Legislature(2015 - 2016)

2016-07-11 House Journal

Full Journal pdf

2016-07-11                     House Journal                      Page 3151
HB 5001                                                                                                                       
HOUSE BILL NO. 5001 by the House Rules Committee by request of                                                                  
the Governor, entitled:                                                                                                         

2016-07-11                     House Journal                      Page 3152
     "An Act relating to the Alaska Permanent Fund Corporation, the                                                             
     earnings of the Alaska permanent fund, and the earnings reserve                                                            
     account; relating to management of the budget reserve fund (art.                                                           
     IX, sec. 17, Constitution of the State of Alaska) by the Alaska                                                            
     Permanent Fund Corporation; relating to procurement by the                                                                 
     Alaska Permanent Fund Corporation; relating to the mental health                                                           
     trust fund; relating to deposits into the dividend fund; relating to                                                       
     the calculation of permanent fund dividends; relating to                                                                   
     unrestricted state revenue available for appropriation; and                                                                
     providing for an effective date."                                                                                          
was read the first time and referred to the Finance Committee.                                                                  
The following fiscal note(s) apply:                                                                                             
1.  Zero, Dept. of Administration/Fund Capitalization                                                                           
2.  Zero, Dept. of Revenue                                                                                                      
3.  Fiscal, Dept. of Corrections                                                                                                
4.  Fiscal, Dept. of Revenue                                                                                                    
5.  Fiscal, Dept. of Revenue                                                                                                    
6.  Fiscal, Dept. of Revenue                                                                                                    
The Governor's transmittal letter dated July 8, 2016, follows:                                                                  
"Dear Speaker Chenault:                                                                                                         
Under the authority of Article III, Section 18, of the Alaska                                                                   
Constitution, I am transmitting a bill relating to the Alaska Permanent                                                         
Fund and the funding structure for State government.                                                                            
This bill would establish a new financial model to enable sustainable                                                           
funding of State services and the protection of the Permanent Fund.                                                             
The bill would provide for an annual sustainable draw from the                                                                  
Permanent Fund earnings reserve account to the general fund to                                                                  
support State government services. Additionally, the bill would change                                                          
the manner in which Permanent Fund Dividends are calculated -                                                                   
basing the calculation on the value of the entire Permanent Fund and                                                            
the value of mineral royalties. Further, the bill includes measures to                                                          
ensure the value of the Permanent Fund is maintained by saving                                                                  
money into the earnings reserve and the corpus in high revenue years.                                                           

2016-07-11                     House Journal                      Page 3153
As a result of the changes in this bill, the Permanent Fund earnings                                                            
reserve account would generate a predictable and solid return of                                                                
revenues for State government, and the dividend would continue, but                                                             
on a more sustainable and predictable basis.                                                                                    
In detail, the bill would make the following changes to allow for                                                               
sustainable withdrawals from the Permanent Fund to the general fund:                                                            
     · Amend AS 37.13.145 to provide for an annual appropriation                                                                
         from the earnings reserve account to the general fund to pay                                                           
         for State government services, calculated based on five and                                                            
         one-quarter percent of the average market value of the                                                                 
         Permanent Fund for the first five of the preceding six fiscal                                                          
         years (hereafter, "POMV draw").                                                                                        
     · Add a new section, AS 37.13.146, to provide for the payment                                                              
         of dividends from the general fund based on an amount equal                                                            
         to 20 percent of the POMV draw and 20 percent of the                                                                   
         mineral royalties received by the State. For the next three                                                            
         years, the dividend would be set at $1,000. Thereafter, the                                                            
         new formula would go into effect, resulting in a dividend of                                                           
         approximately $1,000 into the future.                                                                                  
     · Repeal the annual inflation-proofing transfer from the                                                                   
         Permanent Fund earnings reserve account to the principal in                                                            
         AS 37.13.145.                                                                                                          
     · Add a new section requiring a transfer from the earnings                                                                 
         reserve account to the Permanent Fund principal if the balance                                                         
         of the earnings reserve account exceeds the annual draw                                                                
         amount multiplied by four.                                                                                             
     · Add a new section reducing the annual draw from the                                                                      
         earnings reserve account to the general fund if the State                                                              
         receives more than $1.2 billion in mineral royalties and oil                                                           
         and gas production taxes in a fiscal year.                                                                             
The bill also proposes to amend AS 36.30 to exempt the Alaska                                                                   
Permanent Fund Corporation from the State procurement code. The                                                                 
corporation still would be required to adopt regulations to govern                                                              
procurement and comply with the five percent preference under the                                                               
code. Additionally, contracts for legal services would continue to                                                              

2016-07-11                     House Journal                      Page 3154
require the approval of the Attorney General. The bill also would                                                               
amend AS 37.10.430 to transfer the management and investment of                                                                 
assets of the constitutional budget reserve fund from the Department                                                            
of Revenue to the Alaska Permanent Fund Corporation and to modify                                                               
the investment directives for the budget reserve fund.                                                                          
Finally, the bill seeks to amend the uncodified law to express the                                                              
intent of the Legislature that the Legislature reevaluate the use of                                                            
Permanent Fund earnings as provided for in this bill in three years.                                                            
I urge your prompt and favorable action on this measure.                                                                        
Bill Walker