Legislature(2001 - 2002)
04/08/2002 06:05 PM House BUD
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT COMMITTEE ON LEGISLATIVE BUDGET AND AUDIT
April 8, 2002
6:05 p.m.
MEMBERS PRESENT
Senator Gene Therriault, Chair
Senator Randy Phillips
Senator Gary Wilken
Representative Hugh Fate, Vice Chair
Representative Eldon Mulder
Representative John Harris
Representative Ken Lancaster
MEMBERS ABSENT
Senator Jerry Ward
Senator Lyman Hoffman
Senator Dave Donley
Representative Reggie Joule
Representative John Davies, alternate
Representative William K. "Bill" Williams
OTHER LEGISLATORS PRESENT
Senator Ben Stevens
Representative Lisa Murkowski
COMMITTEE CALENDAR
APPROVAL OF MINUTES
EXECUTIVE SESSION
AUDIT REPORTS
OTHER COMMITTEE BUSINESS
ACTION NARRATIVE
TAPE 02-3, SIDE A
Number 0001
CHAIR GENE THERRIAULT called the Joint Committee on Legislative
Budget and Audit meeting to order at 6:05 p.m. Members present
at the call to order were Senators Phillips, Wilken, and
Therriault, and Representatives Fate, Harris, and Lancaster.
Representative Mulder arrived as the meeting was in progress.
APPROVAL OF MINUTES
Number 0053
REPRESENTATIVE FATE moved to approve the minutes from the March
18, 2002, meeting. There being no objection, the minutes were
approved as read.
EXECUTIVE SESSION
Number 0100
REPRESENTATIVE FATE made a motion to move to executive session
for the purpose of discussing confidential audit reports under
AS 24.20.301. There being no objection, the committee went into
executive session at 6:06 p.m.
Number 0203
REPRESENTATIVE FATE made a motion to bring the committee back
into regular, open session. There being no objection, the
committee returned to regular session at 6:45 p.m.
AUDIT REPORTS
Number 0205
REPRESENTATIVE FATE moved to release the final audit for the
Department of Labor & Workforce Development State Training and
Employment Program to the public. There being no objection, the
final audit was released to the public.
Number 0230
CHAIR THERRIAULT told the committee that there was a question of
whether SB 252 "had an extension of the repealer." The
governor's bill removes the sunset date, he noted, and puts the
program into statute permanently.
OTHER COMMITTEE BUSINESS
Number 0300
CHAIR THERRIAULT said there were resolutions in both bodies [of
the legislature] dealing with the POV [percent of value] method
of payout from the Alaska Permanent Fund. In the [House State
Affairs Standing Committee meeting] of the prior week,
Representatives Croft and Crawford had introduced amendments to
the proposed constitutional amendment that would enshrine the
dividend into the constitution. He said the issue of the tax
consequences of that had come up in the [Senate State Affairs
Committee].
CHAIR THERRIAULT said he had spoken with Senator Halford about
going back to the Washington, D.C., law firm with which the
[Alaska Permanent Fund Corporation's] trustees contract, in
order to get a clarification and update on the legal memos
regarding the tax implications of the dividend, and whether the
dividend could be guaranteed. He added that after talking to
the trustees, he'd concluded it would be a fairly lengthy
process, and it would likely exceed the $25,000 authorization he
was allowed as chairman. He asked the committee if members
would feel comfortable allowing him to spend more than $25,000
to answer those questions.
Number 0445
SENATOR PHILLIPS asked if it would be possible to get the advice
of the Alaska Permanent Fund Corporation (APFC), which has
already been on record saying [a constitutional amendment] could
possibly negate the tax-exempt status of the principal of the
Alaska Permanent Fund.
CHAIR THERRIAULT said he felt the APFC was happy with that
interpretation, but he did not think it would want to raise any
questions that might jeopardize that interpretation, because
they have effectively been able to say, "We can't do that; there
[are] going to be Internal Revenue Service implications." He
said he did not know if [the APFC's conclusion] was true. The
question might not have been put to the law firm in such a way
as to get a clear answer, he suggested.
SENATOR PHILLIPS said the public has great faith in the APFC,
and why not just take it at its word until that is challenged?
He said enshrining the dividend in a constitutional amendment
was new to him.
CHAIR THERRIAULT stated that the issue of whether [enshrining
the dividend in statute] is possible keeps coming up. There is
no memo from the legal experts one way or the other.
[Legislative Legal and Research Services Division] has said the
issue is in a realm it does not deal with, and will not give an
opinion.
Number 0629
SENATOR PHILLIPS referred back to a question he'd asked "the
permanent fund corporation's lawyer" during a [Senate State
Affairs Committee] meeting, when he requested the "Jimmy the
Greek odds" on the matter. Senator Phillips recalled the
lawyer's answer to be a "90 percent chance that that would not
make it."
CHAIR THERRIAULT cited the Washington, D.C., law firm's memo
that states it is clearly not a matter of 90 percent.
Number 0656
REPRESENTATIVE MULDER contributed to the discussion by stating,
"It seems we've had this conversation" on and off the record
with [APFC] as well. Much of it seems to be fairly
confidential, he said, and it seems it would need to be a
confidential report as well, or a legal memo. [The
legislature's] having its own legal opinion would jeopardize
that position. He said the only reason he could see asking the
question was if "anyone would be foolish enough to consider
enshrining this thing in the constitution."
SENATOR PHILLIPS remarked that there would be people trying to
do it.
Number 0802
REPRESENTATIVE FATE moved to approve authorization for the
chairman to enter into a contract for legal tax advice regarding
the permanent fund dividend.
Number 0819
An unidentified member objected to the motion.
Number 0825
SENATOR WARD asked if an amount was ever stated. He asked why
it would cost over $25,000.
CHAIR THERRIAULT said the legal firm is the one the trustees
contract with through the Department of Law. He said he thought
the figure to be somewhere between $25,000 and $50,000.
SENATOR PHILLIPS asked if there was a time crunch for the
decision. He suggested holding the issue until the next meeting
in order to think about it.
CHAIR THERRIAULT commented that he did not want to push the
matter, but it seems to be an issue that keeps being brought up.
He said the memos that have been received are anything but
clear. He pointed to other states' having tax-exempt approval
from the Internal Revenue Service; he said Alaska has a much
stronger case.
SENATOR WARD said he was not opposed [to obtaining an outside
legal opinion], but it would be just that: an opinion. An
opinion would not come from the Internal Revenue Service until
it makes a ruling. He said he would like to see some more
information on the law firm.
CHAIR THERRIAULT said he could track down some information on
what the content of the legal opinion would include.
SENATOR WARD suggested that in the course of researching the
matter, it might be found that the legal services could be
received for less than $25,000 because the firm may have already
done the work.
REPRESENTATIVE FATE withdrew his motion.
ADJOURNMENT
There being no further business before the committee, the Joint
Committee on Legislative Budget and Audit meeting was adjourned
at 6:56 p.m.
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