HOUSE BILL NO. 416 "An Act adopting and relating to the Uniform Prudent Management of Institutional Funds Act; relating to the investment of money for charitable purposes by institutions, including governmental institutions; and relating to the University of Alaska." 1:41:25 PM KONRAD JACKSON, STAFF, REPRESENTATIVE KURT OLSON, SPONSOR, stated that HB 416 would allow the State of Alaska to adopt the Uniform Prudent Management of Institutional Funds Act (UPMIFA). He briefly summarized the history and events that led to the legislation. The State adopted the Uniform Management of Institutional Funds Act (UMIFA) in 1972. In 2006, UMIFA was revised and up-dated to UPMIFA and has been adopted by all but six states and Puerto Rico. UPMIFA brings two changes to institutional funds management and endowment accounting: first, is the elimination of the historic dollar value as a benchmark for endowment spending and the amount identified for accounting purposes as permanently restricted net assets; secondly, clarification of the legal classification of earnings. He continued that UPMIFA incorporates the experience gained in thirty five years under UMIFA and adoption will bring the state current with updated fiduciary practices. He stressed that UPMIFA is default legislation; other provisions in law in donor agreements or governing instruments supersede UPMIFA. Co-Chair Hawker asked what state savings accounts or activities would be affected by the legislation. Mr. Jackson surmised that none would be affected. He thought that the state had governing provisions for all of their funds. He emphasized that governing instruments supersedes uniform prudent management language. Co-Chair Hawker asked who would be affected within the state structure. 1:46:34 PM Mr. Jackson noted that endowments within the University of Alaska are among funds that would be affected. Co-Chair Hawker opened public testimony. JIM LYNCH, TREASURER, UNIVERSITY OF ALASKA FOUNDATION (via teleconference), stated he has been managing the University's endowments for approximately twenty five years. He reiterated that the legislation sets out responsible practices and standards for investment and management and provides essential guidance for the administration of endowments and charitable funds. He indicated that it reduces the exposure of fund administrators to legal challenges. The state does not offer guidance or standards to deal with institutional funds. He summarized that UPMIFA delineated current practices that are used nationally. Mr. Lynch added that there were two UPMIFA provisions that were specifically applicable to the university: management of endowments, and the clarification that state fiduciary rules apply to the university. 1:51:36 PM Mr. Lynch noted support for UPMIFA from non-profits such as the Rasmussen Foundation. Mr. Lynch remarked that various state funds are all heavily regulated by the state and would not be affected by the legislation. He noted UPMIFA mostly applies to non-profits, and municipalities. Co-Chair Hawker surmised that UPMIFA would have a greater impact on the non-profit public sector. He wondered if the legislation would impose new duties or additional burdens to small organizations in the private sector. Mr. Lynch felt that it would assist non-profits by clarifying their fiduciary responsibilities. The guidelines help non-profits manage the funds in accordance with the donor's intent. 1:55:42 PM ERIC WOHLFORTH, CHAIR, UNIVERSITY OF ALASKA FOUNDATION INVESTMENT COMMITTEE (via teleconference), contended that the legislation was important and would be consistent with most other states. He noted that many donors are out of state and use to their own state's endowment administration rules. Additionally, many small university endowments are governed by old-fashioned rules that do not permit payment of scholarships. Those funds would become available for the payment of scholarships with adoption of the legislation. Finally, he was assured by the fact that the bill was default legislation. Representative Fairclough asked if UPMIFA addressed situations where the organization would like to change the purpose of the endowment. Mr. Lynch related that the rules require that the institution would have to ask a court for permission to change the purpose of an endowment. However, an expedited procedure exists for an endowment that is under fifteen thousand dollars and over twenty years old. The non-profit organization must notify the attorney general's office as to the intent to change or to modify restrictions on the endowment. 2:03:11 PM Co-Chair Hawker closed public testimony Co-Chair Stoltze MOVED to report HB 416 out of Committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HB 416 was REPORTED out of Committee with a "do pass" recommendation and with attached previously published fiscal notes: FN 1(LAW), FN 2(UA).