Legislature(2017 - 2018)SENATE FINANCE 532
04/23/2018 09:00 AM FINANCE
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CS FOR HOUSE BILL NO. 213(FIN)(efd fld) "An Act relating to the investment, appropriation, and administration of the public school trust fund." 9:15:20 AM Co-Chair MacKinnon discussed a brief history of the bill. The public hearing had been opened and closed. Vice-Chair Bishop MOVED to ADOPT proposed committee substitute for CSHB 213(FIN), Work Draft 30-LS0765\T (Wallace, 4/18/18). Co-Chair MacKinnon OBJECTED for discussion. JULI LUCKY, STAFF, SENATOR ANNA MACKINNON, explained that the CS reflected one change to the bill that could be found on Page 2, line 23, where the percentage had been update to 5 percent. ALEXEI PAINTER, LEGISLATIVE FINANCE, stated that the impact of the bill would be to increase the draw by approximately $1.4 million in FY 19, which was in the general range of POMV draws. Co-Chair MacKinnon WITHDREW her OBJECTION. There being NO further OBJECTION, it was so ordered. MIKE BARNHILL, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE, concurred with the change to the bill as described by the previous testifiers. Co-Chair MacKinnon asked whether Mr. Barnhill answered in the affirmative. 9:18:34 AM Senator Olson queried the lifespan of the corpus of the Public School Trust Fund. Mr. Barnhill replied that the trust was intended to be of indefinite duration. The trust would last forever if it was managed appropriately, which meant maintaining the inflation adjusted value of deposits. He assured the committee that the trust had a substantial financial cushion at $650 million and a 5 percent draw over the next 10 years should not reduce the cushion below the inflation adjusted value of the fund. 9:20:20 AM Senator Olson asked whether the same would be true when considering the legislature's penchant for spending. Mr. Barnhill thought that the legislature had multiple sets of stakeholders to which it was responsible. He believed that in the end the legislative process resulted in prudent expenditures, particularly in the case of trust funds. He relayed that there were fiduciary duties that applied to the fund and he felt that it would be unlikely that the legislature would intentionally overspend from a fund for which fiduciary duties applied. 9:21:10 AM Senator Stevens asked whether the department would always have a better turnover on investments than the APFC. Mr. Barnhill answered in the negative. He spoke highly of the investment management staff at APFC and at the Department of Revenue. He stated that you could beat the market some of the time, but it was unlikely that you could beat it all the time. He said that the challenge of all investment professionals was to stay ahead of the game as much as possible but sometimes the challenges could be insurmountable. Co-Chair MacKinnon asked Mr. Barnhill to explain the revenue stream that went to the Public School Trust Fund. Mr. Barnhill elaborated that there was a 1 percent revenue stream that was dedicated to the fund by statute. He elaborated that the revenue stream had come in annually since 1978, which had contributed to the sizeable balance. Co-Chair MacKinnon added that it had been difficult to calculate income from the fund and to anticipate what could be used in any given budget. She said that the method in the bill would provide a clear path for the legislature to understand the funds available and the "up to" amount. 9:23:30 AM REPRESENTATIVE JUSTIN PARISH, SPONSOR, stated that the bill would modernize the Public School Trust Fund by bringing it up to the current standard to allow a larger sustainable draw and a high rate of earnings. Co-Chair MacKinnon asked whether the sponsor wanted to speak to the changes in the cs. Representative Parish commented that the change fell within the industry standard. 9:24:54 AM Vice-Chair Bishop MOVED to report SCS CSHB 213(FIN) out of Committee with individual recommendations and the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. SCS CSHB 213(FIN) was REPORTED out of committee with a "do pass" recommendation and with one new zero fiscal note from the Department of Education and Early Development, one new fiscal impact note for the Department of Education and Early Development from the Senate Finance Committee, and one previously published fiscal impact note from the Department of Education and Early Development. 9:25:18 AM AT EASE 9:27:06 AM RECONVENED