Legislature(1995 - 1996)

04/17/1996 03:10 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 HB 345 - PENSION INVESTMENT BOARD PROCUREMENTS                              
                                                                               
 Number 536                                                                    
                                                                               
 CHAIRMAN KOTT announced the committee would hear HB 345, "An Act              
 relating to the procurement of investment and brokerage services by           
 the Alaska State Pension Investment Board."  The bill has been                
 heard before and there were some concerns.  Chairman Kott said                
 there is a proposed committee substitute.                                     
                                                                               
 Number 563                                                                    
                                                                               
 REPRESENTATIVE SANDERS made a motion to adopt the proposed                    
 committee substitute for CSHB 345(L&C), Version K, Bannister, dated           
 4/10/96.                                                                      
                                                                               
 CHAIRMAN KOTT asked if there was an objection.                                
                                                                               
 REPRESENTATIVE NORMAN ROKEBERG objected.  He said the 7 percent               
 figure is still included in the bill and he objected to the                   
 original bill and will object to the committee substitute.                    
 Representative Rokeberg said he sees no reason to conduct further             
 deliberations on the bill.                                                    
                                                                               
 CHAIRMAN KOTT indicated the committee is addressing Version K and             
 the 7 percent figure has been omitted.                                        
                                                                               
 REPRESENTATIVE ROKEBERG indicated he was looking at the wrong bill.           
 He removed his objection.                                                     
                                                                               
 CHAIRMAN KOTT said Version K was before the committee.                        
                                                                               
 Number 624                                                                    
                                                                               
 GEORGE DOZIER, Legislative Assistant to Representative Pete Kott,             
 came before the committee to explain the difference between the               
 State Affairs Committee version of the bill and the proposed                  
 committee substitute.  He explained the bill, as the Labor and                
 Commerce Committee received it, directed the board to increase                
 brokerage in investment services to the level of 7 percent in the             
 state of Alaska utilizing state of Alaska businesses.  Unless the             
 board made a written finding that it was unable to meet this goal             
 because there weren't sufficient individuals present in the state             
 of Alaska with the requisite competency levels.  Mr. Dozier said at           
 the last hearing on the bill there was also a committee substitute            
 that was before the committee which was not adopted.  It went a               
 little further by adding a subparagraph 11 which required the board           
 to invest funds in the state of Alaska under certain conditions.              
 There was a considerable amount of testimony by individuals who               
 felt that this bill would undermine the fiscal integrity of the               
 trust corpus.  Accordingly, a committee substitute, which the                 
 committee members currently have before them, was generated.  The             
 new committee substitute directs the board to utilize investment              
 and brokerage services in the state of Alaska, but only if the                
 business can provide services without materially sacrificing the              
 level of competency that is available or without materially                   
 increasing the cost of utilizing that particular service.  It                 
 defines an in-state business as a business that is located in the             
 state of Alaska and where the majority of its employees are located           
 in the state of Alaska.                                                       
                                                                               
 MR. DOZIER explained the committee substitute goes further in that            
 it directs the board to invest funds in state of Alaska                       
 investments, but only to the extent that these investments would              
 have a risk level that is comparable to or more beneficial to the             
 other beneficiaries of the trust as alternative investments that              
 could be made.  He pointed out this would only be to the extent               
 that the in-state investments would have an anticipated yield that            
 is as favorable to or more favorable than other alternative                   
 investments that could be made.  He said that concludes his                   
 presentation.                                                                 
                                                                               
 Number 764                                                                    
                                                                               
 REPRESENTATIVE ELTON asked if there is currently anything that                
 stops the state from using an in-state brokerage or investment                
 house if the yields are going to be greater.                                  
                                                                               
 MR. DOZIER said he couldn't say for certain, but he believes that             
 there is currently nothing in statute that would prevent that.                
                                                                               
 Number 789                                                                    
                                                                               
 JOHN WALSH, Legislative Assistant to Representative Richard Foster,           
 came before the committee.  He said he has reviewed the committee             
 substitute that is currently before the committee and has no                  
 objections to the changes made.                                               
                                                                               
 REPRESENTATIVE KUBINA questioned the reason for the bill.  He asked           
 if a problem has been identified where the investment board is not            
 investing at all in the state.                                                
                                                                               
 MR. WALSH said he thinks of it more as more of an opportunity.                
 This is an incentive to take a closer look at investment potential            
 and investment services in the state.  He said the tendency, which            
 is understandable, is to go to professional services in some of the           
 larger financial communities such as Chicago, New York, San                   
 Francisco and Seattle.  While that is understandable in that the              
 professional community and financial markets are there, he said it            
 is less likely that they would look at investments in the state.              
 It is going to be less likely that they package investments to be             
 considered given that they reside out of state.  Mr. Walsh said               
 this is not uncommon in pension trusts throughout the nation, yet             
 they have economically targeted investment motive to the pension              
 fund or requirement.  There has been testimony from the union in              
 Alaska.  This is clearly a requirement in their union trusts.  Mr.            
 Walsh said Section 11 is current law in the Alaska permanent fund             
 investment fund, so it isn't unreasonable that it be included in              
 the bill.  He said he feels there are opportunities for                       
 establishing or utilizing brokerage services in Alaska.  Given the            
 age of communication and telecommunications, it is not unreasonable           
 to begin the search for the use of local services and local                   
 investments.  It is an opportunity to enhance the economy and                 
 circulate the money more than it currently is.  Mr. Walsh said                
 there is no interest in diminishing the integrity of the funds or             
 unduly compromising the fiduciary responsibilities of the board.              
                                                                               
 Number 923                                                                    
                                                                               
 REPRESENTATIVE KUBINA asked if Section 10 is also in the permanent            
 fund requirements.                                                            
                                                                               
 MR. WALSH said not to his knowledge.                                          
                                                                               
 REPRESENTATIVE ELTON asked what the meaning is of "without                    
 materially sacrificing competency or performance."                            
                                                                               
 MR. WALSH said he thinks the intent is, as he understands it, is to           
 avoid what was characterized as a quota system in the 7 percent               
 previous language.  He said they didn't want to force the board to            
 meet a minimum test, the 7 percent test, at the expense of signing            
 on to less than competent or less than professional services.  He             
 said he thinks it more accurately defines the intent of the                   
 legislature.  In other words, use it where possible, but don't                
 diminish in any way what you'd normally require.  Mr. Walsh said,             
 "That keep you from having to do a quota test - 7 percent of                  
 transactions to - you know - looking at proposals before you from             
 Alaskan firms unless otherwise incompetent you would consider using           
 them."                                                                        
                                                                               
 Number 1014                                                                   
                                                                               
 REPRESENTATIVE ELTON said in Section 10 it says, "In-state business           
 means a business that is located in this state if the majority of             
 individuals in the business to participate in providing the                   
 services to the board or locally in-state...."  He said he would              
 read that where Smith Barney could do that if the people who were             
 providing were Smith Barney employees in Juneau or Fairbanks.  You            
 would be talking about local firms, but would be talking about                
 national firms.                                                               
                                                                               
 MR. WALSH said he couldn't comment as the integrity of particular             
 individuals and particular firms because Representative Foster's              
 intent.  The board defines requirements for the investment.  He               
 said he doesn't think they're going to diminish the investment                
 grade just because the transaction is done in-state.  If it is done           
 in-state, the likelihood that local investments may be packaged or            
 offered should increase.  Mr. Walsh said he believes there are                
 people waiting to testify via teleconference.  He referred to Mr.             
 Rose and said he understands that he is a capable investment                  
 counselor that could offer these types of services.  Mr. Walsh said           
 he doesn't think it is unreasonable to expect down the road that we           
 develop this in-state with the Pacific Rim being the potential                
 client base.  This is something that could help anchor financial              
 services in Alaska.  Hong Kong has a deadline on its life                     
 expectancy with respect to free market operations.  It is uncertain           
 at any rate.  To encourage this in Alaska is an opportunity that              
 should be seriously looked at.                                                
                                                                               
 Number 1204                                                                   
                                                                               
 REPRESENTATIVE PORTER referred to the competency language and said            
 most of the businesses have data available on their return on                 
 investments and the (indisc.) costs that they take off the top.  He           
 commented that is the bottom line of competency.  He said he would            
 read it as saying that if that difference is too severe, they                 
 wouldn't have to buy into it.  Representative Porter said he                  
 understands the concern about these kinds of these things, but he             
 finds it interesting that the president of the state AFL-CIO said             
 that their trust funds have these kinds of requirements and they              
 like it fine.                                                                 
                                                                               
 Number 1279                                                                   
                                                                               
 REPRESENTATIVE SANDERS said he doesn't understand what the bill               
 accomplishes.  He said there is nothing keeping these funds from              
 currently doing these things.  We're not telling them they have to            
 do it, it is a suggestion.  He asked Mr. Walsh what is being                  
 accomplished.                                                                 
                                                                               
 MR. WALSH said, "It is possible for them to use these services now.           
 It may be the power of suggestion through statute that helps them--           
 it--we can't give a bidders preference as you do in vendor services           
 when the state procures computers or different capital needs.  We             
 can offer a preference because all parties would be offering the              
 same specifications, a computer with such and such specs.  So given           
 that we're gonna get the same equipment, it is reasonable that we             
 can give a preference that does business in Alaska.  Professional             
 services don't exactly have that same spec that we're not sure at             
 the end what we will get.  In other words, there is variability and           
 so we can't offer, according to Legal, a bidders preference in an             
 RFP package.  So the next best thing is sort of incentive without,            
 again, transgressing that fiduciary responsibility in the                     
 obligation, which none of us want to do.  So I guess it's between             
 moral persuasion an requirement.  And we think that as the governor           
 is working different political campaigns for marketing Alaska, we             
 think this is a similar type of local business, persuasion, and we            
 think it should yield, over time, results that help keep the                  
 classrooms full which, therefore, employs a teacher, helps keep our           
 community wholesome.  And I think, personally, that it helps root             
 a financial community that I think is prime in a global market                
 where it doesn't matter that you're commuting daily to Chicago or             
 New York.  You can do it tele-commuting and I think we're wise to             
 suggest that - it is a (indisc.) industry and Anchorage is clearly            
 a hub with this kind of necessary soil, in other words, to grow               
 such crops and I think this is the beginning of our sophistication            
 in the marketplace and I think it's a reasonable challenge for all            
 of us to suggest and to encourage."                                           
                                                                               
 Number 1433                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG referred to page 3, line 3, "without                  
 materially increasing the cost to the board," and asked him to                
 comment on the word "materially."                                             
 MR. WALSH explained there is a fiscal note attached to the                    
 legislation from the Department of Revenue.  It is their position             
 that by slowing down the transactions, in other words, by going to            
 a retail outlet or by backing away from block transaction, we could           
 increase the transaction costs.  He said "materially" may be a                
 given, but we don't want to go any further than we have to in                 
 support of a local hire provision.                                            
                                                                               
 Number 1485                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG referred to line 13 and said Mr. Walsh                
 mentioned that subsection 11 was similar to language in the                   
 permanent fund investment statute.  He referred to there being a              
 reference to (2) of this subsection, "are consistent with the                 
 investment policies established by the board under (2) of this                
 subsection," and said (2) of this subsection says is the board will           
 establish policies to make investments."  Representative Rokeberg             
 then referred wording on page 2, (2) "establish investment policies           
 for the funds for which it is responsible after reviewing                     
 recommendations from the investment advisory council and the                  
 Department of Revenue."  He asked if the permanent fund statute has           
 a similar clause.                                                             
                                                                               
 MR. WALSH said he would check on the permanent fund language.  He             
 noted the reference to subsection (2) is unique to this bill                  
 because it is a certain statute which is referenced that is not in            
 a permanent fund statute.  He said it is arguable that they could             
 have amended Section 2 to say the same thing, but other than the              
 reference to Section 2, the language is identical to the permanent            
 fund language.  Mr. Walsh noted they have spoke to Mr. Mallott,               
 Executive Director of the permanent fund and he indicated his is              
 clearly pursuing that persuasion in his statute and is working with           
 the local investment community.  He said he is very interested and            
 is looking forward to possibly packaging something with the                   
 community to the board for consideration.                                     
                                                                               
 Number 1780                                                                   
                                                                               
 REPRESENTATIVE MASEK asked Mr. Walsh if he could respond regarding            
 the current work draft, Bannister.                                            
                                                                               
 MR. WALSH indicated he hasn't seen the current work draft.                    
                                                                               
 CHAIRMAN KOTT said what he thinks Ms. Bannister, drafter of the               
 bill, is saying is she isn't sure if there is a problem or not.               
                                                                               
 MR. WALSH said that was probably the hesitation in the first                  
 committee substitute, that it be left at 7 percent.  He said he               
 doesn't object to the modification.  He explained he thinks what              
 Ms. Bannister is raising is the potential for a conflict or                   
 repercussion in the definition of "in-state."                                 
                                                                               
 REPRESENTATIVE MASEK said she would appreciate it if Ms. Bannister            
 could address the committee at the next meeting on the measure.               
                                                                               
 Number 1818                                                                   
                                                                               
 DOUGLAS MERTZ, Attorney, came before the committee to testify on HB           
 345.  He explained he is an attorney in private practice in Juneau.           
 Mr. Mertz told the committee that for the last four years he has              
 represented a client who is a beneficiary of one of the trust funds           
 administered by the state Pension Investment Board.  The goal                 
 during this period is to educate and to remind the state Pension              
 Investment Board of its duty as a trustee, mainly, its duty to                
 invest solely for the best interest of the beneficiaries of this              
 pension fund and for no other reason.  Mr. Mertz said his concern             
 with the previous version of the bill and the current version is              
 that this may be the opening wedge for a classic pension fund raid,           
 the kind of thing we've seen all over the country.  Everyone of               
 those raids on a pension fund, whether it is a large or small raid,           
 has been justified on the basis that it's good for the                        
 beneficiaries.  Mr. Mertz pointed out that even when the real                 
 design of the pension fund raid is to divert money from the                   
 beneficiaries or from the fund to someone else's pocket, that is              
 the justification that is used.  He said he thinks that is the way            
 to fairly characterize this.  Mr. Mertz referred to the current               
 version of the bill and said the important thing is to look at the            
 bottom line.  If the bill changes the way the Pension Investment              
 Board makes its investments now, and now it invests solely for the            
 best interest of the beneficiaries, if it changes that then it does           
 indeed violate the trust duty because that is the only concern that           
 they are supposed to have which is solely the best interest of the            
 beneficiary, in which case it would be illegal and a violation of             
 the statute and the constitutional provision on public employee               
 pension funds.  Mr. Mertz said if it doesn't affect the way they do           
 it, if they still would exercise their complete independent                   
 judgement on what investments are in the best interest of the                 
 beneficiaries, then it doesn't accomplish anything and you might as           
 will not waste any of your time on it.                                        
                                                                               
 MR. MERTZ reminded the committee that the last time that the state            
 decided to act as if pension funds in its control were the state's            
 own funds and were available for purposes other than the sole                 
 benefit of the benefit of the beneficiary group was with the mental           
 health trust lands litigation.  He said you don't want to do                  
 something here that is going to create litigation either by the               
 beneficiaries or by people who think that the bill should give them           
 something else out of this, for instance like the brokerage                   
 community in Anchorage.  Mr. Mertz pointed out there are many                 
 beneficiaries of these trust funds and the people know that these             
 pension funds are funds that they have earned and there is a legal            
 duty to invest solely for their own interest.  It is highly likely            
 that if the Pension Investment Board is forced, by this bill, to              
 change the way it invests some of those beneficiaries will not                
 accept it and will decide that litigation is in order.  He urged              
 the committee to not move the legislation.                                    
                                                                               
 Number 2085                                                                   
                                                                               
 REPRESENTATIVE ELTON said in listening to Mr. Mertz's testimony, he           
 could almost make an argument that if we're going to do this, not             
 to have a 7 percent cap because at least no more than 7 percent is            
 at risk.                                                                      
                                                                               
 MR. MERTZ said in a sense that is correct and in another sense a 7            
 percent cap would at least give some clarity, whereas in the                  
 current version, you can have litigation over what "materially                
 sacrificing" means or some of the other terms.                                
                                                                               
 Number 2162                                                                   
                                                                               
 MILT BARKER was the next person to testify on HB 345.  He informed            
 the committee he is a public employee retirement system (PERS)                
 beneficiary and a former deputy commissioner of the Department of             
 Revenue.  He said he would underscore the comments made by Mr.                
 Mertz about the difference between this fund and other funds.  He             
 said we are talking about various funds under the supervision of              
 the Pension Investment Board and these are trust funds.  They are             
 different in character from the permanent fund and the standards              
 that apply are different.  Mr. Barker said he would like to point             
 out that within the bill there is a difference of standards, even             
 within the proposed amendment to the statutes, that is the                    
 standards for brokerages and investment advisory businesses is that           
 the use of such in-state firms must result in no material sacrifice           
 of the interest of the pension fund and the beneficiaries.  With              
 respect to investment of funds, you have a different standard in              
 which the criteria is that the investment would provide a                     
 performance yield equal to or better than other investment                    
 opportunities.  Mr. Barker said what is really being said is that             
 the use of in-state investment management services does not have to           
 provide some positive or at least no detriment to the funds.  He              
 said he thinks that is the different in standards that should be              
 addressed in the legislation.  Mr. Barker said for the reasons Mr.            
 Mertz indicated, he believes that these standards are in conflict             
 with fiduciary obligations.  He said with respect to the in-state             
 investment he would like to give an example of what could be in               
 conflict with the fiduciary obligations.  Fiduciaries not only have           
 to consider the cash flow from investments, but they need to take             
 into account the cash flow from employer contributions.  When you             
 do that, you have to recognize that in-state investments could in             
 their timing of gains and losses tend to produce losses at the same           
 time that employer contributions would be under stress.  For that             
 reason, if fiduciaries are going to act in the best interest of the           
 fund they would have to invest in Alaska less than they would in              
 investments elsewhere.  Mr. Barker said he thinks the legislation             
 is unnecessary.  [End of tape...]                                             
 TAPE 96-36, SIDE A                                                            
 Number 001                                                                    
                                                                               
 MR. BARKER continued, "...about that could be affected because AHFC           
 has recently initiated a multi-family mortgage program.  It's for             
 multi-family housing of five or more units and it does not have any           
 income restrictions on it.  This is something that has been a                 
 hurdle for many communities and many projects around the state -              
 large or multi-family projects - that now has a potential source of           
 financing.  And I would -- I do have some copies of a news article            
 relating to that that I can pass around if the committee is not               
 fully aware of that.  Thank you, Mr. Chairman."                               
                                                                               
 Number 158                                                                    
                                                                               
 DAVE ROSE, Chairman and Chief Executive Officer, Alaska Permanent             
 Capital Management Company, testified via teleconference from                 
 Anchorage.  He explained the organization he represents is a money            
 management firm located in Anchorage.  He said they deal with                 
 institutional investment only and not high network individuals or             
 single individuals of any kind.  Mr. Rose stated they only work in            
 Alaska and currently manage a little less than $1 billion of                  
 Alaskan money, none of which is PERS/TRS money.  He said ordinarily           
 he wouldn't testify in favor of what he would call a compulsive               
 piece of legislation.  What we have in this case is a situation               
 where the Alaska purchasing code allows a lot of discretion to the            
 PERS and PERS operatives, with respect to how they bid work and               
 conduct themselves.  Unfortunately, what has happened is PERS and             
 TRS folks have not exercised very good common sense.  They have not           
 recognized that they have come to realization that some Alaskan               
 funds can be managed, in part, by Alaskans.  Both common sense and            
 less realization does not seem to have employed.  Clearly, we have            
 an out of balance situation and it cries for solutions in two ways,           
 either the adoption of this bill or a change to the purchasing code           
 which puts Alaskans on a more even playing field.                             
                                                                               
 MR. ROSE referred to the last fiscal year and said the PERS/TRS               
 folks in the marketable debt area, the purchasing and sale of                 
 bonds, purchased and sold $3,324,418,776 worth of bonds.  He said             
 that is $3.3 billion and not one cent of that trade was conducted             
 through Alaska.  Mr. Rose said last fiscal year, the PERS/TRS board           
 employed 19 money managers and not one of them was Alaskan.  Last             
 fiscal year money management fee by PERS/TRS combined was $11.8               
 million and none of that was expended in Alaska.  Last year they              
 hired special consultants and paid $56,000 and none of them were              
 Alaskans.  With respect bank custody, which is a securing of cash             
 and securities, last year the PERS/TRS board spent $1,441,798.  Not           
 one cent was spent in Alaska.  Mr. Rose informed the committee that           
 currently the PERS/TRS operatives are entering into negotiations              
 for contracts, that if indeed there is a problem in Juneau with               
 respect to physical or personal ability to maintain the fund, those           
 operations would move to San Francisco and nowhere in Alaska.  Mr.            
 Rose said he would like to speak to one thing about competence.  He           
 explained the firm he works for is a small firm which manages to do           
 about 8 percent to 10 percent of its business in Alaska with                  
 Merrill Lynch, who has an institutional desk and does a fine job.             
 He said most of their business is done out of Alaska, but they make           
 it a point to give 8 percent to 10 percent of their business to               
 local competent people can handle it.  He said as money managers              
 managing money for other folks in this state other than PERS/TRS,             
 last fiscal year their most representative account earned about               
 17.25 percent audited.  The PERS/TRS return was 15.89 percent.  He            
 said last year his firm earned 1.36 percent better than PERS/TRS,             
 and overlaid on a $6 billion fund, his firms strategy would have              
 returned $81.6 million more for PERS/TRS than the firms outside of            
 Alaska.                                                                       
                                                                               
 MR. ROSE referred to banks and said nearly all his firm's clients             
 in Alaska use either National Bank of Alaska Trust or Key Trust               
 services.  They do an excellent job.  They don't have fails on the            
 transactions and they move hundreds of millions of dollars for his            
 firm and probably hundreds of millions of dollars for pension funds           
 (indisc.).                                                                    
                                                                               
 MR. ROSE referred to financial consultants and said he thinks that            
 some of the people who made themselves available to the one RFP               
 last year, he and Bill (indisc.) who have handled millions of                 
 dollars didn't even make the preliminary cut.  Mr. Rose said he               
 believes that what we've had is a realization of a total imbalance            
 and loss of common sense with respect to how you deal in the                  
 Alaskan community.  There are other agencies that use that common             
 sense.  While Alaskans don't get huge amounts of business, they do            
 get tossed a bone.  These folks would rather deal outside.  Mr.               
 Rose explained the solutions are:  (1) Adopt HB 345; (2) amend the            
 purchasing code; or (3) change some attitudes of how these folks              
 operate.  We are all Alaskans, we have some real competency and we            
 deserve a shot to at least compete for contracts.  He thanked the             
 committee for listening to him.                                               
                                                                               
 Number 657                                                                    
                                                                               
 STERLING GALLAGHER, President, Sterling Limited, was next to                  
 testify via teleconference.  He explained he currently does a                 
 slightly different service than what is being talked about                    
 regarding HB 345, but he has some experience having been the                  
 commissioner of the Department of Revenue during 1974 to 1979.  Mr.           
 Gallagher explained that 1974 to 1979 was the pipeline construction           
 era.  We didn't have any savings in the savings industry in the               
 state at that point in time.  We had $100 million in the savings              
 industry and AHFC and AIDA wasn't up and running.  Mr. Gallagher              
 said he used up to 25 percent of the pension funds to make                    
 investments in the state.  He indicated he got political pressure.            
 He said there was losses of $1 million, but it worked out to be a             
 quarter of 1 percent.  The overall results of the funds was that we           
 were the number one fund earning in the United States.  There were            
 high earnings on fixed income and there was extraordinary high                
 earnings in our stock (indisc.).  While you make investments in               
 Alaska, you can also make strategies in other places.  One of the             
 failures with investment management in this state over the last 20            
 years is that we have a tendency to put procedure over                        
 responsibility.  We make it very cumbersome procedurally, but if              
 someone screws up, we don't ever fire them.  Mr. Gallagher said he            
 thinks it is far more important that we turn the clock back and               
 make people more responsible.  He said, "Under this sort of                   
 arrangement here, you're gonna hire Alaska firms.  If they screw              
 up, they're going to be screwing up in their own back yard.  It's             
 gonna be very personal for them.  They're gonna do you a damn good            
 job.  I can assure you of that."                                              
                                                                               
 MR. GALLAGHER said, "The other reason this hurts me - the whole               
 need for this legislation - I had a financial advisory service in             
 this state who in six years there was two RFPs to bid on with state           
 government.  One, I misplaced it and the other one I just wasn't a            
 big enough firm to beat against the outside firms.  Since that                
 time, I've been able to be hired by the University of Moscow to --            
 in Russia -- hired by the government at India, been hired by the              
 City of Socking (Sp.?), I have had to move out some of my                     
 operations out of this state all because you don't get an                     
 opportunity here and it really hurt.  We've come back to Alaska to            
 say, `Wake up guys, there are some competent people here who could            
 provide this service and they should be given an opportunity to               
 work here.'"                                                                  
                                                                               
 Number 839                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG said there has been testimony in the past             
 that one of the concerns about hiring local brokerages and money              
 managers is that they have not been able to get large block                   
 training discounts on large blocks of stock when you're dealing               
 with security transactions.  He said Mr. Rose mentioned that he               
 used the Merrill Lynch institutional desk and so forth.  He asked             
 Mr. Rose if his firm is able to get large block trading discounts             
 as far as his direct dealing with member brokers on the New York              
 Exchange.                                                                     
                                                                               
 MR. ROSE said his firm is able to get what they consider to be the            
 best possible pricing.  He said they look at the same screens that            
 the people on Wall Street look at.  He said, "There aren't many               
 cases where we have to go outside to get the very best pricing, but           
 there are cases when we know what we wish to pay or wish to receive           
 for a purchase and sale, which is on the screen, and if you call              
 your local Merrill Lynch institutional folks up here and they can             
 match the screen price, then they get the deal.  And that is                  
 exactly the kind of deal that we get from anyone else in the                  
 country.  So that we know the prices and if these folks up here can           
 get into their trader, it should be available."                               
 MR. ROSE told Representative Rokeberg he has looked at the fiscal             
 note and almost gagged.  He said he thinks it is ridiculous to say            
 you have to spend $125,000 to figure out who you're dealing with              
 and what the costs are.  The fact of the matter is that the $3                
 billion in marketable debt is transacted by two or three people               
 within the treasury.  He said he thinks that those people, in                 
 dealing with that $3 billion, can spread some of that business                
 around.  He said he wouldn't get it because he isn't in brokerage,            
 but if he can find 10 percent of the time to give money to Merrill            
 Lynch locally, PERS/TRS could do the same.                                    
                                                                               
 Number 973                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG asked Mr. Rose, with the exception of his             
 firm, how many other money managing firms are in the state of                 
 Alaska that his company competes with.  He noted there is McKinley            
 Capital Management and Mr. Godstein has a firm.                               
                                                                               
 MR. ROSE said, "Actually, because I do more fixed income rather               
 than stock, I really compete against National Bank of Alaska and              
 Key Trust.  Godstein and Gillum are McKinley both equities folks              
 and while we have about $60 million in equities, we don't offer the           
 same service as they do.  So there are essentially five major                 
 entities.                                                                     
                                                                               
 CHAIRMAN KOTT said the HB 345 would be held until the following               
 day.                                                                          

Document Name Date/Time Subjects