HB 376-ESTABLISH THE ALASKA STATE BANK  4:26:37 PM CHAIR KITO announced that the next order of business would be HOUSE BILL NO. 376, "An Act establishing a state bank; relating to insurance, mortgage lending, securities, and permanent fund dividends; and providing for an effective date." 4:26:58 PM REPRESENTATIVE CHRIS TUCK, Alaska State Legislature, reintroduced HB 376 as prime sponsor. He said the proposed bill would create a monetary policy for Alaska for infrastructure, science, and technology projects. 4:28:21 PM CHARLES DUNCAN, Staff, Representative Chris Tuck, Alaska State Legislature, presented HB 376 on behalf of Representative Tuck, prime sponsor. He said that as a researcher, he believes the most important reason to create the Alaska State Bank is to allow the legal ability to access the Federal Reserve to prepare for the next financial crisis. REPRESENTATIVE TUCK said the proposal is to get money into the economy for long-term infrastructure projects. He said the most the state would participate is 35 percent. 4:32:53 PM REPRESENTATIVE KNOPP asked where the funds for the state bank would come from. REPRESENTATIVE TUCK answered some funds would come from loan guarantees, capital purchase, and the credit stimulus method. REPRESENTATIVE KNOPP asked whether Alaska Industrial Development and Export Authority (AIDEA) already does those things. MR. DUNCAN answered that AIDEA doesn't directly fund science and technology. 4:35:55 PM CHAIR KITO shared his understanding that the proposal would allow the state to issue bonds for infrastructure projects. He asked about the revenue source for paying back the funds. MR. DUNCAN answered the bank would be active as a securitizer." He said it would create packages which would be put on account with the Federal Reserve. CHAIR KITO suggested the infrastructure bonds are for municipal governments and they are paid back through municipal taxes. MR. DUNCAN answered that is correct. 4:37:39 PM CHAIR KITO suggested the state of Alaska can go to the federal government with the bonds and the federal government can allow the state to lend or generate capital for science and technology. MR. DUNCAN answered in the affirmative. CHAIR KITO suggested it increases the state bank's ability to enter into additional loans to support science and technology. MR. DUNCAN answered in the affirmative. CHAIR KITO clarified there is a two-step procedure. The credit holding with the federal government allows for the creation of additional loans. He said monetary policy means little to people in Alaska. He said it would be creating a method to access capital that is not currently accessible to the state. 4:39:48 PM REPRESENTATIVE KNOPP spoke to issuance of bonds. He said he had not heard how they were to be repaid. He stated science and technology are not necessarily revenue generators. MR. DUNCAN said the aim is to prepare for the next financial reforms. REPRESENTATIVE TUCK said that as bonds are packaged together for municipal projects and the Federal Reserve takes them over, it frees up more money. REPRESENTATIVE KNOPP said the state does already have a bond bank established. REPRESENTATIVE TUCK answered he doesn't know what the bond bank is or whether it is able to do fractional reserve banking. CHAIR KITO answered it is the Alaska Municipal Bond Bank and it is available for cities to support municipal bond programs. 4:42:50 PM REPRESENTATIVE WOOL mentioned the state bank would provide 35 percent as a down payment for commercial banks. He asked whether commercial banks are welcoming the initiative. MR. DUNCAN clarified it also concerns other state agencies. REPRESENTATIVE WOOL asked whether the funds would be the seed money to give commercial banks confidence. REPRESENTATIVE TUCK answered that the banking association had been in Juneau, Alaska, about two weeks previous and the proposal had peaked their interest. 4:45:02 PM REPRESENTATIVE KNOPP asked whether the committee had any testimony from the Department of Revenue or AIDEA or received any thoughts from the administration. CHAIR KITO answered that to date there had not been any commentary from the administration. REPRESENTATIVE TUCK added that since the last hearing there is a fiscal note. CHAIR KITO said the proposal was for a specific revenue source. REPRESENTATIVE BIRCH commented it doesn't sound like a good business solution to him. REPRESENTATIVE WOOL commented he does not understand the proposal. REPRESENTATIVE KNOPP commented he is not ready to support the proposed bill but is ready to support the concept. He said he'd like to see a working group come forward with recommendations. 4:50:07 PM The committee took an at-ease from 4:50 p.m. to 4:51 p.m. 4:51:19 PM REPRESENTATIVE WOOL moved to report HB 376 out of committee with individual recommendations and the accompanying fiscal notes. 4:51:48 PM A roll call vote was taken. Representatives Stutes, Josephson, Wool, and Kito voted in favor of HB 376. Representatives Birch and Knopp voted against it. Therefore, HB 376 was reported out of the House Labor and Commerce Standing Committee by a vote of 4-2.