Legislature(2015 - 2016)HOUSE FINANCE 519

04/05/2016 01:30 PM House FINANCE

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01:32:44 PM Start
01:33:50 PM HB224 || HB245 || HB303
03:17:25 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 224                                                                                                            
     "An  Act relating  to  the  governor's submission  of  a                                                                   
     projection of  anticipated revenue and  expenditures and                                                                   
     proposal  for  enactment  of an  individual  broad-based                                                                   
     tax; relating  to income  of the Alaska  permanent fund;                                                                   
     relating  to the  disposition  of income  of the  Alaska                                                                   
     permanent   fund;  relating   to   the  calculation   of                                                                   
     permanent  fund  dividends;  relating  to  the  dividend                                                                   
     fund; and providing for an effective date."                                                                                
HOUSE BILL NO. 245                                                                                                            
     "An  Act   relating  to   the  Alaska  permanent   fund;                                                                   
     relating  to   appropriations  to  the   dividend  fund;                                                                   
     relating  to  income  of   the  Alaska  permanent  fund;                                                                   
     relating  to the earnings  reserve account;  relating to                                                                   
     the Alaska  permanent fund  dividend; making  conforming                                                                   
     amendments; and providing for an effective date."                                                                          
HOUSE BILL NO. 303                                                                                                            
     "An   Act  relating   to  the   Alaska  Permanent   Fund                                                                   
     Corporation,  the  earnings   of  the  Alaska  permanent                                                                   
     fund,  and the  earnings  reserve  account; relating  to                                                                   
     the  mental  health  trust fund;  relating  to  deposits                                                                   
     into the dividend  fund; and providing for  an effective                                                                   
1:33:50 PM                                                                                                                    
RANDALL  HOFFBECK,   COMMISSIONER,  DEPARTMENT   OF  REVENUE,                                                                   
remarked that  as the department  put together  its permanent                                                                   
fund  bill  it  had  landed  on   a  robust  and  sustainable                                                                   
package.  He relayed  that  the  department had  submitted  a                                                                   
request for  proposal to advise  on the use of  the Permanent                                                                   
Fund earnings  reserve. McKinsey  and Company, Inc.  had been                                                                   
awarded with the bid. He introduced the presenter.                                                                              
1:37:09 PM                                                                                                                    
MARTIN  BAILY,   ECONOMIST,  MCKINSEY  AND   COMPANY;  SENIOR                                                                   
FELLOW,   BROOKINGS   INSTITUTION,  provided   a   PowerPoint                                                                   
presentation  titled "Ensuring a  Sound Fiscal Future"  dated                                                                   
April 5, 2016 (copy on file). He turned to slide 1:                                                                             
     The  Alaska   Department  of   Revenue  has   sought  an                                                                   
     objective  assessment of  the financial  model it  built                                                                   
     to  evaluate an annual  draw from  the Earnings  Reserve                                                                   
     of  the  Permanent  Fund,  as  outlined  in  the  Alaska                                                                   
     Permanent   Fund   Protection    Act.   The   fact-based                                                                   
     assessment  of  the  financial model  included  in  this                                                                   
     document  was conducted  by McKinsey  and Company,  Inc.                                                                   
     with support from expert Martin Baily.                                                                                     
Mr. Bailey discussed slide 2, "Context for this effort":                                                                        
     The APFPA  proposal would  re-route oil revenues  to the                                                                   
     APFC to help stabilize State spending                                                                                      
          The  Alaska Permanent  Fund Protection Act  (APFPA)                                                                   
          calls for  directing a steady annual  amount to the                                                                   
          General  Fund to mitigate  the impact of  oil price                                                                   
          volatility      on     year-to-year      budgeting.                                                                   
          Specifically, the proposal recommends that:                                                                           
               50  percent of  oil royalty  revenues and  100                                                                   
               percent  of production  tax  revenues flow  to                                                                   
               the  Alaska Permanent Fund  Corporation (APFC)                                                                   
               for investment                                                                                                   
               A  fixed annual  draw of  $3.3B (adjusted  for                                                                   
               inflation  beginning  in 2020)  from the  APFC                                                                   
               to   the   General    Fund   to   fund   State                                                                   
               expenditures;     the    amount    would    be                                                                   
               methodically   revisited  every  4   years  to                                                                   
               ensure continued Fund sustainability                                                                             
               Dividend   payments   be  paid   out  of   the                                                                   
               remaining 50 percent of oil royalties                                                                            
     The APFPA seeks to improve budget stability                                                                                
          Given  a rising  budget deficit  and declining  oil                                                                   
         production revenues, the APFPA seeks to:                                                                               
               Protect   and  grow   the  State's   sovereign                                                                   
               wealth   to   maximize    long-term   returns,                                                                   
               acknowledging   the   rising   importance   of                                                                   
               investment income in funding its budget                                                                          
               Delink    public   spending    from   volatile                                                                   
               commodity  prices and stabilize the  budget by                                                                   
               establishing    a    disciplined,    formulaic                                                                   
               approach to drawing from the State's wealth                                                                      
     State modeling proposes that a $3.3B draw should be                                                                        
          The Department  of Revenue (DOR) has  undertaken an                                                                   
          extensive exercise  to assess in a  financial model                                                                   
          what  amount  of annual  draw  will be  sustainable                                                                   
          (i.e., what  draw amount can the State  expect with                                                                   
          greater  than  50 percent  confidence  to  maintain                                                                   
          the starting  asset's real value over  time without                                                                   
          depleting the Earnings Reserve)                                                                                       
          Given the  Earnings Reserve's current  size and the                                                                   
          $3B  proposed  transfer   from  the  Constitutional                                                                   
          Budget  Reserve,  the   State  can  plan  with  100                                                                   
          percent  confidence to draw  $3.3B annually  for at                                                                   
          least  4  years (at  which  point  the draw  amount                                                                   
          will be reviewed)                                                                                                     
          The  cumulative confidence level  of being  able to                                                                   
          draw  $3.3B annually  falls to  95 percent  over 10                                                                   
          years  and to 69  percent through 2040.  Revisiting                                                                   
          the draw  on a 4-year cadence will  lend additional                                                                   
          confidence  (e.g.,  this  safeguard  has  not  been                                                                   
          factored in to modeling)                                                                                              
     The State sought an independent review of this model's                                                                     
          The State  sought an independent evaluation  of (i)                                                                   
          the soundness  of the model's methodology  and (ii)                                                                   
          critical  assumptions  underlying  the model  (most                                                                   
          notably those related to expected oil revenues                                                                        
          and investment returns)                                                                                               
Mr. Baily addressed slide 3, "Overview of conclusions":                                                                         
     The DOR model is sound in its methodology                                                                                  
     The  model tests  whether a  $3.3B annual  draw will  be                                                                   
     Carlo  simulations, to  estimate  confidence levels  for                                                                   
     (i) future  oil prices and  (ii) investment  returns, as                                                                   
     well  as  deterministic  analysis  to establish  a  base                                                                   
     case scenario for oil production                                                                                           
              proach taken is reasonable and the model's                                                                        
     logic is generally  robust in testing the  likely impact                                                                   
     of  a $3.3B  draw,  based  on a  review  of the  model's                                                                   
     structure,  logic,  conceptual  soundness,  and  process                                                                   
     for future updates                                                                                                         
     The assumptions that underlie the model are reasonable                                                                     
          Key assumptions on future crude oil selling                                                                           
     price,  oil production,  and  investment returns  (total                                                                   
     and statutory)  were obtained  from credible,  objective                                                                   
          These assumptions are all within the range of                                                                         
     reasonableness  Assumptions on oil production  and price                                                                   
     are  reasonable  and,  taken   together,  somewhat  more                                                                   
     conservative than most                                                                                                     
          Investment returns assumptions are reasonable,                                                                        
     though were  considered optimistic for the  near-term by                                                                   
     some  members  of the  APFC  investment  staff and  were                                                                   
     higher   than  those  projected   by  APFC's   strategic                                                                   
     partners (third-party asset managers)                                                                                      
     Certain  institutional  investor  best  practices  could                                                                   
     help improve this plan's long-term sustainability                                                                          
          The State of Alaska could further strengthen the                                                                      
     long-term viability  of the APFC and  the sustainability                                                                   
     of its contributions  to the General Fund  by leveraging                                                                   
     best practice  learnings from other SWFs  and investors,                                                                   
     e.g.:  Clear  savings-and-spending   rules  and  capital                                                                   
          Regular   communication    between   investor   and                                                                   
          Formal    and   informal    investment    education                                                                   
     opportunities   for  government   officials  and   board                                                                   
          Board governance processes with appropriate                                                                           
     composition, appointment expertise and roles                                                                               
          Well-designed strategy tied to Fund obligations                                                                       
     and long-term investing                                                                                                    
1:42:21 PM                                                                                                                    
Mr. Baily spoke to slide 5, "The scope of this assessment":                                                                     
     The  Department  of  Revenue  is  seeking  an  objective                                                                   
     assessment  of  its  financial model  which  analyzes  a                                                                   
     $3.3B  fixed annual  draw from the  Earnings Reserve  of                                                                   
    the Permanent Fund to finance General Fund spending                                                                         
     In scope:                                                                                                                  
          Detailed  review and vetting  of the DOR  financial                                                                   
          model's  methodology  and  construction,  including                                                                   
          appropriateness of use of Monte Carlo analysis                                                                        
          Assessment  of the reasonableness  of key  baseline                                                                   
          assumptions    (oil    price,    oil    production,                                                                   
          investment   returns)  affecting  the   sustainable                                                                   
          Perspective  on best practices of other  SWFs which                                                                   
          inform consideration of the proposed model                                                                            
     Not in scope:                                                                                                              
          Holistic  evaluation  of  the  proposed  budget  or                                                                   
          budget deficit                                                                                                        
          Perspectives  relating  to  current or  future  tax                                                                   
          regimes (e.g., Petroleum Value model)                                                                                 
          Assessment  of the Permanent Fund's mandate  or its                                                                   
          investment management processes                                                                                       
          Macroeconomic study of future market fundamentals                                                                     
     Recommendations for alternative funding models                                                                             
Mr.  Baily  relayed   that  the  study  had   looked  at  how                                                                   
sovereign  wealth  funds  were  managed  and  what  the  best                                                                   
practices were.  He shared  that it was  not the task  of the                                                                   
study to  recommend what the policy  should be. He  wanted to                                                                   
be  careful  to  make  it clear  the  study  focused  on  the                                                                   
validity  of  the  model  and  whether it  did  what  it  was                                                                   
supposed  to do.  He moved  to  slide 6  and discussed  other                                                                   
countries and how they had addressed the issue.                                                                                 
1:46:31 PM                                                                                                                    
Mr.   Baily  turned   to   slide   6,  "SWFs   benefit   from                                                                   
establishing a clear  set of disciplined saving  and spending                                                                   
rules to invest for the long-term":                                                                                             
     Establishes a clear set of disciplined saving and                                                                          
    spending rules as well as a predefined capital plan                                                                         
          Singapore's  SWF, GIC, has developed  a proprietary                                                                   
          internal  model projecting 20-year  sub-asset class                                                                   
          level returns                                                                                                         
          Government  of  Singapore is  allowed  to spend  50                                                                   
          percent   of   the  annualized   20-year   expected                                                                   
          returns  giving Government  flexibility on  a year-                                                                   
          by-year  basis on  how  much to  draw, but  capping                                                                   
          outflows at a low enough level to grow the corpus                                                                     
          The  National  Fund  of Kazakhstan  had  previously                                                                   
          suffered   from   discretionary   draws  from   the                                                                   
          corpus.  Under 2010  reforms annual  draw is  fixed                                                                   
          at  $8  billion  for  use  both  to  reduce  budget                                                                   
          deficits  and for economic development.  Government                                                                   
          can  adjust the annual  draw by  15 percent  (as it                                                                   
          did in 2013)                                                                                                          
          If  the balance  of the National  Fund falls  below                                                                   
          20  percent of Kazakh  GDP in  a given fiscal  year                                                                   
          the  Government must reduce  the annual  draw until                                                                   
          the balance has returned to 20 percent of GDP                                                                         
          Norway has  a bipartisan balanced  budget consensus                                                                   
          which  limits  government  non-oil  deficits  to  4                                                                   
          percentage  points.  This prevents  the  government                                                                   
          from   drawing   down   the  corpus   of   Norway's                                                                   
          Government Pension Fund Global unless Norges Bank                                                                     
          Investment Management beats the long-run expected                                                                     
          investment returns of 4 percent                                                                                       
     Temporary increases in withdrawals are allowed under                                                                       
     only limited circumstances, but requires a specific                                                                        
     parliamentary resolution                                                                                                   
Mr. Baily discussed slide 7, "The DOR model was built to                                                                        
establish and test the sustainability of a fixed annual                                                                         
draw from the Earnings Reserve":                                                                                                
     What are the major inflows into the Fund?                                                                                  
          Production tax revenues                                                                                               
          Royalty revenues                                                                                                      
          Investment returns                                                                                                    
     What are the most important drivers of future inflows?                                                                     
          Oil production                                                                                                        
          Oil price                                                                                                             
          Investment returns (total statutory)                                                                                  
     What is the projected spendable output based on cash                                                                       
     flow projections?                                                                                                          
          Sustainable draw amount must ensure:                                                                                  
               less than 50 percent confidence that real                                                                        
               value of starting assets is preserved over                                                                       
               Earnings Reserve durability (confidence that                                                                     
               the annual draw can be taken from ER)                                                                            
1:50:36 PM                                                                                                                    
Mr.  Baily looked  at slide  8, "The  DOR conducted  advanced                                                                   
probabilistic ("Monte  Carlo") modeling to  better understand                                                                   
the Fund's ability  to sustain the draw." which  showed three                                                                   
graphs  for a  high-level  description  of the  DOR  modeling                                                                   
     Step 1                                                                                                                     
          Understand the critical revenue drivers of the                                                                        
          model - in terms of restricted and unrestricted                                                                       
          revenue sources                                                                                                       
     Step 2                                                                                                                     
          Build a probabilistic model of expected oil price                                                                     
          and investment returns fluctuations                                                                                   
     Step 3                                                                                                                     
     Understand impact on revenue flows into the Fund and                                                                       
     Earnings Reserve available for the annual draw                                                                             
Mr. Baily spoke to slide 9, "Over 4 weeks, a detailed                                                                           
review of the most critical elements of the DOR's modeling                                                                      
methodology and assumptions was conducted":                                                                                     
     SWF Model                                                                                                                  
          Assumptions and Methodology                                                                                           
               The existing DOR sovereign wealth fund model                                                                     
               was reviewed along 2 dimensions: methodology                                                                     
               and assumptions                                                                                                  
                    Oil     revenues    (oil     price    and                                                                   
                    production);  Investment  returns  (total                                                                   
                    and  statutory net income);  Structure of                                                                   
                    model;  Logic  and conceptual  soundness;                                                                   
                         Key elements of the model were                                                                         
                         prioritized    and   pressure-tested                                                                   
                         using industry experts, third-                                                                         
                         party projections and proprietary                                                                      
                         modelling assessment framework                                                                         
1:57:34 PM                                                                                                                    
Mr. Baily displayed slide 11, "The DOR model implies a 69                                                                       
percent cumulative confidence that a $3.3B annual draw can                                                                      
be made from the Earnings Reserve each year through 2040":                                                                      
     Earnings  Reserve   acts  as  a  buffer   to  short-term                                                                   
     investment return and oil revenue volatility                                                                               
     $10B   starting   balance   means   near   100   percent                                                                   
     confidence  of being  able to  draw $3.3B  per year  for                                                                   
     first four years even with negative investment returns                                                                     
     APFC  has only  had  negative total  investment  returns                                                                   
     four times in the past 30 years                                                                                            
     Effects  of  cumulative  volatility  and  declining  oil                                                                   
     production  reduce confidence  over time  - but  even in                                                                   
     2040  cumulative  confidence that  a  $3.3B annual  draw                                                                   
     can  be  made  from  Earnings   Reserve  is  69  percent                                                                   
     (confidence  would  be  even   higher  if  adjusted  for                                                                   
     periodic review)                                                                                                           
Mr. Baily discussed slide 12, "The DOR model predicts that                                                                      
the Permanent Fund will be $96B in 2040 with an                                                                                 
interquartile range of $34B and $196B":                                                                                         
     Permanent  Fund  balance  will  grow or  shrink  in  any                                                                   
     given year  because of volatility in  investment returns                                                                   
     and oil revenues                                                                                                           
     DOR  goal is  to  maintain the  real  value of  starting                                                                   
     assets   by  seeing   the  median   balance  grow   with                                                                   
     inflation of 2.25 percent                                                                                                  
     Modelled   output  meets   this  threshold,   predicting                                                                   
     median  balances  rising   to  ~$96B  in  2040  (nominal                                                                   
     Given  expected  volatility,   2040  ending  balance  is                                                                   
     predicted  to  be  between  $34B  and $196B  with  a  50                                                                   
    percent confidence level (the threshold set by DOR)                                                                         
Mr. Baily moved to slide 14, "Review of the DOR model                                                                           
indicates that the assumptions and methodology underlying                                                                       
Fund projections are sound":                                                                                                    
     Conclusions from the review                                                                                                
        · The DOR modeling assumptions and methodology are                                                                      
             o Key assumptions on future oil price, oil                                                                         
               production, and investment returns (total                                                                        
               and  statutory) were  obtained from  objective                                                                   
               sources   and   are   within  the   range   of                                                                   
             o The methodological approach taken, including                                                                     
               use    of   Monte   Carlo    simulations,   is                                                                   
               reasonable,  and the model logic  is generally                                                                   
               robust  in  testing  the  likely impact  of  a                                                                   
               $3.3B draw                                                                                                       
          Future iterations  of the model could  benefit from                                                                   
          the  following  changes:   Build  functionality  to                                                                   
          account   for  second-order  relationships   (e.g.,                                                                   
          year-on-year  correlation  between  variables1  and                                                                   
          the  impact  on  production   of  reaching  certain                                                                   
          breakeven prices for crude2)                                                                                          
        Establish consistent process and ownership for model                                                                    
        construction and sources                                                                                                
     Assumptions may be periodically revisited based on                                                                         
     changes to Fund strategy and investment management, or                                                                     
     changes to the tax regime affecting Fund inflows                                                                           
2:03:01 PM                                                                                                                    
Mr. Baily discussed slide 15, "The review considered the                                                                        
modeling methodology and assumptions behind critical                                                                            
drivers of inflows to the Fund":                                                                                                
     Crude selling price                                                                                                        
          Explanation of DOR approach                                                                                           
               DOR  has  employed   a  Monte  Carlo  analysis                                                                   
               using  ERG  crude  oil  price  projections  to                                                                   
               determine  the likelihood  of price  evolution                                                                   
               in  the future  based  on a  survey of  expert                                                                   
          How approach was assessed                                                                                             
               Comparison   of   projections  with   multiple                                                                   
               third-party     objective    sources    (e.g.,                                                                   
               Woodmac, Rystad)                                                                                                 
     Production volume                                                                                                          
          Explanation of DOR approach                                                                                           
               DOR  has  employed  a  deterministic  analysis                                                                   
               using  ERG oil  production projections  - this                                                                   
               approach    takes   a   fairly    conservative                                                                   
               approach   (e.g.,    approach   reflects   the                                                                   
               uncertainty of future production projects)                                                                       
          How approach was assessed                                                                                             
               Comparison   of   projections  with   multiple                                                                   
               third-party sources                                                                                              
     Total return rate and Statutory net income rate                                                                            
          Explanation of DOR approach                                                                                           
               DOR has  relied on Monte Carlo  analysis based                                                                   
               on  projections  from Callan  Associates  (the                                                                   
               third-party  financial   consultant  that  the                                                                   
               Permanent  Fund  has used  for  20+ years)  to                                                                   
               estimate   the  likelihood   of  future   Fund                                                                   
               performance based on current Fund strategy                                                                       
          How approach was assessed                                                                                             
               Comparison   of   projections  with   historic                                                                   
               performance and third-party projections                                                                          
     Interviews with Permanent Fund investors to understand                                                                     
     view of projections and potential for change to future                                                                     
     fund performance                                                                                                           
Mr. Baily displayed slide 16, "Two types of analysis are                                                                        
used in the DOR model: "probabilistic" and "deterministic"                                                                      
          Describes  the  outcome   of  some  scenario  given                                                                   
          appropriate  inputs  (in this  case,  based on  the                                                                   
          average  or median  value and  the degree to  which                                                                   
          that value varies over time)                                                                                          
          When is it best used                                                                                                  
          When  projections  are based  on  an assumed  trend                                                                   
          given  variance  from  that  trend  within  certain                                                                   
          standard  deviation  (e.g., use  of a  conservative                                                                   
          baseline case for oil production)                                                                                     
     Probabilistic "Monte Carlo"                                                                                                
          Monte Carlo  analysis is a modeling  technique that                                                                   
          runs  multiple trials and  gives a distribution  of                                                                   
          potential  outcomes.  Running a  Monte Carlo  model                                                                   
          creates  a probability distribution  that indicates                                                                   
         the likelihood that an outcome will occur                                                                              
          When is it best used                                                                                                  
          When  attempting  to  project highly  volatile  and                                                                   
          less  predictable  drivers   where  the  impact  of                                                                   
          "randomness"  is  important to  understanding  risk                                                                   
          (e.g., oil price, investment returns)                                                                                 
2:08:51 PM                                                                                                                    
Mr. Baily moved to slide 17, "Model methodology is robust,                                                                      
with some potential opportunities for future improvement":                                                                      
          Check for errors                                                                                                      
               No major mechanical errors found                                                                                 
               Potential steps to improve model:                                                                                
          Dependencies on other models                                                                                          
               Petroleum     Model    model     sub-optimally                                                                   
               Oil production projections are not linked to                                                                     
               price projections                                                                                                
               Potential steps to improve model:                                                                                
               Consider   full  audit   of  Petroleum   Model                                                                   
               (particularly   in  light  of  tax  /  royalty                                                                   
               Wire  model  to account  for  price/production                                                                   
               relationship in future model iterations                                                                          
          Single use of source                                                                                                  
               Sources  consistently used  with exception  of                                                                   
               some  oil price inputs  (e.g., median  used in                                                                   
               Petroleum  Model vs. probabilistic  price used                                                                   
               in SWF model)                                                                                                    
               Potential steps to improve model:                                                                                
               Validate  Petroleum Model  for consistency  in                                                                   
               oil  pricing (e.g., using probabilistic  model                                                                   
               vs. median)                                                                                                      
     Logic and conceptual soundness                                                                                             
          Calculation of inputs                                                                                                 
               Underlying  data sources are  objective (e.g.,                                                                   
               Does  not  account  for impact  of  unrealized                                                                   
               returns on Earnings Reserve balance)                                                                             
               Potential steps to improve model:                                                                                
               Consider  impact unrealized  returns that  are                                                                   
               apportioned  to Earnings Reserve on  the funds                                                                   
               available for spend                                                                                              
          Deterministic vs. probabilistic                                                                                       
               Current   use  of   Monte  Carlo  methods   is                                                                   
               defensible  given  behavior of  oil price  and                                                                   
               investment returns                                                                                               
               Potential steps to improve model:                                                                                
          Probabilistic methodology                                                                                             
               Pert  distribution   of  oil  price  (i.e.,  3                                                                   
               points)  is  sufficient but  highly  sensitive                                                                   
               to  accuracy  of   underlying  inputs  to  the                                                                   
               distribution (P10, P50, P90)                                                                                     
               Does    not     account    for    year-on-year                                                                   
               correlations  in oil  prices (e.g.,  "gamblers                                                                   
               Potential steps to improve model:                                                                                
               Consider    exploring    more    sophisticated                                                                   
               probabilistic   methodology   (e.g.,   revisit                                                                   
               accuracy  of Delphi-style method used  in PERT                                                                   
               Account   for  year-on-year  correlations   in                                                                   
               probabilistic analysis                                                                                           
          Repeatable and consistent process                                                                                     
               Informal  construction process  (partly driven                                                                   
               by ongoing iterative policy process)                                                                             
               Governance  procedures  to  ensure  systematic                                                                   
               auditing/updating not yet developed                                                                              
               Potential steps to improve model:                                                                                
               For  future sustainable  draw  re-visitations,                                                                   
               create   set  of   rules   /  guidelines   for                                                                   
               timeline  /  triggers  of update  and  develop                                                                   
               design principles to guide construction                                                                          
               Unclear  future  ownership  (partly driven  by                                                                   
               unclear end use of model)                                                                                        
               Potential steps to improve model:                                                                                
     For future sustainable draw re-visitations, articulate                                                                     
     clear owner(s) with auditing / updating rights                                                                             
2:13:30 PM                                                                                                                    
Mr. Baily turned to slide 18, "Each of the modeling                                                                             
methodology used by the DOR model to project critical fund                                                                      
inflow drivers is technically sound":                                                                                           
     Crude selling price                                                                                                        
          Description of DOR model methodology:                                                                                 
          Use of  probabilistic analysis (PERT  distribution)                                                                   
          based on P10=$31/bbl, P50=$56/bbl, P90=$87/bbl                                                                        
          Rationale for methodology:                                                                                            
          Probabilistic analysis accounts for volatility                                                                        
          Distribution  method leverages preexisting  DOR/ERG                                                                   
          crude oil price projections                                                                                           
     Production volume                                                                                                          
          Description of DOR model methodology:                                                                                 
          Use    of   deterministic    analysis   based    on                                                                   
          conservative  base  case  (e.g.,  assuming  no  new                                                                   
          project-driven increase in production)                                                                                
          Rationale for methodology:                                                                                            
          Not  much volatility in  the projections  and hence                                                                   
          no need for probabilistic analysis                                                                                    
     Total return rate                                                                                                          
          Description of DOR model methodology:                                                                                 
          Use     of    probabilistic    analysis     (normal                                                                   
          distribution)  based on  6.9 percent  mean rate  of                                                                   
          return and 13.9 percent standard deviation                                                                            
          Rationale for methodology:                                                                                            
          Objective and transparent methodology                                                                                 
          Distribution   method  based   on  mean   reversion                                                                   
          methodology used by Callan                                                                                            
     Statutory net income rate                                                                                                  
          Description of DOR model methodology:                                                                                 
          Use of  probabilistic analysis (PERT  distribution)                                                                   
          based  on   based  on  P10=3.7   percent,  P50=6.01                                                                   
          percent, P90=8.14 percent                                                                                             
          Rationale for methodology:                                                                                            
          Probabilistic analysis accounts for volatility                                                                        
          Distribution  based on  data available from  Callan                                                                   
         statutory model (P10/50/90 distribution)                                                                               
Mr. Baily spoke to slide 19, "Based on the recommendations                                                                      
that came out of the model review, a series of actions were                                                                     
     Improvement identified:                                                                                                    
          Build  Earnings Reserve  sufficiency test  into the                                                                   
          master  model  (versus  using  separate  models  to                                                                   
          test Fund balance and ER sufficiency)                                                                                 
          Adapt  fully   objective,  repeatable   source  for                                                                   
          investment  returns  (versus prior  use of  blended                                                                   
          projected and historic returns rates)                                                                                 
          Update  standard  deviation of  returns  assumption                                                                   
          to match Fund returns projections                                                                                     
          Use  most technically  correct  formulas and  @Risk                                                                   
          functions  (e.g., calculation  for geometric  mean,                                                                   
          @Risk and risk target function cross check)                                                                           
     Changes made to model                                                                                                      
     Expanded model to include ER sufficiency analysis                                                                          
     Changed source from a 50 percent historic/50 percent                                                                       
     projected return to a 10 year deterministic projection                                                                     
     from 3rd party (Callan)                                                                                                    
     Changed standard deviation from use of Power Cost                                                                          
     Equalization Fund deviation to deviation matched to                                                                        
     returns source (Callan)                                                                                                    
     Executed tactical improvements (e.g., updated the                                                                          
     formula to calculate geometric mean, revised at risk                                                                       
     function to calculate cumulative confidence)                                                                               
Mr. Baily discussed slide 20, "Assumptions appear generally                                                                     
reasonable; returns projections are perhaps aggressive in                                                                       
the near term":                                                                                                                 
     Crude oil price                                                                                                            
               10th percentile @ $31/bbl                                                                                        
               Median @ $56/bbl                                                                                                 
               90th percentile @ $87/bbl                                                                                        
               Annual expert conference held by DOR/ERG1                                                                        
               Roughly in-line with third-party estimates,                                                                      
               albeit conservative                                                                                              
               Objective use of DOR/ERG projections                                                                             
     Crude production                                                                                                           
               Declining from 500k bbl/day in 2017 to 112k                                                                      
               in 2040                                                                                                          
               Survey of O and G companies (with likelihood                                                                     
               In line with or below third-party estimates                                                                      
               in short term; below 3rd parties in long-                                                                        
               term due to AK LNG exclusion                                                                                     
               Objective use of DOR/ERG projections                                                                             
     Total returns                                                                                                              
               Mean 6.9 percent                                                                                                 
              Standard deviation 13.9 percent                                                                                   
               Callan deterministic model (Dec 2015)                                                                            
               In  line  with   other  available  projections                                                                   
               (e.g.,  6.4  percent  historic  returns,  7.45                                                                   
               percent       alternative        probabilistic                                                                   
     Statutory net returns                                                                                                      
              10th percentile at 3.7 percent                                                                                    
               Median @ 6.01 percent                                                                                            
              90th percentile @ 8.14 percent                                                                                    
               Callan probabilistic model (Dec 2015)                                                                            
     Only viable estimate available (e.g., no other multi-                                                                      
     year projections available)                                                                                                
Mr. Baily turned to slide 21, "Future iterations of the                                                                         
model could account more rigorously for future trends and                                                                       
second-order relationships":                                                                                                    
     Future shifts in fund target or mandate                                                                                    
               SWF proposal requires Permanent Fund to                                                                          
               manage toward fixed stream of liabilities                                                                        
               (i.e. like a pension fund)                                                                                       
               Likely  to  entails   shift  in  strategy  and                                                                   
              potentially returns projections                                                                                   
          Observations on impact                                                                                                
               Investment   earnings   are   single   largest                                                                   
               driver  of success of  SWF (vs. O and  G taxes                                                                   
               and royalties)                                                                                                   
               Even  small  percentage  changes  in  earnings                                                                   
               therefore  imply significant  changes to  fund                                                                   
               value and sustainability                                                                                         
     Future shifts in fund allocation strategies                                                                                
               Permanent  Fund will likely  change investment                                                                   
               strategies in due course                                                                                         
               SWF   proposal    considers   possibility   of                                                                   
               bringing more investment in-house                                                                                
          Observations on impact                                                                                                
               Changes  in investment  strategy  for a  given                                                                   
               asset    class    will    alter    risk/return                                                                   
               Investing in-house will reduce fees                                                                              
     Liquidity constrains                                                                                                       
               Clearer  liability stream will allow  for more                                                                   
              appropriate level of liquidity                                                                                    
               Liability   driven  investing   may  introduce                                                                   
               greater leverage to portfolio                                                                                    
          Observations on impact                                                                                                
               Reduced  levels  of  liquidity  and/or  higher                                                                   
               leverage  may exacerbate  risk on extremes  of                                                                   
               market return distribution                                                                                       
     New tax proposals                                                                                                          
               Current proposal would amend the tax credit                                                                      
               system and directly impact O and G revenues                                                                      
               going to the State                                                                                               
          Observations on impact                                                                                                
               O and G revenues are a relatively small                                                                          
              percent of revenue in SWF model                                                                                   
               Short-term    impact,   however,    could   be                                                                   
               significant to ensure stability of fund                                                                          
2:18:24 PM                                                                                                                    
Co-Chair  Neuman   stated  that  there  was   currently  $6.2                                                                   
billion in  the earnings reserve.  He wondered if all  of the                                                                   
modeling  assumed  a $3  billion  transfer  from the  CBR  to                                                                   
equal $10 billion.                                                                                                              
Mr. Baily replied in the affirmative.                                                                                           
Co-Chair   Neuman  asked   what  would   occur  without   the                                                                   
Mr.  Baily  answered  that  the   model  could  be  run  with                                                                   
different  numbers. He  stressed that  the current model  was                                                                   
run  with $10  billion. He  shared  that a  $7 billion  model                                                                   
would exhaust  the probability  for the earnings  reserve. He                                                                   
stressed   that  the  100   percent  may   be  shortened   by                                                                   
approximately  one year.  The draw  must also  be reduced  in                                                                   
order  to make  the model  sustainable in  the long-term.  He                                                                   
reiterated that adjustments could be made every four years.                                                                     
Co-Chair Neuman  noted that the  model assumed there  was $10                                                                   
billion in the  earnings reserve. He asked  whether the model                                                                   
was based solely  on the $10 billion in the  earnings reserve                                                                   
at 6.9 percent to spend off $3.3 billion per year.                                                                              
Mr. Baily replied in the affirmative.                                                                                           
Co-Chair  Neuman asked  wondered whether  the model  included                                                                   
the baseline of the Permanent Fund itself.                                                                                      
Mr. Baily replied that it was his understanding.                                                                                
Co-Chair Neuman  noted that the  volatility in  the Permanent                                                                   
Fund  Dividend was  approximately $50  billion, and  wondered                                                                   
how that  was considered  in the  Monte Carlo assessments  on                                                                   
the payback of the $3.3 billion assessment.                                                                                     
Mr. Baily replied  and deferred to Commissioner  Hoffbeck for                                                                   
further detail.                                                                                                                 
Commissioner   Hoffbeck  explained   that   there  was   some                                                                   
additional modeling  required without the $3.3  billion draw.                                                                   
He stated  the draw  would be  reduced by approximately  $150                                                                   
million per year  without the $3.3 billion. There  would be a                                                                   
plateau approximately  one or two  years earlier off  the 100                                                                   
percent confidence.  He stated that the total  uncertainty in                                                                   
2040 was  between two  and four  percent different  than what                                                                   
would  occur  with  the  $3.3 billion.  He  stated  that  the                                                                   
Permanent   Fund   Corporation   published  a   report   that                                                                   
indicated that their  ten year forecast had  reduced from 6.9                                                                   
to 5.8  percent. He stated  that Department of  Revenue (DOR)                                                                   
had   requested  additional   information   from  Callan   to                                                                   
understand the  basis of that  reduction. He stated  that the                                                                   
forecast was  published at  the end of  January, at  the time                                                                   
when the  markets had  dropped dramatically.  He stated  that                                                                   
there was  a factor of seven  months of low returns  into the                                                                   
ten  year forecast,  so it  reduced their  ten year  forecast                                                                   
based on  the one year of  low revenue. He remarked  that the                                                                   
other  nine  years  were  still   at  the  6.9  percent,  and                                                                   
furthered that  the last five  months of their  analysis used                                                                   
their long  term return rate.  He shared  that it was  only a                                                                   
recognition  of the period  from FY  16 to  FY 25,  the lower                                                                   
rate  of return  was  seen on  the investments.  He  stressed                                                                   
that  since   the  reports   publication,  the   markets  had                                                                   
recovered.  He stressed that  the current  value of  the fund                                                                   
was approximately $53 billion.                                                                                                  
2:25:02 PM                                                                                                                    
Co-Chair Neuman asked  if $3.3 billion could be  "spun off" -                                                                   
theoretically,  to understand that  the Permanent  Fund would                                                                   
"spin off" that revenue to replenish the earnings reserve.                                                                      
Commissioner Hoffbeck  answered that it was a  combination of                                                                   
the  permanent fund  and  oil and  gas  revenues could  equal                                                                   
$3.3 billion per year.                                                                                                          
Co-Chair  Neuman  asked  if  the oil  and  gas  returns  were                                                                   
calculated on the governor's new assumptions.                                                                                   
Commissioner   Hoffbeck  answered  that   it  had   used  the                                                                   
probabilistic model, which had a range of prices.                                                                               
Representative  Gara spoke  to  oil prices  projected at  the                                                                   
$40 range. He asked  how it did not impact  the amount coming                                                                   
out of the new sovereign wealth fund.                                                                                           
Commissioner  Hoffbeck replied that  there were  two separate                                                                   
processes.  He  shared  that,  within  the  sovereign  wealth                                                                   
modeling,  there was the  probabilistic  model - examining  a                                                                   
range of prices  throughout the life of the  model. He stated                                                                   
that  there  was  a  deterministic   number  in  the  Revenue                                                                   
Sources Book, with a set data point each year.                                                                                  
Representative  Gara stated  that if  the prices  in the  10-                                                                   
year forecast -  he surmised that it would  impact the payoff                                                                   
from the fund somewhat dramatically.                                                                                            
Commissioner  Hoffbeck  answered that  it  would be  accurate                                                                   
under  the  probabilistic  model;  best guess  of  what  they                                                                   
thought, which was why to use the probabilistic model.                                                                          
Mr. Baily replied  that it showed the advantage  of using the                                                                   
probabilistic   model.  Oil  prices   fluctuated   and  would                                                                   
continue to  do so. It was  not desirable to make  changes to                                                                   
the program every six months.                                                                                                   
Representative  Gara  queried  the  payout  using  the  price                                                                   
forecast from  the spring Revenue  Sources Book.  He recalled                                                                   
that,  after the  guaranteed dividend,  the PFD  would be  in                                                                   
the $500  range. He queried the  PFD by year  three, assuming                                                                   
the oil price forecast in the spring.                                                                                           
Commissioner Hoffbeck  replied that the dividend  would be in                                                                   
the $450 to $500 range.                                                                                                         
Representative   Wilson  asked  looked   at  page   two,  and                                                                   
wondered whether  the budget  should be  reduced in  order to                                                                   
be covered.                                                                                                                     
Mr.  Baily  replied  that  the analysis  was  not  trying  to                                                                   
recommend a specific budget.                                                                                                    
Representative  Wilson  queried   the  spending  cap  in  the                                                                   
Mr. Baily replied  that the model did not  include a spending                                                                   
cap. He  explained that the  model was designed  to determine                                                                   
what was required to ensure a stable amount.                                                                                    
Representative  Wilson observed  that the  state already  had                                                                   
the  system  in  the Permanent  Fund.  She  remarked  that  a                                                                   
policy  could be  made to  access  the funds,  with the  same                                                                   
Commissioner  Hoffbeck replied  that, by  comingling the  oil                                                                   
and  gas revenue  with  the earnings  reserve,  there was  an                                                                   
allowance  to draw  more than  the  deposit in  years of  low                                                                   
Representative Wilson  asked for verification  that under the                                                                   
model they  would not spend anything  from the corpus  of the                                                                   
2:35:28 PM                                                                                                                    
Vice-Chair  Saddler believed  that the  state could  withdraw                                                                   
without  any   restructuring  of   the  Permanent   Fund.  He                                                                   
stressed  that the  legislature could  make the  calculations                                                                   
and make appropriations under current law.                                                                                      
Commissioner  Hoffbeck  replied  that the  calculation  could                                                                   
occur without  the legislation.  He explained  that the  bill                                                                   
would provide a rules based ongoing process.                                                                                    
Vice-Chair Saddler  noted that  under one of  the assumptions                                                                   
the  production  decline  was  a  steady  rate.  He  did  not                                                                   
believe  that  the  pipeline   reduction  was  accurate,  and                                                                   
wondered  whether  the assumption  considered  the  technical                                                                   
challenges of a small amount of oil in the pipeline.                                                                            
Mr. Baily  replied that it  was his understanding  that there                                                                   
were  technical  difficulties   if  the  flow  fell  below  a                                                                   
certain level. He  remarked that he was not  an engineer, and                                                                   
would not want to challenge the assertions.                                                                                     
Vice-Chair   Saddler    felt   that   necessary    additional                                                                   
investments to  maintain oil flow  would change the  net cash                                                                   
revenue,   and  therefore   change   some   of  the   model's                                                                   
assumptions  about oil  income. He remarked  that the  fund's                                                                   
current returns,  assumed the  current investment  guidelines                                                                   
for long-term  capital growth.  He noted  that slide  21 said                                                                   
that  the  sovereign  wealth proposal  would  shift  to  more                                                                   
pension-like  strategy  for  investment,   which  meant  more                                                                   
fixed investments  that assumed less risk and  therefore less                                                                   
return.   He   wondered   if   that   clouded   the   model's                                                                   
Mr. Baily  replied that  the basis  was that  if there  was a                                                                   
more stable  funding process, the corporation  could actually                                                                   
manage  the investment  funds  that were  more systematic  if                                                                   
the plan  went into  effect. He  relayed that  the study  had                                                                   
not done an analysis on the investment policy.                                                                                  
2:40:00 PM                                                                                                                    
Vice-Chair   Saddler  expressed   caution  about   setting  a                                                                   
specific  amount to  draw, which  may  affect the  investment                                                                   
strategy.  He  remarked  that  the Permanent  Fund  Board  of                                                                   
Directors   was  fairly  independent   when  determining   an                                                                   
investment   strategy.   He  stressed   that   changing   the                                                                   
permanent  fund may  influence  the investment  strategy.  He                                                                   
queried  models  of  other  consumer  price  index  inflation                                                                   
Mr. Baily replied  that he did not model  different inflation                                                                   
rates. He  shared that most  in Washington D.C.  worried that                                                                   
inflation  was too  low, and could  not reach  2 percent.  He                                                                   
stated  that the  Federal Reserve  target was  2 percent.  He                                                                   
felt that  2.25 percent  was higher than  the target.  He did                                                                   
not  believe  that  the Federal  Reserve  would  inflate  the                                                                   
Vice-Chair Saddler  recalled that  inflation could  reach 2.5                                                                   
Mr. Baily agreed.                                                                                                               
Representative  Munoz queried  the  impact on  the model,  if                                                                   
the same calculation  was used with the 50  percent draw. She                                                                   
also queried the  impact of changing the calculation  from 21                                                                   
percent  average to  a 10 percent  average,  but tied  to the                                                                   
earning power of the corpus.                                                                                                    
CRAIG  RICHARDS,   ATTORNEY  GENERAL,   DEPARTMENT   OF  LAW,                                                                   
replied  that the  impact of  the sustainable  draw would  go                                                                   
from paying  out approximately $700 million  to approximately                                                                   
$1.4 billion  per year;  which would  impact the  sustainable                                                                   
draw by  about $400  million per  year. He  pointed out  that                                                                   
maintaining  an  earnings  based   dividend  was  undesirable                                                                   
policy,  when there was  also earnings  reserve revenues  for                                                                   
the general  fund. He  explained that  a dividend  calculated                                                                   
on  earnings was  highly  variable.  He remarked  that  every                                                                   
time  the dividend  "jumps up"  the share  to the  government                                                                   
was reduced.                                                                                                                    
2:45:12 PM                                                                                                                    
Representative  Munoz clarified  that there  would be  a 4400                                                                   
million reduction in the current calculation.                                                                                   
Attorney  General  Richards  agreed  to follow  up  with  the                                                                   
exact number.                                                                                                                   
Representative  Munoz noted  that  the model  assumed a  $3.3                                                                   
billion  draw, and  a  continued  tax revenue  from  existing                                                                   
taxes of approximately $850 million.                                                                                            
Attorney  General  Richards  stated  she  was  incorrect.  He                                                                   
explained  that  the  model  assumed  that,  over  time,  the                                                                   
revenues would be highly variable.                                                                                              
Commissioner    Hoffbeck    furthered    that    there    was                                                                   
approximately  $850  million  of other  taxes  available  for                                                                   
government  spending. He stated  that the  money was  not put                                                                   
into the earnings reserve, because it was not volatile.                                                                         
Representative  Munoz  wondered  whether $4.285  billion  was                                                                   
the total with existing revenue under the new model.                                                                            
Commissioner Hoffbeck responded in the affirmative.                                                                             
2:47:50 PM                                                                                                                    
Representative  Guttenberg looked  at slide  5. He felt  that                                                                   
there were  some things  left out of  the scope.  He wondered                                                                   
if there was alternative modeling to proof the assumptions.                                                                     
Mr. Baily replied that he had looked at only one model.                                                                         
Representative  Guttenberg wondered if  there was  an attempt                                                                   
to see if the model would not happen.                                                                                           
Mr. Baily  responded affirmatively.  He shared that  creating                                                                   
this type of model resulted in various outcomes.                                                                                
Representative  Guttenberg  commented  that his  concern  was                                                                   
that  although the  state had  done some  modeling on  taxes,                                                                   
but  never  believed  that  the  current  economic  situation                                                                   
would occur.                                                                                                                    
Representative  Edgmon supported  the concept going  forward.                                                                   
He commented that  it seemed that the state  was shifting the                                                                   
onus onto the Permanent Fund.                                                                                                   
Mr. Baily  did not believe it  was the way the model  was set                                                                   
up  and did  not  believe it  was undermining  the  Permanent                                                                   
Attorney General Richards.                                                                                                      
2:55:00 PM                                                                                                                    
Mr. Baily  believed that  the intent of  setting up  the fund                                                                   
was to  create a sovereign wealth  fund that would  allow the                                                                   
benefits from the oil to be there in perpetuity.                                                                                
Vice-Chair  Saddler  remarked  on  Mr. Baily's  job  for  the                                                                   
Mr.  Baily answered  that  it was  necessary  to revisit  the                                                                   
plan every three years.                                                                                                         
Vice-Chair Saddler remarked on the state's flexibility.                                                                         
3:01:04 PM                                                                                                                    
Representative Wilson  asserted that the model  showed a high                                                                   
amount of oil  money, but was put into the  earnings reserve.                                                                   
She  stressed that  the model  required a  lower dividend  to                                                                   
work.  She remarked  that the  model did not  show the  lower                                                                   
dividend amount  impact to the  state. She stressed  that the                                                                   
model did  not solve the budget  problem. She hoped  that the                                                                   
model would have  shown the overall impact to the  state as a                                                                   
Commissioner   Hoffbeck  remarked   that  there  were   other                                                                   
aspects  that generated  the $3.3  billion.  He stated  that,                                                                   
under the model, the dividend was a "pass through."                                                                             
Representative  Wilson  stated that  she  did not  understand                                                                   
what  was different.  She remarked  that  largest factor  was                                                                   
the lower dividend.                                                                                                             
Commissioner   Hoffbeck  answered   that  three  things   had                                                                   
changed:  the size  of the  dividend,  what revenues  brought                                                                   
in, and how much would be spent.                                                                                                
Attorney  General Richards  added  that it  was  true in  the                                                                   
long-term, but not in the short term.                                                                                           
3:05:43 PM                                                                                                                    
Representative  Wilson  believed that  the  bill lowered  the                                                                   
dividend substantially,  with the  hopes that the  cuts would                                                                   
made  with  no guarantee.  She  announced  that she  did  not                                                                   
support POMV.                                                                                                                   
Representative  Gara  noted  that   the  Legislative  Finance                                                                   
Division (LFD) model  showed that, under POMV,  savings would                                                                   
extend for a decade,  with a period review of  oil prices. He                                                                   
remarked  that  the  PFD  projections  were  high:  $1800  to                                                                   
$2000. He remarked  that maintaining the current  formula for                                                                   
the PFD  resulted in  $1.2 billion into  the dividend  for an                                                                   
$1800  dividend. He  surmised  that the  proposal  was for  a                                                                   
dividend  based   on  oil  revenue.  He  stressed   that  the                                                                   
forecasts  showed   that  it  would   result  in  a   PFD  of                                                                   
approximately   $500.   He   remarked   that  there   was   a                                                                   
presentation  that  asserted that  there  would  be 900  jobs                                                                   
lost  for  every  $100  million  lost  in  the  dividend.  He                                                                   
queried more information about that assertion.                                                                                  
3:13:37 PM                                                                                                                    
Representative Gara  noted that there  was not a  4.5 percent                                                                   
draw from  the fund, based on  the expectation of  future oil                                                                   
revenues. He  remarked that the  price and revenue  forecasts                                                                   
did not  yield the same result.  He wondered if  the forecast                                                                   
numbers were used in the mode.                                                                                                  
Commissioner  Hoffbeck  replied   the  deterministic  numbers                                                                   
were not used in the model.                                                                                                     
Vice-Chair Saddler  wondered whether it should  be considered                                                                   
a lump sum.                                                                                                                     
Commissioner Hoffbeck replied in the affirmative.                                                                               
Attorney  General Richards  furthered that  $3.3 billion  may                                                                   
not be  considered alone  in the  governor's plan.  He stated                                                                   
that the  plan worked as a  POMV. He explained that  the POMV                                                                   
in the plan  was 6 percent, rather than 4.5  percent, because                                                                   
the 1.5 percent  difference was accounting for  the petroleum                                                                   
revenues. He  explained that there  could be a fixed  draw of                                                                   
3.3  billion, or  a  POMV draw  of  6 percent.  He  explained                                                                   
that, as  long as  the petroleum  revenues were flowing  into                                                                   
the fund, the math worked out the same.                                                                                         
Vice-Chair  Saddler surmised that  Attorney General  Richards                                                                   
was only offering a separate way to examine the plan.                                                                           
Attorney   General   Richards   answered  that   the   letter                                                                   
circulated   the   prior   week    did   propose   that   the                                                                   
administration  would work with  the committee to  adjust the                                                                   
fixed draw to a percentage draw.                                                                                                
Co-Chair Thompson  thanked the  presenters. He discussed  the                                                                   
schedule for the following meeting.                                                                                             

Document Name Date/Time Subjects
HB 245 - Ensuring a Sound Fiscal Future - McKinsey Presentation 040516 FINAL.pdf HFIN 4/5/2016 1:30:00 PM
HB 245