Legislature(1995 - 1996)

04/27/1996 01:20 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  SENATE BILL 89                                                               
                                                                               
       "An Act relating to the members  of the board and staff                 
       of the Alaska Permanent Fund Corporation."                              
                                                                               
  SHEILA  PETERSON,  STAFF,  SENATOR  STEVE  RIEGER, spoke  in                 
  support of SB  89.  She pointed  out in the past  two years,                 
                                                                               
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  there has  been a  100% turnover  in top  management of  the                 
  Alaska  Permanent  Fund Corporation.    SB 89  would provide                 
  greater continuity in the management of the fund, creating a                 
  more  careful,  deliberate  financial decision-making  tool.                 
  The legislation  clarifies that removal of a trustee must be                 
  for cause.  The number of  public members would be increased                 
  from  four  to five,  with  staggered  terms.   SB  89 would                 
  clarify that investment policies and staffing decisions must                 
  be made in the best interest of the fund.                                    
                                                                               
  JAMES  BALDWIN, ASSISTANT  ATTORNEY  GENERAL, DEPARTMENT  OF                 
  LAW, spoke to an  amendment made in the House  State Affairs                 
  Committee, addressing the concerns  of keeping commissioners                 
  on the Board of Trustees.  He requested that portion of  the                 
  bill not be changed.                                                         
  Mr. Baldwin spoke  to concerns from  the Department of  Law.                 
  He advised that the legislation  would make dramatic changes                 
  to  the  make-up  of  the  board.    The  Department's  most                 
  significant concern  would be  increasing public  membership                 
  with removal of board  members only for cause.   Mr. Baldwin                 
  reminded members that to remove a board members for cause is                 
  a difficult and expensive exercise.   He urged that the bill                 
  be changed before passage.                                                   
                                                                               
  Mr. Baldwin  referenced Page  1, Lines  13-14, Section  (2),                 
  ".....public  members  of  the board  must  have  recognized                 
  competence  and wide  experience in finance,  investments or                 
  other....".   He advised  that there  are only  a couple  of                 
  people in the State who  could meet proposed qualifications.                 
                                                                               
                                                                               
  Mr. Baldwin  added, Page  3, Section  6,  suggests that  the                 
  corporation staff, serve  at the "pleasure" of  the board of                 
  directors.    The  language  is  too broad.    He  suggested                 
  including language "with investment responsibilities".                       
                                                                               
  He pointed out that language on  Page 3, Section 7(b), would                 
  not permit removal  of the executive director  if a conflict                 
  of personality arose.  That  position would be unreplaceable                 
  regardless of fund performance.                                              
                                                                               
  Representative Mulder believed that Sections 6 and 7 were in                 
  opposition.  Mr. Baldwin  agreed that the language  could be                 
  conflicting.  Representative  Parnell asked  if there was  a                 
  "different" meaning  of cause established in  case opinions.                 
  Mr.  Baldwin responded that the  conviction of a crime could                 
  result  from  something  involving moral  turpitude  and  or                 
  dishonesty, citing AS 16.05.100.                                             
                                                                               
  Representative  Brown referenced  Section  2, and  suggested                 
  deletion  of "and  broad experience";  inserting "recognized                 
  competence".  She  thought that  language would broaden  the                 
                                                                               
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  pool.  Representative Brown referenced  Section 4, asking if                 
  the Administration  had  objected, wanting  to select  their                 
  "own" appointees.   Mr.  Baldwin replied  that existing  law                 
  provides that  the board must be responsive  to the governor                 
  and that the  governor must be  responsive to the voters  of                 
  the State.   In existing law,  the governor can appoint  and                 
  fire  appointees,  which guarantees  that  the board  act in                 
  accordance  with  the  wishes  of  the governor.    Governor                 
  Knowles feels strongly  that the board should  be answerable                 
  to someone.                                                                  
                                                                               
  Co-Chair  Hanley commented  that language  changes could  be                 
  more  consistent.    The  board   members  could  either  be                 
  "accountable"  to  the  governor  or   "influenced"  by  the                 
  governor.  Representative Grussendorf  pointed out that  the                 
  Permanent Fund has never been affected  by the transition of                 
  various governors elected since inception and there has been                 
  no fluctuation in the earnings  of the fund.  He noted  that                 
  he did not support the legislation.                                          
                                                                               
  Representative Brown questioned  how the  language would  be                 
  incorporated.  Representative Mulder  stated that he  viewed                 
  the Permanent Fund similar to other state resources and that                 
  board  should be  treated the  same as  other state  boards.                 
  Members are  appointed and  their terms  should "roll  over"                 
  into  the  term of  the next  Governor.   He  suggested that                 
  action would provide continuity to each board.                               
                                                                               
  SB 89 was HELD in Committee for further consideration.                       

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