HB 490 FINANCIAL ASSISTANCE TO BIDCO CHAIRMAN SHARP brought up HB 490 as the next order of business before the Senate State Affairs Committee. He called the prime sponsor to testify. Number 210 REPRESENTATIVE BETTYE DAVIS, prime sponsor of HB 490, stated her aide would give testimony on the bill. JONATHON SPERBER, Aide to Representative Bettye Davis, prime sponsor of HB 490, stated Jamie Kenworthy, Executive Director of the Alaska Science & Technology Foundation, should be available on teleconference to answer questions. BIDCOs are business investment development companies. They are middle risk private sector financial institutions which provide emerging small and medium sized businesses with financing, management support, and technical assistance. The primary goal of BIDCOs is to establish private sector businesses that create jobs. CHAIRMAN SHARP asked if there is a limit on the amount of the financial assistance. REPRESENTATIVE BETTYE DAVIS stated $3,000,000.00 is needed to fund BIDCO. CHAIRMAN SHARP asked if present statute sets a limit of $3,000,000.00. REPRESENTATIVE BETTYE DAVIS stated there is nothing in statute limiting how much can go into BIDCOs eventually. They need at least $3,000,000.00, but more than that could go into it. CHAIRMAN SHARP stated he will pose that question to Mr. Kenworthy. He does not want to give them a blank check. MR. SPERBER stated that HB 490 would allow ASTF to supplement the originally funded amount of $1,000,000.00 with earnings from that money, or other earnings ASTF would have. So the fiscal note truly is zero for HB 490. HB 490 would simply provide the mechanism for ASTF to provide certain earnings to BIDCOs. CHAIRMAN SHARP asked if that would occur through legislative appropriation. SENATOR DUNCAN noted that the fiscal note prepared by Mr. Kenworthy indicates that there is no fiscal impact. He thinks the chairman's concern is addressed by the fiscal note and the sponsor's statement. CHAIRMAN SHARP stated he was under the impression that Section 8, extending the financial assistance, was the most important part. REPRESENTATIVE BETTYE DAVIS stated if HB 490 is not passed, the authority to do that will sunset at the end of this year. CHAIRMAN SHARP just wants to ensure that HB 490 will not allow ASTF to give money to BIDCO without legislative appropriation. REPRESENTATIVE BETTYE DAVIS thought the legislature did not want to appropriate any money to it. CHAIRMAN SHARP clarified that they did not want to appropriate money to any specific BIDCO projects. But he has a problem with adding money to the foundation without legislative appropriation. REPRESENTATIVE BETTYE DAVIS stated she thought as long as ASTF could come up with funds from interest-earning money that they have, that would be acceptable to the legislature, because they don't have any money to appropriate. If she thought they had money to appropriate to BIDCOs, she would have gone that route. She thinks this in an important economic development issue. CHAIRMAN SHARP asked Representative Davis how many applications have been approved. REPRESENTATIVE BETTYE DAVIS stated none have been approved, because the program is not funded. Number 305 CHAIRMAN SHARP asked if a 50/50 match is still required from the private sector. REPRESENTATIVE BETTYE DAVIS responded yes. CHAIRMAN SHARP stated he doesn't mind giving ASTF the authority to replace the $2,000,000.00 that was vetoed. REPRESENTATIVE BETTYE DAVIS replied that's all they want to do. We wouldn't be authorizing anything more than that, because they don't need it. Once that money is in the private sector, we would not appropriate any more money to the BIDCOs. Number 230 CHAIRMAN SHARP stated he is hesitant to not restrict the amount of money ASTF could put into the BIDCO foundation. REPRESENTATIVE BETTYE DAVIS stated the legislature does not restrict ASTF in any other uses of their money. CHAIRMAN SHARP stated he does not want to give ASTF a blank check. You can only stretch $11,000,000.00 so far (the amount of money ASTF has). The appropriation by ASTF into BIDCOs should be made by legislative approval. REPRESENTATIVE BETTYE DAVIS understands the chairman's concern, but she cannot imagine ASTF would do that. ASTF has made a commitment to all of the programs they're involved with. She doesn't think ASTF would give any more preference to the BIDCOs than it does to any of the other proposals they get. CHAIRMAN SHARP asked Representative Davis if she would object to the addition of language to HB 490 that would limit ASTF to contributing $2,000,000.00 to the BIDCOs. Number 370 REPRESENTATIVE BETTYE DAVIS stated the only problem she would have with that is the late date at which that amendment would be added might keep HB 490 from passing due to time constraints. She suggested passing legislation addressing the chairman's concern during the next legislature. SENATOR DONLEY suggested adding a provision stating ASTF has to get legislative approval if they want to give more than a certain amount of money to BIDCOs. REPRESENTATIVE BETTYE DAVIS asked if that could be done in a letter of intent. CHAIRMAN SHARP stated he does not believe in legislative intent when it comes to millions of dollars. SENATOR DUNCAN thinks it's important to keep HB 490 moving. He asked the chairman to clarify that he is concerned ASTF might give more than $2,000,000.00 to BIDCOs. CHAIRMAN SHARP replied that is correct. He is concerned there are no limits set out in HB 490. SENATOR DUNCAN asked Representative Davis if she thought language limiting the amount of money ASTF could give to BIDCOs would cause a problem in the House. REPRESENTATIVE BETTYE DAVIS did not think that provision would cause a problem, but she is worried that since there are only seven days before adjournment there might not be enough time for the House to concur in Senate amendments to the bill. SENATOR DUNCAN and SENATOR RANDY PHILLIPS think there should be enough time for a concurrence vote. Number 420 CHAIRMAN SHARP stated there is strong support for HB 490 in the Rules Committee. REPRESENTATIVE BETTYE DAVIS does not think the committee needs to be concerned about the ASTF appropriating more than $2,000,000.00 to the BIDCOs, because that would throw all their other obligations off. Number 460 JAMIE KENWORTHY, Executive Director, Alaska Science & Technology Foundation, Department of Commerce & Economic Development, testifying from Anchorage, stated ASTF has grant authority, but there is nothing in statute, without HB 490, that would give authority for establishment of this kind of risk-capital capability in Alaska. If ASTF misuses its' authority, it will have to answer to the legislature during the next session. CHAIRMAN SHARP asked Mr. Kenworthy if he believes that under HB 490, the ASTF would still have to come back to the legislature with their capital budget to appropriate additional money to the BIDCO, over and above what ASTF has right now. MR. KENWORTHY replied no. CHAIRMAN SHARP asked how much authority ASTF currently has. MR. KENWORTHY stated if HB 490 passes, ASTF will have the authority. They would take funds out of their interest earnings, and if the funds were leveraged by the private sector, they would establish a BIDCO. They would not need additional funds appropriated. It is unusual to have an agency director, himself, asking that funds be taken out of his direct authority and put into the private sector where it will be leveraged. CHAIRMAN SHARP asked if BIDCO will have a separate boards. MR. KENWORTHY replied BIDCO will have its' own board. There will be a loan agreement between ASTF and the BIDCO, but the BIDCO will make the decisions on where to invest the money and the terms of those investments. CHAIRMAN SHARP asked Mr. Kenworthy if ASTF feels it has the authority to add money up to $3,000,000.00, or unlimited. Number 490 MR. KENWORTHY responded if HB 490 passes, ASTF would have the authority to add unlimited funds. But he is trying to be very clear to the legislature regarding the size of the commitment ASTF would make, so there is no misunderstanding about what ASTF is doing. A BIDCO needs about $6,000,000.00 to be viable. CHAIRMAN SHARP asked if all the other projects ASTF is involved in were approved by the legislature. MR. KENWORTHY replied the appropriation for the agriculture project for the last two years is a direct earmark by the legislature of ASTF earnings. ASTF is authorized to fund other projects through grants, however they need the legislative exemption because of the statutory provision that they cannot spend more than half their funds in grants of over $100,000.00 a year. HB 490 is needed to give ASTF the authority to fund BIDCOs. CHAIRMAN SHARP asked if there were dollar limits placed on all other ASTF projects. MR. KENWORTHY responded the language in the legislation relating to the Kodiak Launch Facility was "up to $5,000,000.00". Number 515 CHAIRMAN SHARP thinks HB 490 will have difficulty passing the Senate without a limit on the amount ASTF is allowed to appropriate to BIDCOs. MR. KENWORTHY would not have a problem with the legislature limiting the amount ASTF would be allowed to contribute to BIDCOs. Number 533 SENATOR LEMAN made a motion to adopt a conceptual amendment that would limit ASTF to contributing no more than a total of $3,000,000.00 to BIDCO. CHAIRMAN SHARP, hearing no objection, stated the amendment was adopted. SENATOR RANDY PHILLIPS made a motion to discharge HB 490 from the Senate State Affairs Committee with individual recommendations. CHAIRMAN SHARP, hearing no objection, stated HB 490 was discharged from the Senate State Affairs Committee.