Key Performance Indicators

Department of Revenue

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Mission

The mission of the Department of Revenue is to collect, distribute and invest funds for public purposes. Alaska Constitution Article 9; AS 25.27, AS 37, AS 43

Key Performance Indicators

• Target: Increase disbursements of child support payments by 0.5%.

• Target: Maintain or reduce administrative costs from year to year.

• Target: Increase Senior Housing units

• Target: Increase Multi-Family units

• Target: For the funds under the fiduciary responsibility of the Commissioner of Revenue, exceed the applicable 1-year target returns.

• Target: A long-term 5% real rate of return

• Target: Formal visit, bond issue update, or updated document template sent or presented to ratings agencies at least four times per year.

• Target: 100% of new financings will result in savings or diminished administrative effort.

• Target: 90% of all complaints received by the LTCO program are resolved to the satisfaction of the resident or their representative.

Performance Detail

Target #1: Conduct five new compliance projects to identify non-filers. Compliance Projects Conducted Fiscal Year # of Compliance Projects # New Taxpayers FY 2020 250 22 FY 2019 72 11 FY 2018 73 45 FY 2017 67 27 FY 2016 27 15 FY 2015 12 18 FY 2014 15 11 FY 2013 8 62 FY 2012 24 109 FY 2011 68 98 Analysis of results and challenges: The Tax Division encourages voluntary compliance as the most effective tool for collecting tax revenues. An important aspect of voluntary compliance is for taxpayers to believe that they are paying about the same amount in taxes as other similarly situated taxpayers. Seeking out and finding new taxpayers and bringing them into compliance assists the Tax Division both in long-term voluntary compliance as well as bringing in the revenues from the new taxpayers. The Tax Division does not believe there are any major oil and gas taxpayers not filing. Therefore, the Tax Division focuses its compliance efforts on other tax types. This target and measure does not include federal or multi-state compliance programs in which the Tax Division currently participates. Compliance projects include analyzing databases of other states, the federal government, and local agencies to ensure that a person engaged in a taxable activity is filing required tax returns. In the past, the Tax Division has also conducted taxpayer outreach and education through attendance at industry meetings and conferences. **Now that the gaming group lost their audit position they are now doing many more gaming compliance projects - looking at annual reports and other information to flag outliers and other red-flags. Audits will only be performed on a case-by-case basis.

Target #2: 90% of existing taxpayers file their tax returns and make tax payments timely. Taxpayers Filing and Paying Taxes Timely Fiscal Year % of Timely Filers FY 2020 88.9% FY 2019 88.2% FY 2018 88.8% FY 2017 87.4% FY 2016 89.7% FY 2015 89.0% FY 2014 98.5% FY 2013 98.5% FY 2012 96.1% FY 2011 98.5% Analysis of results and challenges: The Tax Division completed its final rollout of its Tax Revenue Management System (TRMS) in FY2017. The new system replaced many outdated legacy systems and allows us to get more accurate information from tax returns. While the above graph and table report a decrease in timely filing and paying of tax returns beginning in FY2015 (the year of our first rollout), we believe the higher numbers in earlier years were not correct, but a flaw in our previous system reports. We have checked with other states and they have told us that their timely filing rates are below 90 percent (some are far below). We feel the new system is giving us more accurate information. It should be noted that certain assumptions had to be made to produce the number provided. For example, only returns and payments that have been received are considered in the calculation. There may be returns and payments that will be late but have not yet been received. One of the primary functions of the Tax Division is to encourage voluntary compliance by all taxpayers across all tax programs. This is achieved in a variety of ways, i.e. taxpayer education and outreach programs, compliance activities where the Tax Division actively looks for non-filers, and collection activities. Taxpayers are more apt to voluntarily comply if they believe that everyone else is paying their fair share and the Tax Division makes it relatively easy to file returns and pay taxes. As such, the most effective way to measure performance is to look at the percentage of known taxpayers who timely file their returns and pay their taxes. TRMS has a public facing component which allows taxpayers to file and make payments online. The Tax Division has had great success with this system and believes it is a factor in the performance reported.

Target #3: Increase child support collections by 1.0%, to include Permanent Fund Dividend collections. Percent Change in Total Child Support Collections for a Fiscal Year Fiscal Year % Change FY 2020 15.6% FY 2019 0.60% FY 2018 0.40% FY 2017 -10.1% FY 2016 0.10% FY 2015 4.2% FY 2014 0.22% FY 2013 -2.20% Analysis of results and challenges: FY2020 collections including Permanent Fund Dividends (PFDs) increased by 15.6% over FY2019. The division far exceeded the target of a 1% increase for FY2020 due to the CARES stimulus payments as well as the increased Unemployment Insurance Benefit payments. PFD collections dropped, similar to the decrease in FY2017, but overall collections increased. The goal for the next fiscal year remains a 1% increase.

Target #4: 1,000 hour increase in audit hours over prior year. Change in Audit Hours over Prior Year Fiscal Year # of Hours FY 2020 963 FY 2019 455 FY 2018 -92 FY 2017 -2,670 FY 2016 4,168 FY 2015 -1,102 FY 2014 -11,582 FY 2013 -4,957 FY 2012 1,006 FY 2011 -3,202 Analysis of results and challenges: Although voluntary compliance remains our best tool for effective tax collection, that voluntary effort is enhanced by an audit presence, therefore, the Tax Division needs to increase its audit numbers. The Tax Division strives to increase its year-over-year audit hours in an effort to be more efficient with its time and spend auditor time on things that will generate the greatest benefit to the State. The Tax Division began design and development of its TRMS in April of 2013. In order to ensure that implementation was successful, the Tax Division deliberately cut back on the number of audits conducted and diverted those resources to the implementation of TRMS. Full implementation of TRMS was completed in February of 2016. The project took a lot of our audit staff time in design and testing at various stages. The drop in audit hours in FY2013 - FY2015 is a result of diverting resources to TRMS. The drop in hours in FY2017 and FY2018 can partially be explained by the fact that there have been significant changes in the oil and gas production tax regime which has required programming changes to TRMS. The oil and gas production tax and corporate income tax Audit Groups remain current on all oil and gas audits. We made significant strides this past year in increasing our audit hours which you can see in the table above.

Target #1: Increase disbursements of child support payments by 0.5%. Methodology: % change from the prior year Disbursements of Child Support Payments Fiscal Year % of Change FY 2020 11.79% FY 2019 1.21% FY 2018 -1.61% FY 2017 -8.45% FY 2016 -0.51% FY 2015 4.98% FY 2014 -0.04% FY 2013 -4.20% Analysis of results and challenges: This measure has a direct correlation to the amount of collections received in the fiscal year: when collections increase, disbursements will also increase. Due to the CARES Act, overall collections drastically increased from 0.60% to 15.6% while disbursements increased from 1.21% to 11.79%. The division continues to focus on improving processes and implementing technology to meet our target increase of 0.5% in child support disbursements.

Target #2: Maintain or reduce administrative costs from year to year. Methodology: Calendar/dividend year is used for Permanent Fund dividend (PFD) application and payment statistics. Appropriations are based on state fiscal year and become effective on July 1 of the dividend year shown. *Total PFD appropriation includes funding for fiscal notes, prior year supplementals, and new capital appropriations. **Number of applications received by the Permanent Fund Dividend Division at time of dividend calculation. Estimated Cost per Dividend Paid Fiscal Year Dividend Year Total PFD Appropriation* #Applications Received** Estimated # PFD's Paid Estimated Cost Per PFD FY 2020 2019 $8,329,400 678,287 638,414 $13.04 FY 2019 2018 $8,323,000 670,759 639,247 $13.02 FY 2018 2017 $8,218,800 672,243 640,245 $12.84 FY 2017 2016 $8,340,100 675,531 643,678 $12.96 FY 2016 2015 $8,521,400 676,379 644,511 $13.22 FY 2015 2014 $8,245,500 677,114 641,489 $12.85 FY 2014 2013 $8,290,900 672,951 640,249 $12.95 Analysis of results and challenges: There is a small increase in the application cost due to increased service costs which include central mail and printing services, and services provided by the Office of Information Technology. We also utilized an advertising firm to notify Alaskans of changes in not only the application, but payment of PFDs.

Target #3: Increase Senior Housing units Analysis of results and challenges: The Alaska Department of Labor and Workforce Development (2019) estimated that the senior population (65+) in Alaska could increase from 23% (low forecast scenario) to up to 58% by 2045 (high forecast scenario). This increase mirrors the national trend in senior population, expected to double by 2060 (U.S. Census Bureau). The gap between need and availability continues to grow each year across Alaska. Senior housing remains a high priority for the Corporation. As with multifamily housing production, senior housing unit development is stymied by the gap between the rents achievable and the cost of building new units. While senior housing funding has remained stable in recent years, the Alaska senior population continues to grow. This continued growth rate places further demands each year on funding from communities throughout the State. (Note: Although AHFC provides mortgage financing for assisted living facilities, those developments report beds rather than units; consequently, the data above excludes AHFC mortgages to assisted living properties.)

Target #4: Increase Multi-Family units Total Multi-Family Units by Fiscal Year Fiscal Year New Units Total Units FY 2020 358 18,020 FY 2019 333 17,662 FY 2018 533 17,329 FY 2017 217 16,796 FY 2016 167 16,579 FY 2015 199 16,412 FY 2014 305 16,213 FY 2013 403 15,908 FY 2012 537 15,505 FY 2011 262 14,968 FY 2010 94 14,706 FY 2009 658 14,612 FY 2008 547 13,954 FY 2007 437 13,407 FY 2006 839 12,970 FY 2005 1,067 12,131 FY 2004 1,491 11,064 FY 2003 938 9,573 FY 2002 748 8,625 FY 2001 2,897 7,887 FY 2000 1,438 4,990 Analysis of results and challenges: Affordable rental housing remains in demand and can benefit markets by facilitating community growth and freeing households to spend more of their disposable income within the community. The production of multi-family housing activity is subject to interest rates, local economic conditions, and other volatile market factors. New construction, in several communities across the state, continues to face marginal feasibility due to the persistent gap between achievable rents and those required to support the high development costs. These factors, when coupled with the reductions in matching funding sources utilized by AHFC funded projects, continue to limit new housing production.

Target #1: For the funds under the fiduciary responsibility of the Commissioner of Revenue, exceed the applicable 1-year target returns. Methodology: FY2020 one-year return data is for the period 7/1/2019 through 6/30/2020. One-year Return Data for Funds Managed by the Treasury Division Fiscal Year Fund Actual Return Target Return FY 2020 Gen Fund/Other Non-segregated Fu 2.15% 1.99% FY 2020 Public School Trust Fund 4.73% 4.71% FY 2020 Int'l Airports Revenue Fund 3.34% 3.20% FY 2020 Const Budg Resv Fund-Main Acc 3.13% 2.88% FY 2020 Retirement Hlth Ins Fund-LongTer 7.47% 7.23% FY 2020 Retirement Hlth Ins Fund- Maj Me 1.77% 1.63% FY 2020 Power Cost Equalization Fund 4.64% 4.73% FY 2020 Illinois Creek Reclamation Fund 4.64% 4.73% FY 2020 Alaska Higher Education Fund 4.73% 4.73% FY 2020 Gen Fund/Other Non-segregated II 3.31% 3.10% Analysis of results and challenges: A combination of investments that is expected to produce the highest investment return for a given amount of risk is known as a "point on the efficient frontier." Each fiduciary for a fund reviews points on the efficient frontier and selects the combination of investments consistent with their appetite for risk and return of the fund. This selection is known as the target asset allocation. Target returns assume the total rate of return of passively managed indexes invested in the same proportions as the target asset allocation. A fund's investment return will differ from its target return if its asset allocation differs from the target asset allocation or if the returns of the underlying investments differ from those of the passively managed indexes.

Target #2: A long-term 5% real rate of return Rolling 10-year real rate of return; annualized returns for periods ended June 30 Fiscal Year Fund total return APF inflation rate Fund real return 5.0% Target FY 2020 8.3% 1.8% 6.5% 5.0% FY 2019 9.2% 1.5% 7.7% 5.0% FY 2018 6.5% 1.7% 4.8% 5.0% FY 2017 5.0% 1.8% 3.2% 5.0% FY 2016 5.4% 2.0% 3.5% 5.0% FY 2015 6.4% 2.3% 4.1% 5.0% FY 2014 7.0% 2.4% 4.6% 5.0% FY 2013 6.8% 2.5% 4.4% 5.0% FY 2012 6.2% 2.4% 3.8% 5.0% FY 2011 6.0% 2.4% 3.6% 5.0% Analysis of results and challenges: The Alaska Permanent Fund's (APFC) long-term real rate of return for the fiscal year period (FY) 2020 was 6.5 percent and the total rate of return for the same period was 8.3 percent. The Fund's annualized total return for 36.5 years, ended June 30, 2020, was 8.60 percent. Alaska Statute 37.13.120 defines APFC's responsibilities for the investment of the Fund. The statute requires that APFC's Board of Trustees applies the standards of the Prudent Investor Rule- emphasizing diversification and long-term goals in asset allocation strategy when making investment decisions. The Board authorizes, and APFC staff make investment decisions to maximize the risk-adjusted return of the portfolio. The Board of Trustees long-term investment objective for the Fund is to generate total returns in excess of Inflation/CPI plus 5 percent, with acceptable levels of risk. The Board has defined an approved risk guideline to delineate the amount of absolute and relative risk staff may take to achieve these investment objectives. To achieve this goal, the Fund is invested across seven asset classes in both public and private markets. The portfolio is designed to deliver compelling long-term returns under a variety of potential market conditions. For FY2020, the Fund ended the year with a value of $65.3 billion in assets under management. This is comprised of $52.4 billion in the Principal of the Fund and $12.9 billion in the Earnings Reserve Account (ERA). The portion of dedicated State of Alaska revenues deposited into the Principle in FY2020 was $319 million, which was well below FY2019's deposit of $385 million.

Target #3: Formal visit, bond issue update, or updated document template sent or presented to ratings agencies at least four times per year. Updates Provided to Ratings Agencies Fiscal Year # of Updates FY 2020 7 FY 2019 7 FY 2018 6 FY 2017 7 FY 2016 16 FY 2015 11 FY 2014 5 FY 2013 4 FY 2012 4 FY 2011 4 FY 2010 5 FY 2009 4 FY 2008 4

Target #4: 100% of new financings will result in savings or diminished administrative effort. New Financings That Resulted in Savings Fiscal Year Percent Aggregated Savings FY 2020 100% $1.0 million FY 2019 100% $4.3 million FY 2018 100% $3.4 million FY 2017 100% $41.2 million FY 2016 100% $75.3 million FY 2015 100% $25 million FY 2014 100% $12.7 million FY 2013 100% $19.6 million FY 2012 100% $17.2 million FY 2011 100% $13.6 million Analysis of results and challenges: In each fiscal year shown, all authorized Alaskan borrowers that borrowed funds through the Alaska Municipal Bond Bank Authority are projected to be paying less debt service (realized savings) than they otherwise might have using other means of financing their project or diminished the administrative burden of their staff.

Target #1: 90% of all complaints received by the LTCO program are resolved to the satisfaction of the resident or their representative. Complaints Resolved to Satisfaction or Partial Satisfaction of Complainant Fiscal Year Complaints Received % Resolved FFY 2019 583 97% FFY 2018 631 98% FFY 2017 508 98% Analysis of results and challenges: In FFY2019, this target was met. 97% of the complaints were resolved to the satisfaction of the resident. The Long-Term Care (LTC) Ombudsmen continue to work to ensure each resident living in a LTC facility was involved in the resolution of their complaints. The LTCO complaint process is that the complaint begins with the resident and ends with ensuring that the resident is satisfied with the resolution of the complaint.

Current as of October 20, 2020