Legislature(1997 - 1998)
02/27/1998 01:06 PM House JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HJR 50 - PERMANENT FUND PUBLIC CORPORATION [Contains discussion of HB 81.] CHAIRMAN GREEN announced the next item of business would be HJR 50, proposing amendments to the Constitution of the State of Alaska relating to a public corporation established to manage the permanent fund. Number 1135 PATRICK LOUNSBURY, Legislative Secretary to Representative Jeannette James, Alaska State Legislature, presented HJR 50 on behalf of the sponsor. He explained that it is an amendment that, if passed, will go before the voters at the next election. It essentially accomplishes two goals, one of which is to provide continuity within the board of the permanent fund. Mr. Lounsbury reminded members that former-Governor Hickel had come in and simply wiped out the board; four years later, Governor Knowles did essentially the same thing. With the Alaska Permanent Fund Corporation being such an important corporation and having more liquid wealth than any other asset in the state, continuity would be a reasonable goal. Equally important, HJR 50 also provides accountability by allowing board members to be confirmed by a joint session of the legislature. This would give Alaskans a little more access and improved scrutiny. Mr. Lounsbury described the resolution as straightforward. Number 1224 REPRESENTATIVE BUNDE referred to the executive director of the Alaska Permanent Fund Corporation and asked how the directorship is achieved. MR. LOUNSBURY said HJR 50 would not affect that. Number 1247 REPRESENTATIVE BUNDE asked about the provision for removing board members. MR. LOUNSBURY explained that presently, board members may serve at the pleasure of the governor, which is how entire boards have been eliminated. This language would allow board members to be removed as provided by law. There is enabling legislation, HB 81, now before the House Finance Standing Committee. Number 1293 REPRESENTATIVE CROFT referred to HB 81 and asked whether these are two-year, staggered terms, with members appointed by the governor but not confirmed by the legislature. MR. LOUNSBURY said no, he believes those two-year, staggered terms would have removal for cause. REPRESENTATIVE CROFT asked if they are confirmed by the legislature. MR. LOUNSBURY said yes. Number 1348 REPRESENTATIVE ROKEBERG referred to an unsigned letter in the bill packet dated January 6, 1995, from Governor Knowles to Mr. Carl F. Brady, Jr., removing him from the Board of Trustees of the Alaska Permanent Fund Corporations. He asked how this legislation overcomes the right of the governor to appoint. MR. LOUNSBURY explained that the letter is an example of how arbitrarily some appointees can be removed. He added, "Don't get me wrong. I believe in our constitution. I believe in a strong constitution. I believe in a strong governorship. However, when dealing with the permanent fund board, I think fiduciary responsibility, and acting in the best interests of the fund for the people of the state of Alaska, is more important than a politician's philosophy of government." Number 1438 REPRESENTATIVE ROKEBERG asked whether HB 81, the enabling legislation, provides for the removal of the head of the board. MR. LOUNSBURY answered that it is the entire board. REPRESENTATIVE ROKEBERG asked whether they could be removed for cause. MR. LOUNSBURY said they hadn't wanted to change the constitution. They had tried to do it in statute, but were thwarted. Mr. Lounsbury stated, "Article III, Section 26, of the constitution, provides that you have to be the head of a principal department, a regulatory agency or quasi-judicial, which clearly the permanent fund does not lie under any of that jurisdiction. So, to deal with the permanent fund corporation, it ... has to be in the constitution. And that's why we chose this course." REPRESENTATIVE ROKEBERG asked for clarification. Number 1517 REPRESENTATIVE JAMES explained, "Basically, this was a bill that we passed in 1996 and was vetoed by the Governor because of its unconstitutionality. ... So, I put the bill back in again. We tried to work around the constitutionality of it. The problem is that we wanted to be sure that the permanent [fund] board could only be removed for cause, because we wanted to maintain the continuity on the board, as having such an important responsibility. And it can't be, under the current constitution, because what allows us to do that in the constitution doesn't include the permanent fund board." REPRESENTATIVE JAMES further explained that they had to make the permanent fund board subject to legislative confirmation in order to make a law that says members only can be removed for cause. Otherwise, members serve at the pleasure of the governor, and any governor could come in, take the board completely apart and put another one in. She concluded, "We have support from all of the previous board members since the beginning of the permanent fund, plus Oral Freeman, who is the father of the permanent fund, and the current board members support this policy and this procedure. The reason why we have the constitutional amendment is to be able to pass HB 81." REPRESENTATIVE ROKEBERG mentioned language referring to a member of the board of the corporation who is not the head of a principal department. He asked what the intention is, and whether they are adding to the board. Number 1638 MR. LOUNSBURY replied that they are trying to dovetail the Alaska Permanent Fund Corporation into the constitution, so that the legislature may insert the provision, "as provided by law," to get to removal for cause. REPRESENTATIVE ROKEBERG expressed his understanding that what Mr. Lounsbury had stated earlier is already in the constitution. He asked whether it is to make sure it is not contrary to another portion. MR. LOUNSBURY said yes. REPRESENTATIVE ROKEBERG expressed understanding that the bill then provides "for cause" authorization, as for the Alaska Public Utilities Commission and the few quasi-judicial bodies in the state that would have "for cause only." REPRESENTATIVE JAMES said that is correct. Number 1695 REPRESENTATIVE BERKOWITZ suggested HB 81 should have been provided. He then mentioned that the notion of cause exists in a universe with the idea of expanding fiduciary duty. The question of what the reasonably prudent investor would do is also evolving. It used to be that the reasonably prudent investor was investing for the highest rate of return. Now, however, there might be a more social agenda, such as the question of whether to invest in tobacco stock. Representative Berkowitz said, "And in my estimation, that kind of philosophical difference to the notion of what constitutes a reasonably prudent investor means there's a difference in the expectation of what the fiduciary responsibility would be, and that would amount to cause." REPRESENTATIVE JAMES said that is arguable. Number 1792 REPRESENTATIVE CROFT asked whether it is Article III, Sections 25 and 26, and particularly the latter, that limits them in this area. MR. LOUNSBURY said yes. REPRESENTATIVE CROFT said, "So, we're not allowed to establish that any executive agency appointee serves for good cause, or any other restriction, except if they fit under Section 26?" MR. LOUNSBURY replied that if it is not in the constitution, they can't do it like that. He cited the Alaska Railroad as an example. REPRESENTATIVE CROFT noted that the previous try had been vetoed by the Governor. He asked whether there had been any other determination, such as by the court, that it was unconstitutional. MR. LOUNSBURY answered that Bradner v. Hammond had addressed that specific issue. Number 1869 CHAIRMAN GREEN agreed that the committee needs to see the companion bill, HB 81. He announced they would hold over HJR 50.
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