Legislature(2005 - 2006)

04/12/2005 05:39 PM EDU


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05:39:33 PM Start
05:40:25 PM HB92
05:53:35 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB  92-UNIVERSITY OF ALASKA AND CORPORATIONS                                                                                  
                                                                                                                                
CHAIR NEUMAN announced that the  first order of business would be                                                               
HOUSE BILL NO.  92 "An Act relating to the  purchase of interests                                                               
in corporations,  including limited  liability companies,  by the                                                               
University of Alaska."                                                                                                          
                                                                                                                                
5:40:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON  moved  to  adopt  CSHB  92,  Version  24-                                                               
LS0344\Y, Bannister, 4/7/05, as  the working document.  [Although                                                               
not formally noted,  Version Y was treated as  adopted and before                                                               
the committee.]                                                                                                                 
                                                                                                                                
5:41:03 PM                                                                                                                    
                                                                                                                                
HEATH HILYARD,  Staff to Representative Mike  Kelly, Alaska State                                                               
Legislature,  explained that  the substantial  change to  CSHB 92                                                               
was  the  removal  of  all  language  referring  to  "for  profit                                                               
corporations"  and   hence  this  legislation  applies   only  to                                                               
"nonprofit   corporations."       Additionally,   AS   37.10.085,                                                               
subsection  (a), was  amended to  reference the  Executive Ethics                                                               
Act, which he characterized as a conforming amendment.                                                                          
                                                                                                                                
5:42:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  WILSON inquired  as to  the reasoning  behind the                                                               
University of  Alaska being exempt  from liability  of purchasing                                                               
even a nonprofit.                                                                                                               
                                                                                                                                
5:43:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MIKE KELLY,  Alaska  State Legislature,  sponsor,                                                               
replied  that this  legislation  would permit  the university  to                                                               
invest in its research and  export that research into the private                                                               
sector.  He  added that other universities have  had success with                                                               
similar  programs.   The  university  doesn't  want to  risk  its                                                               
assets  and this  legislation permits,  only by  approval of  the                                                               
Board of Regents, investments [in  small nonprofits].  He related                                                               
that most of  the investment will be on a  small scale for stand-                                                               
alone  organizations.   The university's  partial ownership  does                                                               
not   signify  that   the  organization   becomes  part   of  the                                                               
university, he noted.                                                                                                           
                                                                                                                                
REPRESENTATIVE WILSON  asked if  the university  will be  able to                                                               
[generate revenue] to use as income.                                                                                            
                                                                                                                                
REPRESENTATIVE KELLY  responded that  some income  is associated.                                                               
However, most  often this legislation  would attempt to  export a                                                               
small  venture into  the private  sector, he  added.   In further                                                               
response  to  Representative  Wilson, Representative  Kelly  said                                                               
this  legislation   is  the  [exact]  "blueprint"   from  similar                                                               
successful  university  programs  that   turn  research  into  an                                                               
"application."                                                                                                                  
                                                                                                                                
5:46:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE THOMAS  opined that  this legislation  should move                                                               
to the  House Judiciary  Standing Committee  in order  to further                                                               
deal with the legalities of this issue.                                                                                         
                                                                                                                                
CHAIR  NEUMAN  related  that  one  of  the  committee's  previous                                                               
concerns with HB  92 has been addressed by  changing the language                                                               
to "nonprofit" corporations.                                                                                                    
                                                                                                                                
5:47:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GATTO  offered   the  scenario   in  which   the                                                               
university invests  in what was thought  to be a great  idea, but                                                               
it ultimately  "busts."  Furthermore,  if the idea  busts because                                                               
of  illegal   activity,  will  the   private  investor   be  held                                                               
accountable while the university is [held harmless], he asked.                                                                  
                                                                                                                                
5:48:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KELLY  said he  will not attempt  to give  a legal                                                               
opinion, but  he related  that the  corporation is  separate from                                                               
the university.   Beforehand, the Board of  Regents would clarify                                                               
to  investors  that  the  university  is  a  stand-alone  limited                                                               
liability and  as such,  if the  corporation fails,  both parties                                                               
could lose  the value  of the  stock but  investors would  not be                                                               
able to sue the university.                                                                                                     
                                                                                                                                
REPRESENTATIVE   GATTO  related   his   understanding  that   the                                                               
university has no culpability.                                                                                                  
                                                                                                                                
REPRESENTATIVE KELLY  answered, "Correct."  However,  he reminded                                                               
the committee that [these  investments/corporations] have to pass                                                               
through all the  appropriate channels first to ensure  it's not a                                                               
risky operation.   This legislation comes from the  desire to not                                                               
enter  into  "too  much  risk" and  not  miss  opportunities  for                                                               
Alaska.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  GATTO surmised  then  that  since the  university                                                               
isn't liable, the [private investor] would likely be sued.                                                                      
                                                                                                                                
REPRESENTATIVE  KELLY said,  "Correct," and  reiterated that  the                                                               
university,  prior   to  investment,   would  clarify   that  its                                                               
relationship is held harmless from "any deep pocket" activity.                                                                  
                                                                                                                                
5:52:18 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN offered that every  corporation has its own body and                                                               
immunity.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  WILSON  alluded  to  he  notion  that  nonprofits                                                               
aren't different from limited liability [companies].                                                                            
                                                                                                                                
5:53:35 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN closed public testimony.                                                                                           
                                                                                                                                
REPRESENTATIVE  WILSON  moved  to  report CSHB  92,  Version  24-                                                               
LS0344\Y,  Bannister, 4/7/05,  out of  committee with  individual                                                               
recommendations and the accompanying zero fiscal note.  There                                                                   
being no objection, CSHB 92(EDU) was reported from the House                                                                    
Special Committee on Education.                                                                                                 

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