02/01/1996 09:10 AM Senate FIN

                                                                               
  Referencing legislation relating  to a similar issue  (SB 89                 
  PERMANENT FUND BOARD MEMBERS &  STAFF) Mr. Baldwin expressed                 
  concern over "removal for cause" provisions.                                 
                                                                               
  [The tape  recording problem  was corrected  at this  point.                 
  Minutes reflect transcription of the tape.]                                  
                                                                               
  Mr. Baldwin explained  that under present SB 89 language, it                 
  is unclear  whether "removal  for cause"  would involve  due                 
  process and require a hearing and trial-like procedures.  He                 
  further questioned language indicating that:                                 
                                                                               
       The governor shall base the decision to appoint or                      
       remove a board member solely on the financial best                      
       interest of the fund.                                                   
                                                                               
                                                                               
  He then asked what  would occur if a board  member committed                 
  an  offense  involving  moral  turpitude  but  unrelated  to                 
  finances of the fund.  Under present language it appears the                 
  individual could not be removed, even though he or she might                 
  be undesirable as  well as charged  with and convicted of  a                 
  criminal act.  There are  real problems associated with both                 
  the   "cause"   requirement   and   implementation  of   the                 
  requirement.  The process is not simple.                                     
                                                                               
  Senator Rieger told  members that  the purpose of  staggered                 
  terms was to prevent the "wholesale  sacking of the board of                 
  trustees   which    has   occurred    in   the    last   two                 
  administrations."  Co-chairman Halford  added that staggered                 
  terms are meaningless  if members are removed  without cause                 
  during a change  in administration.  Mr.  Baldwin reiterated                 
  concern that present  language might  involve a lengthy  due                 
  process  procedure.   The  bill is  vague and  ambiguous and                 
  requires work in that area.                                                  
                                                                               
                                                                               
  SENATE BILL NO. 89                                                           
                                                                               
       An  Act relating to  the members of  the board and                      
       staff of the Alaska Permanent Fund Corporation.                         
                                                                               
  In  directing  that  a  brief  introduction  to   SB  89  be                 
  presented, Co-chairman  Halford noted  need for  consistency                 
  between the bill and SSSJR 14.   Senator Rieger advised of a                 
  100% turn  over in  top management  of the  Alaska Permanent                 
  Fund Corporation over the last two years.  That includes the                 
  executive director,  chief investment  officer, and  all six                 
  trustees.    The purpose  of  SB  89 is  to  provide greater                 
  continuity in management of the fund.  Provisions make clear                 
  that  removal  of a  trustee  must  be for  cause.   Further                 
  provisions  reduce the  number of  cabinet-member appointees                 
  from two to  one and increase  the number of public  members                 
  from four to six.  Public members also have staggered terms.                 
  The  aggregate board  would thus  be seven  rather than  six                 
  members.                                                                     
                                                                               
  SB 89 also  clarifies that investment policies  and staffing                 
  decisions must be  made solely in  the best interest of  the                 
  fund.  The over  $18 billion fund is  more than seven  times                 
  the  amount of general  funds used  in annual  operating and                 
  capital budgets.                                                             
                                                                               
  CSSB 89  (STA) clarifies  that at  least two  of the  public                 
  members must  have recognized competence and wide experience                 
  in   investment  portfolio   management.     The   committee                 
  substitute  further  defines   "cause"  and  clarifies  what                 
  removal for cause would entail.                                              
                                                                               
  Co-chairman  Halford  voiced   his  understanding  that  the                 
  limitation on contracts applies to  permanent fund employees                 
  rather than management contracts.  Senator Rieger concurred.                 
                                                                               
                                                                               
  JIM  BALDWIN,  Assistant   Attorney  General,   Governmental                 
  Relations Section, Dept. of  Law, remained before committee.                 
                                                                               
                                                                               
  He initially spoke to possible conflicts between contractual                 
  hire terms and an executive director  who might serve at the                 
  pleasure of the board.  He later advised that he had not yet                 
  reviewed CSSB  89 (STA)  and would  reserve further  comment                 
  until he had done so.  In his closing remarks, he reiterated                 
  concern  that  imposition of  removal  for cause  provisions                 
  would be bad for the permanent fund board.                                   
                                                                               
  Senator  Donley  acknowledged  a possible  conflict  between                 
  employment contract  provisions and service at  the pleasure                 
  of the  board and suggested  that the bill  contain language                 
  specifying  that  the  contractual  employee  serve  at  the                 
  pleasure of the board.  Senator Rieger acknowledged that the                 
  suggestion  was  reasonable and  requested  time  to explore                 
  proper   language  to   ensure  consistency   with  existing                 
  statutes.                                                                    
                                                                               
  Co-chairman Halford directed that SB 89 be held in committee                 
  for further discussion.