Legislature(2015 - 2016)HOUSE FINANCE 519

03/22/2016 09:30 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time --
+= HB 268 AIDEA:DIVIDEND TO STATE;INCOME;VALUATION TELECONFERENCED
Moved HB 268 Out of Committee
-- Public Testimony --
+= HB 143 AIDEA BONDS, LOANS, FUND; AEA LOAN TELECONFERENCED
Scheduled but Not Heard
-- Public Testimony --
+= SB 53 ADVANCED PRACTICE REGISTERED NURSES TELECONFERENCED
Moved HCS SB 53(L&C) Out of Committee
-- Public Testimony --
+ HB 351 ADOPTION OF REGS; LIMITATIONS; VOID REGS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 268                                                                                                            
                                                                                                                                
     "An  Act  relating to  the  dividends  from the  Alaska                                                                    
     Industrial Development  and Export  Authority; relating                                                                    
     to  the meaning  of 'mark-to-market  fair value,'  'net                                                                    
     income,'  'project or  development,' and  'unrestricted                                                                    
     net  income'  for  purposes of  the  Alaska  Industrial                                                                    
     Development and Export Authority;  and providing for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
9:41:38 AM                                                                                                                    
                                                                                                                                
GENE  THERRIAULT, DEPUTY  DIRECTOR, STATEWIDE  ENERGY POLICY                                                                    
DEVELOPMENT,   ALASKA   ENERGY  AUTHORITY,   DEPARTMENT   OF                                                                    
COMMERCE,  COMMUNITY   AND  ECONOMIC   DEVELOPMENT,  briefly                                                                    
addressed the bill. He recounted  that the legislation would                                                                    
remove  market  value  adjustments  and  various  losses  or                                                                    
write-offs on  projects that utilized sources  of money from                                                                    
outside   Alaska    Industrial   Development    and   Export                                                                    
Authority's (AIDEA)  income stream from the  calculation for                                                                    
the AIDEA  dividend. He elaborated that  the procedure would                                                                    
result  in   a  more  predictable  dividend.   The  dividend                                                                    
normally fluctuated  because the  authority shared 25  to 50                                                                    
percent of the annual net  earnings with the state treasury.                                                                    
The removal  of the accounting adjustments  would reduce the                                                                    
amount of  uncertainty and fluctuations  on a  yearly basis.                                                                    
He mentioned  that AIDEA historically attempted  to share as                                                                    
much net  income with the  state treasury as  possible, with                                                                    
the average  at 46 or 47  percent of the net  earnings while                                                                    
keeping in mind  the bond rating agencies  concerns over the                                                                    
authority's solvency.                                                                                                           
                                                                                                                                
Co-Chair Neuman  pointed to  page 2, lines  9 through  15 of                                                                    
the legislation  relating to  project development.  He asked                                                                    
what was not included in  the bill. Mr. Therriault explained                                                                    
that the accounting  items were being added  to the existing                                                                    
statutory exclusions  and would  be backed  out from  all of                                                                    
the  accounting adjustments  for  all of  AIDEA's funds  and                                                                    
investment tools that produced  the income that the dividend                                                                    
was based on.                                                                                                                   
                                                                                                                                
Representative  Gara  thought  that   the  losses  from  the                                                                    
project were  not counted when calculating  the dividend. He                                                                    
asked for  clarity. Mr. Therriault  clarified that  only the                                                                    
losses on projects utilizing an  outside source of money. He                                                                    
explained  that if  the  project was  not  developed or  had                                                                    
limited or no value AIDEA had  to account for the project as                                                                    
a loss to "get it off  the books." He restated that only the                                                                    
losses that  were funded  from outside  of the  AIDEA income                                                                    
stream would be eliminated.  Representative Gara did not see                                                                    
where the specific language relating  to outside sources was                                                                    
referenced  in the  legislation. Mr.  Therriault pointed  to                                                                    
[page 2],  line 6, the  words, "state and federal  grants or                                                                    
appropriations" that were the  sources of revenue outside of                                                                    
the  AIDEA  income  stream. Representative  Gara  understood                                                                    
that  AIDEA  would not  count  losses  of state  money  when                                                                    
calculating  the dividend  and asked  for verification.  Mr.                                                                    
Therriault answered  that only losses for  project work that                                                                    
was  funded  through  revenue   outside  of  AIDEA's  income                                                                    
stream.                                                                                                                         
                                                                                                                                
Vice-Chair Saddler asked for the  balances for the Revolving                                                                    
Fund,   Sustainable    Energy   Transmission    and   Supply                                                                    
Development  Fund  (SETS),  and  the  Arctic  Infrastructure                                                                    
Fund.  Mr. Therriault  replied that  the question  was asked                                                                    
during the  previous bill  hearing; AIDEA  was working  on a                                                                    
letter  in response  to the  committee that  clearly defined                                                                    
the balances. The accounts net  amount included loans and he                                                                    
wanted to avoid confusion.                                                                                                      
                                                                                                                                
9:47:17 AM                                                                                                                    
                                                                                                                                
Representative  Gattis determined  that  the question  about                                                                    
the  balances of  the funds  had  two parts;  what were  the                                                                    
current   amount  balances   and  what   amount  did   AIDEA                                                                    
anticipate being  repaid on a  yearly basis and the  life of                                                                    
the loans.                                                                                                                      
                                                                                                                                
Co-Chair Neuman  asked if  AIDEA had  ever issued  any loans                                                                    
that had  defaulted. Mr. Therriault responded  that he would                                                                    
follow up but acknowledged that the number was very low.                                                                        
                                                                                                                                
Co-Chair Thompson OPENED public testimony.                                                                                      
                                                                                                                                
Co-Chair Thompson CLOSED public testimony.                                                                                      
                                                                                                                                
9:50:07 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:52:47 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HB  268  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
[Note:  HB  268  was  taken  up later  in  the  meeting  and                                                                    
reported out of committee. See 10:51 a.m.]                                                                                      
                                                                                                                                
HOUSE BILL NO. 268                                                                                                            
                                                                                                                                
     "An  Act  relating to  the  dividends  from the  Alaska                                                                    
     Industrial Development  and Export  Authority; relating                                                                    
     to  the meaning  of 'mark-to-market  fair value,'  'net                                                                    
     income,'  'project or  development,' and  'unrestricted                                                                    
     net  income'  for  purposes of  the  Alaska  Industrial                                                                    
     Development and Export Authority; and providing for an                                                                     
     effective date."                                                                                                           
                                                                                                                                
10:51:12 AM                                                                                                                   
                                                                                                                                
GENE  THERRIAULT, DEPUTY  DIRECTOR, STATEWIDE  ENERGY POLICY                                                                    
DEVELOPMENT,   ALASKA   ENERGY  AUTHORITY,   DEPARTMENT   OF                                                                    
COMMERCE, COMMUNITY  AND ECONOMIC DEVELOPMENT,  responded to                                                                    
a question  asked earlier during  the meeting  regarding the                                                                    
default  rate on  AIDEA's loan  portfolio.  He had  obtained                                                                    
answers    from   Mr.    Springsteen,   John    Springsteen,                                                                    
CEO/Executive  Director, AIDEA,  and  AIDEA accountants.  He                                                                    
informed  the committee  that the  default  rate on  AIDEA's                                                                    
loan portfolio was .49 percent  as of September 30, 2015 and                                                                    
as of  February 2016  it was .41  percent. He  reported that                                                                    
the cumulative  default rate for  all of Alaska's  banks was                                                                    
0.7 percent.                                                                                                                    
                                                                                                                                
Co-Chair Thompson CLOSED public testimony.                                                                                      
                                                                                                                                
Vice-Chair Saddler  addressed the  fiscal note.  He reported                                                                    
that  the Department  of  Commerce,  Community and  Economic                                                                    
Development   (DCCED)  fiscal   note   (FN   1  (CED))   was                                                                    
indeterminate.                                                                                                                  
                                                                                                                                
Representative Wilson referred to the  analysis on page 2 of                                                                    
the  fiscal note  that contained  a chart  and asked  for an                                                                    
explanation.   Mr.  Therriault   replied   that  the   chart                                                                    
portrayed  the historic  effect that  the Implementation  of                                                                    
the   Governmental   Accounting   Standards   Board   (GASB)                                                                    
Statement 31,  mark-to-market rule had overtime.  The impact                                                                    
on  the dividend  was depicted  in the  second column  which                                                                    
showed a  reduction of almost  $7 million [in 2006]  and $11                                                                    
million  in  2013.  He   detailed  that  the  mark-to-market                                                                    
adjustments had  created volatility  in AIDEA's  dividend to                                                                    
the  state and  that  the authority  believed  it should  be                                                                    
backed out before the dividend was calculated.                                                                                  
                                                                                                                                
Representative Wilson  wanted a better understanding  of the                                                                    
fiscal note. She requested a  comparison between the present                                                                    
accounting impacts and the accounting  impacts with the GASB                                                                    
rule  31 items  excluded.  Mr. Therriault  replied that  the                                                                    
chart showed the  total impact that the GASB rule  31 had on                                                                    
AIDEA's  net income  in the  first column  and half  of that                                                                    
amount was the effect the  rule had on the dividend depicted                                                                    
in the second column. He  reiterated that AIDEA shared up to                                                                    
50  percent  of  its  net   income  with  the  dividend.  He                                                                    
explained that  the charts demonstrated the  volatility that                                                                    
the  GASB  rule  31  accounting  had  on  the  dividend.  He                                                                    
delineated  that the  rule either  artificially inflated  or                                                                    
reduced the  dividend and  overtime would  cancel the  up or                                                                    
down  effect   out.  However,   the  rule   intensified  the                                                                    
uncertainty  of the  dividend each  year. He  furthered that                                                                    
new rules  were coming that  would add to the  volatility of                                                                    
the  dividend and  deepen the  seesaw effect.  The provision                                                                    
eliminated the uncertainty in the dividend.                                                                                     
                                                                                                                                
10:56:43 AM                                                                                                                   
                                                                                                                                
Co-Chair  Neuman MOVED  to REPORT  HB 268  out of  committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
note. There being NO OBJECTION, it was so ordered.                                                                              
                                                                                                                                
HB  268 was  REPORTED  out  of committee  with  a "do  pass"                                                                    
recommendation   and    with   one    previously   published                                                                    
indeterminate fiscal note: FN 1 (CED).                                                                                          
                                                                                                                                

Document Name Date/Time Subjects
HB 351 Supporting Documents - Letter from the AK Chamber.pdf HFIN 3/22/2016 9:30:00 AM
HB 351
HB 351 Supporting Documents - Letter from NFIB.pdf HFIN 3/22/2016 9:30:00 AM
HB 351
CSHB 351(STA) Summary of Changes Ver W to Ver N.pdf HFIN 3/22/2016 9:30:00 AM
HB 351
CSHB 351(STA) Sectional Analysis Version N.pdf HFIN 3/22/2016 9:30:00 AM
HB 351
CSHB 351 Sponsor Statement Version N.pdf HFIN 3/22/2016 9:30:00 AM
HB 351
HB 143 NEW FN DCCED AIDEA 3-18-16.pdf HFIN 3/22/2016 9:30:00 AM
HB 143
HB 143 NEW FN DCCED AEA 3-18-16.pdf HFIN 3/22/2016 9:30:00 AM
HB 143
HB143 Operating Engineers Support Letter.pdf HFIN 3/22/2016 9:30:00 AM
SNRG 3/31/2016 3:30:00 PM
HB 143
HB143 Kensington Update Support Letter January 2016.pdf HFIN 3/22/2016 9:30:00 AM
HB 143
HB143 AIDEA Springsteen.pdf HFIN 3/22/2016 9:30:00 AM
HB 143
HB 143(FIN) Sponsor Statement(OO4).pdf HFIN 3/22/2016 9:30:00 AM
HB 143
HB 143 ADIEA Decision Making.pdf HFIN 3/22/2016 9:30:00 AM
HB 143
HB 143 J. Hydro Presentation.pdf HFIN 3/22/2016 9:30:00 AM
HB 143
HB 351 NEW FN GOV 3-20-16.pdf HFIN 3/22/2016 9:30:00 AM
HB 351