SENATE STATE AFFAIRS COMMITTEE May 1, 1997 4:04 p.m. MEMBERS PRESENT Senator Lyda Green, Chairman Senator Jerry Ward, Vice-Chairman Senator Jerry Mackie MEMBERS ABSENT Senator Mike Miller Senator Jim Duncan COMMITTEE CALENDAR HOUSE CONCURRENT RESOLUTION NO. 7 Proposing an amendment to the Uniform Rules of the Alaska State Legislature relating to notice of committee meetings held during the first week of a first regular session. SENATE BILL NO. 118 "An Act relating to investments of the Alaska Permanent Fund Corporation." CS FOR HOUSE BILL NO. 50(FIN) "An Act relating to the use of broadcasting to promote certain classics or sweepstakes; and providing for an effective date." CONFIRMATION HEARINGS ON GOVERNOR'S APPOINTEES TO BOARDS AND COMMISSIONS: Alaska Air National Guard and Alaska Mental Health Trust Authority Board of Trustees PREVIOUS SENATE COMMITTEE ACTION HCR 7 - See Senate State Affairs minutes dated 5/1/97. Rules minutes dated 5/8/97. SB 118 - See Senate State Affairs minutes dated 5/1/97. HB 50 - No previous action to record. WITNESS REGISTER Jeff Logan, Staff to Representative Joe Green State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Offered information on HCR 7 Byron Mallott, Executive Director Alaska Permanent Fund Corporation P.O. Box 25500 Juneau, AK 99802-5500 POSITION STATEMENT: Testified in support of SB 118 Representative Mark Hogins State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Prime Sponsor of CSHB 50(FIN) Ms. Laura Measles 402 Overland Kenai, AK 99611 POSITION STATEMENT: Testified in support of CSHB 50(FIN) ACTION NARRATIVE TAPE 97-25, SIDE A Number 001 HCR 17 IMPROVE HIGHWAYS AND HWY FACILITIES CHAIRMAN GREEN called the Senate State Affairs Committee to order at 4:04 p.m. and brought up HCR 7 as the first order of business before the committee. JEFF LOGAN, staff to Representative Joe Green, explained HCR 7 amends Uniform Rule 23(a) to allow a committee chairman to hold a meeting within 24 hours notice during the first week of the first session. Currently, the rule requires five-day notification of a meeting, and under this requirement it is technically impossible for a chairman to hold a meeting during the first week of session. He pointed out that as chairman of the House Health, Education & Social Services Committee, Representative Green wanted to hold a meeting during the first week of session for departmental overviews but was unable to under the current rule. Mr. Logan said HCR 7 amends the Uniform Rules to allow for a hearing during the first week of the first session to be held after 24 hours notice. Such a hearing could only be held for the purposes of an overview or committee organization. The five-day notice requirement for a bill or resolution would still apply. There being no further testimony on HCR 7, CHAIRMAN GREEN asked for the pleasure of the committee. Number 050 SENATOR MACKIE moved HCR 7 be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. Number 060 SB 118 PERMANENT FUND CORP. INVESTMENTS CHAIRMAN GREEN brought SB 118 before the committee as the next order of business. BYRON MALLOTT, Executive Director, Alaska Permanent Fund Corporation, explained that the percentage of their total portfolio allocated to stocks is now limited to 50 percent and SB 118 will allow the corporation to increase that allocation to 60 percent. Based upon their current allocation, a 50 percent equities exposure, on a total return basis the fund can be expected to return essentially 8.4 percent. If the corporation is given the authorization to increase that equity exposure to 60 percent, the return, over time, would move to 8.7 percent. Over a 20-year period of time, using their current portfolio and reasonable assumptions for growth and use of income, at a 50 percent limit it would allow growth of the total portfolio to just under $50 billion, and at a 60 percent limit it would grow to over $60 billion. Mr. Mallott said the corporation believes that increasing this percentage provides the opportunity to add value to this tremendous state asset over time without meaningful additional risk. He added that the volatility in returns at 50 percent are similar to the volatility in returns that they could expect at 60 percent in the equities market, while the opportunity for additional return is meaningfully greater and grows at an expediential rate over time. He pointed out the fund has experienced significant volatility in equity markets over the past two years, but the corporation has still achieved significant growth in the portfolio in spite of that record. Number 142 CHAIRMAN GREEN asked if other funds similar to the Alaska Permanent Fund have more flexibility in all arenas as to the percentages they designate for certain types of investment. MR. MALLOTT responded that most funds operate under the Prudent Investor Rule and they have no limitations on where they can place their assets in the marketplace except as their prudent judgment might dictate. The Alaska Permanent Fund Corporation invests to a specific investment list which is specified in statute, whereas most funds have significantly greater latitude. Most other funds that do manage to statutory investment lists are moving away from that system toward the Prudent Investor standard, although the corporation is not requesting that. Number 230 CHAIRMAN GREEN noted that previously the percentage of the total investments of the fund added up to 100 percent, but under this legislation it now adds up to 110. She asked if something else needs to be adjusted. JIM KELLY, Director of Communications, Alaska Permanent Fund Corporation, explained these are limits for asset categories and none of these limits can be exceeded. Number 270 SENATOR MACKIE asked if the corporation had approached the Legislative Budget & Audit Committee and asked that this legislation be introduced. MR. MALLOTT said the corporation approached Legislative Budget & Audit (which is their mandated oversight committee) and indicated that they did not want to proceed with seeking this legislation unless there was meaningful legislative support going in. The corporation wanted to be sure that LB&A understood the nature of what it was they were seeking, that they weren't pressing for it in a way that would suggest that it's importance might be overblown. He added that moving from 50 to 60 percent isn't that significant as you look at the total portfolio and the total impact on the fund. Number 304 There being no further testimony on SB 118, CHAIRMAN GREEN stated the bill would be held until the end of the meeting. CSHB 50(FIN) BROADCASTING OF RAFFLES AND CLASSICS CHAIRMAN GREEN brought CSHB 50(FIN) before the committee as the final order of business. REPRESENTATIVE MARK HODGINS, prime sponsor of HB 50, explained the legislation allows the removal of a prohibition on legislatively designated sweepstakes to be broadcast on radio or T.V. Currently, the only designated sweepstakes that can be broadcast are fishing derbies. This will bring 19 sweepstakes such as the Nenana Ice Classic, the Kenai Snow Goose Classic, etc., into the same status as a fishing derby. He said basically these are community activist groups that are trying to raise money to provide scholarships and other benefits within their communities. Number 326 LAURA MEASLES, Executive Director, Kenai Chamber of Commerce, testifying from Kenai in CSHB 50(FIN), said the Kenai Chamber Snow Goose Classic began in 1993, and Tesoro Alaska has been the major sponsor in providing financial assistance each year to put this event on. A determination was made in 1993 by an attorney working for Tesoro that it would not be a violation of any gaming laws if they advertised over the radio the location of ticket outlets in their community, which they proceeded to do, and over the next couple of years the classic grew. In November 1996, the chamber was notified by the Division of Gaming that the advertising over the radio was illegal and in violation of the gaming law. Ms. Measles then contacted Representative Hodgins to see what could be done legislatively so that they could at least promote their activity on the airways. She noted that without the radio promotion this year, the classic experienced no growth, and it is affecting their ability, as well as others, to fund their goals of scholarships and various community events. There being no further testimony on CSHB 50(FIN), CHAIRMAN GREEN asked for the pleasure of the committee. SENATOR WARD moved CSHB 50(FIN) and the accompanying zero fiscal note be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. CHAIRMAN GREEN requested a motion to move SB 118 (PERMANENT FUND CORP. INVESTMENTS) out of committee. SENATOR MACKIE moved SB 118 be passed out of committee with individual recommendations. Hearing no objection, it was so ordered. The final item on the committee calendar was a confirmation hearing on the Governor's appointees to boards and commissions. There being no questions or witnesses waiting to testify, CHAIRMAN GREEN requested a motion on the nominees. SENATOR WARD moved the names of the following appointees be forwarded to a joint session for consideration: Alaska Air National Guard - Brigadier General: Colonel Van P. Williams, Jr., Commander 176th Wing; and Colonel Jerry W. Gillean, Chief of Staff, Headquarters Alaska Air National Guard Alaska Mental Health Trust Authority Board of Trustees: John Malone, Bethel; and Caren Robinson, Juneau Hearing no objection, CHAIRMAN GREEN stated the motion carried, and clarified that the committee members' signature do not necessarily indicate endorsement of the appointees. There being no further business to come before the committee, the meeting adjourned at 4:35 p.m.