Session: State Capitol, Room 121 Juneau, AK 99801-1182 Phone: (907) 465-4797 Fax: (907) 465-3884 Interim: post office: 119 N. Cushman, Suite 101 Fairbanks, AK 99701-2879 location: 3340 Badger Road. North Pole, AK 99705 Phone: (907) 488-0857 Fax: (907) 488-4271

Sponsor Statement for SB 311
State Trust Fund Monies

"An act relating to the public school trust fund, the Alaska children's trust, and the Alaska heritage endowment fund; and providing for an effective date."

Senate Bill 311 is designed to give greater flexibility to the Commissioner of Revenue in investing the principle of the Public Schools Trust Fund, the Alaska Children's Trust and the Alaska Heritage Endowment Fund.

When these funds were created, the statutes were written so that the money appropriated from the accounts could only come from the Net Income Account of the funds. This forced the Commissioner of Revenue to invest the money in low yield bonds and CD's that would return guaranteed dividends as net income. The current language creates no incentive for the Commissioner to invest in high yield equities because the increase in value of the equity is considered an increase in principle rather than net income.

Senate Bill 311 will allow appropriations from the funds to be based on the market value rather than net income. This change in statute will direct the Commissioner of Revenue to manage the funds as endowments and allow investments in higher yielding securities. The commissioner would be directed to invest the assets in a manner to yield at least a 5% real rate of return over time and report to the legislature annually the market value of the fund as well as the amount of money available for appropriation.

Passage of Senate Bill 311 would create a more productive group of funds that would more effectively fund programs throughout the state.

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