Legislature(1997 - 1998)
03/05/1998 01:40 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 5, 1998
1:40 P.M.
TAPE HFC 98 - 54, Side 1.
TAPE HFC 98 - 54, Side 2.
TAPE HFC 98 - 55, Side 1.
CALL TO ORDER
Co-Chair Hanley reconvened the House Finance Committee
meeting to order at 1:40 P.M.
PRESENT
Co-Chair Hanley Representative Kelly
Co-Chair Therriault Representative Kohring
Representative J. Davies Representative Martin
Representative G. Davis Representative Moses
Representative Foster Representative Mulder
Representative Grussendorf
ALSO PRESENT
Representative Ivan Ivan; Dan Spencer, Chief Budget
Analyst, Office of Management and Budget, Office of the
Governor; Annalee McConnell, Director, Office of Management
and Budget, Office of the Governor; Margot Knuth, Assistant
Attorney General, Department of Law; Jeff Logan, Staff,
Representative Joe Green; Jim Sourant, Staff,
Representative Brian Porter; David Pree, Staff,
Representative Joe Ryan; Richard Thwaites, Private
Attorney, Alaska Trust Corporation, Anchorage; Mike
Mosesian, (Testified via Teleconference), Anchorage; Steve
Noey, Alaska Trust Corporation, Anchorage.
SUMMARY
HJR 36 Proposing amendments to the Constitution of the
State of Alaska relating to redistricting of the
legislature, and repealing as obsolete language
in the article setting out the apportionment
schedule used to elect the members of the first
state legislature.
CS HJR 36 (FIN) was reported out of Committee
with a "do pass" recommendation and a fiscal note
by the Office of the Lt. Governor dated 1/23/98.
HJR 44 Proposing amendments to the Constitution of the
State of Alaska relating to redistricting of the
legislature.
CS HJR 44 (FIN) was reported out of Committee with
"individual recommendations" and with fiscal notes
by the Department of Law dated 2/18/98 and the
Office of the Lt. Governor dated 2/18/98.
HB 290 An Act relating to motor vehicle license plates
for ranchers, farmers, and dairymen.
CS HB 290 (TRA) was reported out of Committee
with a "no recommendation" and with a fiscal note
by the Department of Administration dated
2/25/98.
HB 321 An Act relating to trusts, to the prudent
investor rule, and to standards of care
applicable to personal representatives,
conservators, and trustees; and providing for an
effective date.
HB 321 was HELD in Committee for further
consideration.
HB 370 An Act making an appropriation for relief of the
1997 fishery disaster in Bristol Bay and on the
Kuskokwim River; and providing for an effective
date.
CS HB 370 (FIN) was reported out of Committee
with "individual recommendations".
HB 461 An Act making supplemental and special
appropriations; and providing for an effective
date.
CS HB 461 (FIN) was reported out of Committee
with a "do pass" recommendation.
HOUSE BILL 461
"An Act making supplemental and special
appropriations; and providing for an effective date."
DEPARTMENT OF CORRECTIONS
Co-Chair Hanley distributed Amendment #3. [Copy on file].
He stated that Judge Hunt has ordered the Department of
Corrections to reduce current jail capacity by 500 people
bringing it down to emergency status. The plan as proposed
by the Department is to use more Community Residential
Center (CRC) beds. Amendment #3 would add enough money
into the Department's budget to meet Judge Hunt's request
for this fiscal year.
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGMENT AND
BUDGET, OFFICE OF THE GOVERNOR, distributed a handout
titled "FY98 Costs To Be In Compliance With Cleary Order as
of May 1, 1998 (Through June 30, 1998)". [Copy on file].
Representative Mulder criticized that this information had
not been available for a Corrections Subcommittee meeting
this morning. He requested a detailed breakout of the $40
thousand general fund dollars to be used for CRC beds.
MARGO KNUTH, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW,
advised that once there are over 500 prisoners placed in
Arizona, the State is required to provide a probation
officer on the premise to deal with grievance procedures.
She added that the "gratuity" amount was a "term of art"
which means in-mate wages. In-mates are put to work and
they are paid a small stipend.
Ms. Knuth continued, the projected $55 dollars per day
prisoner cost is actually $2 dollars a day less than the
current rate. Exceeding a specified number allows that the
state be eligible to qualify for a discount. Ms. Knuth and
Representative Mulder discussed the handout and costs
associated with it.
Representative Mulder asked where the new CRC beds would be
located. Ms. Knuth stated there would be 32 beds in
Anchorage, 20 in Fairbanks, 20 in Nome and 10 in Bethel.
The 10 beds in Bethel are already in process. The cost
breakout is for 72 beds which excludes Bethel.
Co-Chair Therriault asked about the one-time set-up costs
and if there were any used supplies which might be
available. Ms. Knuth stated that the tents had been sold a
couple of years ago. She was not aware of any organization
from which the State could borrow equipment now needed by
the Department of Corrections.
Ms. Knuth clarified that the $40 thousand general fund
dollars and the $25.7 thousand federal fund dollars for CRC
beds would be the Department's supplemental request in
addition to funds on hand.
Representative J. Davies asked if the State would be
eligible to receive a discounted rate in Arizona for all
prisoners or just the amount over 500. Ms. Knuth explained
that the price break would be only for the additional
prisoners over the first 500.
Representative Mulder MOVED to adopt Amendment #3. There
being NO OBJECTION, it was adopted.
DEPARTMENT OF FISH AND GAME
Representative Grussendorf MOVED to adopt Amendment #4.
[Copy on file]. The amendment addresses the request by the
Department of Fish and Game for costs associated with the
Sitka herring roe on kelp fishery for fiscal year ending
6/30/98. Co-Chair Hanley pointed out that the costs would
be paid by the people having the testing done. There being
NO OBJECTION to Amendment #4, it was adopted.
Co-Chair Hanley MOVED that Section (J) from work draft 0-
LS1638\B, Cramer, 3/05/98, remain in Amendment #3. There
being NO OBJECTION, it was adopted.
Co-Chair Therriault MOVED to report CS HB 461 (FIN) out of
Committee with individual recommendations. There being NO
OBJECTION, it was so ordered.
CS HB 461 (FIN) was reported out of Committee with a "do
pass" recommendation.
HOUSE BILL NO. 370
"An Act making an appropriation for relief of the 1997
fishery disaster in Bristol Bay and on the Kuskokwim
River; and providing for an effective date."
Representative Moses MOVED to adopt Amendment #1. [Copy on
file]. Co-Chair Hanley OBJECTED for the purpose of
discussion.
Representative Moses explained that Amendment #1 corrected
a misprint in the legislation. Co-Chair Hanley WITHDREW
his OBJECTION. There being NO further OBJECTION, it was
adopted.
Co-Chair Therriault MOVED to report CS HB 370 (FIN) out of
Committee with individual recommendations. Representative
Kohring OBJECTED.
Representative Kohring noted that he philosophically
opposed the legislation. He commented that state
government should not be in the business of subsidizing
village activity. Representative Kohring suggested that
there are alternative ways to assist people in economic
distress.
A roll call vote was taken on the motion.
IN FAVOR: J. Davies, G. Davis, Foster, Grussendorf,
Kelly, Moses, Hanley, Therriault
OPPOSED: Kohring, Martin
Representative Mulder was not present for the vote.
The MOTION PASSED (8-2).
Representative Kohring offered to help assist these areas
by contacting non-profits and churches for support.
CS HB 370 (FIN) was reported out of Committee with
"individual recommendations".
HOUSE BILL NO. 290
"An Act relating to motor vehicle license plates for
ranchers, farmers, and dairymen."
JEFF LOGAN, STAFF, REPRESENTATIVE JOE GREEN, stated that HB
290 would clarify that a person, defined in AS 01.10.060 to
include a corporation, company, partnership, firm,
association, organization, business trust, or society, as
well as a common person, be eligible for agricultural
plates issued by the Division of Motor Vehicles (DMV).
Representative J. Davies asked if certain corporations
would be eligible for the plates through passage of the
legislation. Mr. Logan replied that they would if they met
the other qualifications listed in the bill.
Representative J. Davies questioned the need for allowing a
lower rate in this classification.
MIKE MOSESIAN, (TESTIFIED VIA TELECONFERENCE), ANCHORAGE,
stated that the intent of the original law was to address
the short growing season. He suggested that it would be
unfair for the farmer to be required to pay the same fee
paid for commercial use. He believed this bill would
provide more farmer incentives.
Representative G. Davis asked if these vehicles could be
used for anything else in off-season and would they be
required to be insured as a commercial vehicle. Mr.
Mosesian replied that the vehicle would be used for hauling
agricultural supplies.
Representative Foster MOVED to report CS HB 290 (TRA) out
of Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 290 (TRA) was reported out of Committee with "no
recommendation" and with a fiscal note by the Department of
Administration dated 2/25/98.
HOUSE JOINT RESOLUTION NO. 36
Proposing amendments to the Constitution of the State
of Alaska relating to redistricting of the
legislature, and repealing as obsolete language in the
article setting out the apportionment schedule used to
elect the members of the first state legislature.
Co-Chair Therriault spoke to changes made to Page 3, Line
19, resulting from Committee concerns. The change keeps
the 60-day requirement which could be problematic. Co-
Chair Therriault noted that Amendment #2 would address that
concern. [Copy on file]. It would guarantee the
transition from one plan to the next.
Co-Chair Therriault MOVED to adopt Amendment #2.
(Tape Change HFC 98- 54, Side 2).
Co-Chair Therriault explained the intent addressed concerns
in those areas of the State which could loose
representation because their population had declined. That
could result in litigation to keep the old plan in place
for two years.
Representative Mulder questioned if the timing would cause
concern for the Court system. Co-Chair Therriault noted
that the Court established a plan with minor flaws to work
as an interim plan.
Representative J. Davies voiced concern that should there
be a legal challenge and if that challenge was resolved 30
days before the election, then which plan would the
election be held under. Co-Chair Therriault responded that
the Courts have moved the primary date back in previous
years to accommodate all the time lines. In working with
the Division of Elections, the Court could make it work.
There being NO OBJECTIONS to Amendment #2, it was adopted.
Representative J. Davies MOVED to adopt Amendment #3.
[Copy on file]. Co-Chair Therriault OBJECTED.
Representative J. Davies stated that Amendment #3 would
address an issue raised by Assistant Attorney General
Baldwin. It would allow the redistricting board to take
into account and deduct non-resident military personnel and
dependants.
Co-Chair Hanley opposed the amendment, which he felt would
be unconstitutional. Representative Mulder added that from
the Hickel vs. Southeast Conference case in 1992, the Court
found it impossible to accurately identify non-resident
military personnel. Representative Martin echoed his
opposition. Representative J. Davies WITHDREW the MOTION
to adopt Amendment #3. There being NO OBJECTION, it was
withdrawn.
Representative Mulder MOVED to report CS HJR 36 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal note.
CS HJR 36 (FIN) was reported out of Committee with a "do
pass" recommendation and with a fiscal note by the Office
of the Lt. Governor dated 1/23/98.
HOUSE JOINT RESOLUTION NO. 44
Proposing amendments to the Constitution of the State
of Alaska relating to redistricting of the
legislature.
Co-Chair Therriault noted that the Committee would be
working with the 0-LS0528\I, Glover, 3/3/98, version of the
proposed legislation.
Co-Chair Therriault MOVED to adopt Amendment #6. [Copy on
file]. Discussion followed among Committee members
regarding deletion of the language, "until sixty days after
adoption and final adjudication of the succeeding
redistricting plan and proclamation of redistricting".
There being NO OBJECTION, Amendment #6 was adopted.
Representative Gary Davis asked the outcome of the final
redistricting plan referenced on Page 4, Line 6 - 13. Co-
Chair Therriault noted that passage of Amendment #6 would
remove the confusion.
Co-Chair Therriault spoke to the fiscal note as provided by
the Department of Law. Representative J. Davies understood
that the fiscal note had been submitted because there would
be costs in obtaining pre-clearance which would require
expertise and time.
JIM SOURANT, STAFF, REPRESENTATIVE BRIAN PORTER, thought
that the fiscal note would not be relevant with passage of
Amendment #6. Co-Chair Therriault explained that the
mechanism for drawing the lines would be changed, not the
requirements of who is eligible to vote. He also
questioned the need for the fiscal note.
Representative J. Davies commented that the base of the
fiscal note was to address preclearance which would
guarantee that there are no problems before the changes are
implemented. This would be an expense which would occur in
any case when a significant change has been made. Co-Chair
Therriault reiterated that a change in the method of
drawing the lines would not require a preclearance.
Representative Mulder suggested that the bill's fiscal note
could be changed on the House Floor or in Conference
Committee.
Representative Mulder MOVED to report CS HJR 44 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal notes. Representative J. Davies
OBJECTED.
Representative J. Davies believed that the approach taken
with the province of the justice system could be a large
mistake. He suggested that this system would encourage
politicizing among the Supreme Court Judges with far
reaching consequences. He stated that he strongly opposed
the legislation.
Representative Martin acknowledged that the legislation
could be interuptive to the political process, causing
chaos.
A roll call vote was taken on the motion to MOVE the bill
from Committee.
IN FAVOR: Foster, Kelly, Mulder, G. Davis, Hanley,
Therriault
OPPOSED: Grussendorf, Kohring, Martin, Moses, J.
Davies
The MOTION PASSED (6-5).
CS HJR 44 (FIN) was reported out of Committee with a "do
pass" recommendation and with fiscal notes by the
Department of Law dated 2/18/98 and the Office of the Lt.
Governor dated 2/18/98.
HOUSE BILL NO. 321
"An Act relating to trusts, to the prudent investor
rule, and to standards of care applicable to personal
representatives, conservators, and trustees; and
providing for an effective date."
DAVID PREE, STAFF, REPRESENTATIVE JOE RYAN, stated that the
Uniform Prudent Investor Act would reverse common law rules
that restrict the investment powers of trustees. The new
act would require a trustee to invest as a prudent investor
would, using reasonable care, skill and caution in light of
the objectives and risk tolerance of the individual trust.
Diversification of assets is an obligation. Trustees can
delegate investment responsibilities to experts. Within
the scope of these powers and duties, trustees can choose
to invest in any kind of asset that meets the objective of
the specific trust.
Co-Chair Therriault acknowledged that the bill would add
new verbiage as recommended by the Uniform Law Commission.
RICHARD THWAITES, PRIVATE ATTORNEY, ALASKA TRUST
CORPORATION, ANCHORAGE, testified in support of the
legislation. The purpose of the Uniform Act was to bring
Alaska in line with the rest of the states. Like the
Uniform Commercial Code, which made businesses able to deal
from one state to another, the bill would allow fiduciaries
in each of the states to rely on consistency in Alaska Law.
The Alaska Law currently, is not the Uniform Act. The
Uniform Prudent Investor Act changes and unifies the
investment standard throughout the country by providing
more flexibility. The new act would allow the fiduciary to
select the standard appropriate for the beneficiary.
(Tape Change HFC 98- 55, Side 1).
Mr. Thwaites continued, the legislation would standardize
the language while at the same time providing the leeway
necessary to allow the trustee to customize the investment
plan for a particular person.
Representative Kelly questioned language used on Page 3,
Line 4, asking if it would become more "risky" when more
wealth was involved. Mr. Thwaites commented that the risk
would have to be in line with the amount of money
available. The normal investment standard would require
only a fractional share of high-risk investment versus the
other. "Other resources of the beneficiaries" relates to
situations where there might be children in a family with
developmental disabilities. There could be a greater
distribution to the child with the disability. The
language opens the flexibility for the fiduciary to make
those kinds of decisions on distribution.
Representative Kelly questioned the language on Page 4,
Line 16. Mr. Thwaites noted that language indicated in
section (a) that the trustee "shall" not "may" exercise
reasonable skill and caution in selecting an agent.
Representative Kelly asked if section (b) would relate to
section (d). Would the agent need to be bonded. Mr.
Thwaites explained that in the bank licensing process, most
of the probate codes require bonding unless the entity
acting as the fiduciary is either exempt from the statute
or they have some other type of insurance protection.
Representative Kelly understood that section (c) would
require that someone bonded would be obligated.
Representative Kelly inquired if the current prudent
standards are now a problem. Mr. Thwaites replied that
they have been. There have been in some estates, certain
assets which were not trust quality, and they were required
to be liquidated, against the families wishes. That action
resulted because the prudent standards, which currently
exist, require the fiduciary to have a certain number of
assets to qualify, even though the family might want the
assets to be maintained.
Representative J. Davies asked about the prohibition of the
review. Mr. Thwaites noted that the bill would require a
standard of care for the fiduciary to review decisions. If
there is a conflict between trusts, the proposed act would
provide more freedom to make exceptions under the right
case. Independent approval should be obtained.
Mr. Thwaites added that the legislation would require that
there be an evaluation if a conflict exists. They would be
required to look at the beneficiaries of both trusts to
make sure that there was equal treatment.
Representative J. Davies reiterated concern that by being
the manager of a trust, under the prudent person rule,
there is a duty to manage both trusts for the benefit of
the beneficiaries. If a person was in the business of
selling one trust for another, there would be an apparent
conflict of interest which could result in a determent in
one trust and a benefit to the other trust. Mr. Thwaites
explained that the conflict concern before was too strict;
this legislation has chosen to give the discretion and
liability to the trustee.
Mr. Thwaites continued, common law has reinforced stricter
standards. Most of the conservative fiduciaries around the
country have a list of trust quality assets, which excludes
common trust funds and mutual funds.
In response to Representative Mulder, Mr. Thwaites said
that the settler of a trust could establish specific
standards in the trust that are wider than what was
contained under the prudent man rule. That has been
narrowed over the years. The typical minimum rate charge
in Alaska to manage a trust account is around $1000 dollars
per year or .75% of the account value, whichever is
greater.
STEVE NOEY, DIRECTOR, ALASKA TRUST COMPANY, ANCHORAGE,
voiced support for the purposed legislation.
Representative J. Davies pointed out that language on Page
2, Line 11-14, indicates that the prudent investor rule is
the default rule; it would be expanded or eliminated by
provisions of the trust and the trustee would not be
liable. He voiced concern with the possibility of
eliminating the prudent investor rule. Mr. Thwaites stated
that any court would repeal that rule if it was not
appropriately requested.
Representative J. Davies asked if there were situations,
which might not be prudent. He struggled with use of the
word "eliminated". Mr. Thwaites ascertained this was how
the standard had been developed. The term fiduciary means
that you look after the other party's interest more than
you would look after your own. The bill addresses only the
investment standards. The legislation is an attempt to
open the door, providing as much flexibility as possible,
for the planners.
HB 321 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 3:55 P.M.
H.F.C. 12 3/05/98
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