"An Act relating to the investment responsibilities of the Alaska Permanent Fund Corporation; relating to regulations proposed and adopted by the Board of Trustees of the Alaska Permanent Fund Corporation and providing procedures for the adoption of regulations by the board; and providing for an effective date. "
Analysis of CSHB 215 (FIN) Prepared by APFC staff
This legislation removes the Permanent Fund's allowed investment list from statute and places it in regulation. Four key limits on investments would be retained in statute:
Investments must be made under the Prudent Investor Rule
The board may leverage assets only if there is no recourse to the Fund
The board must maintain a diverse mix of assets
In-state investments must have a risk and return comparable to other investment alternatives
Section 1 -
AS 37.13.120(a) - Requires the Alaska Permanent Fund Corporation Board of Trustees to adopt regulations that specify allowed investment types. Retains the requirement that investments conform to the Prudent Investor Rule and provides a definition for the standard that specifies the investment decisions be compared to those of other institutional investors.
AS 37.13.120(b) - This section is AS 37.13.120(e) under existing statute. Allows the corporation to leverage Fund assets as long as there is no recourse to the Fund and allows for direct leveraging. Previously assets could only be leveraged through a separate entity.
AS 37.13.120(c) - This section is a combination of AS 37.13.120(c) and (l) under existing statute. Requires the board to maintain a diverse mix of assets within the Fund. Also requires the board to make in-state investments if the investments have a risk level and expected return comparable to similar investments outside of the state and conform to the Prudent Investor Rule.
AS 37.13.120(d) - This section is AS 37.13.120(f) under existing statute. Allows the corporation ("board" in existing statute) to enter necessary contracts for managing the Fund. In a change from existing statute, the provision gives examples of some types of investment contracts.
AS 37.13.120(e) - Combines AS 37.13.120(d) under existing statute with new provisions. The new portion requires that proposed regulations be submitted in electronic form to the Legislative Budget and Audit Committee for comment before the regulations are adopted. The rest of the paragraph continues to require the board to submit investment reports to the LBA Committee at least quarterly.
Section 2 -
Adds new provisions regarding the adoption of regulations:
AS 37.13.206(a) Allows the board to adopt regulations, and requires the board to adopt regulations as specified in AS 37.13.120(a). Exempts the board from the provisions regarding the adoption of regulations contained in AS 44.62. This exception is recommended by the Department of Law because market changes could require faster action than is possible under standard regulation adoption guidelines. The AIDEA, AHFC and the Alaska Commission on Postsecondary Education all follow the abbreviated guidelines contained in this legislation.
AS 37.13.206(b) - Allows the board to adopt regulations by motion, resolution, or by means specified in the APFC's bylaws.
AS 37.13.206(c) - Requires public notice of proposed regulation change to be made at least 15 days before adoption, and outlines how that notice will be made.
AS 37.13.206(d) - Requires that the public notice include the time and place where the regulation change proceedings will take place.
AS 37.13.206(e) - Requires the board to allow public testimony on the proposed regulation change at the time of the proceedings.
AS 37.13.206(f) - Creates guidelines under which the board may make an emergency regulation change without conforming to the requirements under (c) - (e) of this section. Emergency regulations will expire after 120 days.
AS 37.13.206(g) - Specifies when regulation changes adopted under this section will take effect and requires regulation changes to be submitted to the Lt. Governor and the Administrative Regulation Review Committee.
Section 3 - repeals AS 37.13.205, the statutes that allowed APFC to draft regulations under the provisions contained in AS 44.62.
Section 4 - Allows the Board to adopt regulations prior to the effective date of section 1, although the regulations will not take effect until January 1, 2006.
Section 5 - Allows an immediate effective date for sections 2 and 3, which provide new procedures for drafting APFC regulations.
Section 6 - Effective date for section 1, which repeals the statutory legal investment list on January 1, 2006.
CS HB 215 (FIN)
For more information, please contact Laura Achee at the Alaska Permanent Fund Corporation, 465-2059.