HJR 10-CONST AM: PERMANENT FUND; POMV;EARNINGS  2:59:50 PM CHAIR GRAY announced that the final order of business would be HOUSE JOINT RESOLUTION NO. 10, Proposing amendments to the Constitution of the State of Alaska relating to the Alaska permanent fund and to appropriations from the Alaska permanent fund. 3:00:11 PM The committee took an at-ease from 3:00 p.m. to 3:02 p.m. 3:02:13 PM REPRESENTATIVE CALVIN SCHRAGE, Alaska State Legislature, ss prime sponsor, reminded the committee that HJR 10 proposes a constitutional amendment that would combine the Alaska Permanent Fund ("the fund") into a single account structure with a maximum 5 percent draw based on a 5-year average of the 6 preceding years. 3:03:04 PM REPRESENTATIVE VANCE moved to adopt Amendment 1 t HJR 10, labeled 34-LS0648\A.3, Nauman/Wallace, 5/5/25, which read: Page 1, line 5: Delete "twenty-five" Insert "fifty [TWENTY-FIVE]" CHAIR GRAY objected. 3:03:12 PM REPRESENTATIVE VANCE explained that Amendment 1 would strengthen the state's long-term fiscal stability by ensuring that 50 percent of all mineral related revenues are constitutionally deposited into the fund. Currently, only 25 percent of these revenue are constitutionally protected, and an additional 25 percent is directed by statute, but the amount is subject to legislative appropriation. She said Amendment 1 would elevate this statutory practice to a constitutional mandate to remove these funds from political discretion and protecting them for future generations. CHAIR GRAY said he wished the proposed amendment had been passed 40 years ago, but not today in the state's current fiscal climate. 3:05:42 PM REPRESENTATIVE KOPP said Amendment 1 would result an immediate and significant decrease in general fund (GF) revenue in a rapidly declining oil price environment. He added that Amendment 1 would make paying dividends and services orders of magnitude more difficult. 3:06:37 PM REPRESENTATIVE SCHRAGE agreed with the previous comments that in a different fiscal environment he could be persuaded to support such an amendment. He recalled the previous committee discussion on the need for flexibility to meet current day obligations and stated his opposition to Amendment 1. CHAIR GRAY maintained his objection. 3:07:36 PM REPRESENTATIVE VANCE said she's open to including some transition time and asked the committee, "If not now, when?" A roll call vote was taken. Representatives Underwood and Vance voted in favor of Amendment 1. Representatives Mina, Eischeid, Kopp, and Gray voted against it. Therefore, Amendment 1 failed by a vote of 2-4. 3:10:04 PM REPRESENTATIVE VANCE moved to adopt Amendment 2 to HJR 10, labeled 34-LS0648\A.4, Nauman/Wallace, 5/5/25, which read: Page 2, lines 2 - 5: Delete "Each fiscal year, the legislature may also appropriate from the permanent fund an amount to pay costs associated with investments made under (a) of this section, including operating expenditures associated with managing the fund." CHAIR GRAY objected. 3:10:10 PM REPRESENTATIVE VANCE explained that Amendment 2 would remove a provision in HJR 10 that would authorize withdraws from the fund to pay for investment and operating expenses of the Alaska Permanent Fund Corporation (APFC). She shared her belief that the Constitution of the State of Alaska ("the Alaska Constitution") should not carveout an area that quietly spends form the fund beyond the structured percent of market value (POMV) draw. The additional language would undermine the POMV limit by permitting ongoing withdraws for internal costs outside of the cap. She reported that current operating costs total $240 million annually, which if Amendment 2 were to pass, would be funded statutorily by GF obligations or the POMV draw. She said Amendment 2 would provide intentional oversight into how money is being spent from the fund, force a conversation, and fold these costs into the cap. CHAIR GRAY asked APFC to comment on the proposed amendment. 3:13:33 PM DEVEN MITCHELL, Executive Director, Alaska Permanent Fund Corporation (APFC), said in terms of practicality, Amendment 2 would reduce the draw rate and shared an example. He said he would prefer that APFC's budget be maintained in its current status where its netted out prior to transfers being made to the state, which is more in line with the practices of other trusts and those entities that manage them. 3:17:22 PM REPRESENTATIVE KOPP reminded the committee that investment managers are compensated for excellent performance. He said there is no binding language in this provision, and that it simply provides legal authority for APFC to request costs associated with investment. If amendment 2 were to pass, he suggested that the legislature could never say, "yes," to these requests. 3:19:16 PM REPRESENTATIVE VANCE clarified that this is an additional draw on top of the POMV transfer to pay for costs associated with investment operations, which is close to $250,000 from the corpus of the fund. Without Amendment 2, she explained these costs would essentially be exempted. She said her goal is to maintain ultimate legislative authority while protecting the fund. 3:23:10 PM A roll call vote was taken. Representatives Underwood and Vance voted in favor of Amendment 2. Representatives Kopp, Mina, Eischeid, and Gray voted against it. Therefore, Amendment 2 failed by a vote of 2-4. REPRESENTATIVE SCHRAGE emphasized the importance of the fund and the threats that face it. He expressed his he appreciation to the committee. 3:24:49 PM REPRESENTATIVE KOPP thanked Representative Vance for the spirit of Amendment 2, noting that the costs associated with investments are already paid from the fund's earnings. He said HJR 10 would protect the ability to pay future dividends and state expenses and reflects 20 years of APFC's requests to make such a change to protect the fund. 3:26:08 PM REPRESENTATIVE EISCHEID shared his belief that HJR 10 would protect future dividends. 3:26:47 PM REPRESENTATIVE VANCE clarified that HJR 10 would not constitutionalize a dividend, it would simply protect the fund, which the legislative majority has expressed a desire to grow for state services. Until other pieces of the fiscal plan are put forth, she said she could not support the constitutional amendment. 3:28:57 PM REPRESENTATIVE KOPP moved to report HJR 10 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HJR 10 was reported out of the House Judiciary Standing Committee. CHAIR GRAY authorized Legislative Legal Services to make any necessary technical or conforming changes.