Legislature(1993 - 1994)
01/28/1994 09:00 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE STATE AFFAIRS COMMITTEE January 28, 1994 9:07 a.m. MEMBERS PRESENT Senator Loren Leman, Chair Senator Mike Miller, Vice Chair Senator Johnny Ellis Senator Jim Duncan MEMBERS ABSENT Senator Robin Taylor COMMITTEE CALENDAR SPONSOR SUBSTITUTE FOR SENATE JOINT RESOLUTION NO. 2 Proposing an amendment to the Constitution of the State of Alaska relating to the rights of victims of crimes and to penal administration. SENATE JOINT RESOLUTION NO. 38 Proposing amendments to the Constitution of the State of Alaska relating to revenues from natural resources, the Alaska permanent fund, the appropriation limit and the budget reserve fund; and providing for an effective date for the amendments. SENATE BILL NO. 170 "An Act relating to income of the permanent fund." SENATE BILL NO. 244 "An Act relating to investments of the permanent fund in certain limited partnerships each of whose principal purpose is investment in securities of public or private companies; and providing for an effective date." SENATE BILL NO. 245 "An Act relating to investments of the permanent fund involving equity interests in and debt obligations secured by mortgages on real estate; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SJR 2 - See State Affairs minutes dated 1/21/94 and 1/26/94. SJR 38 - See State Affairs minutes dated 1/26/94. SB 170 - See State Affairs minutes dated 1/26/94. SB 244 - no previous senate committee action. SB 245 - no previous senate committee action. WITNESS REGISTER Margo O. Knuth, Assistant Attorney General Criminal Division, Department of Law P.O. Box 110300, Juneau, AK 99811-0300¶465-3428 POSITION STATEMENT: testified on SJR 2 Senator Dave Donley State Capitol, Juneau, AK 99801-1182¶465-3892 POSITION STATEMENT: prime sponsor of SJR 2 Scott Goldsmith, Economist Institute for Social & Economic Research 5331 Sillary, Anchorage, AK 99508¶337-2285 POSITION STATEMENT: opposed to SJR 38 Roger Cremo 425 G Street, Anchorage, AK 99501¶333-8188 POSITION STATEMENT: in favor of SJR 38 William H. Scott, Executive Director Permanent Fund Corporation P.O. Box 25500, Juneau, AK 99802-5500¶465-2047 POSITION STATEMENT: in favor of SB 245 Jim Kelly, Research & Liaison Officer Permanent Fund Corporation P.O. Box 25500, Juneau, AK 99802-5500¶465-2047 POSITION STATEMENT: in favor of SB 245 ACTION NARRATIVE TAPE 94-5, SIDE A Number 001 CHAIRMAN LEMAN calls the Senate State Affairs Committee to order at 9:07 a.m. Number 003 CHAIRMAN LEMAN brings up SJR 2 CRIME VICTIM RIGHTS;CRIM JUSTICE ADMIN as the first order of business before the committee today. Number 005 SENATOR MILLER moves the adoption of CSSSSJR 2(STA). There being no objection, it was so ordered. Number 008 MARGO KNUTH, Department of Law, Criminal Division, believes the change from penal administration to criminal and juvenile justice in section 1 is a good change and will make more specific that SJR 2 refers to the entire process and not just sentencing and post- sentencing. Adding community condemnation of the offender and the rights of victims of crimes will achieve the purpose of the legislature. She does, however, believe the use of the term restitution to be repetitious of the rights of victims of crimes. If we differentiate restitution from the rights of victims of crimes, what other differentiations should be made? Restitution is the principal right of a victim of crime and is set out in new section 24. There is, therefore, a logical inconsistency in explicitly setting restitution out in SJR 2. Number 046 MS. KNUTH states that in section 2, subsection (b) of SJR 2 the Department of Law is still concerned rights will be created for victims of crimes, whether there is clarification from the legislature or not. The main concern is that it may create liability for the state, and that there ought to be limits on the liability, which could be achieved through language in the section. There is also a concern that victims may want and may be given a control in state prosecutions. This would represent a radical departure from the way the system was originally created and has been operating in the United States for several hundred years now. Number 105 MS. KNUTH introduces a proposed amendment which would change subsection (b), adding the same language currently in the victim's rights act in Alaska State Statutes. Number 117 CHAIRMAN LEMAN asks if any members have questions for Ms. Knuth. Number 122 SENATOR ELLIS asks if when "penal administration" was changed to "criminal and juvenile justice", it was discussed in the last committee meeting. The chairman replies that it was discussed in the last meeting. The term "criminal and juvenile justice" was chosen because it seemed to be more encompassing than penal administration. Senator Ellis asks Ms. Knuth what the specific ramifications are of SJR 2 applying to juvenile justice. Number 140 MS. KNUTH responds that the juvenile justice system is designed differently than the adult justice system, the juvenile justice system having been designed primarily to treat the offender. She thinks it would perhaps be more consistent with the committee's intent to use the term "criminal justice administration", and leave out the "...juvenile justice administration", or there may be a change in our juvenile justice system that we have not anticipated. Number 164 CHAIRMAN LEMAN asks where the terms being discussed originated. Number 168 SENATOR DONLEY replies the term "penal" refers to any system whereby someone suffers some penalty. That includes the juvenile justice system. The language change was suggested in order to make the language more understandable. He thinks the average person could look at SJR 2 and understand it much better than the language that is currently in the constitution. He does not think the language change will alter who will be affected by SJR 2. Number 200 SENATOR ELLIS supports victim's rights, but wants more discussion on the impacts of SJR 2. In particular, he wants to know how it would affect the juvenile justice system. Number 223 MS. KNUTH states she is involved in the adult offender process, and not in the juvenile offender process, so is not in the best position to address the consequences of the impact of SJR 2 on the juvenile justice system. She says SJR 2 may dramatically change the juvenile justice system. Number 240 SENATOR DONLEY responds that everything in section 2 is qualified by subsection (b). For this reason, he does not believe the amendment proposed by the Department of Law is a good idea. The caveat is already there, it being that enforcement can be provided by statute. The problem with the amendment is it would put into the constitution a sweeping grant of immunity to the state. What other constitutional rights do we have which we would want to give immunity to the state for violating? Freedom of speech? Freedom of religion? Should we say, "This is a right, but if the state violates it, it's ok?" Senator Donley does not believe that attitude is appropriate for a constitutional amendment. He would like the committee to consider that point. Number 266 CHAIRMAN LEMAN questions Ms. Knuth about insertion of the word "restitution". He realizes that in section 24 there is provision for the right to restitution, so he wonders if also having "restitution" in section 12 would be repetitious. The chairman also asks Ms. Knuth to clarify who would qualify for restitution, whether there would also be a corporate or state right to restitution. Chairman Leman notes as an example of the corporate right to restitution DWI offenders having to pay the state up to $1000.00 of the cost of prosecution. He wants secondary victims, such as society or the state, and not just primary victims, to have the right to restitution. Number 285 MS. KNUTH replies that currently the word "restitution" refers only to payment being made to a primary victim of a crime. It is not a term that has been used for making everyone, including the system, whole. She cannot think of a word that would refer to making the system whole. To a certain extent, fines have served the purpose of restitution to the state; although fines are also punitive in nature. She will try to come up with a word that would better define restitution to the state between now and when SJR 2 is heard in the Senate Judiciary Committee. Number 310 SENATOR ELLIS asks if the list of penal administration guidelines on lines 9 through 11 are equal or if they are listed in order of importance. Number 316 MS. KNUTH responds they are ranked in order of priority. Number 321 SENATOR ELLIS expresses he does not necessarily agree with the order of priority. He asks what "community condemnation of the offender" means. Number 330 MS. KNUTH answers that "community condemnation of the offender" means punishment of the offender. Number 333 SENATOR ELLIS declares he did not realize it was a legal term, and to him it sounds as though the meaning might be to egg someone's house after they get out of prison. He does think restitution should be in the list of principals of penal administration. Senator Ellis wants to know, since the principal of reformation is the most important factor in the juvenile justice system, how reordering the principals of penal administration for both the adult and juvenile justice systems will affect the juvenile justice system. Number 346 MS. KNUTH comments Senator Ellis has raised the interesting thought that SJR 2 might run afoul of the United States Constitution. States may not have the right to make punishment of the offender or restitution to the victim a higher priority than reformation of the offender. Number 362 SENATOR ELLIS asks why the committee prefers the term community condemnation of the offender, rather than punishment of the offender. Number 364 SENATOR DONLEY responds that the language was developed over the interim, and punishment entails less than community condemnation of the offender. Community condemnation is a more encompassing concept. Number 374 SENATOR ELLIS expresses his opinion that community condemnation of the offender sounds a lot more wimpy than punishment. Number 381 SENATOR DONLEY adds a comment to the question raised by Ms. Knuth regarding the possible unconstitutionality of the prioritization of the principals of penal administration under the U.S. Constitution. He is not concerned with possible unconstitutionality under the federal constitution, because federal constitutional concerns would be primary to state constitutional concerns. If the prioritization turns out to be unconstitutional under the U.S. Constitution, the state constitution would simply defer to the federal constitution. It would not cause the type of constitutional crisis we now have with subsistence. Number 391 MS. KNUTH makes a last point regarding creating a new section 24, rights of victims of crimes. She states that one possible negative affect of creating additional rights for victims of crimes would be that victims might not be required to press charges or testify if they do not wish to do so. As a result, the effect could be to drop charges against a defendant if the victim chooses to not press charges. The state would not have the choice of going forward with a case if the victim was not in favor of doing so also. This would probably have the greatest impact on domestic violence cases in which the victim recants. Currently, the state has the right to go ahead with prosecutions, even when the victim recants because the Department of Law knows it is the right thing to do statistically. Prosecution does break the chain of violence. It's not fun for the victim at the time, but it is a massive improvement in their situation, and is the only basis for optimism that something will get better there. Most people probably do not like the idea of someone being able to buy their way or influence their way out of a prosecution, but this is what could happen if victims have the final say in whether or not to prosecute. Number 424 CHAIRMAN LEMAN states that it is certainly not his intent to allow cases to be dropped if the victim chooses not to testify or chooses not to press charges, and he would like the record to reflect that. Number 428 SENATOR DONLEY states the language in SJR 2 came straight from the constitution of Michigan, and Michigan has not articulated any concern with the implementation of the language. In addition, the language is modified by section (b). He thinks that it would be a stretch of the law for it to arrive at the effect Ms. Knuth just described, and if that were to happen, it could be addressed with a statute from the legislature. Number 448 SENATOR ELLIS states he does not have confidence that the concerns he voiced today will be adequately resolved or addressed in the Senate Judiciary Committee. He requests the Department of Law to note, in writing, the specific effects of SJR 2, should it be adopted. Number 468 CHAIRMAN LEMAN repeats the request Senator Ellis just made to Ms. Knuth. Number 476 SENATOR MILLER motions CSSSSJR 2(STA) be moved from committee with individual recommendations. Number 479 CHAIRMAN LEMAN, hearing no objections, discharges CSSSSJR 2(STA) from the Senate State Affairs Committee with individual recommendations. Number 488 CHAIRMAN LEMAN announces that SB 170 DISPOSITION OF PERMANENT FUND INCOME will be held until Wednesday, February 1, 1994, as the representative from the administration was unable to be in attendance this morning. Number 502 CHAIRMAN LEMAN brings up SJR 38 RESTRUCTURE PERMANENT FUND as the next order of business before the Senate State Affairs Committee today. The chairman calls a witness from the Institute for Social & Economic Research (ISER). Number 513 SCOTT GOLDSMITH, Economist, Institute for Social & Economic Research (ISER), testifying from Anchorage, states he has talked to Mr. Cremo about his plan (SJR 38), and thinks it is an interesting concept. Mr. Goldsmith has five comments he would like to make regarding SJR 38, which he will submit in further detail in writing to the committee. They are: 1) The Permanent Fund is at risk if this plan is adopted. 2) The need for safety valves must be considered. 3) The plan appears to be simple, but it is not. 4) The plan is not a magic and painless solution. 5) Less radical alternatives should be considered. Number 533 MR. GOLDSMITH details the previously listed five points. TAPE 94-5, SIDE B Number 562 MR. GOLDSMITH continues with his detailing of the previously listed five points. Number 529 MR. GOLDSMITH suggests potential solutions to budget problems. They are: 1) Solution for economic instability from year to year: cap the budget at 2.5 billion dollars for four years. 2) Solution for price-induced fluctuations in petroleum revenues from year to year: restructure constitutional budget reserve to fill all or a portion of any short-fall between current revenues and the budget. 3) Solution for long-run petroleum revenues declining with production: cap the budget at 2.5 billion dollars for four years, the same as number 1. 4) Solution to minimize long-term Prudhoe Bay-type economic boom and busts: double the Permanent Fund contribution rate for royalties on newly discovered natural resource production to 100%. 5) Solution to maximize the return on the Permanent Fund: base the dividend on the long-term averaged total return of the fund, including unrealized gains and losses. Number 506 CHAIRMAN LEMAN thanks Mr. Goldsmith for his comments and asks that he submit his testimony in writing to the committee by Monday, in order for members to review it before the meeting Wednesday, February 2, 1994. The chairman asks Mr. Cremo if he would like to comment on any part of the testimony made by Mr. Goldsmith. Number 496 MR. CREMO declines, saying he would like to see a copy of Mr. Goldsmiths' written comments, so he could intelligently respond to them. Number 488 CHAIRMAN LEMAN asks if there is anyone else who would like to testify on SJR 38. Hearing none, he announces SJR 38 will be held until the committee meeting Wednesday, February 2, 1994. Number 483 CHAIRMAN LEMAN announces the committee will now take up SB 245 PERMANENT FUND INVESTMENTS IN REAL ESTATE and calls Mr. Scott and Mr. Kelly of the Permanent Fund Corporation to the committee table. Number 476 JIM KELLY, Research and Liaison Officer, Permanent Fund Corporation, passes out four Permanent Fund real estate portfolios. Number 470 BILL SCOTT, Executive Director, Permanent Fund Corporation introduces himself, Mr. Kelly, and Malcolm Goepfert, the portfolio analyst from the real estate department of the Permanent Fund Corporation. He states the purpose of SB 245 is to authorize the permanent fund corporation to invest up to 100% in real estate investments. The corporation has found that the current 40% ownership limitation does not give the corporation as much control as it needs over assets. Number 447 MR. SCOTT claims the corporation has come a long way and learned a lot in the ten years since the corporation has been authorized to invest in real estate. The Alaska Permanent Fund Corporation is recognized nation-wide as being a very good real estate operation. Number 423 MR. SCOTT says that the corporation needs to have the ability to invest 100% in some types of real estate, particularly those in the smaller range, under 25 million dollars. He states the corporation will still be involved in co-investing, but that it needs the latitude to invest 100% in some smaller projects. The board of trustees of the corporation voted unanimously in support of being able to invest 100% in some real estate investments. The corporations' rate of return on real estate investments is about double the national rate of return. Number 354 CHAIRMAN LEMAN tells Mr. Scott he wants to review the backup materials on SB 245. He asks Mr. Scott how he would feel about only having authorization to invest 100% in small investments, but continue to be required to have co-investors on larger real estate investments. Number 332 MR. SCOTT replies that the chairman's suggestion would certainly be one solution, and the solution in SB 245 was suggested because it was simple and straightforward, but it is certainly not the only solution. Number 315 MR. KELLY adds that the Permanent Fund Corporation has always been very selective in its' real estate investments. The corporation is allowed to have 15% invested in real estate. The Current amount invested is under 7%. The Board of Trustees of the Permanent Fund Corporation has set a target rate of 10% investment in real estate. We believe it will be easier to get closer to the target investment rate of 10% if we have the additional flexibility of being able to invest 100% in real estate investments. Number 297 MR. SCOTT says another problem caused by only being able to invest 40% in a project is that deals are often not closed with a co- investor because the corporation is not willing to give up certain controls. Number 278 CHAIRMAN LEMAN announces SB 245 will be taken up again on Wednesday, February 2, 1994. Number 274 CHAIRMAN LEMAN announces the schedule for Wednesday, February 2, 1994 will be SB 245, SB 170, SJR 38, and bills previously heard. Number 267 CHAIRMAN LEMAN adjourns the meeting at 10:22 a.m.