion.                                                               
  IN FAVOR:      VEZEY, KOTT, G. DAVIS, SANDERS, OLBERG.                       
  ABSENT:        ULMER, B. DAVIS.                                              
  CHAIRMAN VEZEY announced the zero fiscal note was adopted.                   
  Number 180                                                                   
  REPRESENTATIVE OLBERG moved HB 450 be passed from committee                  
  with individual recommendations and accompanying fiscal                      
  Number 184                                                                   
  CHAIRMAN VEZEY recognized the motion and asked the committee                 
  secretary to call the roll.                                                  
  IN FAVOR:      VEZEY, KOTT, G. DAVIS, SANDERS, OLBERG.                       
  ABSENT:        ULMER, B. DAVIS.                                              
  CHAIRMAN VEZEY announced HB 450 passed from the House State                  
  Affairs Committee with individual recommendations.                           
  HB 369 - STATE LEASES & LEASE-PURCHASE FINANCING                             
  CHAIRMAN VEZEY opened HB 369 for discussion.  He announced a                 
  representative of the sponsor was not present to testify,                    
  but DUGAN PETTY was present.                                                 
  Number 201                                                                   
  DEPARTMENT OF ADMINISTRATION (DOA), addressed HB 369.  He                    
  stated the DOA has been in support of the companion bill, SB
  247 in the Senate, after some minor amendments.  He directed                 
  the committee to section 6 & 7 of HB 369, which clarifies                    
  the relationship of current law between leasing and lease-                   
  financing.  He stated HB 369 would create two sections in AS                 
  36.30, one dealing with the lease of real property, and the                  
  other dealing with lease-financing of real property.  He                     
  emphasized AS 36.30 was beginning to get fairly confusing in                 
  current law.                                                                 
  MR. PETTY recommended amendments to section 7 of HB 369,                     
  which have been made in SB 247.  He recommended on page 6,                   
  line 16 which states "when evaluating proposals to acquire                   
  property under lease-purchase," that the term "real" be                      
  inserted before "property."  He recommended the same                         
  amendment on page 6, line 22.  On page 7, line 9, he                         
  recommended inserting, after the word "agreement," "to                       
  acquire real property."  Under the current definition of                     
  lease-purchase or lease-financing in AS 36.30, transactions                  
  for copier leases which cost between $100-$1,700 a month are                 
  included.  The DOA has approximately 1,000 of these copier                   
  agreements by the agencies.  He did not believe it was the                   
  intent of HB 369 to include those sorts of transactions                      
  approved by law.  HB 369 was intended to focus on real                       
  Number 266                                                                   
  CHAIRMAN VEZEY stated HB 369 would be involved with items                    
  such as computers, copy machines, and road maintenance                       
  equipment.  He asked if there is not already a $1 million                    
  cap on lease-purchase agreements.  He thought HB 369 would                   
  not apply to a purchase of less than $1 million.                             
  MR. PETTY responded the $1 million cap affects the lease                     
  side.  He pointed out; however, with the current form of HB
  369 there is no cap whatsoever.  Under section 7, any lease-                 
  purchase transaction regardless of dollar amount would                       
  require approval by the legislature.                                         
  Number 282                                                                   
  CHAIRMAN VEZEY clarified the state would not require                         
  legislative approval to lease-purchase a $1.5 million                        
  MR. PETTY replied, as HB 369 is written, an approval would                   
  be required from the legislature to acquire a $1.5 million                   
  excavator or a $100 copier contract applied to the                           
  definition of lease-purchase or lease agreement.                             
  CHAIRMAN VEZEY believed a dollar cap might be more effective                 
  than a blanket approval.                                                     
  Number 297                                                                   
  REPRESENTATIVE OLBERG asked if the dollar cap did not                        
  already exist.                                                               
  MR. PETTY replied yes, for lease-financing with a cap of $1                  
  million a year, and $10 million over the term of the lease.                  
  Number 304                                                                   
  REPRESENTATIVE OLBERG inquired if HB 369 was termed the                      
  "Wildwood Bill."                                                             
  CHAIRMAN VEZEY answered that terminology for HB 369 is in                    
  the sponsor statement by RANDY WELKER.  He quoted, "This                     
  legislation has been responsible for ongoing review and                      
  concern over lease-purchases of the Wildwood Correction                      
  Center, and the Court Plaza Building."  He asked if MR.                      
  PETTY had his proposed amendment in writing.                                 
  Number 319                                                                   
  MR. PETTY did not, but he marked on his copy of the HB 369.                  
  Number 339                                                                   
  CHAIRMAN VEZEY clarified the recommended amendments were as                  
  follows:  Page 6, line 16, shall read, "when evaluating                      
  proposals to acquire real property..."; page 7, line 9,                      
  shall read, "may not enter into lease-purchase agreement to                  
  acquire real property..."                                                    
  Number 347                                                                   
  MR. PETTY added page 6, line 22, shall read, "whether                        
  acquisition of the real property by lease-purchase                           
  Number 350                                                                   
  REPRESENTATIVE G. DAVIS moved to adopt the requested                         
  amendments to HB 369.                                                        
  Number 353                                                                   
  CHAIRMAN VEZEY recognized the motion and asked the committee                 
  secretary to call the roll.                                                  
  IN FAVOR:      VEZEY, KOTT, G. DAVIS, SANDERS, OLBERG                        
  ABSENT:        ULMER, B. DAVIS                                               
  CHAIRMAN VEZEY announced the requested amendments were                       
  adopted to HB 369 and a committee substitute will be drawn                   
  up to reflect them.                                                          
  Number 362                                                                   
  REPRESENTATIVE G. DAVIS moved to pass CSHB 369 from                          
  committee with individual recommendations and attached                       
  fiscal notes.                                                                
  CHAIRMAN VEZEY recognized the motion and asked the committee                 
  secretary to call the roll.                                                  
  IN FAVOR:      VEZEY, KOTT, G. DAVIS, SANDERS, OLBERG.                       
  ABSENT:        ULMER, B. DAVIS                                               
  CHAIRMAN VEZEY announced CSHB 369 passed from the House                      
  State Affairs committee.                                                     
  CHAIRMAN VEZEY adjourned the meeting at 9:57 a.m.                            
  BILLS NOT HEARD                                                              
  HB 342:   "An Act extending the termination date of the                      
            Alaska Tourism Marketing Council."                                 

Document Name Date/Time Subjects