State Senator District E

Senate Majority Leader

 

Senator Cathy Giessel Newsletter

UPDATES



Issues affecting

your family, community and jobs.

June 27, 2024

Dear Friends and Neighbors,

 

The Permanent Fund and its management is critically important to our State. The first item in this newsletter is the meeting held on June 24 about the Fund.

 

Permanent Fund's spendable account faces first potential shortfall in July. ADN

The fund’s managers have warned that the state’s nest egg has a small but growing risk of financial crisis. In February, advisers to the board of trustees said there was a 5% chance the Earnings Reserve Account could be exhausted within three years.  Extend the horizon out to 10 years and the risk of draining the spendable account at least once in the next decade grows to 20%, a recent report shows.

 

Why permanent Fund managers are again sounding the alarm about a key account running dry. Alaska Public Media

The Alaska Permanent Fund Corp. expects to start the next fiscal year $600 million short of a planned $1 billion inflation-proofing payment planned for July 2025.

 

After email leak, some Alaska legislators say they're skeptical of Permanent Fund's direction. Alaska Beacon

During the meeting, Mitchell said questions about the leaked emails amounted to “noise,” which drew a rebuke from Rep. Andy Josephson, D-Anchorage. “There’s been an accumulation of things — the dispute over the Anchorage office, these emails, whether a thumb has been put on the scale in terms of investment decisions that are outside the norm,” he said. He said the APFC’s decision to spend as much as $200 million on private equity investments within the state is also an area of concern. One of those investments was in Peter Pan Seafoods, which has since declared bankruptcycausing a crisis in Southwest Alaska.

 

 

 

I am very concerned about the Inflated Prescription Drug Costs that Alaskans are experiencing. That's why I sponsored SB 121 to address Pharmacy Benefit Managers - a hidden industry that takes money out of consumers pockets and is destroying private pharmacies, leaving only their national pharmacies.

This New York Times article does a great job of explaining how the PBM middlemen are costing you, employers and our state government.

 

The Opaque Industry Secretly Inflating Prices for Prescription Drugs. New York Times

June 21, 2024

 

 

Items in this Newsletter:

·     Hearing on Permanent Fund management

·     APFC May Financial Statement

·     Partisan Divide: Warning

·     Current Hot Topics, Things I Found Interesting, Education, Economy, Minerals, Healthcare, Politics

·     Resource Values, Permanent Fund

Presentation to the Legislative Budget & Audit Committee

June 24, 2024

 

Here's the powerpoint and here's the recorded meeting.

 

Devin Mitchell, Executive Officer of APFC did the presentation up to the Investment & Risk Management portion, which was presented by Marcus Frampton, Chief Investment Officer.

 

Slide 5 - the Legislative purpose for the Fund. Also the Investment performance target of CPI (inflation) + 5% over a 10-year period. Mitchell said this was a very hard goal to hit due to volatility of investments.

Slide 6 - you see the investment diversity and how it evolved from just Fixed Income to now a global investment.

Slide 7 - the gold dots is CPI+5%. You can see that for 11 years that return objective was not met. There was no POMV draw until 2019

Slide 9 - Graph on left - notice how much our economy was driven by Petroleum over the years. On the right, graph shows in blue when POMV began to contribute to state revenue (2019) and how stable it has been. POMV draw for budget beginning next week (July 1, 2024) is $3.66 Billion.

Slide 10 - This shows the two subdivisions in the Fund: The Principal and the Earnings Reserve Account. The brown line on the left side graph is the total return - you can see how volative it is. The yellow line shows "Realized" return - the amount of actual money received that year. (Constrast with Unrealized Earnings - the investment has value but has not been sold so the value has not put actual money in the account).

Slide 11 - More about the Realized and Unrealized: Look at the 4 bars showing value in the Earnings Reserve Account (ERA).

·     FY25 POMV is the money coming out of the beginning on July 1 (new Fiscal Year 25) of $3.7 B; this is to pay for part of the budget.

·     FY24 Inflation Proofing is money that goes into the Principal to keep its value up with inflation; it will leave the ERA on June 30.

·     Uncommitted Realized Earnings of $3.9 B is actual money in the ERA that would be available to spend (except the POMV rule prevents spending beyond its 5% limit).

·     Earnings Reserve Unrealized Gains of $2.0 B is value that investments have but won't be "realized" until the investment (for instance real estate) is actually sold.

Slide 12 shows this yet again. The point is that, with only $3.9 B of Uncommitted Realized Earnings in the ERA, there may not be enough there for the next POMV draw for the budget and Dividend.

Slide 13 shows this again, another way.

Slide 14 shows the upcoming dilemma

Slide 15 explains the complexity

 

I've had questions about why the investments aren't earning as much.

Slide 19, 20, 21 - Frampton goes into the allocations

 

At the end of the meeting, Mitchell was asked about the email leaks from the APFC and the Board's disregard of the Legislative directive to close the Anchorage office.

 

Permanent Fund's spendable account faces first potential shortfall in July. ADN

The fund’s managers have warned that the state’s nest egg has a small but growing risk of financial crisis. In February, advisers to the board of trustees said there was a 5% chance the Earnings Reserve Account could be exhausted within three years.  Extend the horizon out to 10 years and the risk of draining the spendable account at least once in the next decade grows to 20%, a recent report shows.

 

Why permanent Fund managers are again sounding the alarm about a key account running dry. Alaska Public Media

The Alaska Permanent Fund Corp. expects to start the next fiscal year $600 million short of a planned $1 billion inflation-proofing payment planned for July 2025.

 

After email leak, some Alaska legislators say they're skeptical of Permanent Fund's direction. Alaska Beacon

During the meeting, Mitchell said questions about the leaked emails amounted to “noise,” which drew a rebuke from Rep. Andy Josephson, D-Anchorage. “There’s been an accumulation of things — the dispute over the Anchorage office, these emails, whether a thumb has been put on the scale in terms of investment decisions that are outside the norm,” he said. He said the APFC’s decision to spend as much as $200 million on private equity investments within the state is also an area of concern. One of those investments was in Peter Pan Seafoods, which has since declared bankruptcycausing a crisis in Southwest Alaska.

FY24 Monthly Financial Statements

May 31, 2024

 

With the publication of the May monthly financial statements, we want to highlight -



·The Principal's non-spendable deposits from royalties, inflation proofing, and special appropriations now total $69.2 billion, with $12.3 billion of unrealized gains from investments we continue to hold.

 

·The Earnings Reserve Account (ERA) has -

 

·Commitments of known obligations for the FY24 inflation-proofing appropriation of $1.4 billion and the FY25 POMV draw of $3.7 billion.

 

·There are also $2.0 billion of unrealized gains associated with the ERA holdings. This pro-rate share shifts as values change.

 

·What is Available for Appropriation in the ERA? See graphic below.

 

There is currently an available balance of $3.9 billion of uncommitted realized earnings for future use, including appropriations for FY25 inflation proofing and the commitment for the FY26 POMV draw.

 

The other portions of the Fund include the nonspendable Principal, unrealized gains, and ERA commitments for known obligations - including the FY24 inflation proofing and FY25 POMV draw.

 

The History & Projections report

To provide Alaskan stakeholders with updated projections, APFC incorporates FYTD actuals together with Callan's projections for the remainder of the fiscal year in the performance forecasts for accounting net income, statutory net income, and fund values. 

CLICK HERE FOR MORE INFORMATION

 

Join us at Chena Hot Springs Resort on August 18th, 2024 for the 18th Annual Renewable Energy Fair. For more details click the link above to stay up to date on speakers and vendors attending the event. You won't want to miss this! 

State of Alaska Land Use Authorizations for

Large-scale Renewable Energy Development

The Alaska Department of Natural Resources (department), pursuant to Governor Dunleavy’s May 2, 2024 Administrative Order No. 355 (AO 355), is conducting a thorough review of current state statutes and regulations that govern the authorization of the use of state land for large-scale renewable energy project development. The department is seeking information on this matter as described in the attached notice. We encourage you to submit information by Friday, August 16, 2024, so that it can be incorporated into the final report. Please note that any information you provide will be subject to inspection, copying, and distribution as public records under Alaska Statute 40.25.110-40.25.220.

 

How can I find more information?

To read the full text of AO 355, visit the Governor’s website: https://gov.alaska.gov/admin-orders/administrative-order-no-355/

 

Visit the DNR website for background information and links to current statutes and regulations: https://dnr.alaska.gov/mlw/ao355/ 

 

Forum Open to the Public

DNR will host a forum open to the public on August 2, 2024, from 10:00am to 12:00pm at the Atwood Conference Center in Anchorage (Robert B. Atwood Building, 550 West 7th Avenue, Room 106, Anchorage, AK 99501)

 

The format of the forum will be an informational exchange between DNR and invited industry and subject matter experts working in large-scale renewable energy development. The public is invited to observe and learn; there will be no in-person public testimony or comment opportunity at the forum.

 

If you would like to be considered for an invitation to present information at the forum, send an email with your name, organization, and a description of the information you can provide in a short presentation to DNR.RenewablesReport@alaska.gov by July 12, 2024.

 

You do not have to attend in person. A virtual option will be available for participation or observation. For a virtual forum link and for location and parking information, visit the DNR website at https://dnr.alaska.gov/mlw/ao355/.

Education

Alaska Supreme Court to hear oral arguments in challenge to correspondence programs. ADN

Alaska has resisted a formal voucher program as such schools have grown in prevalence and popularity across the country. Vouchers are generally supported by religious voters — who can use public education funding to pay for religious education, even if the U.S. Constitution forbids overtly religious education in public schools. The practice was advertised and promoted by the wife of Alaska Attorney General Treg Taylor in a 2022 article she penned, describing how she used correspondence program allotments to pay for her children’s education at a private Catholic school in Anchorage.

 

Public funds for religious charter school would be unconstitutional, Oklahoma high court says. AP News

The Oklahoma Supreme Court on Tuesday stopped what would have been the first publicly funded religious charter school in the U.S., turning back conservatives and the state’s GOP governor who have welcomed religious groups into public education.

 

What you need to know about Alaska's contested homeschool allotments. Alaska Beacon

Supporters of the law say that parents should choose the education model that best fits the needs of their child, regardless of whether it is public or private. This parallels arguments in favor of “school choice,” which is policy or programs that allow families to use public dollars to access educational options beyond their local school.

Detractors say that allowing allotments to be spent on private and religious instruction, such as private school tuition, undermines the public school system by siphoning money elsewhere. Allotments in their current form have been called a shadow voucher program, an allusion to programs that give families taxpayer dollars to send their children to private schools.

 

 

Stuff I Found Interesting

What you gut has in common with Arctic permafrost. Canada's National Observer

Every time you eat a blueberry, the microbiome in your gut gets to work. Bacterial enzymes attack the organic compounds of the fruit: a burbling, gurgling digestive process that can, often to our embarrassment, cause us to pass gas. That may not be such a big deal for a human, but new research shows that the microbial action in icy Arctic soils might not be so different. On a global scale, it could mean the planet belching up more dangerous greenhouse gases.

 

 

Economy

Sitka and Juneau residents propose hard caps in cruise ships as tourism grows. Alaska Beacon

With as many as 1.6 million cruise ship tourists expected to visit Southeast Alaska this year, a growing number of the region’s residents are seeking to put hard limits on the industry. 

 

Millennials may have had it bad financially, but Gen Z may have it worse. ADN

Generation Z has been disproportionately pummeled by rising prices, higher housing costs, larger student loan balances and more overall debt than the millennials before them.

 

Quoted: Rystad Energy analyst Surya Hendry. Axios

"This growth is a race against time to expand power generation without overwhelming electricity systems to the point of stress."

(My comment: While this quote related to Lower 48, it also applies to Alaska. If we expect to grow and respond to energy demands of our climate, we have to pay attention to our electric grid. It needs upgrade, modernization, and management for the future. That’s what HB 307 is all about, a bill that I worked hard to craft for our future.)

 

 

Minerals

Red Dog's dwindling ore is forcing the entire region to consider its future. Alaska Public Media

The Red Dog Mine produces about 4% of the global zinc supply. The land is owned by the NANA Regional Corporation, while the mine itself is owned and operated by Canadian mining company, Teck Resources. Red Dog is often held up as a success story for how an international mining company can work with an Alaska Native corporation. And the economic impact would be enormous if the mine closes down. In 2023, about a thousand NANA shareholders were working for the mine, which equates to about $62 million in yearly wages to shareholder employees.

 

 

Fisheries

Nearly $12 million headed to Alaska in latest infusion of fishery-disaster aid. Alaska Beacon

The aid money is for disasters declared for the 2022 chum salmon failure on the Kuskokwim River and the 2021-2022 sockeye salmon failure that affected Upper Cook Inlet setnet fishers. Aid for the Kuskokwim River disaster totaled $331,920, while aid for the Upper Cook Inlet sockeye disaster totaled nearly $11.5 million, according to the National Oceanic and Atmospheric Administration, which is a branch of the Commerce Department.

 

 

Politics

U.S. Supreme Court may consider Alaska's 'dark money' disclosure rules. Alaska Beacon

Under Alaska law, donors are required to disclose the “true source” of large contributions from politically oriented groups to local candidates. In other states, donors frequently obscure their political activity by giving to a politically oriented nonprofit, which then donates money to a candidate. These donations are frequently labeled “dark money.”

 

State judge upholds most fines against group seeking repeal of Alaska ranked chouse voting. Alaska Beacon

In a 54-page order, Judge Laura Hartz upheld almost all fines issued in January by the state’s campaign finance regulator and concluded that Alaska’s “true source” disclosure laws apply to ballot measures. 

 

Judge upholds fines levied against ranked choice opponents for campaign finance violations. ADN

The Alaska Public Offices Commission, a campaign finance watchdog, fined several groups seeking to repeal the voting system by ballot measure a total of more than $94,000 earlier this year for failing to adhere to the state’s disclosure requirements.

 

Witnesses say petitions to repeal Alaska's election system were mishandled. Alaska Public Media

Witnesses spoke of seeing unattended petitions at Tudor and Big Valley bingo halls, Duane’s Antique Market in Anchorage and at a business in Soldotna. Witnesses also said they saw petition booklets at the state fair that did not appear to be in the possession of the circulator they were assigned to. 

 

 

Childcare

Alaska foster families get another year of fully funded child care. Alaska Beacon

The state has long subsidized child care for foster families, but during the pandemic it used federal relief dollars to pay the entire cost of care. A spokesperson for the Department of Community Services said the state will dedicate $350,000 to the effort over the next fiscal year, which equates to full funding for about 530 families. Advocates say the change means that more families will be able to take care of the state’s most vulnerable children, which improves health outcomes and keeps siblings together.

 

 

Healthcare

Alaska's food stamp program rebound continues with more users, timely benefits. Alaska Beacon

After years of backlogged applications kept thousands of Alaskans from accessing food aid, the state’s health department appears to be maintaining the program’s recovery. State officials said they overcame the backlog in March. Deb Etheridge, director of the Division of Public Assistance, said the agency is processing roughly 90% of its Supplemental Nutrition Assistance Program applications on time, a major improvement over January, when it was processing only 10% of applications and 5% of recertifications on time.

 

Fairbanks lawmaker, domestic violence expert waiting for contraceptive bill to become law. Alaska's News Source

Rep. Ashley Carrick, D-Fairbanks, sponsored a bill that passed both the state House and Senate with strong bipartisan support that would increase women’s access to birth control. Supporters of the bill say it is an important step in saving women’s lives who are victims of domestic violence, citing a study conducted in 2010 that showed 48% of all pregnancies in Alaska were unintended.

Alaska Oil Resource Values

 

Alaska North Slope crude oil price (6/26/24): $85.91

FY24 budget (beginning 7/1) is fully funded at a

forecast of $73/barrel of oil.

Price on 9/30/23: $87.99

Price on 9/30/22: $86.91

Price on 6/29/22: $116.84

Price on 3/08/22: $125.44

Price on 12/22/21: $75.55

ANS production (6/25/24): 430,895 bpd



 

What they're saying: the new nuclear law. Axios

The Senate overwhelmingly approved the ADVANCE Act.  One part of the expansive bill requires the Nuclear Regulatory Commission to update its mission statement so that it does not "unnecessarily limit" deployment and its benefits. Other portions include reduction of licensing fees and provisions to cut down review times for previously licensed designs and trim timelines for nuclear NEPA reviews.

 

North Slope Borough backs state agency's financing of first methanol plant in U.S. Arctic. ADN

Alyeschem, planned to be built in Prudhoe Bay in the next few years, would use existing natural gas to create two chemicals — methanol and ultra-low-sulfur diesel — that are currently imported into the oilfield area in great volumes, said the founder and CEO of the project, JR Wilcox. The first petrochemical facility in the U.S. Arctic, it would support producers in the North Slope and other places across Alaska, he said.

 

South Augustine second exploration plan approved, NEvada MT crew starting. Petroleum News

On June 13, GeoAlaska CEO and majority owner Paul Craig was issued a letter of approval from Alaska's Division of Oil and Gas for the second Plan of Exploration, or POE, for noncompetitive geothermal prospecting permits ADL 394080 and ADL 394174 on South Augustine Island.

 

Sidebar: Hilcorp buys 151 jack-up. Petroleum News

As reported in the June 9 issue of Petroleum News, Hilcorp Alaska has acquired the Spartan 151 jack-up rig from Enterprise Offshore Drilling. Hilcorp said in a June 3 email that the sale closed May 31, and it now owns the rig through a wholly owned subsidiary. The company said the jack-up purchase ensures that Hilcorp Alaska has access while enabling it to work with other Cook Inlet natural gas producers to ensure their access to the jack-up.

(My comment: This means that Hilcorp will control access to the only jack-up rig in Cook Inlet, making it pretty hard for any other entities from exploring.)

 

Royalty-free terms do little to boost interest in Cook Inlet oil and gas lease sales. Alaska's News Source

Lawmakers and oil and gas experts are once again sharing skepticism that royalty relief is not the answer to solving fears of a potential natural gas shortage in the Cook Inlet.

 

Exxon's $850 million new hydrogen partner. Axios

Industrial gases giant Air Liquide is planning an $850 million investment that supports Exxon's planned low-carbon hydrogen project at its Baytown, Texas, petrochemical complex.

 

 

 

Precious Metal Prices

June 26, 2024

Gold - $2310.81

Silver - $28.95

Platinum - $1024.45

Palladium - $963.43

Rhodium - $4500.00

 

Alaska Permanent Fund

website

 

Fund value June 21, 2024 - $80,939,300,000

PFD payout from ERA, Fiscal years 1980-2023: $29.7 Billion

Cost of PFD in Oct. 2022: $2.2 B

Cost of PFD Oct. 6, 2023: $881.5 Million



Alaska History

 

1996, June 22-10  Miller’s Reach fire, Big Lake, $8.8 million damage

 

Feedback is always welcome.

Have a great week!

 

Cathy 

 

Personal Contact:

907.465.4843

sen.cathy.giessel@akleg.gov

 

Past Newsletters on my website



My Staff:

·     Chief of Staff: Jane Conway (from Soldotna)

·     Office Manager: Paige Brown (from Anchorage/Girdwood)

·     Resources Committee Staff: Julia O'Connor (from Juneau)

·     Legislative Analyst: Angela Rodell (from Juneau)

 

 

Copyright © 2024. All Rights Reserved.

Senator Cathy Giessel's Newsletter | 12701 Ridgewood Rd | Anchorage, AK 99516 US