CS FOR SENATE BILL NO. 311(HES) "An Act relating to the public school trust fund, the Alaska children's trust, and the Alaska heritage endowment fund; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. ZACH WARWICK, staff to Senator Gene Therriault, informed the Committee that this legislation would provide methods to "better manage" the Public School Trust Fund, the Alaska Heritage Endowment Fund, and the Alaska Children's Trust. He reminded the Committee that State statute originally established two fund components for each of the three funds: a principle account and a net income account along with the stipulation that any fund appropriations be made from the net income account. He continued that this appropriation mandate resulted in the funds being invested in endeavors with a guaranteed income rather than in those that appreciate in value. He stated that investments that appreciate in value are generally higher yielding and "could make the trust funds much more useful for what they were originally designed for." Mr. Warwick stated that this legislation would allow the appropriations to be based on market value rather than on net income, would direct the Commissioner of the Department of Revenue "to invest the assets in a manner that would yield at least five percent real rate of return over time," and would require the Department to provide an annual fund value and appropriations report to the Legislature. Mr. Warwick referred the Committee to grant language specified in Section 17, subsection (d) located on page 7, line 17 of the bill, that would limit the Alaska Children's Trust Fund grants to one per organization per year in addition to specifying that the grant be used to fund projects within a specific locale in the State. NEIL SLOTNICK, Deputy Commissioner, Treasury Division, Department of Revenue stated that the Department supports this bill as it would make these funds consistent with other State administered endowments such as the Arctic Winter Games endowment and the Power Cost Equalization (PCE) endowment "which are managed at a five percent of value payout." He stated "it's good policy" to have all the State's endowments managed in similar fashion, as it allows for the Department to manage "on a basis of total return not on different types of returns;" it allows for automatic inflation proofing; "and for a smooth, reliable payout with the five percent of market payout each year." JOHN JENKS, Chief Investment Officer, Treasury Division, Department of Revenue, stated, "this bill really does allow the investment decision to be made in the best interest of these long-term funds," which would allow for more productive funds with "the expectation" of an increase of over half a percent return over the long term. He informed the Committee this increase could amount to several million dollars a year over time. He asserted that the explicit language for inflation proofing the funds is important. Senator Austerman asked for clarification that any earnings produced from the endowment are deposited into the fund and are included in the total when determining the five percent of the fund's value. Mr. Jenks replied, "yes, that is correct." Senator Austerman stated; therefore, that of that total, five percent could be used for funding purposes. He asked the Department the current value of each of the three funds. Mr. Slotnick listed the Public School Trust value at approximately $275 million; the Alaska Children's Fund is approximately $9 million; and the value of the Alaska Heritage Endowment fund "is relatively small" with a value "in the hundreds of thousands." Senator Austerman asked if the Legislature appropriates general funds to the Public School Trust fund. Mr. Slotnick replied State statute specifies that monies in the Public School Fund must be spent on educational purposes; however, he would need to verify whether the Fund receives appropriations from the general fund. CAROL BRICE, Chair, Children's Trust Fund, testified via teleconference from Fairbanks to voice concern that the grant language in Section 17, subsection (d) of this legislation restricting grant monies to fund projects "within a municipality or a regional education attendance area or an unincorporated community…" is contrary to what "has been the practice." She stated the receiving one grant in a twelve month period is not a problem; however, prohibiting grant monies to fund programs such as the Norton Sound Health Corporation Parenting Program that operates programs in 36 villages, is of concern. MARILYN EGGLESTON, Grant Writer, Resource Center for Parents & Children (RCPC), testified via teleconference from Fairbanks to voice that the new language would negatively affect a RCPC program to produce three parenting videos for distribution to numerous small rural communities throughout Alaska. Ms. Brice interjected that most of the grants support private, non- profit entities, and she asked why the Legislature would want to eliminate projects that have a statewide benefit. She stated that resource networking provided by entities such as the RCPC enable "small resources" to have a large reach. She urged the Committee to omit the restrictive language requiring "a project to be located in one community or municipality." Senator Austerman clarified that Ms. Brice contends the language is restrictive because it mandates that a program must operate in one municipality. Ms. Brice reiterated that the language is restrictive as it limits funds "to a single project within a municipality." She stressed that many programs applying for these grants "have a large reach" and this language puts those programs at "a disadvantage." Senator Wilken asked Ms. Brice what issue might have prompted this language to be included in this bill. Ms. Brice responded she did not know why the language was introduced to the bill. COLEEN TURNER, Director, RCPC, testified via teleconference from Fairbanks to voice concern about the language limiting projects to a specific area. She urged the Committee to write an amendment to this legislation, as the current wording is "problematic." Mr. Warwick stated that the language in question was introduced at the request of Senator Green due to some Alaska Children's Trust grant awards "she was in objection to." CHERIE PAUL, Program Manager, Alaska Children's Trust, informed the Committee that Senator Green's concern was prompted by grants the Alaska Children's Trust had awarded to the Alaska Public Radio network to fund child abuse and neglect parenting messages aired on statewide public radio. She stated that the Alaska Children's Trust worked with a variety of agencies to write the messages and paid the public radio network to produce and air the messages over a three-year period. Senator Wilken asked how much money these grants amounted to. Ms. Paul stated that the first year's funding amounted to $49,000 that was strictly for airtime, "and the other two years was just under $30,000." Co-Chair Donley asked the percentage of "total expenditures" of the Alaska Children's Trust fund. Ms. Paul responded that total grant awards have ranged between $330,000 and $365,000 per year during the past five years. Co-Chair Donley calculated that the public radio network grants amounted to approximately 10 percent of the annual allocated grant total. Senator Wilken asked the witness to suggest alternate language that could address Senator Green's concerns while allowing for the flexibility suggested by Ms. Brice. Ms. Paul preferred that the Board of Directors for the Children's Trust Fund suggest language alternatives. She expressed that the "sole purpose" of the Children's Trust is to deliver child abuse and neglect prevention messages, and the Board feels that is what they "should do, that is what the statutes mandate us to do, and I think that over the years, we have done the best job possible in allocating our dollars." Senator Wilken recommended that further discussions should occur to address Senator Green's concerns and "yet not hamstring the Trust from doing things statewide." The bill was HELD in Committee.