SENATE STATE AFFAIRS COMMITTEE January 29, 1993 9:20 A.M. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Robin Taylor Senator Johnny Ellis MEMBERS ABSENT Senator Jim Duncan Senator Mike Miller COMMITTEE CALENDAR SENATE BILL NO. 49 "An Act relating to reelection reports; closing the two-day reporting gap in those reports; setting the date of February 15 for filing year-end campaign finance reports; and requiring of zero year-end reports. SENATE BILL NO. 29 "An Act making a special appropriation to the principal of the Alaska permanent fund; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 49 - No previous action to record. SB 29 - No previous action to record. WITNESS REGISTER Josh Fink, Aide Senator Tim Kelly State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Testified in support of SB 49. Brooke Miles Alaska Public Office Commission P. O. Box 110222 Juneau, Alaska 99811 POSITION STATEMENT: Testified in support of SB 49. Senator Bert Sharp State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Sponsor of SB 29. Jim Kelly Alaska Permanent Fund Corporation P. O. Box 25500 Juneau, Alaska 99802-5500 POSITION STATEMENT: Testified on SB 29. ACTION NARRATIVE TAPE 93-6, SIDE A Number 001 Chairman Leman called the Senate State Affairs Committee meeting to order at 9:20 a.m. SENATOR LEMAN brought SB 49 (YEAR-END CAMPAIGN FINANCE REPORTS) before the committee as the first order of business. JOSH FINK, representing SENATOR KELLY'S office testified in support of SB 49. He explained this legislation makes some long needed adjustments to the campaign reporting laws, the major feature of which is closing the two-day reporting gap. Number 035 Since the inception of Alaska's current finance reporting laws in 1974, there has been an inadvertent two-day gap which occurs between the seven day pre-election report and the 24-hour reports. The reporting period for the 7-day pre- election report ends three days prior to the report due date. The 24-hour reports for contributions which exceed $250 do not begin until 7 days prior to the election. Thus, contributions exceeding $250 received the 9th and 8th days before the election are not reported until the 10-day post election report. This has the effect of obscuring the public's right to know. In addition SB49 would change the deadline for filing year- end campaign reports from December 31 to February 15th, thus allowing candidates and groups the use of December bank statements, and provide a longer time period to prepare a year-end report. This legislation was introduced in the 17th Legislature and, after passage in the House, passed the Senate Ethics Reform and Judiciary Committees, but died in the Senate Rules Committee. During the committee process last session the Alaska Public Office Commission requested amendments to the bill; new language clarifies scope of year-end report; and the filing of zero reports are made mandatory. SENATOR ELLIS asked if SENATOR KELLY had discussed introduction of this bill with SENATOR DONLEY and if he was in agreement with the amendments contained within the legislation. JOSH FINK, answered that SENATOR KELLY had talked with SENATOR DONLEY and that SENATOR DONLEY was first co-sponsor. Number 100 BROOKE MILES, representing the Alaska Public Office Commission, testified that SB49 was identical to House Bill 86 from the 17th Legislature and that the Alaska Public Office Commission was in favor of it. SENATOR LEMAN asked if the February 15th date was to allow time for bank statements to clear. BROOKE MILES, replied that the January 15th date was a concern, and that the commission supported the date change to February 15th. She mentioned that the commission currently did not have the statutory authority for moving forward that date to January 15. A final concern with respect to its January 15 date is that, except for the year following gubernatorial elections, January 15 always falls on the first week of the legislative session, which makes it difficult for some elected officials who haven't filed their report before they come to Juneau to file it timely. Number 130 SENATOR TAYLOR moved to pass SB 49 from committee with individual recommendations. Hearing no objections, it was so ordered. SENATOR LEMAN introduced SB 29 (APPROP: EARNING RESERVE TO PF PRINCIPAL) and invited the prime sponsor, SENATOR BERT SHARP, to join the committee at the table. SENATOR SHARP explained SB 29 proposes to appropriate $600 million dollars from the Permanent Fund Earnings Reserve for deposit into the Permanent Fund's Principal Account. The last special appropriation into the principal of the fund occurred in 1987 when $1,264,000,000 was moved from the Permanent Fund Earnings Reserve by the legislature into the Permanent Fund Principal Account. SB 29's proposal to move $600,000,000 will leave an estimated balance of $235,000,000 in the Earnings Reserve Account. This balance should prove more than adequate to meet other needs and be a cushion for assuring that inflation proofing obligations are met through the 1990's. Number 175 SENATOR SHARP explained that the $835 million projected balance got a lot of legislators, administrators and advocates of various programs eyeballing it pretty strongly for their various projects. He suggested that appropriating some funds into the principal balance portion of the reserve may be a way that the public perception would accept using some of the other funds for education or whatever. He said that the projections assume that there would be no other withdrawals from the earnings reserve and that was a very optimistic assumption for the next five, six or seven years. JIM KELLY, representing the Permanent Fund Corporation, testified their job is to manage the money, keep it safe, earn as much income as they can and leave the decisions about what to do with the use of the earnings up to the legislature. The only time the Corporation's board of trustees would take a position is if the legislature were proposing some kind of a change that was going to adversely affect the corporation's ability to do it's job. The analysis that has been provided is strictly the corporation's best estimate about what the impacts are going to be on growth principal in the future, what's going to happen to income if something like this is done, what will be the impact on the statutory uses that exist for it right now. Mr. Kelly said, right now $835 million is the amount that will be in the fund at yearend. However, that amount is subject to change with still five months to go. Number 250 JIM KELLY said the board meets once a year to discuss asset allocation. Those decisions are based on what the board thinks the different markets are going to earn over the next five-year period. JIM KELLY distributed a packet that included various reports, charts and miscellaneous information on the permanent fund. SENATOR LEMAN asked how the Alaska Permanent Fund ranked in terms of funds, such as pension funds, etc. When the fund moves assets around, does it have a significant impact on the market? JIM KELLY answered that although the fund was one of the 50 largest funds in the world, when assets were moved, it did not have a significant impact on the market. SENATOR LEMAN said, if $600 million is put into the principal, that will affect inflation proofing because there is a larger principal to inflation proof and there is a time coming soon where we are going to have trouble meeting our inflation proofing. I assume that shifts the date somewhat, if so, when does it shift and how will if affect future inflation proofing. Number 375 JIM KELLY explained that based on the capital market assumptions, and one he did not mention was what the rate of inflation would be, the rate of inflation was going to be 4 percent on the average over the next four years. If inflation is at 4 percent and the fund is able to earn 8 1/2 percent, we should be able to make enough money each year to do both, even with the $600 million going to principal. If inflation jumps up dramatically or our earning go down, we will have to start drawing down that earnings reserve. SENATOR SHARP said he neglected to mention that there is some confusion currently where the permanent fund earning reserve comes into play. Classification under the constitutional budget reserve statute says all other funds have to be exhausted before getting into the constitutional reserve, and according to legislative legal there is a possibility that the permanent fund earnings are labeled as other funds. Unless clarified by statute, which he thinks no matter what we do, we might want to see that that's clarified depending on the will of the body. If that's the case he felt that its more imperative than ever to protect some of the reserves. Due to the loss of a quorum, the Chairman announced the bill would be moved out of committee at the next meeting. There being no further business to come before the committee, the meeting was adjourned at 9:50 a.m.