Public Testimony to Protect the PFD in the Alaska Constitution Denied, Judiciary Committee Hastily Adjourns
By MARY KAUFFMAN
April 08, 2018
After substantive debate on SJR 1, public testimony was denied by Senator Coghill. Senator Wielechowski made a motion to move the Resolution to the next committee of referral, which was immediately objected to and the chair quickly adjourned without hearing the other two bills.
According to Senate Democrats, once that letter became part of the record, Senate Judiciary Chair Coghill (R-North Pole) was required to hold a hearing on the three bills within four days, or, barring a hearing, move the bills on to their next committee of referral. The question remains whether the rule has been met, or if SB 127 and HB 214, the bills on public safety, will now move on to their next committees.
The three bills included Senator Bill Wielechowski's SJR 1 , which would put to a vote of the people the inclusion of the dividend in the Constitution; Senator Costello's SB 127 , which would repeal 2016's omnibus crime bill, SB 91; and HB 214 , which would rename the Teen Dating Violence Awareness and Prevention Education statute to Bree's Law after Bree Moore, the 20-year-old women tragically shot to death by her boyfriend in 2014. HB 214 has 14 co-sponsors in the Senate.
"I am shocked the hearing was adjourned before a valid motion was considered," said Senator Wielechowski. "Thousands of Alaskans from all over the State have reached out to my office on this issue. When it became clear there was no intention to allow the public their one opportunity to testify, I was forced to make a motion to move the bill out of committee."
Wielechowski's SJR 1, is a resolution that would allow the people of Alaska to vote whether to enshrine their permanent fund dividend into the Alaska Constitution. Wielechowski originally filed this bill in 2013 during the 20th legislature and never got a hearing in 2013 or 2014 again in 2015. It was pre-filed again in January 2017 and the bill has been in the Senate Judiciary Committee since March 8, 2017. Nearly one year. Wielechowski requested a hearing at the beginning of this session and still has not had a hearing.
Wielechowski said in previous testimony that he received numerous emails and communications from Alaskans all across the state and in his district who have requested this resolution to heard. Wielechowski said he received a petition claiming to have 3,500 Alaskan sign to it requesting this resolution be passed.
"The people of Alaska have waited for more than a year to have their voices heard on protecting the Dividend in the Constitution," said Senate Democratic Leader Berta Gardner (D-Anchorage). "Alaskans deserve to have their voices heard. The Dividend, and the future of the Permanent Fund, is too important to be brushed aside."
And on Friday, on the heels of record Permanent Fund earnings, the Alaska Senate Finance Committee adopted a 5.25 percent of market value (POMV) draw from the Permanent Fund for Fiscal Year 2018, which is effectively a 4.21 percent draw due to the five-year average provision.
The draw would generate $1.8 billion for the general fund, leaving the state with a $300 million deficit and a Constitutional Budget Reserve (CBR) balance of $4.2 billion for the current fiscal year. Quoting a news release from the Senate Finance Committee, a healthy Constitutional Budget Reserve balance is necessary to provide a cushion for cash flow purposes, so money managers can schedule transfers in the most prudent and responsible manner.
With the action by the Alaska Senate Finance Committee on Friday, the Permanent Fund Corporation would not have to sell off assets to provide for the draw because instructions have been developed for the Permanent Fund Corporation and Alaska Department of Revenue to work together on a schedule of payments from the fund to the state.
Additionally, with the passage of SB 26—a bill to protect the use of Permanent Fund earnings and ensure a dividend - districts can count on another $1.25 billion in Fiscal Year 2020.
As of February 28, 2018, $65.2 billion in assets are currently under management by the Alaska Permanent Fund Corporation. In a special board meeting of the Trustees on March 15, 2018, Resolution 18-01 was adopted supporting adherence to a rules based legal framework for permanent fund transfers.
According to this Alaska Permanent Fund Corporation's resolution, Alaska has a long tradition of following a rules-based system for Permanent Fund withdrawals and savings. Since the Fund’s inception, with the exception of certain one time deposits into the corpus, the State has adhered to a combination of constitutional and statutory law to manage cash flows into and out of the Fund, as well as those between the corpus and earnings reserve. However, starting in 2016, Alaska has not consistently followed the statutory rules.
The Board of Trustees acknowledged the fiscal challenges facing the State have resulted in multiple stakeholders proposing and analyzing new rules-based frameworks to change how Fund transfers occur, and that this process of examination and evaluation takes time. Nonetheless, the Board of Trustees believes that consistently adhering to a rules-based framework established in law to govern Fund Adherence to a rules-based system for Fund transfers is a basic element of best practices for management of sovereign wealth funds.
The International Forum of Sovereign Wealth Funds, of which the Permanent Fund is a member, has adopted a set of Generally Accepted Principles and Practices, including that, “There should be clear and publicly disclosed policies, rules, procedures, or arrangements in relation to the fund’s general approach to funding, withdrawal and spending operations on behalf of the government.”1 “Such a system helps provide a clear basis for deriving the expected time horizon and efficient investment policy for the savings, and promotes macroeconomic stability and accountability.”
A rules based legal framework of inflows, outflows, and internal transfers is critical to the success of the Permanent Fund.
The Board of Trustees stated in their resolution the board believes a rules-based system for Fund transfers will provide it with certainty as to the annual liquidity demands on the Fund, thereby allowing the APFC Investment Team to prudently invest all of the Fund’s assets while simultaneously having a plan in place to meet distributions for dividends and government spending.
Absent the adoption of a replacement rules-based system that results in known annual draws, the Board or Trustees stated they may be obligated to use a separate, more liquid and risk averse asset allocation for the earnings reserve account to meet the State’s unknown annual revenue demands. This allocation would likely generate lower returns for this portion of the Fund.
As stated above, according to the Alaska Senate Finance Committee, the Permanent Fund Corporation will not have to sell off assets to provide for the draw because instructions have been developed for the Permanent Fund Corporation and Alaska Department of Revenue to work together on a schedule of payments from the fund to the state.
Members of the Senate Finance Committee on Friday also moved forward on a plan to early fund education.
In addition to bolstering the Constitutional Budget Reserve (CBR) and offering a path to compromise between the Alaska House and Senate, the Senate Finance Committee substitute for HB 287 delivers two years of funding certainty for K-12 education,
“Early funding for education will give Alaska’s education community the certainty it needs,” said Anna MacKinnon (R-Eagle River), co-chair of the Senate Finance Committee. “The Senate wants to end the gridlock and avoid a situation where districts are forced to send out pink slip notices to teachers because they don’t know the funding level from the state.”
The bill directs $1.25 billion in Fiscal Year 2019 toward K-12 education = fully funding the base student allocation and pupil transportation.
“We can take positive, meaningful action this year to move our state forward—like forward-funding education—if we stabilize Alaska’s revenue,” said Sen. Lyman Hoffman (D-Bethel), co-chair of the Senate Finance Committee. “A responsible draw from the Permanent Fund’s earnings, committing a percentage to government and a percentage to ensure dividends, provides the stabilization we’re looking for.”
Last week, the Alaska House led the way by establishing a sustainable draw and dividend in its budget. With a proposed 5.25 percent draw and a $1,600 dividend in both the House and Senate budgets, that criteria has been satisfied Gov. Bill Walker said in a prepared statement released Friday.
Walker stated, "I commend this action, as I have always said that a sustainable draw on the Permanent Fund earnings reserve account must also enable a dividend that is significant and capable of growing over time.'
"I support this dividend amount and, given the broad support from both sides, debate over the size of this year’s dividend should be considered settled. I also praise the Senate for acknowledging in its budget that we need a permanent structure around future use of Permanent Fund earnings. This will protect both the dividend and the corpus of the fund itself for the long term," said Walker.
The Governor said he is disappointed that the Alaska Senate budget cuts resources needed to build a safer Alaska. "At minimum, the final budget sent to my desk should restore public safety cuts and include funding for:
The Alaska Senate on Friday unanimously passed a bill to give Alaskans the option of donating all or a portion of their Permanent Fund dividend directly to the state general fund.
“I’ve heard from Alaskans who say they wouldn’t mind giving up a portion of their income or PFD to the State of Alaska,” said Sen. David Wilson (R-Wasilla), the bill’s sponsor. “This bill creates a mechanism for Alaskans to donate their PFDs directly to the state general fund.”
Participants will be able to contribute as little as $25, up to the total amount of the PFD, in increments of $25.
A donation to the state’s general fund, in some cases, can be counted as a charitable donation for federal tax purposes. It’s advised, however, that Alaskans consult with a tax professional to verify how this may apply them individually. PFD donations are subject to a 7 percent administrative fee paid to the Permanent Fund Dividend Division.
SB 154 is on its way to the Alaska House of Representatives for consideration.
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