Legislature(2003 - 2004)
04/27/2004 09:02 AM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 379(JUD)
"An Act providing that public members of the Board of Trustees
of the Alaska Permanent Fund Corporation may be removed only
for cause; and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken explained that this legislation, which is sponsored
by the Senate Rules Committee by Request of the Governor, would
provide the process through which an Alaska Permanent Fund
Corporation Board of Trustees public board member could be removed
for cause.
MIKE BARNHILL, Assistant Attorney General, Commercial/Fair Business
Section, Civil Division (Juneau), Department of Law, stated that
under current law, a public Board member could be removed from
their position on the Board for any reason provided the reason is
presented in written format. This bill would change the current
scenario in that a Board member trustee could only be removed "for
cause." He stated that the bill defines "for cause" to be such
things as "inefficiency, misconduct in office, neglect of duties,
and conviction while in office of crimes involving moral
turpitude." The current process is detrimental to the effectiveness
of the Board as there is value in maintaining institutional
knowledge and continuity of management of the $28 billion fund.
Co-Chair Wilken asked for clarification that Mr. Barnhill is
speaking of language in the Judiciary version of the bill, Version
23-GS2142\D.
Mr. Barnhill concurred.
Mr. Barnhill stated that the bill would allow the aggrieved Board
member, through a hearing process, to present witnesses on their
behalf, with the final hearing decision regarding their removal
being filed with the Lieutenant Governor. He also noted that during
the bill's progression through various committees, numerous
questions regarding the hearing process arose. In response, a
forthcoming committee substitute, Version 23-GS2142\H has been
developed that would streamline the process by aligning it with
other current "removal for cause" statutes that do not require a
hearing process, as detailed in the "Other Alaskan Statutes 'For
Cause' Removal Provisions" handout [copy on file] that was compiled
by the Department of Law. The streamlined process would, were the
Member to challenge the reason for removal, involve the Alaska
Court System in the final determination process.
Co-Chair Green moved to adopt the Version 23-GS2142\H committee
substitute as the working document
There being no objection, the Version "H" committee substitute was
adopted as the working document.
ROBERT STORER, Executive Director, Permanent Fund Corporation,
Department of Revenue, explained that typically it takes
approximately two years for a Board member to become thoroughly
educated on Board matters. The six-member Board consists of two
Cabinet members one of whom is the Commissioner of the Department
of Revenue, and four members who are appointed by the Governor and
who serve four-year, staggered terms with one Board member position
expiring on June 30th of each year. The Alaska Permanent Fund
Corporation has not been afforded the protection of removal for
cause, as have other Boards.
Mr. Storer shared that on two different occasions, five of the six
Board Members have been replaced when a new Administration took
office. He could not say that this has disadvantaged the Permanent
Fund Corporation; however, due to the maturity level of the Fund
and the length of time that is spent regarding the various
investment approaches, adoption of this policy would be beneficial.
The Corporation believes that "it is very important" that Board
continuity occurs in order for the education and knowledge to be
gained in some systemic manner. He noted that the Governor Frank
Murkowski Administration retained two Board members and appointed
others who had a previous or related experience with the Permanent
Fund Corporation. This provided a very smooth transition to occur.
Any new Administration would have the ability to replace two
members immediately, one being the Commissioner of the Department
of Revenue and the other being the Cabinet member. An additional
replacement would be possible on June 30th of that year.
Mr. Storer also observed that new Board members learn far more
quickly when allowed to gleam knowledge from existing Board
members. While numerous State boards operate with the removal for
cause component, he urged the Committee to support the bill.
Senator Hoffman, noting that the Version "D" committee substitute
incorporated the definition of "for cause" but the Version "H" did
not, asked whether the definition of "for cause" exists within
State statute.
Mr. Barnhill responded that were a lawsuit filed by the aggrieved
Board member, the Alaska Court System would apply a test to
determine whether the reason was capricious, arbitrary, or illegal.
If the determination were that none of those applied, then the
determination would be that it was valid. This is a "common law
defined term."
Senator Bunde spoke in support of the bill as should there "be
mischief at foot" and were a Governor to replace all Board members
with people he could control, there might be a way to "manipulate
the dividend to the detriment…of the overall investment goal of the
Permanent Fund."
Senator Bunde moved to report the bill from Committee with
individual recommendations and accompanying fiscal notes.
There being no objection, CS SB 379(FIN) was REPORTED from
Committee with zero fiscal note #2, dated February 4, 2004 from the
Department of Law and zero fiscal note #3, dated February 6, 2004
from the Department of Revenue.
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