Legislature(1993 - 1994)
01/28/1994 09:00 AM Senate STA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SENATE STATE AFFAIRS COMMITTEE
January 28, 1994
9:07 a.m.
MEMBERS PRESENT
Senator Loren Leman, Chair
Senator Mike Miller, Vice Chair
Senator Johnny Ellis
Senator Jim Duncan
MEMBERS ABSENT
Senator Robin Taylor
COMMITTEE CALENDAR
SPONSOR SUBSTITUTE FOR SENATE JOINT RESOLUTION NO. 2
Proposing an amendment to the Constitution of the State of Alaska
relating to the rights of victims of crimes and to penal
administration.
SENATE JOINT RESOLUTION NO. 38
Proposing amendments to the Constitution of the State of Alaska
relating to revenues from natural resources, the Alaska permanent
fund, the appropriation limit and the budget reserve fund; and
providing for an effective date for the amendments.
SENATE BILL NO. 170
"An Act relating to income of the permanent fund."
SENATE BILL NO. 244
"An Act relating to investments of the permanent fund in certain
limited partnerships each of whose principal purpose is investment
in securities of public or private companies; and providing for an
effective date."
SENATE BILL NO. 245
"An Act relating to investments of the permanent fund involving
equity interests in and debt obligations secured by mortgages on
real estate; and providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SJR 2 - See State Affairs minutes dated 1/21/94 and 1/26/94.
SJR 38 - See State Affairs minutes dated 1/26/94.
SB 170 - See State Affairs minutes dated 1/26/94.
SB 244 - no previous senate committee action.
SB 245 - no previous senate committee action.
WITNESS REGISTER
Margo O. Knuth, Assistant Attorney General
Criminal Division, Department of Law
P.O. Box 110300, Juneau, AK 99811-0300¶465-3428
POSITION STATEMENT: testified on SJR 2
Senator Dave Donley
State Capitol, Juneau, AK 99801-1182¶465-3892
POSITION STATEMENT: prime sponsor of SJR 2
Scott Goldsmith, Economist
Institute for Social & Economic Research
5331 Sillary, Anchorage, AK 99508¶337-2285
POSITION STATEMENT: opposed to SJR 38
Roger Cremo
425 G Street, Anchorage, AK 99501¶333-8188
POSITION STATEMENT: in favor of SJR 38
William H. Scott, Executive Director
Permanent Fund Corporation
P.O. Box 25500, Juneau, AK 99802-5500¶465-2047
POSITION STATEMENT: in favor of SB 245
Jim Kelly, Research & Liaison Officer
Permanent Fund Corporation
P.O. Box 25500, Juneau, AK 99802-5500¶465-2047
POSITION STATEMENT: in favor of SB 245
ACTION NARRATIVE
TAPE 94-5, SIDE A
Number 001
CHAIRMAN LEMAN calls the Senate State Affairs Committee to order at
9:07 a.m.
Number 003
CHAIRMAN LEMAN brings up SJR 2 CRIME VICTIM RIGHTS;CRIM JUSTICE
ADMIN as the first order of business before the committee today.
Number 005
SENATOR MILLER moves the adoption of CSSSSJR 2(STA). There being
no objection, it was so ordered.
Number 008
MARGO KNUTH, Department of Law, Criminal Division, believes the
change from penal administration to criminal and juvenile justice
in section 1 is a good change and will make more specific that SJR
2 refers to the entire process and not just sentencing and post-
sentencing. Adding community condemnation of the offender and the
rights of victims of crimes will achieve the purpose of the
legislature. She does, however, believe the use of the term
restitution to be repetitious of the rights of victims of crimes.
If we differentiate restitution from the rights of victims of
crimes, what other differentiations should be made? Restitution is
the principal right of a victim of crime and is set out in new
section 24. There is, therefore, a logical inconsistency in
explicitly setting restitution out in SJR 2.
Number 046
MS. KNUTH states that in section 2, subsection (b) of SJR 2 the
Department of Law is still concerned rights will be created for
victims of crimes, whether there is clarification from the
legislature or not. The main concern is that it may create
liability for the state, and that there ought to be limits on the
liability, which could be achieved through language in the section.
There is also a concern that victims may want and may be given a
control in state prosecutions. This would represent a radical
departure from the way the system was originally created and has
been operating in the United States for several hundred years now.
Number 105
MS. KNUTH introduces a proposed amendment which would change
subsection (b), adding the same language currently in the victim's
rights act in Alaska State Statutes.
Number 117
CHAIRMAN LEMAN asks if any members have questions for Ms. Knuth.
Number 122
SENATOR ELLIS asks if when "penal administration" was changed to
"criminal and juvenile justice", it was discussed in the last
committee meeting. The chairman replies that it was discussed in
the last meeting. The term "criminal and juvenile justice" was
chosen because it seemed to be more encompassing than penal
administration.
Senator Ellis asks Ms. Knuth what the specific ramifications are of
SJR 2 applying to juvenile justice.
Number 140
MS. KNUTH responds that the juvenile justice system is designed
differently than the adult justice system, the juvenile justice
system having been designed primarily to treat the offender. She
thinks it would perhaps be more consistent with the committee's
intent to use the term "criminal justice administration", and leave
out the "...juvenile justice administration", or there may be a
change in our juvenile justice system that we have not anticipated.
Number 164
CHAIRMAN LEMAN asks where the terms being discussed originated.
Number 168
SENATOR DONLEY replies the term "penal" refers to any system
whereby someone suffers some penalty. That includes the juvenile
justice system. The language change was suggested in order to make
the language more understandable. He thinks the average person
could look at SJR 2 and understand it much better than the language
that is currently in the constitution. He does not think the
language change will alter who will be affected by SJR 2.
Number 200
SENATOR ELLIS supports victim's rights, but wants more discussion
on the impacts of SJR 2. In particular, he wants to know how it
would affect the juvenile justice system.
Number 223
MS. KNUTH states she is involved in the adult offender process, and
not in the juvenile offender process, so is not in the best
position to address the consequences of the impact of SJR 2 on the
juvenile justice system. She says SJR 2 may dramatically change
the juvenile justice system.
Number 240
SENATOR DONLEY responds that everything in section 2 is qualified
by subsection (b). For this reason, he does not believe the
amendment proposed by the Department of Law is a good idea. The
caveat is already there, it being that enforcement can be provided
by statute. The problem with the amendment is it would put into
the constitution a sweeping grant of immunity to the state. What
other constitutional rights do we have which we would want to give
immunity to the state for violating? Freedom of speech? Freedom
of religion? Should we say, "This is a right, but if the state
violates it, it's ok?" Senator Donley does not believe that
attitude is appropriate for a constitutional amendment. He would
like the committee to consider that point.
Number 266
CHAIRMAN LEMAN questions Ms. Knuth about insertion of the word
"restitution". He realizes that in section 24 there is provision
for the right to restitution, so he wonders if also having
"restitution" in section 12 would be repetitious. The chairman
also asks Ms. Knuth to clarify who would qualify for restitution,
whether there would also be a corporate or state right to
restitution. Chairman Leman notes as an example of the corporate
right to restitution DWI offenders having to pay the state up to
$1000.00 of the cost of prosecution. He wants secondary victims,
such as society or the state, and not just primary victims, to have
the right to restitution.
Number 285
MS. KNUTH replies that currently the word "restitution" refers only
to payment being made to a primary victim of a crime. It is not a
term that has been used for making everyone, including the system,
whole. She cannot think of a word that would refer to making the
system whole. To a certain extent, fines have served the purpose
of restitution to the state; although fines are also punitive in
nature. She will try to come up with a word that would better
define restitution to the state between now and when SJR 2 is heard
in the Senate Judiciary Committee.
Number 310
SENATOR ELLIS asks if the list of penal administration guidelines
on lines 9 through 11 are equal or if they are listed in order of
importance.
Number 316
MS. KNUTH responds they are ranked in order of priority.
Number 321
SENATOR ELLIS expresses he does not necessarily agree with the
order of priority. He asks what "community condemnation of the
offender" means.
Number 330
MS. KNUTH answers that "community condemnation of the offender"
means punishment of the offender.
Number 333
SENATOR ELLIS declares he did not realize it was a legal term, and
to him it sounds as though the meaning might be to egg someone's
house after they get out of prison. He does think restitution
should be in the list of principals of penal administration.
Senator Ellis wants to know, since the principal of reformation is
the most important factor in the juvenile justice system, how
reordering the principals of penal administration for both the
adult and juvenile justice systems will affect the juvenile justice
system.
Number 346
MS. KNUTH comments Senator Ellis has raised the interesting thought
that SJR 2 might run afoul of the United States Constitution.
States may not have the right to make punishment of the offender or
restitution to the victim a higher priority than reformation of the
offender.
Number 362
SENATOR ELLIS asks why the committee prefers the term community
condemnation of the offender, rather than punishment of the
offender.
Number 364
SENATOR DONLEY responds that the language was developed over the
interim, and punishment entails less than community condemnation of
the offender. Community condemnation is a more encompassing
concept.
Number 374
SENATOR ELLIS expresses his opinion that community condemnation of
the offender sounds a lot more wimpy than punishment.
Number 381
SENATOR DONLEY adds a comment to the question raised by Ms. Knuth
regarding the possible unconstitutionality of the prioritization of
the principals of penal administration under the U.S. Constitution.
He is not concerned with possible unconstitutionality under the
federal constitution, because federal constitutional concerns would
be primary to state constitutional concerns. If the prioritization
turns out to be unconstitutional under the U.S. Constitution, the
state constitution would simply defer to the federal constitution.
It would not cause the type of constitutional crisis we now have
with subsistence.
Number 391
MS. KNUTH makes a last point regarding creating a new section 24,
rights of victims of crimes. She states that one possible negative
affect of creating additional rights for victims of crimes would be
that victims might not be required to press charges or testify if
they do not wish to do so. As a result, the effect could be to
drop charges against a defendant if the victim chooses to not press
charges. The state would not have the choice of going forward with
a case if the victim was not in favor of doing so also. This would
probably have the greatest impact on domestic violence cases in
which the victim recants. Currently, the state has the right to go
ahead with prosecutions, even when the victim recants because the
Department of Law knows it is the right thing to do statistically.
Prosecution does break the chain of violence. It's not fun for the
victim at the time, but it is a massive improvement in their
situation, and is the only basis for optimism that something will
get better there. Most people probably do not like the idea of
someone being able to buy their way or influence their way out of
a prosecution, but this is what could happen if victims have the
final say in whether or not to prosecute.
Number 424
CHAIRMAN LEMAN states that it is certainly not his intent to allow
cases to be dropped if the victim chooses not to testify or chooses
not to press charges, and he would like the record to reflect that.
Number 428
SENATOR DONLEY states the language in SJR 2 came straight from the
constitution of Michigan, and Michigan has not articulated any
concern with the implementation of the language. In addition, the
language is modified by section (b). He thinks that it would be a
stretch of the law for it to arrive at the effect Ms. Knuth just
described, and if that were to happen, it could be addressed with
a statute from the legislature.
Number 448
SENATOR ELLIS states he does not have confidence that the concerns
he voiced today will be adequately resolved or addressed in the
Senate Judiciary Committee. He requests the Department of Law to
note, in writing, the specific effects of SJR 2, should it be
adopted.
Number 468
CHAIRMAN LEMAN repeats the request Senator Ellis just made to Ms.
Knuth.
Number 476
SENATOR MILLER motions CSSSSJR 2(STA) be moved from committee with
individual recommendations.
Number 479
CHAIRMAN LEMAN, hearing no objections, discharges CSSSSJR 2(STA)
from the Senate State Affairs Committee with individual
recommendations.
Number 488
CHAIRMAN LEMAN announces that SB 170 DISPOSITION OF PERMANENT FUND
INCOME will be held until Wednesday, February 1, 1994, as the
representative from the administration was unable to be in
attendance this morning.
Number 502
CHAIRMAN LEMAN brings up SJR 38 RESTRUCTURE PERMANENT FUND as the
next order of business before the Senate State Affairs Committee
today. The chairman calls a witness from the Institute for Social
& Economic Research (ISER).
Number 513
SCOTT GOLDSMITH, Economist, Institute for Social & Economic
Research (ISER), testifying from Anchorage, states he has talked to
Mr. Cremo about his plan (SJR 38), and thinks it is an interesting
concept. Mr. Goldsmith has five comments he would like to make
regarding SJR 38, which he will submit in further detail in writing
to the committee. They are:
1) The Permanent Fund is at risk if this plan is adopted.
2) The need for safety valves must be considered.
3) The plan appears to be simple, but it is not.
4) The plan is not a magic and painless solution.
5) Less radical alternatives should be considered.
Number 533
MR. GOLDSMITH details the previously listed five points.
TAPE 94-5, SIDE B
Number 562
MR. GOLDSMITH continues with his detailing of the previously listed
five points.
Number 529
MR. GOLDSMITH suggests potential solutions to budget problems.
They are:
1) Solution for economic instability from year to year: cap
the budget at 2.5 billion dollars for four years.
2) Solution for price-induced fluctuations in petroleum
revenues from year to year: restructure constitutional budget
reserve to fill all or a portion of any short-fall between current
revenues and the budget.
3) Solution for long-run petroleum revenues declining with
production: cap the budget at 2.5 billion dollars for four years,
the same as number 1.
4) Solution to minimize long-term Prudhoe Bay-type economic
boom and busts: double the Permanent Fund contribution rate for
royalties on newly discovered natural resource production to 100%.
5) Solution to maximize the return on the Permanent Fund: base
the dividend on the long-term averaged total return of the fund,
including unrealized gains and losses.
Number 506
CHAIRMAN LEMAN thanks Mr. Goldsmith for his comments and asks that
he submit his testimony in writing to the committee by Monday, in
order for members to review it before the meeting Wednesday,
February 2, 1994. The chairman asks Mr. Cremo if he would like to
comment on any part of the testimony made by Mr. Goldsmith.
Number 496
MR. CREMO declines, saying he would like to see a copy of Mr.
Goldsmiths' written comments, so he could intelligently respond to
them.
Number 488
CHAIRMAN LEMAN asks if there is anyone else who would like to
testify on SJR 38. Hearing none, he announces SJR 38 will be held
until the committee meeting Wednesday, February 2, 1994.
Number 483
CHAIRMAN LEMAN announces the committee will now take up SB 245
PERMANENT FUND INVESTMENTS IN REAL ESTATE and calls Mr. Scott and
Mr. Kelly of the Permanent Fund Corporation to the committee table.
Number 476
JIM KELLY, Research and Liaison Officer, Permanent Fund
Corporation, passes out four Permanent Fund real estate portfolios.
Number 470
BILL SCOTT, Executive Director, Permanent Fund Corporation
introduces himself, Mr. Kelly, and Malcolm Goepfert, the portfolio
analyst from the real estate department of the Permanent Fund
Corporation. He states the purpose of SB 245 is to authorize the
permanent fund corporation to invest up to 100% in real estate
investments. The corporation has found that the current 40%
ownership limitation does not give the corporation as much control
as it needs over assets.
Number 447
MR. SCOTT claims the corporation has come a long way and learned a
lot in the ten years since the corporation has been authorized to
invest in real estate. The Alaska Permanent Fund Corporation is
recognized nation-wide as being a very good real estate operation.
Number 423
MR. SCOTT says that the corporation needs to have the ability to
invest 100% in some types of real estate, particularly those in the
smaller range, under 25 million dollars. He states the corporation
will still be involved in co-investing, but that it needs the
latitude to invest 100% in some smaller projects. The board of
trustees of the corporation voted unanimously in support of being
able to invest 100% in some real estate investments. The
corporations' rate of return on real estate investments is about
double the national rate of return.
Number 354
CHAIRMAN LEMAN tells Mr. Scott he wants to review the backup
materials on SB 245. He asks Mr. Scott how he would feel about
only having authorization to invest 100% in small investments, but
continue to be required to have co-investors on larger real estate
investments.
Number 332
MR. SCOTT replies that the chairman's suggestion would certainly be
one solution, and the solution in SB 245 was suggested because it
was simple and straightforward, but it is certainly not the only
solution.
Number 315
MR. KELLY adds that the Permanent Fund Corporation has always been
very selective in its' real estate investments. The corporation is
allowed to have 15% invested in real estate. The Current amount
invested is under 7%. The Board of Trustees of the Permanent Fund
Corporation has set a target rate of 10% investment in real estate.
We believe it will be easier to get closer to the target investment
rate of 10% if we have the additional flexibility of being able to
invest 100% in real estate investments.
Number 297
MR. SCOTT says another problem caused by only being able to invest
40% in a project is that deals are often not closed with a co-
investor because the corporation is not willing to give up certain
controls.
Number 278
CHAIRMAN LEMAN announces SB 245 will be taken up again on
Wednesday, February 2, 1994.
Number 274
CHAIRMAN LEMAN announces the schedule for Wednesday, February 2,
1994 will be SB 245, SB 170, SJR 38, and bills previously heard.
Number 267
CHAIRMAN LEMAN adjourns the meeting at 10:22 a.m.
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