Legislature(2009 - 2010)BELTZ 211
04/09/2009 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB37 | |
| HB170 | |
| HB139 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 37 | TELECONFERENCED | |
| + | HB 170 | TELECONFERENCED | |
| + | HB 139 | TELECONFERENCED | |
SB 37-DIVEST INVESTMENTS IN SUDAN
9:02:07 AM
CHAIR MENARD announced the consideration of SB 37.
SENATOR MEYER moved to adopt the proposed committee substitute
(CS) to SB 37, labeled 26-LS0240\R, as a working document. There
being no objection, Version R was before the committee.
9:03:10 AM
SENATOR FRENCH said the idea of divesting from Sudan has been
around since 1997 when the U.S. government imposed sanctions
against Sudan. Many states and public entities have decided they
can no longer, in good conscience, invest in companies who work
in Sudan. Investing money in these companies helps the Sudanese
government wage war against its own people. SB 37 gets Alaska's
permanent fund out of companies that do business in Sudan that
help enable and finance that government in systematically
killing thousands and thousands of their own people. There was
resistance to this bill last year, mainly based on the idea that
the investment world should be in the investment world, and
social efforts to change the world should be separate. He feels
that there has been progress in convincing the administration
that "you can do both." Genocide is different from tobacco,
alcohol, and other social ills. There is concern for a slippery
slope of divesting from "a nation you don't like, like Iraq or
North Korea." But a bright line can be drawn around the topic of
genocide. This CS adopts the administration's preferred
mechanism for achieving this goal. He appreciates the efforts by
the administration.
9:05:53 AM
SENATOR MEYER said he is concerned that the state is going down
a slippery slope. How is this different from being concerned
about pharmaceutical companies that sell the morning-after pill
or tobacco companies that kill thousands of people every year?
"You almost get into a value judgment."
SENATOR FRENCH said the systematic killing of a group of human
beings by a government is clearly distinct from issues that we
may disagree on, such as selling alcohol to minors or selling
tainted pharmaceutical products in third world countries. The
United Nations, former President Bush, and the U.S. Congress
have declared this as genocide, and so "we're in a different
moral realm here." The world is nothing but slippery slopes, and
every day people make judgments and draw lines. This is unique
and is the right thing to do.
9:08:12 AM
SENATOR MEYER said he appreciates that explanation. The bill
becomes effective in 90 days, and the board has said it will
stop investing in these companies. Alaska may be losing
thousands of dollars by giving the board a timeline. A gradual
process, which seems to be happening anyway, might work better.
PAT GALVIN, Commissioner, Department of Revenue (DOR), said the
administration is in favor of SB 37. It opposes the activities
in Sudan, and it is important for the state to join the chorus
of those who recognize the moral imperative to stop the
genocide. One thing the state can do is stop investing in the
companies that support those activities. Last year, in the same
committee, he spoke on Sudan for the first time for the
governor. "We were very clear that the governor and the
administration supports the concept of divestiture." There were
some issues with that bill, and he had asked for an opportunity
to work on them. During the interim the administration crafted
this CS that divests in a way that avoids the unintended costs
of a broad brush approach. He said the administration looked for
the things the state could do within its existing authority. The
bill also applies to investments under the Department of Revenue
and the Alaska Retirement Management (ARM) board. He found that
this could not happen with current statute. Even if those three
entities wanted to implement a divestiture policy similar to SB
37, "we do not currently have the authority to do so." All
decisions had to be based on investment value, hence the bill.
9:12:05 AM
COMMISSIONER GALVIN said the question of the slippery slope has
come up. The administration attempted to isolate the issue of
genocide from other types of social investing. This is an
unprecedented situation where the United Nations, the State
Department, and Congress have labeled the genocide. It is not an
issue that is subject to debate. There is unified agreement. The
bill focuses divestiture on those investments that the boards or
the commissioner of DOR have control over. "The things that we
can mandate are divested from certain companies." Previous
versions had a broad brush into investments that "we don't
control that closely in terms of the individual companies that
may be invested." That would have left them unable to use
investment vehicles the state couldn't control, whether they
invested in Sudan or not.
9:14:25 AM
COMMISSIONER GALVIN said the bill exempts those investment
vehicles that the state can't control, but he doesn't anticipate
that those will have Sudanese-related investments. The CS has
support from the permanent fund and ARM boards. Both passed
resolutions supporting divestiture in a manner consistent with
the bill introduced by the governor, which is consistent with SB
37. The requirement for divestiture within 90 days can be
complied with. The structure of the bill is to allow it to be
done in a fairly routine manner by the accounting staff. It can
be incorporated into normal daily compliance implementation. It
can just work into their routines.
SENATOR MEYER said markets are down worldwide, and the state may
suffer a loss if it has to be out of these companies in 90 days.
He suggested changing the 90-day period to a year. "Would that
meet the same purpose of trying to get out of these investments,
but yet do it over a gradual period of time so that, hopefully,
we don't lose quite as much money?"
9:17:27 AM
COMMISSIONER GALVIN said he doesn't anticipate that the amount
divested will be significant. "Generally we don't participate in
a timing issue with regard to individual holdings." They don't
hold something with an anticipation of it going up. The 90-day
term will not result in a significant risk of a loss.
SENATOR MEYER said the bulk of the state investments will be in
the permanent fund. What companies are doing business in Sudan?
COMMISSIONER GALVIN said it is a small number. He has a list of
four companies with about $3.5 million in investments as of
December. He is referring only to the ARM board in the DOR, and
that is out of $20 billion in investment. The administration is
attempting to have the accounting system implement the
divestments, not the managers. "The decision to insure that we
don't have any money invested in a particular stock would be one
that would become automatic as opposed to one where you would
just be saying, 'Well, let's sell this one next week because I
hear something or other.'"
9:21:19 AM
MICHAEL BURNS, Executive Director, Alaska Permanent Fund
Corporation, Juneau, said this has been a difficult issue for
the board for a number of years. "We have a history of being
against social investing." The situation in Darfur rises above
that in everybody's mind. The other side has always has been the
slippery slope, and where it may stop. This bill gives friction
to that slope with its very tight definition. It has been
defined by the U.S. government and international organizations,
and it is a specific geography. The bill takes the board out of
the decision of which companies should be on the divesting list.
His board's tasks are investment policy, risk management, and
asset allocation. The legislature's job is to create the public
policy. If this is public policy and a list is given to the
board, it is absolutely fine. He doesn't want the board meetings
taken up with trying to decide what company should be on the
list. The commissioner will be responsible for creating the
list, and his job will be to enforce it. He doesn't know how
much will be divested because there is not yet a list. Different
organizations have different lists, but it will not involve a
lot of money. He retracted that and said it is a lot of money,
but not in the scale of the portfolio. It is probably less than
$20 million depending on what companies are on the list.
9:24:45 AM
SENATOR MEYER said he is surprised because Mr. Burns was
adamantly against this bill last year. Mr. Burns mentioned some
changes in the bill. What are those changes?
MR. BURNS said the language change includes the tight definition
and the defined geography. Most importantly, his board will not
be making the decision. The accounting or compliance staff can
do the work. The department will come up with the list and
notify those on the list to allow them to rebut the claims. It
will just be a matter of compliance. The board has many tasks,
and an emotional debate is not a good use of its time.
9:26:47 AM
SENATOR MEYER said the legislature has intervened in the past
regarding investing in futures, commodities, and other high-risk
items. "It just seems like it makes your job that much more
difficult when we go out there and say, 'Maximize the return to
our shareholders ... but only invest here, here, and here." If
Mr. Burns doesn't think this bill is tying his hands, "then I'm
fine with it." If the goal is to get out of Sudan, maybe the
state could do it gradually to save a few thousand dollars.
MR. BURNS noted the issue of market timing. It could cost the
state money, but it could actually be the very best day to sell.
He thanked the legislature for untying the board's hands in 2005
regarding the statutory investment list. "We think we've been
able to make some progress." The market has moved against it,
but there is a better structure. "We still have a lot of things
we don't do by policy." He noted bond ratings and concentrations
in any stock. This is another compliance issue that the staff
can do, but the board is not creating the threshold for being in
or out. That takes time and is where the costs would be buried.
Enforcing a rule is not expensive, but being the decider is.
9:29:41 AM
SENATOR FRENCH thanked Mr. Burns for bringing his skills to
this. With his help something can be done.
SENATOR PASKVAN said this comes down to state policy on
genocide. Over 10 years ago the federal government determined
that genocide was occurring. The state has not taken any action
in those 10 years. "I am willing for the state of Alaska to lose
money to make clear its opposition to proven genocide." The
market timing issues are irrelevant. He said he would even
cleanse the funds of the 10 years profit from the genocide.
CHAIR MENARD said this bill intends to send a strong message.
9:31:34 AM
AMY KEARNS, Member, Save Darfur Anchorage, Wasilla, said her
group has been working with the legislature to get this bill
passed. She thanked the legislators for introducing the bill and
for the CS that eliminates a fiscal note. Passing this is more
critical now with recent events in Sudan with aid workers being
ousted from the country. The people of Darfur now have even less
protection. There are people living in Alaska from Darfur who
fled because of the genocide. Some of the atrocities are truly
horrific. She suggested taking a moment to think about those
events. Women in refugee camps have to make a decision to go get
firewood knowing that men are waiting to rape them. Men would be
killed if they were to go get the firewood. This is so far from
our personal experiences. The United States turned its back on
the Rwanda genocide of 1994. George Bush said, "Not on our
watch." "We have an obligation to fulfill that promise."
9:35:11 AM
DEBORAH BOCK, Member, Save Darfur Anchorage, Anchorage, said her
group has spoken with hundreds of Alaskans about the genocide
and have yet to meet a single private citizen who does not
support immediate divestment from Sudan. Two dozen people from
Darfur have been resettled in Anchorage by the state department.
They are strong advocates for divestment. Those few members of
the legislature who are opposed are out of touch with
constituents.
BILL LEIGHTY, Business Owner, Juneau, said he would like to
speak to Senator Meyer's concerns. About 20 years ago he
listened to a prosecutor from the Nuremburg trials speak about
the quandary of what kind of punishment was appropriate for
people who were responsible for the murder of millions. He came
to the conclusion that the only thing humans could do was to ask
that international law be so firm and so powerful that this
behavior is prevented in the future. It has been inadequate; we
still have genocide in several places in the world. It is
impractical to go to Sudan or to prevent China from buying oil
from Sudan. It seems like SB 37 is all that Alaskans can do. The
root causes for markets being down is the lack of attention to
the larger context in which these markets operate. We thought,
in our splendid isolation, that everything was under control. So
we are suffering in international matters like the genocide. In
lacking any other punishment, pass this bill. It is financial
tokenism, but it is an important matter of principle.
9:39:32 AM
STEVE WOLF, Juneau, said he is a retired teacher. He applauded
Senator French's testimony. He appreciates Senator Meyer's
concerns. When his high-minded teenaged son comes home from
college, he would like to tell him Alaska divested from Darfur.
SENATOR FRENCH moved to report the CS to SB 37, labeled 26-
LS0240\R, from committee with individual recommendations and
attached fiscal note(s). There being no objection, CSSB 37(STA)
moved out of committee.
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