Legislature(1995 - 1996)
02/01/1996 09:10 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
Referencing legislation relating to a similar issue (SB 89 PERMANENT FUND BOARD MEMBERS & STAFF) Mr. Baldwin expressed concern over "removal for cause" provisions. [The tape recording problem was corrected at this point. Minutes reflect transcription of the tape.] Mr. Baldwin explained that under present SB 89 language, it is unclear whether "removal for cause" would involve due process and require a hearing and trial-like procedures. He further questioned language indicating that: The governor shall base the decision to appoint or remove a board member solely on the financial best interest of the fund. He then asked what would occur if a board member committed an offense involving moral turpitude but unrelated to finances of the fund. Under present language it appears the individual could not be removed, even though he or she might be undesirable as well as charged with and convicted of a criminal act. There are real problems associated with both the "cause" requirement and implementation of the requirement. The process is not simple. Senator Rieger told members that the purpose of staggered terms was to prevent the "wholesale sacking of the board of trustees which has occurred in the last two administrations." Co-chairman Halford added that staggered terms are meaningless if members are removed without cause during a change in administration. Mr. Baldwin reiterated concern that present language might involve a lengthy due process procedure. The bill is vague and ambiguous and requires work in that area. SENATE BILL NO. 89 An Act relating to the members of the board and staff of the Alaska Permanent Fund Corporation. In directing that a brief introduction to SB 89 be presented, Co-chairman Halford noted need for consistency between the bill and SSSJR 14. Senator Rieger advised of a 100% turn over in top management of the Alaska Permanent Fund Corporation over the last two years. That includes the executive director, chief investment officer, and all six trustees. The purpose of SB 89 is to provide greater continuity in management of the fund. Provisions make clear that removal of a trustee must be for cause. Further provisions reduce the number of cabinet-member appointees from two to one and increase the number of public members from four to six. Public members also have staggered terms. The aggregate board would thus be seven rather than six members. SB 89 also clarifies that investment policies and staffing decisions must be made solely in the best interest of the fund. The over $18 billion fund is more than seven times the amount of general funds used in annual operating and capital budgets. CSSB 89 (STA) clarifies that at least two of the public members must have recognized competence and wide experience in investment portfolio management. The committee substitute further defines "cause" and clarifies what removal for cause would entail. Co-chairman Halford voiced his understanding that the limitation on contracts applies to permanent fund employees rather than management contracts. Senator Rieger concurred. JIM BALDWIN, Assistant Attorney General, Governmental Relations Section, Dept. of Law, remained before committee. He initially spoke to possible conflicts between contractual hire terms and an executive director who might serve at the pleasure of the board. He later advised that he had not yet reviewed CSSB 89 (STA) and would reserve further comment until he had done so. In his closing remarks, he reiterated concern that imposition of removal for cause provisions would be bad for the permanent fund board. Senator Donley acknowledged a possible conflict between employment contract provisions and service at the pleasure of the board and suggested that the bill contain language specifying that the contractual employee serve at the pleasure of the board. Senator Rieger acknowledged that the suggestion was reasonable and requested time to explore proper language to ensure consistency with existing statutes. Co-chairman Halford directed that SB 89 be held in committee for further discussion.