An Act relating to loans from the agricultural revolving loan fund and to contracts for the sale of state agriculture land; and providing for an effective date.

Agriculture is important to Alaska. The Agriculture Revolving Loan Fund is a valuable tool in aiding the emerging agriculture market in the State. However, changes in the market rates for loans and lower commercial loan rates have jeopardized the fund.

SB 161 makes changes in interest rates and loan provision amounts that will help keep the fund viable. These changes will assist distressed farmers in keeping their mortgage payments timely. This ensures a better use of the fund by providing more moneys revolving for further use and less chance of default.

SB 161 reduces the minimum interest rate from 8 percent to not less than 5 percent, bringing the rate in line with federal Farm Service Agency loans. Standard FSA loan rate is currently 5 percent. Emergency Farm Service Agency loans are available at an interest rate of 3.75 percent. Commercial Bank loan rates are available at below 8.0 percent.

SB 161 increases the emergency Loan Provision limit from $25,000.00 to $50,000.00, with approval by majority vote of a committee to be comprised of the Chair of the Board of the Agriculture Revolving Loan Fund, a loan officer who is an employee of the Board and the Director of Agriculture.

SB 161 allows farmers the ability to reschedule their loans under either of two conditions:

• If the loan was in existence on January 1, 1987.
• If a borrower has experienced 3 years of agricultural disaster, within the past 5 years.

The Revolving Loan Fund has approximately five million dollars continuing to revolve to and from farmers. This gives the fund a useful life of about five years at the current rate. Though a reduction in the interest rate reduces the returning income, it should help insure that farmers would be able to make their payments on schedule and avoid default. It also encourages use of the fund at a fair market rate, which should encourage use and thereby more revenues.

The fund is also used to fund the operations of the Division of Agriculture, which is a significant reason for lower returns showing, as this use drains the loan monies and does not return interest.