Legislature(2019 - 2020)SENATE FINANCE 532
01/31/2020 09:00 AM Senate FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| Alaska Permanent Fund Corporation | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
January 31, 2020
9:01 a.m.
9:01:03 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Donny Olson
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Lyman Hoffman
Senator David Wilson
ALSO PRESENT
Angela Rodell, Executive Director, Alaska Permanent Fund
Corporation; Senator Cathy Giessel.
SUMMARY
^ALASKA PERMANENT FUND CORPORATION
9:03:01 AM
ANGELA RODELL, EXECUTIVE DIRECTOR, ALASKA PERMANENT FUND
CORPORATION, introduced herself. She stated that she had
been in her position since fall of 2015, and had been in
Alaska since 2011. She introduced some members of her
staff. She introduced Mr. Frampton and Mr. Vadakumcherry.
Co-Chair Stedman suggested that the slides take up
approximately 75 minutes.
9:05:12 AM
Ms. Rodell discussed the presentation, "Senate Finance
Committee; APFC and The Alaska Permanent Fund" (copy on
file). She looked at slide 2, "1969":
Alaska receives $900 million in Prudhoe lease sale
bonuses.
FY70 state budget: $173 million.
Ms. Rodell discussed slide 3, "The Alaska Permanent Fund":
1976 Alaska voters approve a Constitutional Amendment
establishing the Permanent Fund.
1977 Permanent Fund receives its first deposit of
constitutionally dedicated oil revenues, $734,000.
1980 The Alaska Permanent Fund Corporation is
established to manage and invest the Fund.
2020 The Fund now has over $66 billion in assets under
management.
Ms. Rodell highlighted slide 4, "APFC 40 Years":
Forty years ago, on April 8, 1980
.notdef Governor Jay Hammond signed SB 161 into law,
establishing the Alaska Permanent Fund
Corporation as an independent state entity tasked
with the management and investment of the Alaska
Permanent Fund.
Today
.notdef APFC is a talented, award-winning, investment
firm that embodies the resiliency, integrity, and
pioneer spirit of Alaska.
.notdef The influence of our dynamic, Alaskan
corporation extends around the world based on
APFC's practices of good governance,
transparency, and a long-term investment horizon.
Ms. Rodell highlighted slide 5, "Generating Revenue for
AK":
As stewards of the Alaska Permanent Fund, our team
possesses the skill and efficiency to ensure that
Alaskans benefit from this resource for generations to
come.
APFC's Mission
To manage and invest the assets of the permanent
fund and other funds designated by law.
APFC's Vision
To deliver sustained, compelling investment
returns as the United States' leading sovereign
endowment manager, benefitting all current and
future generations of Alaskans.
APFC's Values
Integrity Stewardship Passion
Ms. Rodell discussed slide 6, "Number 1 Source of Revenue."
She remarked that the slide was from the Fall Revenue
Forecasts from FY 15 to FY 19, and it showed that the
Permanent Fund was the number one source of revenue for the
state.
Co-Chair von Imhof noted that the light blue portion was
the investment income.
Ms. Rodell replied in the affirmative, and stated that it
was the POMV calculation.
Co-Chair Stedman asked for a definition of POMV.
Ms. Rodell replied with slide 7, "POMV AS 37.13.140 (b)":
Percent of Market Value (POMV)
Draw of the average market value of the Fund for
the first five of the preceding six fiscal years,
subject to annual appropriation by the
Legislature.
5.25 percent - Effective July 1, 2018 (FY19)
.notdef FY19 5.25 percent POMV = $2.7 billion
.notdef FY20 5.25 percent POMV = $2.9 billion
.notdef FY21 5.25 percent POMV = $3.1 billion
5.0 percent - Effective July 1, 2021 (FY22)
.notdef FY22 5.0 percent POMV = $3.1 billion
.notdef FY23 5.0 percent POMV = $3.3 billion
.notdef FY24 5.0 percent POMV = $3.4 billion
9:10:13 AM
Senator Bishop looked at page 6, and noted that the state
did better than ExxonMobil year after year on profit.
Ms. Rodell highlighted slide 9, "Investment
Responsibilities AS 37.13.120":
.notdef When adopting regulations or managing and investing
fund assets, the prudent-investor rule shall be
applied by the corporation. The corporation shall
exercise the judgment and care that an institutional
investor of ordinary prudence, discretion, and
intelligence exercises in the designation and
management of large investments entrusted to it, not
in regard to speculation, but in regard to the
permanent disposition of funds, considering
preservation of the purchasing power of the fund over
time while maximizing the expected total return from
both income and the appreciation of capital.
.notdef The corporation may not borrow money or guarantee
from principal of the fund the obligations of others.
Except the corporation may, either directly or through
an entity in which the investment is made, borrow
money if the borrowing is nonrecourse to the
corporation and the fund.
.notdef The board shall maintain a reasonable
diversification among investments unless, under the
circumstances, it is clearly prudent not to do so. The
board shall invest the assets of the fund in in-state
investments to the extent that in-state investments
are available and if the in-state investment provides
the same risk-reward benefit as other investment
opportunities.
Ms. Rodell addressed slide 10, "Historical Asset Allocation
based on actuals." She explained that the asset allocation
had changed due to many different factors. She noted that
it showed that the corporation was responding to many
different economies, and bring those returns back to the
state. She remarked that the state had one of the most
diverse sets of economies of any state. She felt that there
was a resilient asset allocation that could withstand many
volatilities within the market.
Ms. Rodell displayed slide 11, "Allocation Structure":
.notdef The asset allocation structure is organized by
growth and income strategies, as well as liquidity
objectives.
.notdef This strategic categorization provides a framework
for ensuring that investment return targets are
commensurate with the risks undertaken.
.notdef The Board of Trustees reviews the Asset Allocation
annually.
Ms. Rodell looked at slide 12, "Management of the Fund":
The Board of Trustees continues to work towards an
optimal mix of in-house versus external management
capabilities based on resources and opportunities.
In-House Management Allows for:
.notdef Alignment of investment goals and mandates
.notdef Increased flexibility in timing/tactical
decisions
.notdef Lower fees with investment benefit of active
management
9:15:18 AM
Ms. Rodell addressed slide 13, "Management of the Fund by
Asset Class":
Internal Management
Public Markets -APFC investment staff directly
buys and sells the publicly traded securities.
Private Markets -APFC investment staff directly
conduct the investment and legal due diligence
for the fund or investment and make the decision
to invest.
Ms. Rodell looked at slide 14, "Awards and
Accomplishments":
? Angela Rodell, CEO ranked in the Top 5 of Sovereign
Wealth Quarterly's 100 Most Significant and Impactful
Asset Owner and Public Executives of 2019.
? Marcus Frampton, CIO named one of Private Equity
International's 40 under 40 Future Leaders of Private
Equity and Trusted Insight's Sovereign Wealth Fund CIO
of the Year for 2019. Recognized amongst CIO
Magazines' Power 100 of 2019 and for their 2019
Industry Innovation Awards.
? PEI's Private Debt Magazine recognized APFC in their
inaugural 30 Most Influential Investors in Private
Credit for our internal management team's pioneering
contributions in this asset class.
? Chad Brown, Human Resources Manager was accepted
into Forbes Human Resource Council.
? Tom O'Day, Portfolio Manager Fixed Income,
selected by Chief Investment Officer Magazine for
their Class of 2019 NextGen Award.
? Steve Moseley, Director of Alternative Assets was
recognized as one of the 2018 Top 30 Private Equity,
Venture Capital Investors by Trusted Insight.
? The Alaska Permanent Fund selected as North American
Limited Partner of the Year for 2018 by Private Equity
International for the second year in a row.
? APFC received dual nominations for 2018 Partnership
of the Year for Institutional Investor's Allocators'
Choice Awards and won the award for our Capital
Constellation Partnership.
Ms. Rodell looked at slide 15, "Global Diversification as
of June 30, 2019." She noted that the map showed the
locations of investments around the world. She stressed the
importance of the work outside of Alaska, and that the
money was brought back to the state.
Ms. Rodell discussed slide 17, "Fiscal Year 2019
Performance as of June 30, 2019." She stated that many of
the strategies were not designed to be daily strategies,
but rather were intended for success over a period of time.
She noted the difference in return between the one-year and
three-year terms. She stated that the first benchmark was
the Passive Index Benchmark.
9:21:08 AM
Co-Chair von Imhof noted that APFC exceeded all of its
benchmarks. She appreciated the efforts.
Senator Wielechowski wondered whether there were any
lessons to be learned or mistakes.
Ms. Rodell responded that there was a tilt toward non-US
funds, so emerging markets did not fair as well. She shared
that looking at the S and P 500, and the effect of
Facebook, Netflix, Google and other stocks showed great
outperformance. She stressed that moving away from those
stocks would not yield as good of a result. She shared that
the real estate portfolio was in the process of being
rebuilt after a major sale of an asset. She felt that as
the staff continued to work through the portfolio, it
considerably lagged its performance benchmark. She
announced that there was an expectation that it would turn
around. She stressed that the board had spent time looking
into that portfolio.
Senator Wielechowski felt that the private equity had
grown, and wondered what investments were being made and
what how it was different than investment in the stock
market.
Ms. Rodell replied that private equity had gained traction
by institutional investors recently. She stated that it
could run from U.S. insurance companies to European retail.
She explained that private equity was about finding the
companies that were privately held that may have an
opportunity for additional capital or scale their
operations. She stressed that going public may not be the
right avenue. She stated that it allowed for tapping into a
market that may not otherwise be accessible.
9:25:38 AM
Senator Wielechowski queried the returns in private equity.
He asked for information about investment in Alaskan
companies.
Ms. Rodell replied that it was a $200 million mandate. She
stated that $100 million was awarded to Barings, who had
tremendous experience in building instate programs across
the country. She announced that $100 million was awarded to
McKinley Capital, who understood the opportunities in
Alaska. She stated that there were no draws on those
amounts. She explained that APFC did not have veto power in
those agreements. She understood that they were seeing some
interesting things across the state that might surprise
Alaskans. She explained that many people thought of
investments in rail lines or pipelines and other major
infrastructure projects. She announced that there were many
smaller opportunities in the information space and
alternative energy.
Senator Wielechowski queried the performance of private
equity.
Ms. Rodell replied that APFC had traditionally gotten into
double digits.
9:28:20 AM
AT EASE
9:28:41 AM
RECONVENED
Ms. Rodell looked at the one-year return, which was 17.6
percent. The three-year return was 22.8 percent.
9:30:21 AM
Senator Wielechowski looked at slide 10 and queried the
performance of infrastructure and asset allocation.
Ms. Rodell noted that monthly performance reports were on
the website. She explained that infrastructure was
investing in things like ports, toll roads, and utility
systems. She shared that there was exposure to those
systems around the world. She announced that the
infrastructure returns for one year were 7.4 percent; for
three years 15.1 percent; and for five years 16.4 percent.
She explained that they provided regularized income similar
to real estate. She stated that asset allocation was a
"catch all" for all other individual asset classes. The
asset allocation may manage cash, foreign currency
exposure, or liquidity exposure. She explained that asset
allocation was also the location of the risk parody
investment. She stated that it must have an outlook over
the total fund versus any specific type of asset. She
announced that the returns for one year was 9 percent; for
three years was 2.8 percent; and for five years was 2.5
percent. She remarked that the bond market was reflective
in that portfolio.
Ms. Rodell highlighted slide 18, "Fund Value and Returns in
millions."
1977 Initial Legislation permitted an investment list
that included only fixed income securities such as
treasury bonds.
1983 Following changes to the statutory investment
list, the Fund makes its first investment in the stock
market, and later that year, indirectly held real
estate.
1990 After the Legislature expands the statutory
investment list, the Fund begins to invest in stock
and bond markets outside the United States.
2005 The Legislature makes a significant change in how
Permanent Fund investments are determined, by removing
the allowed investment list from state law. The
Trustees will make investment decisions under the
guidelines of the prudent investor rule.
Ms. Rodell addressed slide 20, "Future Growth of the Fund -
10 Year Capital Markets Forecast":
.notdef For planning purposes, APFC references both a
current fiscal year and a 10-year forecast for the
projected return of the Fund that is provided by our
performance consultant, Callan Associates.
.notdef It is understood that there will be a wide range of
returns delivered by each asset class to the total
Fund performance over any given time.
.notdef Callan Associates projects a total return of 7
percent over the next 10-year period for the portfolio
that APFC has constructed for the Fund.
.notdef They also project an inflation rate of 2.25 percent
over that same period, which brings the real return
for the portfolio to 4.75 percent over the 10-year
period from FY21- FY29.
9:35:15 AM
Senator Wielechowski wondered whether APFC changed its
investing philosophy now that the government was using a
significant amount of the ERA. He wondered whether the
investments were more conservative.
Ms. Rodell replied that there was no change in the
investment strategy. She explained that it was a constant
topic at the most recent board meetings because the
trustees were focused on that issue. She shared that there
was a tremendous amount of work to inform the board on
taking risk adjusted returns. She announced that
approximately $49 billion would be in the corpus of the
fund and must be invested in perpetuity. She shared that
there was an effort to balance the long-term requirement
with the short-term need was the focus of the board.
Co-Chair Stedman felt that Senator Wielechowski's questions
could be addressed later in the presentation.
Ms. Rodell highlighted slide 21, "Callan's Capital Markets
Forecast." She noted that no single asset class was
expected to return double digits over the next ten-year
period. She explained that the annualized standard
deviation showed the difference around the returns. She
looked at the cash equivalence, which was only expected to
vary plus or minus 0.9 percent.
Ms. Rodell pointed to slide 22, "Projections FY 20 excerpt
from APFC's History and Projections as of December 31,
2019." She announced the low expected return of negative
0.52 percent. She explained that adding the effective
inflation would result in a total return of negative 0.52
percent. She shared that there was a tendency to use the
mid, which was 6.61 percent, with inflation would be
slightly above 5 percent. She shared that it was only a
coincidence that both the total return and the statutory
return were the same.
Ms. Rodell discussed slide 23, "History and Projections
Dec 31, 2019":
The Fund is projected to have a balance of $84.6
Billion at the end of FY29.
.notdef This projection assumes the 7 percent total return
over ten years, and
.notdef Adherence to rules-based deposits into and
withdrawals from the Fund.
Royalty Deposits - AS 37.13.010 (a) (1) and (a)
(2)
.notdef Constitutional minimum of 25 percent
.notdef Statutory 50 percent for leases after 1979
Inflation Proofing -AS 37.13.145 (c)
.notdef Annual CPI calculated on the Principal
Amount
POMV - AS 37.13.140 (b) and AS 37.13.145 (e) and
(f)
.notdef (e) The legislature may not appropriate
from the earnings reserve account to the
general fund a total amount that exceeds the
amount available for appropriation under AS
37.13.140(b) in a fiscal year.
.notdef (f) The combined total of the transfer
under (b) of this section and an
appropriation under (e) of this section may
not exceed the amount available for
appropriation under AS 37.13.140(b).
Co-Chair Stedman felt that the committee was interested in
following the guidelines of the royalty contributions.
9:41:37 AM
Ms. Rodell looked at slide 24. She stated that the slide
included the actual POMV calculations for both FY 20 and FY
21.
Co-Chair Stedman remarked that the information was
available on the website, which was updated monthly. He
shared that in the year prior, $4 billion was added to the
corpus. He stated that there was also language to ensure
that the contribution was for forward inflation proofing.
He requested a perspective on the buildup of the ERA,
because there was some interest in doing another
contribution from the ERA to the corpus to protect it from
legislative appropriations.
Ms. Rodell noted the yellow highlighted bars on slide 24.
She explained that it showed the low, mid, and high cases,
which were the rates of returns from the previous slide.
She explained that the mid case expected that by the end of
the fiscal year there would be a balance in the principal
of the fund of approximately $53.4 billion.
Ms. Rodell discussed slide 26, "The Alaska Constitution":
In 1976, Alaskans voted, 75,588 to 38,518, in favor to
amend the Constitution of the State of Alaska and
created the Alaska Permanent Fund.
Alaska Constitution Article IX, Section 15
Section 15. Alaska Permanent Fund
At least twenty-five percent of all mineral lease
rentals, royalties, royalty sale proceeds,
federal mineral revenue sharing payments and
bonuses received by the state shall be placed in
a permanent fund, the principal of which shall be
used only for those income-producing investments
specifically designated by law as eligible for
permanent fund investments. All income from the
permanent fund shall be deposited in the general
fund unless otherwise provided by law.
9:47:22 AM
Ms. Rodell addressed slide 27, "Renewable Resource." She
shared that every year there was an attempt to create a
graphic to show how the funds were interacting and how the
money was moving through the fund. She noted that money
came in, was invested, there were unrealized gains
associated with the principal, money moves into the ERA
from gains, expenses were paid, percent of market value was
paid, and then reinvest whatever is left behind.
Co-Chair von Imhof noted the separate smaller circle for
the ERA. She queried any other fund in the world that had a
separate earnings reserve account utilized for draws. She
wondered whether the ERA was unique to the Alaska Permanent
Fund.
Ms. Rodell replied in the affirmative. She stated that the
constitution was written as such.
Co-Chair von Imhof felt that most endowments, foundations,
and sovereign wealth funds had only one large fund that was
managed as a whole; and then manage the assets to provide
the funding throughout the year for their 5 percent draw.
Ms. Rodell agreed, and furthered that most endowments and
trusts had one pool of money with a spend limit. She stated
that there was no opportunity to affect change on the POMV
distribution.
Co-Chair Stedman noted that the Alaska Mental Health Trust
fund did not have an earnings reserve. He explained that
they did 4.25 POMV.
9:49:43 AM
Co-Chair von Imhof felt that an ERA of over $14 billion in
potential vulnerability to be accessed, thereby taking a
quarter of the fund pretty quickly. She felt that folding
the ERA into the corpus would protect the corpus and the
fund over time.
Ms. Rodell replied in the affirmative. She stressed that
the challenge with the ERA was that it was a unique feature
due to the constitutional language.
9:50:51 AM
Co-Chair Stedman he stressed that there were conflicting
statutes with the statutory dividend versus the maximum
draw of POMV that would be addressed until resolution.
Senator Wielechowski wondered whether work would be made
easier if the ERA were folding into the corpus via
constitutional amendment, and there were constitutional
provisions for the PFD and a valve for government.
Ms. Rodell responded that their job was to invest the fund,
so she did not know if it would make their job easier. She
stressed that the challenge came with reconciling the
investment strategies with the intent of the ERA. She
explained that the board supported a POMV and eliminating
the concept of income versus the rest of the fund. She
remarked that it would not affect the work, but that one
fund would make it cleaner.
Co-Chair von Imhof surmised that the board was more
interested in the amount of the draw versus what the
legislature did with the money.
Ms. Rodell agreed, and furthered that it reduced
appropriation risk with inflation proofing and did many
things to create the one fund. She stressed that the intent
of the board was to build a robust asset for all
generations of Alaskans.
Ms. Rodell highlighted slide 28, "Contributions to
Principal in millions." She stated that it was the largest
deposit in the history of the fund. She noted the influx of
the royalties and the contributions by inflation proofing.
She noted that in 2010, inflation was flat, so there was no
inflation proofing. She remarked that in 2016, 2017, and
2018 there was no appropriation for inflation proofing. She
thanked the legislature and governor for that contribution.
9:55:05 AM
Co-Chair Stedman stated that there was a symbolic
presentation with a large cardboard check that would be
presented to Ms. Rodell.
Co-Chair von Imhof presented a large check to Ms. Rodell.
Co-Chair Stedman stressed that the committee spent time on
problematic issues.
Ms. Rodell agreed, and noted the debate about the challenge
of the budget. She applauded the committee for their
actions.
Senator Bishop stressed that the legislature put $7 billion
above and beyond, not including the recent deposit.
Co-Chair Stedman remarked that the legislature had not
historically drawn out the 50 percent portion over time,
which made a significant impact.
Ms. Rodell discussed slide 29, "Values in billions - as of
December 31, FY20 Q2." She announced that the ERA had $7.5
billion in realized earnings, which was available for
appropriation. She furthered that there was an unrealized
gain of an additional $2.7 billion. She shared that $3.1
billion was set aside for the FY 21 POMV. She announced
that the $4 billion principal contribution was set aside,
and it was required to come at the end of the fiscal year.
She stated that inflation proofing was marked based on
actual inflation.
9:59:34 AM
Co-Chair Stedman remarked that there was a concern about
the breach of PFD appropriation. He requested help in
reviewing the ERA, because there would be a discussion
about an additional deposit into the constitutionally
protected portion. He noted that the board was not taking
into account politics in the portfolio mathematics. He
noted that the board might feel that the fund should carry
a larger ERA than the Senate Finance Committee.
10:05:31 AM
Co-Chair von Imhof noted the POMV on the slide. She
surmised that the POMV was moved to the general fund on a
periodic basis. She noted that the CBR was approximately $2
billion. She remarked that an upcoming supplemental budget
might draw on the CBR slightly. She wondered whether there
were conversations between APFC and the managers of the
general fund to change the cadence of the frequency of the
POMV. She queried the need for cash sooner than the
schedule.
Ms. Rodell replied that there was close work with the
Treasury Division in DOR. She stated that the DOR website
had all the cash draws as needed. She shared that the first
year, FY 19, there was a significant delay in the draw due
to a cash flow issue. She explained that a quarterly
schedule was the initial setup. She stressed that the PFD
would not be a part of this aspect of the discussion. She
shared that the agreement stated that the schedule could be
decelerated or accelerated. She noted that there was a
large transfer at the end of FY 19. She remarked that FY 20
showed the opposite, so there was more of an acceleration
of the use of that money. She deferred to the Treasury
Division to inquire about the reason for that issue. She
stated that the Treasury Division had used approximately
$2.4 billion of the $2.9 billion for FY 20 thus far.
Co-Chair Stedman felt that a conversation with the Treasury
Division was important because a proposed budget would take
the balance of the CBR from $2 billion to around $500
million depending on performance and supplemental requests.
He stressed that it would be a significant erosion of its
value.
Ms. Rodell explained that the $2.4 billion included a $1
billion payout for the PFD in October.
Co-Chair Stedman understood and stressed that it was
examined in the entirety. He explained that the Treasury
Division and APFC worked out the logistics.
10:10:24 AM
Co-Chair von Imhof stressed that the CBR was meant to be a
short-term daily source and revenue payback. The ERA was a
long-term fund. She stressed that there was no desire for
the ERA to become the short-term cushion for the general
fund. She stressed that the short-term cushion was the CBR,
because it was invested differently. She felt that the
investment numbers could decrease if the ERA became a
short-term solution. She wanted to ensure that the CBR had
a robust balance to provide the necessary daily cash flow
in a short-term basis that was required by the general
fund.
Co-Chair Stedman remarked that the CBR used to have more
than $10 billion, and was divided into two components. He
remarked that they saw the CBR become reduced, and he did
not want to see the same thing happen to the Permanent
Fund. He stressed that they needed to be careful with the
draw rate of the Permanent Fund.
Senator Wielechowski remarked that he shared the concerns
about the ease of access that the legislature had to the
ERA. He queried the minimum balance in the ERA needed for
survival. He also wondered whether APFC would be violating
its prudent investor obligation if it were forced to sell
assets to provide funds for government or a PFD.
Co-Chair Stedman felt that the minimum balance discussion
should be postponed until later in session, because it
related to the contribution amount. He stated that there
would be a robust discussion that may or may not agree with
the board on that issue.
Ms. Rodell did not believe that it was a violation of
fiduciary responsibility to meet the obligations that were
expected of the fund. She stressed that the prudency was
related to going through the investment portfolio;
understanding the locations of the potential unrealized
gains; and the most prudent course of action to meet the
obligations. She stressed that there was a challenge to
determine whether or not it was prudent to be in a seven or
twelve year investment anymore.
Ms. Rodell looked at slide 30, "Return on Investment":
FY 19
Revenues: $ 3,907,500,000
Operating/Investment Expenses: $ 132,600,000
Value Generated Per Day (based on 251 active trading
days through FY19)
Total Fund: $ 3.91 B / 251 = $15.6 M per day
Statutory Net Income: $ 3.3 B / 251 = $13.1 M per
day
Revenue Generation for the State of Alaska
ERA POMV Draw -
42 percent of total General Fund revenues in
the FY 19 budget
47 percent of total General Fund revenues in
the FY 20 budget.
52 percent of total General Fund revenues in
the FY21 proposed budget.
10:15:23 AM
Ms. Rodell addressed slide 31, "Reliance on Corporate
Activity":
.notdef SB 26, CH 16 SLA 18 established a POMV rules based
structure for Fund withdrawals a percentage of the
average market value of the Fund for the first five of
the preceding six fiscal years.
.notdef Inflation Proofing AS 37.13.145 (c) protects the
future value of the Principal by transferring a
portion of the earnings to the Principal to maintain
the long term sustainability of the Fund.
.notdef APFC's operations and investment management of the
Fund's assets are supported by the ERA.
.notdef Agencies working on the collection of royalties also
receive appropriations from the ERA.
Ms. Rodell pointed to slide 33, "Board of Trustees":
As the fiduciaries, the Trustees have a duty to
Alaskans in assuring that the Permanent Fund is
managed and invested in a manner consistent with
legislative findings in AS 37.13.020 -
.notdef The Fund should provide a means of conserving a
portion of the state's revenue from mineral
resources to benefit all generations of Alaskans.
.notdef The Fund's goal should be to maintain safety of
principal while maximizing total return.
.notdef The Fund should be used as a savings device
managed to allow the maximum use of disposable
income from the Fund for the purposes designated
by law.
A fiduciary is a person or organization that
acts on behalf of another person or persons
to manage assets. Essentially, a fiduciary
owes to that other entity the duties of good
faith and trust. The highest legal duty of
one party to another, being a fiduciary
requires being bound ethically to act in the
other's best interests.
- Investopedia
Ms. Rodell addressed slide 34, "Resolution 18-04":
Sustainable Rules- Based Legal Framework For Fund
Transfers
In providing guidance on rules-based withdrawals for
the Fund and to help ensure the long-term
sustainability of using Fund earnings for the benefit
of all generations of Alaskans, the board passed
Resolution 18-04 at a special meeting on October 17,
2018.
This resolution affirms the importance of formulaic
management of transfers into and out of the ERA to
ensure sustainability and long-term growth of the
Fund, by identifying four key principles:
Adherence - Sustainability - Inflation Proofing -
Real Growth
Ms. Rodell looked at slide 35, "Evolving Role of the Fund":
Successful SWFs operate within a rules-based system
that allows them to perform a combination of saving,
stabilization, and income generation functions. In
Alaska, the latter function has come into sharper
focus, as the Fund income supports the State budget in
an era of lower oil revenues.
Alaska has a robust system of constitutionally
mandated savings, a long history of preserving and
growing the real value of the fund, and a strong track
record in investment management.
This paper proposes a number of reforms that will
strengthen the stability and sustainability of
Alaska's Permanent Fund:
.notdef LESSON 1: MISSION CLARITY
.notdef LESSON 2: THE IMPORTANCE OF RULES
.notdef LESSON 3: SUCCESSFUL ENFORCEMENT OF SAVING
RULES
.notdef LESSON 4: DESIGNING A POMV SPENDING RULE
.notdef LESSON 5: REFORMING THE ERA
Ms. Rodell discussed slide 36, "APFC's Strategic 5 Year
Plan":
Priorities for FY 20-FY25:
1. Position the organization and Fund for
implementation of annual POMV draw
2. Develop and implement comprehensive risk management
for the organization
3. Integrate best-in-class investment management
capabilities to maximize investment returns
4. Enhance talent and staff across APFC
Ms. Rodell looked at slide 38, "FY21 Budget":
APFC recognizes this evolution in the Fund's role to
generate revenue to support state services and
programs; as such, APFC looks to the State to ensure
that resources are available to support APFC's
investment and management needs for ongoing success in
generating long-term returns.
Operating Budget FY21
Merit and Retention Adjustments $720.6
Real Estate Manager Position $257.5
Operational Reductions ($1097.9)
Investment Management Fees ($21,098.1)
Co-Chair Stedman thanked the presenter. He stated that he
would not be present for the upcoming Monday's meeting. He
continued to explain the schedule for the next week.
ADJOURNMENT
10:21:41 AM
The meeting was adjourned at 10:21 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 013120 2020_APFC Trustees' Paper Volume 9_S.pdf |
SFIN 1/31/2020 9:00:00 AM |
APFC |
| 013120 APFC Newspaper-Insert.pdf |
SFIN 1/31/2020 9:00:00 AM |
APFC |
| 013120 APFC SFC Presentation.pdf |
SFIN 1/31/2020 9:00:00 AM |
APFC |
| 2019-APFC-Annual-Report.pdf |
HFIN 1/31/2020 1:30:00 PM SFIN 1/31/2020 9:00:00 AM |