02/08/2002 01:05 PM House JUD
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= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
February 8, 2002
1:05 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chair
Representative Scott Ogan, Vice Chair
Representative Jeannette James
Representative John Coghill
Representative Kevin Meyer
Representative Albert Kookesh
MEMBERS ABSENT
Representative Ethan Berkowitz
COMMITTEE CALENDAR
HOUSE BILL NO. 332
"An Act extending the termination date of the Council on
Domestic Violence and Sexual Assault; and providing for an
effective date."
- HEARD AND HELD
HOUSE JOINT RESOLUTION NO. 15
Proposing amendments to the Constitution of the State of Alaska
relating to inflation- proofing the permanent fund.
- HEARD AND HELD
HOUSE BILL NO. 243
"An Act relating to sexual assault or abuse of a minor."
- MOVED CSHB 243(JUD) OUT OF COMMITTEE
SENATE BILL NO. 183
"An Act relating to public interest litigants and to attorney
fees; and amending Rule 82, Alaska Rules of Civil Procedure."
- BILL HEARING POSTPONED
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 321
"An Act relating to the purpose for crime victims' compensation;
and limiting the factors that may be considered in making a
crime victims' compensation award in cases of sexual assault or
sexual abuse of a minor."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 332
SHORT TITLE:EXTENDING COUNCIL ON DOMESTIC VIOLENCE
SPONSOR(S): REPRESENTATIVE(S)BUNDE
Jrn-Date Jrn-Page Action
01/16/02 1981 (H) READ THE FIRST TIME -
REFERRALS
01/16/02 1981 (H) JUD, FIN
01/16/02 1981 (H) REFERRED TO JUDICIARY
02/08/02 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HJR 15
SHORT TITLE:CONST. AM: PERMANENT FUND
SPONSOR(S): RLS BY REQUEST OF LEG BUDGET & AUDIT
Jrn-Date Jrn-Page Action
02/14/01 0316 (H) READ THE FIRST TIME -
REFERRALS
02/14/01 0316 (H) JUD, FIN
02/14/01 0316 (H) REFERRED TO JUDICIARY
10/19/01 (H) JUD AT 11:00 AM Anch LIO Conf
Rm
10/19/01 (H) Heard & Held
10/19/01 (H) MINUTE(JUD)
02/04/02 (H) JUD AT 1:00 PM CAPITOL 120
02/04/02 (H) Scheduled But Not Heard
02/08/02 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 243
SHORT TITLE:VERIFY AGE REQD FOR DEFENSE IN SEX CRIMES
SPONSOR(S): REPRESENTATIVE(S)DYSON
Jrn-Date Jrn-Page Action
04/10/01 0930 (H) READ THE FIRST TIME -
REFERRALS
04/10/01 0930 (H) JUD
04/25/01 (H) JUD AT 1:00 PM CAPITOL 120
04/25/01 (H) Heard & Held
04/25/01 (H) MINUTE(JUD)
01/23/02 (H) JUD AT 1:00 PM CAPITOL 120
01/23/02 (H) Heard & Held/Subcommittee
assigned
MINUTE(JUD)
02/08/02 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
REPRESENTATIVE CON BUNDE
Alaska State Legislature
Capitol Building, Room 501
Juneau, Alaska 99801
POSITION STATEMENT: Sponsor of HB 332.
SUSAN SCUDDER, Executive Director
Council on Domestic Violence and Sexual Assault (CDVSA)
Department of Public Safety (DPS)
PO Box 111200
Juneau, Alaska 99811-1200
POSITION STATEMENT: During discussion of HB 332, spoke in
support of extending the sunset date and responded to questions.
DEL SMITH, Deputy Commissioner
Office of the Commissioner
Department of Public Safety (DPS)
PO Box 111200
Juneau, Alaska 99811-1200
POSITION STATEMENT: During discussion of HB 332, spoke in
support of extending the sunset date and responded to questions.
JAMES WELCH, Chief of Police
City of Fairbanks
911 Cushman Street
Fairbanks, Alaska 99701
POSITION STATEMENT: Testified in support of HB 332.
BRENDA STANFILL, Executive Director
Interior Alaska Center for Non-Violent Living (IAC)
717 9th Avenue
Fairbanks, Alaska 99701
POSITION STATEMENT: Testified in support of HB 332.
WINIFRED KELLY
Tundra Women's Coalition (TWC)
PO Box 2785
Bethel, Alaska 99559
POSITION STATEMENT: Testified in support of HB 332.
ARLEATA SNELL
PO Box 3121
Bethel, Alaska 99559
POSITION STATEMENT: Testified in support of HB 332.
BURT COTTLE, Mayor
City of Valdez
PO Box 307
Valdez, Alaska 99686
POSITION STATEMENT: Testified in support of HB 332.
CATHERINE VAARA, Executive Director
Advocates for Victims of Violence (AVV)
PO Box 524
Valdez, Alaska 99686
POSITION STATEMENT: Testified in support of HB 332.
GRACE BROOKS, Executive Director
Sitkans Against Family Violence (SAFV)
PO Box 6136
Sitka, Alaska 99835
POSITION STATEMENT: Testified in support of HB 332.
DEB KNAFF
Sitkans Against Family Violence (SAFV)
PO Box 6136
Sitka, Alaska 99835
POSITION STATEMENT: Testified in support of HB 332 and noted
that she would be faxing a letter from Louise Howitzer (ph) to
the committee.
DAWN COYKENDALL
407 Vestovia Street
Sitka, Alaska 99835
POSITION STATEMENT: Testified in support of HB 332.
GINGER BAIM, Director
Safe and Fear-Free Environment (SAFE)
PO Box 94
Dillingham, Alaska 99576
POSITION STATEMENT: Testified in support of HB 332.
JILL SIMPSON, Executive Director
Cordova Family Resource Center (CFRC)
PO Box 863
Cordova, Alaska 99574
POSITION STATEMENT: Testified in support of HB 332.
NANCY SCHEETZ-FREYMILLER, Public Member
Council on Domestic Violence and Sexual Assault (CDVSA)
420 Kayak Drive
Anchorage, Alaska 99515
POSITION STATEMENT: Testified in support of HB 332.
BILL MILLER, Deputy Chief
Domestic Violence Coordinator
Anchorage Police Department (APD)
Municipality of Anchorage
4501 South Bragaw Street
Anchorage, Alaska 99508
POSITION STATEMENT: Testified in support of HB 332.
PATTI SWENSON, Staff
to Representative Con Bunde
Alaska State Legislature
Capitol Building, Room 501
Juneau, Alaska 99801
POSITION STATEMENT: During discussion of HB 332, responded to
questions on behalf of the sponsor, Representative Con Bunde.
CLARK S. GRUENING, Member
Alaska Permanent Fund Corporation Board of Trustees
217 Second Street, Suite 204
Juneau, Alaska 99801
POSITION STATEMENT: Provided comments on HJR 15 and responded
to questions.
ROBERT D. STORER, Executive Director
Alaska Permanent Fund Corporation (APFC)
PO Box 25500
Juneau, Alaska 99802-5500
POSITION STATEMENT: Provided comments on Version C of HJR 15
and responded to questions.
JIM KELLY, Director of Communications
Alaska Permanent Fund Corporation (APFC)
PO Box 25500
Juneau, Alaska 99802-5500
POSITION STATEMENT: Provided comments during discussion of HJR
15 and responded to questions.
RONALD W. LORENSEN, Attorney
Simpson, Tillinghast, Sorensen & Longenbaugh
One Sealaska Plaza, Suite 300
Juneau, Alaska 99801
POSITION STATEMENT: Speaking as counsel to the Alaska Permanent
Fund Corporation, provided comments and responded to questions
regarding HJR 15.
REPRESENTATIVE FRED DYSON
Alaska State Legislature
Capitol Building, Room 104
Juneau, Alaska 99801
POSITION STATEMENT: Sponsor of HB 243.
ANNE CARPENETI, Assistant Attorney General
Legal Services Section-Juneau
Criminal Division
Department of Law (DOL)
PO Box 110300
Juneau, Alaska 99811-0300
POSITION STATEMENT: During discussion of HB 243 responded to
questions.
HEATHER M. NOBREGA, Staff
to Representative Norman Rokeberg
House Judiciary Standing Committee
Alaska State Legislature
Capitol Building, Room 118
Juneau, Alaska 99801
POSITION STATEMENT: During discussion of HB 243 responded to
questions.
ACTION NARRATIVE
TAPE 02-13, SIDE A
Number 0001
CHAIR NORMAN ROKEBERG called the House Judiciary Standing
Committee meeting to order at 1:05 p.m. Representatives
Rokeberg, Ogan, Coghill, Meyer, and Kookesh were present at the
call to order. Representative James arrived as the meeting was
in progress.
HB 332 - EXTENDING COUNCIL ON DOMESTIC VIOLENCE
Number 0050
CHAIR ROKEBERG announced that the first order of business would
be HOUSE BILL NO. 332, "An Act extending the termination date of
the Council on Domestic Violence and Sexual Assault; and
providing for an effective date."
Number 0071
REPRESENTATIVE CON BUNDE, Alaska State Legislature, sponsor,
explained that HB 332 would extend the Council on Domestic
Violence and Sexual Assault (CDVSA) to June 30, 2006. He noted
that last [fiscal] year, the CDVSA provided services to over
7,000 Alaskan women and children, giving them safe shelter
throughout the state for a total of over 50,000 "shelter
nights." He mentioned that an audit conducted by the
Legislative Audit Division suggested the sunset extension.
REPRESENTATIVE MEYER asked if it is typical to extend sunsets
four years at a time.
REPRESENTATIVE BUNDE said that in his experience, it is.
REPRESENTATIVE OGAN asked whether all of the concerns raised by
the Legislative Audit Division's audit have been addressed by
the CDVSA.
REPRESENTATIVE KOOKESH, after noting that the sponsor's
statement makes reference to providing services for
perpetrators, asked what those services entail.
REPRESENTATIVE BUNDE said that there is a "batterers' program"
in which perpetrators are encouraged to change their behavior.
Number 0421
SUSAN SCUDDER, Executive Director, Council on Domestic Violence
and Sexual Assault (CDVSA), Department of Public Safety (DPS),
said that the CDVSA strongly supports the extension of the
sunset date. It provides a critical service [pertaining to] the
public safety of Alaskans, particularly Alaskan women and
children, and provides prevention services to perpetrators of
domestic violence. She noted that of the five recommendations
made as a result of the audit performed on the CDVSA, one is the
extension of the sunset date.
CHAIR ROKEBERG referred to the Legislative Audit Division's
Recommendation No. 1, which said: "The legislature should amend
the Council on Domestic Violence and Sexual Assault's statutes
related to appointment of council members." He asked Ms.
Scudder to speak to that issue.
MS. SCUDDER explained that the current statute regarding
appointment of council members requires the Alaska Network on
Domestic Violence & Sexual Assault (ANDVSA), which is a
nonprofit coalition of the programs served by the CDVSA, to
submit a list of recommended persons to the governor, and
requires the governor to appoint three persons to the council
after consultation with the ANDVSA. However, the governor is
not required to choose the appointees from the ANDVSA's list;
rather, he/she must simply consult with the ANDVSA. She noted
that it is fairly standard practice for the governor to consult
with the experts in any field when making appointments to boards
or commissions. She said that the CDVSA does not feel that the
statutes need to be changed since the governor only consults
with the ANDVSA and does not have to follow its recommendations
regarding appointees; "in fact, precedent shows there have been
governors who have appointed people who were not recommended by
the [ANDVSA]."
REPRESENTATIVE OGAN referred to the audit's statement that an
apparent conflict of interest exists when a council member
reviews, evaluates, approves, and monitors a grant to the same
non-profit corporation that was responsible for recommending
that individual for council membership.
MS. SCUDDER said:
The way that this works is the [ANDVSA] puts out the
word to all the programs that there is an opening, and
then the programs themselves have a specific protocol
that they use - an evaluation process - and they
recommend people to the [ANDVSA], and then the
[ANDVSA] will recommend people to the governor. The
people who are recommended by the individual programs
may indeed have had an affiliation with any of those
programs in the past. In fact, on our current
[council], one of our more recent appointments used to
be on the board of STAR [Standing Together Against
Rape] in Anchorage, and actually had to resign that
position in order to serve on the council. [Because
we want to have people who are informed on the issue],
... that same perceived conflict of interest could
occur with many people who have served on the council:
that they will have had an affiliation with a domestic
violence or sexual assault program somewhere in the
state at some point in time....
REPRESENTATIVE MEYER asked how the CDVSA interacts with groups
like Star.
MS. SCUDDER explained that the CDVSA provides funding to those
programs, mostly through federal grants, and then provides
oversight of the grants to ensure that the programs are
fulfilling all the requirements of the grants.
Number 0740
DEL SMITH, Deputy Commissioner, Office of the Commissioner,
Department of Public Safety (DPS), added that the CDVSA, of
which he is a member, is intended to serve not only as a funding
body, but also as a center of information about related
subjects. He noted that the CDVSA does maintain ongoing
discussions with the different programs across the state.
CHAIR ROKEBERG referred to the Legislative Audit Division's
Recommendation No. 3, which said: "The legislature should amend
AS 18.66.050 referring to the council hiring staff, and the
council should address personnel issues and promote strong
leadership by the executive director." He asked Ms. Scudder to
comment.
MS. SCUDDER explained that current statute says that the council
shall hire an executive director and staff, but in practice,
that is not what happens. The council hires the executive
director who then hires the staff; there have not been any cases
where the council has directly hired staff.
CHAIR ROKEBERG asked why the CDVSA has not sought a statutory
change regarding that issue.
MS. SCUDDER replied that "it hasn't been posing a problem."
MR. SMITH added that although he has been a member of the
council for the past seven years and is aware of what the
statute says, "it never occurred to me that I wanted to be
involved, or [that] any member of the council wanted to be
involved in the selection of staff for the executive director."
He said that it just seemed like an unnecessary change because,
in practice, the council has interpreted the statute to mean
that the council hires the executive director who then hires
his/her own staff.
CHAIR ROKEBERG remarked that this practice, in essence, is an
example of the administration interpreting and following, as it
sees fit, the laws passed by the legislature. He noted,
however, that although the current practice is working, the
statute should be changed to reflect "reality."
REPRESENTATIVE KOOKESH agreed that the statute should be changed
to reflect the current practice. He added that since he puts a
lot of faith in the people he hires, if he hired an executive
director, for example, he'd expect that executive director to
hire the appropriate staff.
CHAIR ROKEBERG noted that the audit does recommend a statutory
change to this effect, and that he prefers the administration to
follow what the statutes say.
REPRESENTATIVE JAMES said she agrees with Representative
Kookesh; when hiring a leader, it is important for that leader
to have employees that he/she can work with. She, too, opined
that the statute should be changed to reflect current practice.
Number 1016
CHAIR ROKEBERG referred to the Legislative Audit Division's
Recommendation No. 4, which said, "The council should address
statutory responsibilities that relate to consultation with the
Department of Health and Social Services (AS 18.66.050(12)) and
other entities and organizations (AS 18.66.050(14))." He asked
Ms. Scudder to comment.
REPRESENTATIVE COGHILL interjected to suggest that
Recommendation No. 4 and Recommendation No. 5, which said:
"Council members and the executive director should consult with
the Department of Education and Early Development, school
district representatives, and grantees who have worked toward
curriculum development to create a comprehensive standardized
curriculum to be used within the schools across the state,"
could be rolled into a "communication discussion between
agencies."
CHAIR ROKEBERG offered Ms. Scudder the opportunity to address
both recommendations together.
MS. SCUDDER said that Recommendation No. 4 asked that the
council work with the Department of Health & Social Services
(DHSS) on the training of healthcare professionals in
identifying and treating cases of domestic violence and sexual
assault. She explained that the council has had a role in this
[training]; the DHSS has an ongoing program - The Alaska Family
Violence Prevention Project - and at its inception as a ten-
state test program, the CDVSA sat on the program's advisory
board. She said she is not sure "exactly what happened in the
audit on that," but the healthcare professionals in Alaska are
receiving training on these issues already. She added that the
CDVSA was at the table when this program was first set up, can
certainly take a more active role in the ongoing process of the
program, and will do that with the DHSS.
MS. SCUDDER mentioned that the second part of [Recommendation
No. 4] pertains to mandatory training for certain types of
employees - including employees of the court, judges, and
private employees - on issues of domestic violence. She
explained that the CDVSA has also had a role in that training
through one of the grants that it administers - the "Violence
Against Women Act" grant - and one of the portions of that
training this year is to have judges receive training on
domestic violence issues. Thus, she assured the committee, some
of this aspect of Recommendation No. 4 is already being
addressed, and the CDVSA will take a look at the training to
ensure that it is comprehensive and meets the needs [of
participants].
Number 1153
MS. SCUDDER said that Recommendation No. 5 pertained to working
with the Department of Education and Early Development (EED) to
develop a statewide curriculum on domestic violence and sexual
assault issues. She explained that historically, the CDVSA has
left it to the individual programs funded by the CDVSA to
[create] curriculums that are tailored to their regions. She
reiterated that the activity recommended in the audit is
happening; the programs are in the schools, but the curriculum
has not been [created] by the CDVSA. She noted that the CDVSA
will, however, gather the materials that are already being used
around the state, and will work with the EED to come up with at
least a base model that school districts can use if they want to
- but, once again, letting the individual programs in the
[different] areas add information that is specific to those
areas to ensure that cultural and other local, relevant issues
are addressed.
CHAIR ROKEBERG asked whether curriculum requirements are a
matter of federal law.
MS. SCUDDER said she did not know. In response to a question
pertaining to what is taught in the classroom regarding sexual
assault and domestic violence, she explained that the
recommendation of the CDVSA is to start age-appropriate
education in the school system; part of the solution is breaking
a cycle, and part of breaking a cycle is education.
MR. SMITH added that what is intended of the curriculum in the
schools is to break the cycle of violence, to teach that
violence is not the answer to resolving problems; that is what
the curriculum is focused on, not necessarily on sex education.
REPRESENTATIVE JAMES asked whether any assertiveness
training/education is being offered.
MS. SCUDDER said yes; in the programs throughout the state,
counseling services are offered to victims of domestic violence
and sexual assault, and part of those services include
empowering people so that they can become stronger advocates for
themselves.
Number 1387
REPRESENTATIVE OGAN mentioned that for years, he'd served on the
"public finance subcommittee," noting that at the time, that
subcommittee felt that the batterers' issue was not receiving
enough emphasis. He said he is disappointed to see, years
later, that the audit is pointing out the same weaknesses
regarding the batterers' program, and he surmised that perhaps
this issue is not a priority for the council.
MS. SCUDDER countered that the CDVSA funds seven community-
based, nonprofit batterers' programs, and three [batterers']
programs in the prisons. So it is not that batterers' issues
aren't being addressed, she added; "it is fairly new to the
council - we've only been doing this for three years - but it is
something that we are addressing."
REPRESENTATIVE OGAN opined that a lot of things done by the
CDVSA merely address the problem after the fact. He also opined
that the batterers' program is the one preventative program that
goes to the root of the problem. He suggested that more money,
time, and resources should be spent on the people who are
perpetrating these crimes, rather than on just trying to make
the victims whole.
MR. SMITH confirmed that initially, the CDVSA was not spending
anything on the batterers' programs; then the CDVSA was able to
spend $200,000 and now it spends $360,000. He added his belief
that there is a recommendation/request for funds in the
governors budget this year as well. He explained that the
problem is that "you've got to spend out of both pockets for a
while." He continued:
I want to break the cycle of violence, as every member
does that's involved in this, and certainly batterers'
intervention and changing their behavior is an
appropriate approach. But I cannot leave women on the
street who are not protected. So I need to spend
money on shelters also. I'd spend every dime you're
willing to give us for batterers' intervention, in
addition to what we already get.
Number 1563
JAMES WELCH, Chief of Police, City of Fairbanks, testified via
teleconference and stated simply that the Fairbanks Police
Department (FPD) is in support of extending the sunset for the
CDVSA because the council performs some very important and
necessary work throughout Alaska and because the council's
support and guidance are needed throughout the law enforcement
community.
Number 1599
BRENDA STANFILL, Executive Director, Interior Alaska Center for
Non-Violent Living (IAC), testified via teleconference. She
noted that the IAC has a community-based batterers' intervention
program as well as a program in the prison. She spoke in
support of extending the sunset for the CDVSA, noting that she
has been with her organization for six years and thus has had an
opportunity to see what the CDVSA has accomplished. She said
that the IAC definitely appreciates the support and oversight
provided by the CDVSA; "they come in every two years, at least,
go through our records, make sure we're doing what we say we're
going to be doing, [and], in addition to that, they're great at
providing support when we're having issues."
Number 1673
WINIFRED KELLY, Tundra Women's Coalition (TWC), testified via
teleconference, asking the committee to extend the sunset on the
CDVSA. She said that the CDVSA funds programs that are very
important and much needed in Alaska. She relayed that although
CDVSA-funded programs have many success stories, the TWC is
still receiving calls from victims who need services; in 2001,
for example, 718 crisis calls were taken, and 1,969 shelter
nights were provided. She noted that in the Yukon-Kuskokwim
Delta, the TWC is a strong community resource that provides
necessary education and outreach services, in addition to crisis
intervention services. She extended her thanks to
Representative Bunde for sponsoring HB 332, and to the committee
for holding the hearing on it.
Number 1734
ARLEATA SNELL testified via teleconference, asking the committee
to extend the sunset on the CDVSA. Speaking as a victim of
domestic violence, she noted that it is very important for
communities to have safe places for victims and their families
to go to.
Number 1765
BURT COTTLE, Mayor, City of Valdez, testified via teleconference
in support of extending the sunset on the CDVSA. He recounted
that he has lived in Valdez for 28 years; has worked in the
police department for 22 years, 8 years as chief of police; has
served on the city council for 3 years, 2 years as mayor; and
has spent 2 years on the board of Advocates for Victims of
Violence (AVV). Speaking as both the mayor and as a private
citizen, he said that he and the citizens of Valdez support the
AVV in the following ways: The city of Valdez, in 1998 and
1999, donated $215,000 for the purchase and building of a new
domestic violence shelter; the city has funded $37,000 per year
for the past 15 years-plus; in 2001, two local fundraisers were
held that raised over $85,000 to "pay off the building here in
town"; and United Way, for the past 10 years-plus, has donated
$30,000-$40,000 each year towards domestic violence issues. He
noted that when he travels to Juneau in his capacity as mayor,
he stops by the CDVSA and speaks with them directly to ensure
that Valdez is doing everything possible to curb domestic
violence. In conclusion, he stated that domestic violence has
not ended, and that simply throwing people in jail is not
sufficient, since there has been no intervention. He added that
the CDVSA is part of that intervention.
Number 1847
CATHERINE VAARA, Executive Director, Advocates for Victims of
Violence (AVV), testified via teleconference in support of
[extending the sunset on] the CDVSA. She said that the CDVSA
has made a significant difference in many people's lives in the
Valdez area, as well as throughout Alaska: saving people,
housing them, and helping them to find the resources they need
in order to get on with their lives. The CDVSA has had a
significant role in terms of expanding public awareness; "they
are a voice for us," she said, adding that the CDVSA has also
had a significant role in terms of providing technical
assistance. She relayed that the CDVSA has supported AVV with
its efforts regarding three successful children's programs: the
Peacemakers Program specifically addresses bullying issues in
schools; the Strong Girls Program addresses issues of self-
esteem and advocates for developing strong peer-group support;
and a "teen talk group" provides a very significant service for
teens in the area. She added that the AVV is currently working
with the Valdez Counseling Center in developing a very strong
[batterers'] intervention program. She relayed that the CDVSA
has been instrumental in providing a marvelous network
throughout Alaska, linking up the AVV with 23 other domestic
violence programs. She concluded by saying she fully supports
the continuance of the CDVSA.
Number 1919
GRACE BROOKS, Executive Director, Sitkans Against Family
Violence (SAFV), testified via teleconference in support of
extending the sunset of the CDVSA. She said that it is
imperative for Alaska to make a stronger commitment to ending
violence against women and children, and extending the CDVSA is
a way to demonstrate that commitment. She remarked that the
CDVSA is able to leverage federal funds, provides technical
assistance to the many programs around the state, and, most
importantly, provides resources to victims and survivors in
order that they may build safe lives for themselves and their
children.
Number 1942
DEB KNAFF, Sitkans Against Family Violence (SAFV), testified via
teleconference, urging the committee to extend the sunset on the
CDVSA so that it may continue working with all the programs
around Alaska. With Alaska being such a huge state, the CDVSA
has been integral in providing services that keep women and
children safe. She noted that she also has a letter from Louise
Howitzer (ph) that she will fax to the committee.
Number 1980
DAWN COYKENDALL testified via teleconference in support of
extending the sunset on the CDVSA. She noted that as a victim
of domestic violence, the CDVSA has been invaluable to her. She
recounted that previous to living in Sitka, she lived in Florida
but did not receive services there because she was not aware
that such services even existed. Now, because she lives in
Sitka and because of the CDVSA and the money it provides, she
explained that she is able to carry on with her life in a
nonviolent environment; awareness of safe shelters through
community education has been invaluable to her. She said:
I've had need to use the shelter, I've had need to use
their services, and without them I would still be
living in a domestically violent situation. Without
them I would have not had legal help to protect myself
from my husband's violence, I would not have
understood what domestic violence really is, and I
would not have had the services that have been
provided for my husband to make him aware of his own
violent acts. I appreciate this council and the funds
that they have provided, and I am especially grateful
for the safe shelter and the services provided by
them.
Number 2060
GINGER BAIM, Director, Safe and Fear-Free Environment (SAFE),
testified via teleconference, and noted that SAFE, a domestic
violence program, provides services to the entire Bristol Bay
region - about 33 villages. She said that she is in support of
HB 332 because SAFE depends on the CDVSA to keep the program
going. She continued:
As you may have heard, it's been pretty rough out here
in Bristol Bay the last few years. The failing of our
fishing industry has had a devastating affect on many
of our communities, and one measure of that problem is
that SAFE provided nearly as many shelter nights in
the first quarter of fiscal year [FY] '02 [as] we
provided in all of fiscal year '01. In addition to
the SAFE shelter, we also have a residential care
facility for children, in state custody, that's
operated in the same building as our domestic violence
program.
We have a Sister's Program, which is a treatment and
shelter program set up specifically for women - with
children - who are battered and chemically dependent.
We have a fetal-alcohol-syndrome prevention program
where we provide childcare for any parent, but
particularly for young women who are attempting to go
into after-care treatment or evening treatment, [and]
we provide childcare and transportation for them. We
have an active children's program. We have an active
village outreach program; we have at least two trained
volunteers in 24 of our 33 villages, and we have four
part-time paid advocates in 4 of our villages.
MS. BAIM also said:
Our board of directors consists of many people from
our community, including two village residents [from]
outside of Dillingham. We depend on the council [in
order] to be able to provide these core services; the
council's direction and oversight of our programs
guarantees the most efficient and effective use of
state resources. The council also helps to coordinate
the efforts of other state, federal, and local
agencies to enhance the safety of victims and to
reduce domestic violence. We need them to continue
their good work, and I urge you to pass HB 332 out of
committee today with your positive support.
Number 2153
JILL SIMPSON, Executive Director, Cordova Family Resource Center
(CFRC), testified via teleconference in support of extending the
sunset for the CDVSA. She said that the CDVSA is important to
the CFRC because the community is isolated and must rely on the
CDVSA's funding and support to transport some victims out of the
community. She continued:
Many of these people, if they didn't know there was a
way out, would not be reporting domestic violence. So
they would continue living with it. But, because
we're able to offer them support and encouragement and
a place to go outside of their community, we are
getting a lot more reporting, and [are] able to
support these families. The other aspect ... we
consider important [is the] work we do in the schools.
We concentrate ... on doing education and prevention;
we're in the grade schools doing a bullying-prevention
program ... trying to cut down on bullying behavior
and build self-esteem. In the junior high and high
schools, we concentrate more on discussion groups and
educating students as to relationships and the pattern
of domestic violence. A lot of people don't realize
what can be called domestic violence, and [by]
educating them in relationships as they get into
girl/boy relationships a lot more, [we are] therefore
coming from a prevention mode and not waiting until
it's already happened. ... We rely on the council to
support us in this - in these programs - and [to
offer] us [the] support to be able to run our office.
So I really encourage you to look at extending the
council, thank you.
Number 2235
NANCY SCHEETZ-FREYMILLER, Public Member, Council on Domestic
Violence and Sexual Assault (CDVSA), testified via
teleconference in support of extending the sunset on the CDVSA.
She opined that the CDVSA is one of the best models for
efficient and effective government. It's efficient in terms of
the fact that there are four state departments working together
and with various programs on the issues of domestic violence and
sexual assault. It's a model that is a leader in coordination
and family response. She said that it's effective in the sense
that she has seen people from all different political
persuasions come together to try to stop domestic violence; she
has seen them stop domestic violence by working with victims, by
working with men, by working with children, and by dealing with
everybody in the community. She noted that she has had women
and children come up to her and say "Thank you, I now have a
positive future," and she has had men come up to her and say
"Thank you, I didn't want to be like this."
Number 2316
BILL MILLER, Deputy Chief, Domestic Violence Coordinator,
Anchorage Police Department (APD), Municipality of Anchorage,
testified via teleconference, noting that as a representative of
the chiefs of police from around Alaska, he is also on the
committee that administers the "Violence Against Women Act"
grant monies. He said that he is in support of HB 332 for two
main reasons. The first has to do with rural law enforcement;
[the CDVSA] helps with the distribution of monies from the
"follow-up grant" to rural law enforcement and smaller police
departments around the state for training in the areas of
domestic violence and sexual assault. "As many of you know,
with the smaller departments and the constricted budget, this
money and the training that it provides becomes extremely
important to those law enforcement officers and the communities
that they serve," he noted. The second reason is that [the
CDVSA] provides a mechanism for coordination among law
enforcement, advocates, and other departments that deal with the
victims and the perpetrators of domestic violence and sexual
assault. He opined that [the CDVSA] offers a fine example of
the mechanism that provides for coordination amongst government
agencies.
CHAIR ROKEBERG asked of the sponsor's representative, Patti
Swenson, if there was a reason the sponsor did not incorporate
the legislative auditor's recommendation to modify the statute
as it pertained to the hiring of staff.
Number 2397
PATTI SWENSON, Staff to Representative Con Bunde, Alaska State
Legislature, sponsor, on behalf of the sponsor, explained that
Representative Bunde spoke with the executive director of the
CDVSA about that recommendation, and at that time, he felt it
would not be necessary to incorporate such a change. She added
that the sponsor would not object to such a change if it is the
will of the committee to amend HB 332.
CHAIR ROKEBERG noted that there is some consensus among the
committee that the auditor's recommendation should be
incorporated into HB 332. In order to allow the sponsor the
opportunity to develop a committee substitute (CS), Chair
Rokeberg announced that HB 332 would be held over.
HJR 15 - CONST. AM: PERMANENT FUND
Number 2458
CHAIR ROKEBERG announced that the next order of business would
be HOUSE JOINT RESOLUTION NO. 15, Proposing amendments to the
Constitution of the State of Alaska relating to inflation-
proofing the permanent fund.
CHAIR ROKEBERG called an at-ease from 1:50 p.m. to 1:52 p.m.
TAPE 02-13, SIDE B
Number 2459
REPRESENTATIVE MEYER moved to adopt the proposed committee
substitute (CS) for HJR 15, version 22-LS0568\C, Cook, 1/31/02,
as a work draft. There being no objection, Version C was before
the committee.
CHAIR ROKEBERG noted that Version C merely changes, from 5
percent to 6 percent, the maximum amount that can be
appropriated from the permanent fund. He asked for comments
regarding this change
Number 2437
CLARK S. GRUENING, Member, Alaska Permanent Fund Corporation
Board of Trustees ("the board"), noted that other testifiers
would speak more specifically to that change, whereas he
preferred to address the purpose of [HJR 15], which is to
provide "complete and protected inflation-proofing" for the
permanent fund ("the fund"). He explained that [HJR 15] does
this by limiting the annual appropriation to 5 percent of the
"moving average." Simply speaking, he said, the "projected
long-term average earning return of the fund" is 8 percent,
whereas inflation is 3 percent; so by only spending 5 percent,
the fund retains that 3 percent inflation figure. In an effort
to explain why inflation-proofing is so important for the fund,
he mentioned that 25 years ago, when the ninth legislature
amended the Alaska State Constitution, they knew that although
the state would quickly get used to using oil revenue, oil
production would decline at some point. Because of this
inevitable decline, it made sense to set up a savings account
even though, at the time, it was not known exactly what that
savings account would be used for, nor what kind of financial
situation the state would find itself in.
MR. GRUENING, in response to a question, elaborated that some of
the things that could not be foreseen were the rate of oil
production and the exact timeframe when the oil money would run
out. He said that according to his recollection, the
projections of when the money would run out were a lot earlier
than has proven to be the case, and this has been due in part to
good luck and a lot more oil production than was initially
anticipated by the oil companies.
CHAIR ROKEBERG added that to his recollection, it was projected
that the state would be out of oil in 2003.
MR. GRUENING confirmed that. "It was very pessimistic," he
added. He said that the one point he wanted to bring to the
committee's attention as it looks forward for the next 25 years
is that if it could be legislated that an industry produce "X"
amount of revenue, the legislature would do so. He recalled a
joke that he has heard from time to time regarding a
hypothetical piece of legislation that says, "The price of oil
will be 'X.'" He posited that what HJR 15 does is the
equivalent of taking an industry such as fishing, oil, or
tourism, for example, and saying, "You're going to produce this
much income over this period of time." Passage of HJR 15 will
ensure that over the next 25 years - looking at the oil industry
to produce under $20 billion, and even after the inflation-
proofing money is retained - the permanent will produce, for the
legislature's and the people's use, more than twice $20 billion.
He stated that in the larger context, inflation-proofing makes
"good policy sense." He indicated that the next testifier would
speak to the issue of why the appropriation limit should remain
5 percent instead of 6 percent as is proposed in Version C.
Number 2240
ROBERT D. STORER, Executive Director, Alaska Permanent Fund
Corporation (APFC), indicated that he would speak briefly about
how the APFC and its staff came to the conclusion that 5 percent
is the appropriate number to have as an appropriation limit, and
about how the Earnings Reserve Account (ERA) functions as a
shock absorber for market volatility. He noted that next week,
the APFC's consultant will make the yearly presentation before
the board wherein it will review the capital market assumptions
that the consultant prepares. During the review, the board
looks at an array of options, and what they mean to the board is
a median expected return over the next five years. "Over the
last few years and, in fact, next week, you're going to find our
existing asset allocation ... has a median expectation of
producing a 5 percent real rate of return, a return that would
be 5 percent over the rate of inflation," he said. This is more
than coincidence, he warned, it is actually the long-term
historical rate of return of what the asset allocation earns.
CHAIR ROKEBERG asked what that amount was. "It was more than 5
percent then, right?"
MR. STORER acknowledged that "the history of the permanent fund
is in fact more than 5 percent." He said that it can be looked
at two ways: one way is to look at "five years projecting
forward," but when he refers to long-term, he said he is
actually talking about data since 1926.
CHAIR ROKEBERG asked: "But you just said last year we just got
the data, and it was the inflation plus 5 [percent] - which
added up to how much, then?"
MR. STORER asked whether he is referring to returns.
CHAIR ROKEBERG indicated he is referring to returns. "I thought
you said you met the 5 percent target based on what inflation
occurs."
Number 2175
MR. STORER, to clarify that point, said that last year, when
there was actually a negative return, the [real rate of] return
of the fund was below inflation. He noted that this information
segues into another point he wanted to make: When looking at
long-term numbers and how they are interpreted, there are
periods, sometimes prolonged periods, when that real rate of
return can not be achieved, such as happened last year. He
pointed out that if members had looked at this same proposal in
1983, when he first came to work for the APFC, they would have
disapproved of the measure because the asset allocation for the
decade previous to 1983 did not achieve a 5 percent real rate of
return. But over the longer term, he noted, the APFC has been
able to achieve a return in excess of that 5 percent rate of
return.
CHAIR ROKEBERG remarked that it has been closer to 12 percent.
MR. STORER indicated that that is a fair statement; "double
digits at least ... over last year." But there are prolonged
periods of time, he reiterated, when that goal cannot be
achieved, though there are also prolonged periods of time when
the return is in excess of that goal. Which is why the ERA is
so important, he added. He explained that the permanent fund is
divided into two components: the principal, which cannot be
touched without a vote of the people, and the ERA, which is, in
essence, the profits and the income of the fund realized through
the normal market process [and] the unrealized gains through
stock and bond appreciation. The ERA is actually the component
that absorbs the market volatility, he noted. When the value of
the fund goes down because of the market, the principal does not
change but the ERA goes down dramatically. He pointed out that
the ERA is also the component that allows the legislature to
appropriate money for the permanent fund dividend (PFD), for
inflation-proofing, et cetera.
CHAIR ROKEBERG remarked that if [HJR 15] is adopted, there
wouldn't be an ERA.
MR. STORER said that technically, there would still be an ERA;
there would still be a principal that could be measured by ...
CHAIR ROKEBERG interjected, pointing out that all the funds
would be commingled, and that there would be no need for an ERA.
"That's the whole idea of an endowment, I thought," he added.
Number 2070
MR. STORER acknowledged that the funds would be commingled. He
noted, however, that the language pertaining to "principal"
still exists in HJR 15; this underscores the importance of
having an ERA as a cushion. He said that it could be considered
a belt-and-suspenders way of protecting the earnings.
CHAIR ROKEBERG noted that "that's what we have now." If HJR 15
were adopted, however, then future legislatures would be limited
to the amount constitutionally stipulated via this legislation.
"So we [won't] have an [ERA] that we could dip into," he added.
MR. STORER said: "Not all of it, no."
CHAIR ROKEBERG countered: "We wouldn't have any." There would
just be the 6 percent or 5 percent or whatever appropriation
limit the legislature stipulates.
MR. GRUENING noted that the part that doesn't change in HJR 15
is the concept of protecting the principal. Once "principal" is
defined, the rest is earnings reserve or whatever the
legislature wants to call it, he added. That aspect of the
statute doesn't get repealed by HJR 15, so that difference
between that notional number of principal - which is simply what
has gone in by constitutional mandate plus what the legislature,
over the last 25 years, has put in voluntarily, which amounts to
$7 billion - and the market value is what is currently available
for appropriation. He remarked that HJR 15 doesn't change the
concept that once all that is left is just the principal, either
through spending or market volatility, then there is no
spending, period.
CHAIR ROKEBERG asked: "At the 5 percent figure, all things
being equal right now, what would that dollar amount be?"
MR. STORER offered that it would be about $1.2 billion.
CHAIR ROKEBERG asked what the amount would be at 6 percent.
MR. STORER said that it would be about $1.5 billion.
CHAIR ROKEBERG asked what amount of the "unencumbered earnings
reserve" could be paid out in 2003, for example, "if we wanted
to dip into the [ERA], that's over and above the PFD and
inflation?"
Number 1914
MR. STORER said that the projection is that the APFC will earn
about 8 percent on June 30, after the liability of the PFD is
encumbered and after inflation-proofing. This should leave
about $3 billion in the ERA, the projected amounts of about 8
percent earnings and about 3 percent inflation, he noted.
CHAIR ROKEBERG remarked that he has heard numbers ranging
between $175 million to $200 million a year as the profit.
MR. STORER clarified that the "residual" is about $175 million
to $300 million; "we use a range because of our components."
REPRESENTATIVE JAMES noted that the remark that HJR 15 is not
changing a certain portion of the statute is incorrect; HJR 15
stipulates that all income from the permanent fund shall be
deposited into the permanent fund rather than in the general
fund as is currently required. She said:
So you are making the permanent fund, in total, a
permanent fund. And I assume that this means that the
appropriations shall be limited to 6 percent but it
doesn't say [that] no other appropriations from the
permanent fund may be made. But what you're allowing
us, then, is to appropriate from the permanent fund
itself. Isn't that correct?
MR. GRUENING pointed out that when he is speaking of the market
value of the fund, he is referring to the principal and the
earnings reserve, so in a sense, right now, because of the
current statutory language that sets up the ERA, the money does
go into the permanent fund.
REPRESENTATIVE JAMES said that she disagrees with that statement
because it is not [put into the] permanent [fund], it is [put
into the] general [fund]; all of the state's income is currently
put into the general fund.
CHAIR ROKEBERG indicated that he, too, disagrees with Mr.
Gruening's statement.
MR. GRUENING acknowledged that HJR 15 would change it from the
way it is done now. Under current statute, money is deposited
into the ERA, which sets up the mechanism. But in terms of what
the APFC manages, it's the total amount, including the ERA.
"And when you take a percent of market value, it includes the
total market value - principal and earnings reserve," he said.
Number 1792
REPRESENTATIVE JAMES sought confirmation that it is true that
when the permanent fund is managed, when part of it is permanent
and part of it isn't, there could be a difference in the way
that some of [the money] is "deposited," and thus the portion
that is not permanent might be invested a little differently.
MR. STORER explained that APFC manages the permanent fund with a
single asset allocation; in terms of managing the assets of the
fund there's no distinction between the principal and the
earnings reserve. He noted that if HJR 15 were to pass, that
management style would continue.
CHAIR ROKEBERG sought confirmation that the APFC does "manage
for payouts," such as the PFD.
MR. STORER acknowledged that there is a cash-flow issue and that
is part of the whole asset-allocation development.
REPRESENTATIVE JAMES asked whether the 5 percent figure that Mr.
Storer is advocating for would then be the only amount available
for liquidation in order to have cash available.
MR. STORER said:
We would basically manage the fund as we do now, which
has, to date, the dividend, [and] you can expect to
average about 4 percent, and so that cash
requirement's nominally more in terms of managing a
$25 billion fund. And so that certainty, if you will,
would allow us to maintain the stock exposure that we
have. If the payout were to increase dramatically,
then we might consider managing the fund more
conservatively to meet the cash-flow needs.
REPRESENTATIVE JAMES said that she does not know whether she is
more comfortable with a 6 percent or with a 5 percent
limitation. She added, however, that she is not comfortable
with the fact that "if we do this and we don't change the way we
calculate the permanent fund dividend, that's all that ever gets
paid - or mostly all that ever gets paid." She said that she is
not willing "to go there until we've made some changes in how we
allocate the permanent fund dividend over the long period ...;
in fact, I'm not sure the current calculation we have even works
with this situation because of the way the statutory language
is."
Number 1639
CHAIR ROKEBERG noted that they would have to leave the existing
statutory language in until the voters get a chance to vote on a
constitutional amendment. He said that he would not be averse
to changing the current "statutory regime" because he thinks
it's broken.
REPRESENTATIVE JAMES remarked that she has a plan.
CHAIR ROKEBERG asked how much was paid out in PFDs last year.
MR. STORER said $1.182 [billion].
CHAIR ROKEBERG asked how much the inflation-proofing was.
MR. STORER said roughly $700 million.
CHAIR ROKEBERG surmised, then, that the 5 percent figure
wouldn't have been sufficient for last year's inflation-proofing
and PFDs.
MR. STORER said that is correct.
CHAIR ROKEBERG said that depending on the level of inflation, if
the 5 percent figure is adopted, there is still the risk that
the dividend would have to be reduced and that there would be
nothing available for the legislature to appropriate. He said
that was his rational for raising the appropriation limit to 6
percent. He asked whether the $7 billion that the legislature
has voluntarily placed into the principal is "nominal dollars or
growth dollars."
MR. GRUENING said it is actual dollars.
CHAIR ROKEBERG surmised, then, that "the growth is more than
half." For those that are concerned that the permanent fund has
not been inflation-proofed enough, he said that he would suggest
instead that the legislature has "inflation-proofed the kitchen
sink; we have inflation-proofed every dime and dollar in every
nook and cranny of the permanent fund - we've over-inflation-
proofed it." The legislature has added fully half of the
permanents fund's whole value, he noted, "by nominal direct
dollar deposits" and the appreciation of those dollars. He
said:
If we look at the integers of what can really be the
proper endowment amount, in my ... opinion we could
probably go 50 years at 6 percent and wouldn't eat up
what we've already got inflation-proofed in there now.
I'd love to see some numbers on that in a model. I
think we've already inflation-proofed it so far ahead
that ... to say that we [should] just stick here at
the old conservative 5 percent rate - and leaving us
nothing on table for maneuver-room - is ridiculous,
because we've already [done] our job over and over
again, as the legislature, and being responsible to
the public. ... I'm a firm believer, gentlemen, in
your endowment plan and your recommendation, but to
tie the legislature's hands in this manner, when we
already have done the good job of protecting it, is, I
think, a false economy and not good, given the
financial circumstances we're going into. In other
words, I can't believe that we could sell this to the
public, and even our own colleagues here, if we have
such a miniscule amount. That's my opinion.
Number 1484
JIM KELLY, Director of Communications, Alaska Permanent Fund
Corporation (APFC), to clarify, said:
Any discussion about how much money needs to be
inflation-proofed isn't included in the $1.2 billion.
We will make $2 billion in this coming year, and the
money that would be available would be made available
for dividends and any other public use that you'd
have, and that would be out of the $1.2 billion. In
this fiscal year that's coming up, the dividend is
going to be right around [$1] billion, so there would,
in fact, be close to $250 million available for
another use.
MR. KELLY said that the more important point has to do with the
long-term, and although part of it is about inflation-proofing,
the other part of it, as Mr. Gruening points out, is about
producing a sustainable income stream. "And if your intent, Mr.
Chairman, is to produce as much money as possible from the
permanent fund, over the next 25 years you will get more money
at a 5 percent limit than you will with a 6 percent limit," he
stated.
CHAIR ROKEBERG mentioned that he "would also be interested in
seeing that, because you're talking about building the critical
mass, so 5 percent of 200 is bigger than 5 percent of 100."
MR. KELLY acknowledged that it is a "math thing and it has to do
with compounding." But over time, when more money is paid out,
there is less money to invest in the future, and so less is
produced, he noted. He continued:
I can tell you that over a 25-year period - and with
the permanent fund we try to think of it in terms of
generations, which is 35 years, 65 years, 100 years
... - you're going to get more money.
CHAIR ROKEBERG pointed out a picture located on the back wall of
the committee room. He said that it is "from about 1886 and
it's of Liberty being strangled to death by taxes; that's where
we're at today, we're about ready to be strangled to death by
taxes." He said he didn't know if there is time to build a
critical mass, and fiddle while Rome burns, without using some
permanent fund earnings of one nature or another. He noted that
although he doesn't disagree with Mr. Kelly's point, it is a
matter of how much patience "we" have.
Number 1356
REPRESENTATIVE KOOKESH asked the representatives from the APFC
and the board whether "the 5 percent is supportable by you all."
He said that although he understands Chair Rokeberg's position
regarding 6 percent, he doesn't automatically support that
figure and would like to hear the representatives' viewpoint.
MR. GRUENING said: "It's on the aggressive side, [though] we
believe it's supportable.
MR. STORER said:
We concluded that given our existing statutes that
limit the amount of money we can invest in the equity
market, ... a 5 percent was on the high end of
achievable; it's aggressive but we believe we can
achieve that goal and still ensure that the permanent
fund is inflation-proofed well into the future.
Recognizing, because of market volatility, that
certain years you would not make (indisc.--coughing),
and certain years you would make considerably more
than that sum.
CHAIR ROKEBERG surmised, then, that the APFC would be able to
"guarantee the basic valuation of the fund's ability to produce
a real dollar, not nominal dollar, in the future; so your future
income stream would be consistent.
MR. STORER said that is correct.
CHAIR ROKEBERG added that that does not take into account any
market volatility or economic volatility the state may face;
"therefore, it's like the permanent fund will be this solid,
growing rock ... of financial stability, as the state goes
bankrupt - potentially." He said that that is how he is
interpreting the testifiers' comments.
MR. KELLY advised members not to forget that [the permanent
fund] is going to be producing $2 billion a year of income - or
$1.250 billion - which is going to be in excess of any other
source of income in the state. "It's twice as large as your
next largest source of income," he added.
CHAIR ROKEBERG said he agrees, adding that he wants to make sure
it remains a bountiful source of income.
Number 1228
REPRESENTATIVE MEYER, referring to the memorandum from the APFC
in members' packets, asked how increasing the appropriation
limit in HJR 15 to 6 percent would impact the amount available
to help fill the fiscal gap.
MR. STORER, after noting that the dividend formula would remain
the same, said that there could be between $375 million and $550
million available for appropriation. He reminded members,
however, that ultimately, if more is taken "off the table,"
there would be some diminishment of the dividend over time,
though that impact would be relatively small.
REPRESENTATIVE JAMES remarked that the legislature is attempting
to fill a $900 million hole this year, and to fill even half of
that with taxes is going to have a huge impact on Alaska's
economy, "to suck that out of the people's pockets." She also
remarked that Alaska is going to have to "grow our economy,"
which is going to take money. "You don't get anywhere without
investing in something; we need to probably spend some more
money, ... and so, quite frankly, I don't want to have my hands
tied right now," she added. She said that although she likes
the concept of HJR 15, she has concerns about going that route
at this time.
REPRESENTATIVE COGHILL stated: It's available now. He also
mentioned that it wasn't going to be easy to go to the people
and convince them to vote to allow the legislature to
appropriate from the permanent fund.
CHAIR ROKEBERG remarked that HJR 15 would protect the permanent
fund much better than it is being protected now, since the
current "statutory regime is broken." If there is an extended
period of "negative markets," and if there are not adequate
amounts in the ERA, it may result in not being able to pay a
dividend, he predicted.
Number 1041
MR. KELLY said that there is no doubt that HJR 15 adds a level
of protection to the permanent fund. Even using the 6 percent
figure, it is still a limit on how much can be appropriated from
the fund, he noted, and is a tighter limit than what exists
right now, which is none. Right now, the legislature can
appropriate all $3 billion that's in the permanent fund's ERA,
and that would be that; HJR 15 at least limits that ability. He
noted that the APFC has spoken to people in different
communities throughout the state and there has been a great deal
of support for the notion of a constitutional amendment that
would limit the annual payout of the permanent fund earnings and
that would ensure that that money is "at as high a level as
possible for as long as possible"; that's something that
resonates with the people.
REPRESENTATIVE JAMES asked whether, during those conversations,
the APFC told people that "all of this was going to go to
permanent fund dividends - or most of it."
MR. KELLY replied that there is a long-standing tradition at the
APFC that the trustees do not opine on issues of what should be
done with that money, and "we've just never crossed that line."
REPRESENTATIVE COGHILL asked how the payout and the fund's
valuation would be affected should there be another recession
such as the one that occurred in the early '70s when "we did get
into double-digit inflation."
MR. STORER posited that it could limit the amount that could be
paid out. He said that there are two questions: If we get into
double-digit inflation, then what happens to the financial
markets, and how long would they both perform "in the manner
that they did." He remarked that "we" didn't even experience
double-digit inflation in the '70s; it was actually rather
short-lived, and more like 6 to 8 percent. A prolonged double-
digit inflation combined with a bear-equity market, which would
have some impact on the bond market as well, would create the
biggest problem, he noted. The problem of lower earnings
combined with higher inflation could exist, he added, regardless
of whether [HJR 15] passes; however, [HJR 15] would allow a
consistent level of appropriation so that the needs of the state
could be met in such an environment.
REPRESENTATIVE COGHILL said that his point is that the
legislature would still be limited to 5 percent of whatever the
value of the fund is, and people might view it differently in
that kind of situation.
Number 0740
REPRESENTATIVE MEYER relayed that a constituent of his had
mentioned that back when the permanent fund was started, no one
had ever dreamed that it would one day be worth $25 billion, and
had proposed that some of that money could be used to close the
fiscal gap. Representative Meyer surmised that in his
constituent's opinion, $25 billion was enough; he posited that
it might be time to question how big the permanent fund should
get. Are "we" going to be here 20 years from now with a fund
that's worth $75 billion, he asked.
CHAIR ROKEBERG offered that it is a question of whom the fund
should benefit: "you, or your grandchildren?"
REPRESENTATIVE MEYER said that the question for him is, "At what
point is enough, enough: when has it grown enough, and when
should we start using it for something?"
MR. GRUENING remarked that Representative Meyer has brought up a
point regarding the way inflation-proofing is done now: it
actually is taken from the earnings reserve and placed into the
principal, where it can't be spent. Under [HJR 15], that money
would actually be retained and become part of that total market
value, which is another way of saying it inflation-proofs the
whole fund.
MR. KELLY noted that he'd received a call from a reporter who
asked, "What if you stopped inflation-proofing; ... what would
be the impact in 25 years?" Mr. Kelly explained that although
the fund will still be $25 billion, the value of the dollars
paid out - in dividends or anything else - would shrink at the
rate of inflation. So in 25 years, that $25 billion would be
the equivalent of $6 billion in today's dollars, which would not
be good for either "you, or your grandchildren," if inflation-
proofing is discontinued.
REPRESENTATIVE MEYER indicated that he is hopeful that "someday
we will have [Arctic National Wildlife Refuge] (ANWR) open,
we'll have another 'Prudhoe Bay,' we'll have a gas pipeline,"
and then as more money becomes available, it can again be used
to inflation-proof the permanent fund. He posited that adoption
of [HJR 15] would definitely tie the legislature's hands.
Number 0565
REPRESENTATIVE OGAN asked whether HJR 15 would change the way
PFDs are distributed and whether any statutes related to that
distribution would need to be changed.
MR. KELLY indicated that HJR 15 would not change the way PFDs
are distributed and no statutory changes would be needed.
CHAIR ROKEBERG said he disagrees; "we would have to make
statutory changes to reflect [changes created by] the
constitutional amendment.
REPRESENTATIVE OGAN asked what would be the payout of the PFD,
under HJR 15, if the statutes don't change.
MR. KELLY said that the [PFD] projection for the following year
is a little bit under $1 billion - under the existing statutes -
and that is also what it would be under HJR 15. The [PFD]
statute wouldn't change and wouldn't need to change; the amount
that would be needed to pay the PFD falls well within the 5
percent limit proposed by HJR 15.
CHAIR ROKEBERG asked whether the PFD would be around $1,300 to
$1,400.
MR. KELLY said that it is not yet that low although it moves
down towards $1,400 over several years.
Number 0441
REPRESENTATIVE JAMES said that according to her understanding,
"even though this fund is a total fund, you still know what the
earnings are, and the [PFD] is calculated on the average of the
last five years of earnings." So she is assuming, she said,
that even if "you had all the permanent fund in as a permanent
fund, you could still identify what those earnings were over the
last five years and average it." She suggested, however, that
"it goes on to say ..., 'or half of the earnings reserve', which
is ever smaller, and now we don't have an earnings reserve
anymore [under HJR 15]; it's all permanent [fund], with an
allocation for us to appropriate." That's not the same thing,
she argued, adding that if it is the 5 percent, the amount "in
that pot" is reduced to half - instead of almost all, as
indicated the APFC representatives. "So it either can't be done
at all, or it greatly changes the way we do it, in one fell
swoop," she said.
CHAIR ROKEBERG said that that is why he believes a statutory
change is needed, "because, number one, there's statutory
requirements for inflation-proofing, which would be obviated by
the adoption of [HJR 15]; so because inflation-proofing is
internalized and automatic, ... those provisions for inflation-
proofing need to be repealed." He noted that "the rest of the
mechanics of the fund would have to be adjusted also, to reflect
the reality of the payout, because right now it says, 'the
general fund', and that creates the earnings reserve," whereas
[HJR 15] would change it to say, "permanent fund", which to him
means that "the earnings reserve goes away."
MR. GRUENING pointed out that actually, the legislature
appropriates funds in each year's budget for inflation-proofing.
He added that there was an attorney general's opinion - "back in
the 'Dave Rose days'" - that indicated that such inflation-
proofing is automatic, but the legislature was of a contrary
opinion.
Number 0263
RONALD W. LORENSEN; Attorney; Simpson, Tillinghast, Sorensen &
Longenbaugh; noted that he has been counsel to the APFC for over
five years. He said that his interpretation of [HJR 15] is that
it would not change the present distinction between what is
principal and what is income - earnings reserve. He said that
the reason for this interpretation can be found in Section 1 of
HJR 15, which says that the principal into which all funds are
deposited shall only be used for certain purposes. It is the
following sentence in Section 1 that stipulates what happens to
income, he explained, adding that although HJR 15 says that
income shall be deposited into the permanent fund, it does not
automatically become principal; income is still income, so for
accounting purposes, the principal continues to be accounted for
as principal, and the income is accounted for as income by
accruing it in what has been designated by the legislature as
the ERA. He advised the committee not to assume that just
changing where the income goes - from general fund to permanent
fund - by itself, turns income into principal, which is
inviolate.
REPRESENTATIVE COGHILL asked whether what is currently done with
unrealized gains would change under HJR 15.
MR. LORENSEN said that the simple answer is that unrealized
gains, under accepted accounting principles, are required to be
accounted for as income; under HJR 15, they would continue to be
treated in the same manner for purposes of the five-year market
value, which is as income and not as principal. He pointed out
that for purposes of calculating the PFD, only realized income
is considered, not unrealized income.
REPRESENTATIVE COGHILL remarked that he is referring to the
value upon which the 5 percent limitation is based, so he is
wondering at what point do [unrealized gains] discount that
value.
MR. LORENSEN said that under the 5-percent-of-market-value
approach, the market value would be based on generally accepted
accounting principles (GAAP), which say that unrealized gains
are included as income; hence they would be part of the total
value.
REPRESENTATIVE JAMES asked whether this means that at any given
time, the APFC could calculate how much is in the ERA, and if
so, whether [that calculation] would include the unrealized
gains.
MR. LORENSEN said yes.
TAPE 02-14, SIDE A
Number 0001
CHAIR ROKEBERG closed the public hearing on HJR 15. He
indicated that he would like to see either Version C or the
original version of HJR 15 move from committee.
REPRESENTATIVE JAMES indicated that she is not willing to move
either version at this point in time.
CHAIR ROKEBERG announced that HJR 15 would be held over.
HB 243 - VERIFY AGE REQD FOR DEFENSE IN SEX CRIMES
Number 0140
CHAIR ROKEBERG announced that the last order of business would
be HOUSE BILL NO. 243, "An Act relating to sexual assault or
abuse of a minor."
Number 0242
REPRESENTATIVE MEYER moved to adopt the proposed committee
substitute (CS) for HB 243, version 22-LS0770\C, Luckhaupt,
2/1/02, as a work draft. There being no objection, Version C
was before the committee.
CHAIR ROKEBERG moved to adopt Conceptual Amendment 1:
Page 1, line 7:
Delete "and in good faith"
CHAIR ROKEBERG explained that the language he recommends
deleting is language that is used in business, and isn't used in
the criminal code.
REPRESENTATIVE FRED DYSON, Alaska State Legislature, sponsor,
objected. He explained that the aforementioned language was
part of what the subcommittee developed. He told the committee
that Representative Berkowitz felt that the language was a good
idea.
CHAIR ROKEBERG informed the committee that he has a note from
[his staff] that Representative Berkowitz changed his mind in
regards to the need for the language.
REPRESENTATIVE MEYER remarked that if Representative Berkowitz
didn't feel strongly about the language, then perhaps the
sponsor wouldn't either.
Number 0483
ANNE CARPENETI, Assistant Attorney General, Legal Services
Section-Juneau, Criminal Division, Department of Law (DOL),
remarked that her first reaction to the amendment is that "and
in good faith" is used in civil law, and is probably subsumed
within "reasonably", anyway.
REPRESENTATIVE DYSON asked if Chair Rokeberg meant to say that
after the subcommittee meeting, Representative Berkowitz changed
his mind and agreed that "and in good faith" shouldn't be
included.
HEATHER M. NOBREGA, Staff to Representative Norman Rokeberg,
House Judiciary Standing Committee, Alaska State Legislature,
noted that after the subcommittee meeting, which she attended,
she spoke with Representative Berkowitz who, upon further
reflection, felt that use of the aforementioned language was a
bad idea. She agreed that the rationale was that the language
is used in civil law, and would be redundant [when used with
"reasonably"].
REPRESENTATIVE DYSON removed his objection to Conceptual
Amendment 1.
CHAIR ROKEBERG announced, for the record, that Representative
Berkowitz's staff wasn't present during the aforementioned
conversation and thus couldn't comment.
CHAIR ROKEBERG asked whether there was any objection to
Conceptual Amendment 1. There being no objection, Conceptual
Amendment 1 was adopted.
Number 0697
REPRESENTATIVE OGAN moved to report the proposed committee
substitute (CS) for HB 243, version 22-LS0770\C, Luckhaupt,
2/1/02, as amended, out of committee with individual
recommendations and the accompanying fiscal note. There being
no objection, CSHB 243(JUD) was reported from the House
Judiciary Standing Committee.
ADJOURNMENT
Number 0738
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 2:49 p.m.
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