Legislature(1995 - 1996)

04/24/1996 03:12 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                          
                         April 24, 1996                                        
                           3:12 p.m.                                           
 MEMBERS PRESENT                                                               
 Representative Pete Kott, Chairman                                            
 Representative Norman Rokeberg, Vice Chairman                                 
 Representative Beverly Masek                                                  
 Representative Jerry Sanders                                                  
 Representative Brian Porter                                                   
 Representative Kim Elton                                                      
 Representative Gene Kubina                                                    
 MEMBERS ABSENT                                                                
 All members present                                                           
 COMMITTEE CALENDAR                                                            
 *HOUSE CONCURRENT RESOLUTION NO. 35                                           
 Relating to support for the Alaska Community College system within            
 the University of Alaska.                                                     
      - PASSED CSHCR 35(L&C) OUT OF COMMITTEE                                  
 HOUSE BILL NO. 345                                                            
 "An Act relating to the procurement of investment and brokerage               
 services by the Alaska State Pension Investment Board."                       
      - PASSED CSHB 345(L&C) OUT OF COMMITTEE                                  
 (* First Public Hearing)                                                      
 PREVIOUS ACTION                                                               
 BILL:  HCR 35                                                               
 SPONSOR(S): RULES BY REQUEST                                                  
 JRN-DATE     JRN-PG                  ACTION                                   
 04/18/96      3843    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 04/18/96      3843    (H)   LABOR & COMMERCE                                  
 04/24/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 BILL:  HB 345                                                               
 SPONSOR(S): REPRESENTATIVE(S) FOSTER, Ivan                                    
 JRN-DATE     JRN-PG                  ACTION                                   
 05/10/95      2088    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 05/10/95      2088    (H)   STATE AFFAIRS, L&C, FINANCE                       
 03/21/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/21/96              (H)   MINUTE(STA)                                       
 03/21/96      3259    (H)   COSPONSOR(S): IVAN                                
 03/26/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/26/96              (H)   MINUTE(STA)                                       
 03/27/96      3390    (H)   STA RPT  CS(STA) 2DNP 4NR                         
 03/27/96      3391    (H)   DNP:  ROBINSON, WILLIS                            
 03/27/96      3391    (H)   NR: JAMES, PORTER, GREEN, OGAN                    
 03/27/96      3391    (H)   FISCAL NOTE (REV)                                 
 04/03/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 04/03/96              (H)   MINUTE(L&C)                                       
 04/17/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 04/17/96              (H)   MINUTE(L&C)                                       
 04/18/96              (H)   L&C AT  2:00 PM CAPITOL 17                        
 04/18/96              (H)   MINUTE(L&C)                                       
 04/19/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 04/19/96              (H)   MINUTE(L&C)                                       
 04/22/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 04/22/96              (H)   MINUTE(L&C)                                       
 WITNESS REGISTER                                                              
 ERIC MUSSER, Legislative Assistant                                            
 House Majority                                                                
 Alaska State Legislature                                                      
 Capitol Building, Room 116                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-3720                                                    
 POSITION STATEMENT:  Gave sponsor statement for HCR 35.                       
 WENDY REDMAN, Vice President                                                  
 Statewide University System                                                   
 University of Alaska                                                          
 P.O. Box 155000                                                               
 Fairbanks Alaska 99775                                                        
 Telephone:  (907) 474-7311                                                    
 POSITION STATEMENT:  Testified on HCR 35.                                     
 RALPH MCGRATH, President                                                      
 Alaska Community College                                                      
   Federation of Teachers                                                      
 2533 Providence Drive                                                         
 Anchorage, Alaska 99508                                                       
 Telephone:  (907) 562-2666                                                    
 POSITION STATEMENT:  Testified in support of HCR 35.                          
 ERIC LEEGARD, Teacher                                                         
 University of Alaska - Southeast                                              
 Alaska Community College                                                      
   Federation of Teachers                                                      
 11120 Glacier Highway                                                         
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-8787                                                    
 POSITION STATEMENT:  Testified on HCR 35.                                     
 ARNE J. LYSHOLM, Teacher                                                      
 University of Alaska - Southeast                                              
 Alaska Community College                                                      
   Federation of Teachers                                                      
 211120 Glacier Highway                                                        
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-8777                                                    
 POSITION STATEMENT:  Testified on HCR 35.                                     
 CHUCK WADE, Faculty Member                                                    
 University of Alaska - Fairbanks                                              
 Alaska Community College                                                      
   Federation of Teachers                                                      
 121 Akiak Street                                                              
 Bethel, Alaska 99559                                                          
 Telephone:  (907) 543-4580                                                    
 POSITION STATEMENT:  Testified in support of HCR 35.                          
 BOB STORER, Chief Investment Officer                                          
 Treasury Division                                                             
 Department of Revenue                                                         
 P.O. Box 110405                                                               
 Juneau, Alaska 99811-0405                                                     
 Telephone:  (907) 465-4399                                                    
 POSITION STATEMENT:  Answered questions on HB 345.                            
 ACTION NARRATIVE                                                              
 TAPE 96-40, SIDE A                                                            
 Number 001                                                                    
 The House Labor and Commerce Standing Committee was called to order           
 by Chairman Pete Kott at 3:12 p.m.  Members present at the call to            
 order were Representatives Porter, Masek, Sanders, Elton and Kott.            
 Representative Rokeberg arrived at 3:15 p.m. and Representative               
 Kubina arrived at 3:38 p.m.                                                   
 HCR 35 - SUPPORT FOR COMMUNITY COLLEGE SYSTEM                               
 Number 057                                                                    
 CHAIRMAN PETE KOTT announced the first order of business would be             
 HCR 35, "Relating to support for the Alaska Community College                 
 system within the University of Alaska."                                      
 ERIC MUSSER, Legislative Assistant, House Majority, Alaska State              
 Legislature, read the sponsor statement into the record on behalf             
 of Representative Gail Phillips:                                              
 "HCR 35 was introduced in order to put focus on the issue of the              
 merger, in 1987, of the Community College System with the                     
 University of Alaska.                                                         
 "This resolution confirms the opinion of many in the legislature              
 who feel that the community college mission is not being served as            
 it should be under the current university structure.  While                   
 positive things have occurred since the restructuring, we have also           
 seen a decline in the opportunities in vocational and developmental           
 educational programs, which should be an integral part of Alaska's            
 global higher education offerings.                                            
 "We don't wish to detract from any of the positive movements made             
 in recent years by the University System; however, we want to try             
 to bring common programs, from throughout the state, together.                
 This Resolution is not asking to have a separate community college.           
 It is merely asking the Alaska Commission on Postsecondary                    
 Education to develop a plan for restoration of a community college            
 system within the university, under guidance from the Board of                
 Regents, to keep the linkage between the two institutions, and also           
 to protect the individual missions of each sector.                            
 "Further, there is still a cultural difference between those                  
 programs that serve community college type students and those                 
 programs that serve either associate or bachelor's degree type                
 students.  There is a vast difference in faculty, students, purpose           
 and mission and since the merger, it's been very difficult to bring           
 those two cultures together.  The typical community college student           
 is older, usually married and often working full-time.  Those                 
 students require a different kind of counseling and teaching style            
 than other degree seeking students.                                           
 "There was a commitment by the Board of Regents at the time of                
 restructuring to maintain the community college mission.  The                 
 enrollment numbers indicate that something is not working according           
 to that commitment.  As the university has been struggling to meet            
 its financial needs, it has been raising tuition.  While we are on            
 par with the national average for university tuition, we are way              
 over the national average in community college tuition and it's               
 becoming a major problem.                                                     
 "If we are able to pull the community colleges all together to                
 provide them the ability to develop a quick response to community             
 education needs as the community colleges are supposed to, without            
 going through the University curriculum process, it would allow us            
 to develop processes which are far more appropriate for both lower            
 division and vocational education courses.                                    
 "This resolution is both timely and necessary and I would encourage           
 and appreciate its passage."                                                  
 Number 335                                                                    
 REPRESENTATIVE NORMAN ROKEBERG referred to the statement made by              
 Mr. Musser where the University of Alaska system is on par with the           
 national average for university tuition and said he thought they              
 were below the national average.                                              
 Number 366                                                                    
 WENDY REDMAN, Vice President, Statewide University System,                    
 University of Alaska, said that they are right at the national                
 average for universities.                                                     
 Number 400                                                                    
 RALPH MCGRATH, President, Alaska Community College Federation of              
 Teachers (ACCFT), was next to come before the committee to testify            
 in support of HCR 35.  He informed the committee members that ACCFT           
 represents approximately 260 faculty who teach the community                  
 college programs.  For many years, they had the distinction of                
 representing 12 accredited community colleges around the state and            
 during that period of time, they developed a system of education              
 that made sense for the state.  He said he thinks the system was              
 particularly sensitive to the community college student.  Mr.                 
 McGrath explained community college students tend to be older                 
 students, people who have been in the workplace, individuals who              
 are returning or are wishing to return to the workplace, and they             
 like an environment that has open access.  Issues like lower                  
 tuition is one of the benefits of that accessibility.  The focus              
 that the community college has had on vocational technical is                 
 MR. MCGRATH explained he has been with the university since 1967,             
 when he first taught at the Sitka Community College.  He noted in             
 the 1970s he taught at the Anchorage Community College.  He                   
 emphasized that there has been a significant erosion in that                  
 commitment to the community college.  The 1987 merger, while                  
 proclaiming many different reasons for its necessity, one of the              
 consequences has been that the administration of the community                
 college was wiped out.  Within two years, no community college                
 administrator remained at the university.  He said there hasn't               
 been a direction or focus that the community college has value, and           
 in that vacuum, what is developing more and more is kind of                   
 university orientation.  He said ACCFT thinks there is a place for            
 both community college and the university and they believe the                
 board should be sensitive to that.  The study being requested of              
 the Postsecondary Commission could point out the need to restore              
 the community college focus and it would give the university that             
 direction.  Mr. McGrath noted there is a report in the committee              
 member's file that identifies some of ACCFT's specific reasons for            
 thinking the resolution is timely.  He noted Representative                   
 Rokeberg supported an open letter to the Board of Regents calling             
 for a statewide community college system.                                     
 Number 681                                                                    
 REPRESENTATIVE ROKEBERG said he thinks he made statements                     
 supporting the community colleges earlier in the year.                        
 MR. MCGRATH said that is correct.                                             
 CHAIRMAN KOTT asked Mr. McGrath what he sees as the major                     
 distinguishing factor between the community college and the normal            
 type universities.                                                            
 MR. MCGRATH said for the students, the focus is the accessibility             
 and the focus that teachers place on teaching.  He said they have             
 a heavier workload in terms of a workload to focus on teaching.               
 Mr. McGrath explained they don't get releases for research.  When             
 he came to Alaska, he was involved in hiring because he was in an             
 administrative position, and when they hired they always focused on           
 getting teachers who liked to work with students.  That                       
 relationship is very important.  Another focus is the orientation             
 to be a part of the community.  He said he thinks the saddest thing           
 about the merger, visually, was that the university had to go                 
 around and, "paint an Anchorage green over community."  When they             
 took the "community" out of "college," they took a lot out of the             
 focus.  The job retraining types of programs are community oriented           
 and you're working with the community.  That is not a focus of the            
 university.  The focus of the university is write a book or do                
 Number 973                                                                    
 ERIC LEEGARD, University of Alaska - Southeast (UAS), Alaska                  
 Community College Federation of Teachers, came before the committee           
 to testify.  He informed the committee earlier in the day he spent            
 time meeting with the Academic Restructuring Committee where                  
 Marshall Lind announced what the structure for the next year will             
 be.  Mr. Leegard said he spent this year working on this committee            
 and he is the sole member of the committee that would like to see             
 more efficiency in the system.  Mr. Leegard said, "The way it has             
 filtered out - basically next year is going to be ruled by the                
 committee instead of our department head, or this year she is                 
 called acting director, interim director.  She will be an assistant           
 or associate dean reporting to the dean of faculty who reports to             
 the vice chancellor of academic affairs who in turn reports to the            
 MR. LEEGARD explained it is very frustrating working within this              
 system.  He said they spent a year developing an academic model for           
 how a university should work and it's extremely inefficient.  He              
 said he was the only one on the entire committee pushing for the              
 chancellor to take the leadership role so things would be done                
 efficiently.  Mr. Leegard noted he is a former naval officer and              
 the philosophy is get it done.  He referred to the new structure              
 and said they can't go up or down.  The faculty is down at the                
 bottom and they will all be sitting around a large table with a               
 representative from each of the different schools to hash out the             
 problems of the institution.  It will then go to the dean.  Mr.               
 Leegard said the administration of the university is academic in              
 nature just because of the thought process of the administrators              
 and the faculty that teach academic courses.  It is not cost                  
 efficient at all.  There are going to have to be work releases in             
 order to maintain the labor for this.                                         
 MR. LEEGARD explained when he was hired in 1978, it was a community           
 college system and when you had a problem, you simply went to the             
 president of the campus and it was solved.  He said he is speaking            
 with frustration of the inefficiency of the university versus the             
 community college system.                                                     
 Number 1154                                                                   
 ARNE J. LYSHOLM, Teacher, University of Alaska - Southeast                    
 Alaska Community College; Federation of Teachers, said he teaches             
 automotive technology.  The community college is something that               
 serves the people.  The university also serves the people, but it             
 is a higher grade up.  He said there are problems across the United           
 States.  Mr. Lysholm said, "Where are we getting the work force to            
 take care and help you guys in the end?  Community College is what            
 that boils down to.  It is the next step from the high school.  But           
 the thing is, as a typical example, has anybody been to a repair              
 shop and had their vehicle repaired?  What's your frustration                 
 afterwards?  You'd be forking a lot of your own personal money and            
 you come back and say, `My car is not working.'  The community                
 college, as the typical example, it is the kind that is geared                
 toward your help in the long run.  Universities in some ways are              
 but not to that respect.  So the reason why I'm saying this is I'm            
 also an educated automotive technician from Norway and I can't go             
 any higher in my trade, but I'm stuck where I am right at the                 
 moment, but I love teaching and I love the students - and I love              
 the students.  I've got some people that I call students, (indisc.)           
 72 years old that's coming in and having a ball because they figure           
 that `I've been a lawyer, I've been a judge, I've been whatever,'             
 and they come in just to learn something to find out that hey, this           
 was worth it.  But this is not university, that's a community                 
 college level thing and they think they are having a ball.  So in             
 the end, you guys are going to get to that stage of the game too.             
 The reality is there, but the thing is community college, we're               
 gunna have to put some more emphasis on that because it's going to            
 serve you guys the same as us.  So I think what you're saying that            
 for in 1987 - I'm totally right on that - you're totally right on             
 that so -- but this is just something to think about real hard                
 because I know if we just keep on going up, you're going to find              
 out that the split between the person who has got an education and            
 the person who is trying to get an education is going to be worse             
 and the foreign debt is going to be a lot worse in the United                 
 States than you realize because we're the people who is making the            
 foreign debt lower.  Look at that in the end too.  That's just                
 something to think about.  Thank you."                                        
 Number 1320                                                                   
 WENDY REDMAN, Vice President, Statewide University System,                    
 University of Alaska, came before the committee members to give her           
 testimony on HCR 35.  She pointed out she was the vice chancellor             
 for the Community College Division for 12 years from the time of              
 its inception until the time of its demise at the time of the                 
 restructuring.  She stated she comes from the community college               
 background.  The vocational programs within the statewide system              
 are under (indisc.) currently, so she has a great deal of conflict            
 regarding this legislation.  Ms. Redman stated she is not in                  
 attendance to speak against it.  She said she believes that much of           
 the information that the committee has been presented with by                 
 Professor McGrath and others is correct.  She said we have seen,              
 over time, a loss of part-time student enrollment.  There has also            
 been a significant drop in vocational enrollments.  The cause of              
 that is not clear to a lot of people.  Ms. Redman said she tends to           
 think that one of the primary causes is cost.  The tuition for our            
 community colleges has risen along with our universities and we're            
 frankly just costing people right out of the market at this point,            
 especially part-time students.  It is a tremendous problem.  It               
 currently costs about $300 to take one class which is high.                   
 MS. REDMAN explained she spoke to the Board of Regents the previous           
 week about the HCR 35 and their first reaction was, "We don't want            
 anybody telling us how to run things."  The board feels strongly              
 that they have tried hard to preserve the community college mission           
 and, in fact, they have done a lot to try to do that.  During the             
 current program assessment, they directed the chancellors to                  
 reallocate $500,000 into community college and vocational programs.           
 Ms. Redman said she thinks there is a difficulty between the                  
 cultures of a university and a community college and there                    
 continues to be some problems with that.  She said she thinks a               
 study, as called for in HCR 35, would be helpful.  Ms. Redman said            
 the difficulty they will have is it will be very easy for them,               
 today, to recreate the cree (?) system for every campus except for            
 Anchorage.  She pointed out community colleges and universities               
 have a tremendous amount of overlap at the Freshman/Sophomore level           
 and both offer english, history, etc.  In Anchorage, those have               
 been completely integrated on the same acre.  How they would deal             
 with that, she simply doesn't know.  That would be something that             
 would come out in this kind of a study.  Ms. Redman explained the             
 chancellor in Anchorage feels very strongly that pulling his campus           
 apart would destroy all of the advantages that have been made.  As            
 pointed out in the Speaker's statement, there have been many many             
 pluses because of the restructuring, including the elimination of             
 transfer problems.  While the overall enrollment, for the system as           
 a whole including part-time students, has declined and varies                 
 dramatically from campus to campus.  The enrollments in the                   
 southeastern region have enormously increased and part of that was            
 because of the restructuring.  They have a much closer working                
 relationship.  She said it is a complicated system when you look at           
 it system wide.                                                               
 MS. REDMAN referred to the "Whereas" clause on page 2, lines 6                
 through 8, and said the statement that the cost savings didn't                
 occur is simply not true.  She said there was a legislative audit             
 done.  That is the kind of inflammatory statement that she thinks             
 might detract from their ability to get people to work towards                
 this.  She referred to the second part of that clause which states            
 that the community college programs have been diminished and said             
 it is covered in the other "Whereas" clauses.  She urged the                  
 committee to remove it.  The cost savings from the restructuring              
 were very real as they saved nearly $6 million just in                        
 administrative costs.  She said 80 administrative staff people were           
 laid off.  Not a single faculty member was laid off.  She said the            
 legislative audit is available to the committee and she would                 
 provide copies if they wished.  She request that "Whereas" clause             
 be eliminated.                                                                
 Number 1580                                                                   
 REPRESENTATIVE BRIAN PORTER asked Ms. Redman if it is true that               
 prior to the consolidation, an instructor at the community college            
 taught four classes a week, but as soon as they were integrated               
 into the university, they could only teach three a week.                      
 MS. REDMAN explained it depends on the campus.  In Anchorage, the             
 faculty had retained essentially the same workload.  In the                   
 northern region, however, the faculty did drop down immediately               
 after the restructuring.  She noted that until last year, and maybe           
 even currently, they did drop down from four to three classes.  In            
 Southeast, it may have stayed the same as well.                               
 REPRESENTATIVE PORTER questioned why it would be different from one           
 region to another.                                                            
 MS. REDMAN explained the campuses are individually accredited and             
 they have different cultures.  Fairbanks is considered nationally             
 as a Doctoral institution.  After the restructuring they insisted             
 that all of their faculty, including the newly restructured                   
 faculty, take on a research workload whether it was appropriate or            
 Number 1630                                                                   
 REPRESENTATIVE GENE KUBINA said the Prince William Sound campus is            
 the only campus that contributes substantially to its operation.              
 He said he thinks they put in about 35 percent.  He asked if that             
 would have any bearing, whatsoever, on reestablishing a community             
 college system.                                                               
 MS. REDMAN indicated there shouldn't be any bearing.  Valdez and              
 Ketchikan also contributes to their campus.  She said there would             
 be some problems which would have to be worked out and assumed that           
 would be part of the plan.  She said they couldn't recreate cree              
 (?) in the same way that it was.  There simply isn't $6 million to            
 do that, so the plan would have to be sharing of some                         
 administrative costs with the university centers.                             
 Number 1734                                                                   
 CHUCK WADE, Faculty Member, University of Alaska - Fairbanks (UAF),           
 Alaska Community College Federation of Teachers, came forward to              
 give his testimony.  He said much of what he was going to say has             
 already been said.  Mr. Wade explained he taught ten years under              
 the community college system and is completing his ninth year under           
 the university system.  Those who have been around for awhile have            
 taught under both structures have had several analogies that they             
 have used to describe what has happened to them.  In fact, what               
 they thought would happen to them has happened to them.  For some             
 reason they seem to be animal related - the big fish eating the               
 little fish - being absorbed by UAF.  He said he wrote down two               
 columns of terms of the before and after types of things that have            
 occurred.  Mr. Wade said they were Kuskokwim Community College, one           
 of 12 or 13 accredited colleges.  Now they are Kuskokwim campus and           
 are one of six units that is represented within UAF by the rural              
 college which is then part of thee other units in the university.             
 He pointed out that they were teachers and now they are professors.           
 The leadership of the units were called presidents and now they're            
 directors with one exception.  The focus and direction was all                
 local in terms of hiring, programs and purchasing.  That is                   
 currently all centralized and everyone looks to the north in terms            
 of community and vocational education.  That was part of their                
 instruction at the college.  Mr. Wade said Ms. Redman is right.               
 One day he was a teacher and the next day he was a professor.  He             
 said he went from teaching four classes a semester to five classes            
 a year - three one semester and two another.  That has gradually              
 eased back, but it is still not four classes a semester.  So the              
 workload was reduced.  Currently at Kuskokwim, what they have for             
 community education or vocational education is handled by one non-            
 faculty person who has a very popular program.  It is all noncredit           
 with zero faculty assigned to that program.                                   
 MR. WADE said he believes the legislature intended for the                    
 university to continue with the community college mission.  It just           
 hasn't happened.  The experiment hasn't worked.  As it has been               
 said, Alaska needs the kind of skills that are produced by people             
 who come through the community college systems.  He said there was            
 a lady from the local welfare association who visited a meeting the           
 other day at Kuskokwim and she said as she understood the welfare             
 reform, they were going to be sending more and more people to the             
 college.  He said his thought was, "What are we going to do with              
 them?"  He thanked the committee for listening to him and urged               
 support for HCR 35.                                                           
 Number 1922                                                                   
 CHAIRMAN KOTT said there was a comment made by Ms. Redman where one           
 of the "Whereas" clauses should be removed from the resolution                
 based on it being inaccurate.  He asked Mr. Musser to respond.                
 MR. MUSSER said while the sponsor would not oppose the wishes of              
 the committee, she would not be very favorable of striking that               
 clause unless the committee feels it is an inaccurate statement.              
 As Ms. Redman testified, you can very validly make the argument               
 that administrative costs have been reduced since the merger,                 
 through reductions in administrative staff.  However, the statement           
 really is reflective on the overall costs of the system since the             
 merger, and the overall cost to the system has really just                    
 continued to grow year after year since the merger; therefore, that           
 statement is really just a recognition of that fact.                          
 Number 1978                                                                   
 REPRESENTATIVE ROKEBERG suggested deleting the first portion and              
 leaving in, "the community college mission and programs have been             
 REPRESENTATIVE PORTER suggested adding "overall long-range cost               
 savings" between "the" and "cost".  It would then read, "WHEREAS              
 the legislature is aware that the overall long-range cost savings             
 anticipated in the 1987 consolidation..."                                     
 MR. MUSSER said there would be no objection to that wording at all.           
 Number 2025                                                                   
 CHAIRMAN KOTT asked if there was an objection.  Hearing none, the             
 amendment was adopted.                                                        
 Number 2035                                                                   
 REPRESENTATIVE JERRY SANDERS made a motion to pass HCR 35 out of              
 committee with individual recommendations.                                    
 CHAIRMAN KOTT said there is a motion to pass CSHCR 35(L&C) out of             
 committee.  He said with Mr. Musser's concurrence, the committee              
 would write a zero fiscal note.  He said he would amend                       
 Representative Sander's motion to include the zero fiscal note.               
 CHAIRMAN KOTT asked if there was an objection to moving the                   
 resolution.  Hearing none, CSHCR 35(L&C) was moved out of the House           
 Labor and Commerce Committee.                                                 
 HB 345 - PENSION INVESTMENT BOARD PROCUREMENTS                              
 Number 2078                                                                   
 REPRESENTATIVE ROKEBERG made a motion that the committee rescind              
 their action in failing to move out of committee CSHB 345(L&C).               
 CHAIRMAN KOTT asked if there was an objection.                                
 REPRESENTATIVE ELTON objected.                                                
 REPRESENTATIVE KUBINA asked that the motion be restated.                      
 CHAIRMAN KOTT said the motion, as he understands it, is to rescind            
 the committee's action in failing to move from committee HB 345.              
 Number 2118                                                                   
 REPRESENTATIVE ELTON said he would like to have some discussion of            
 why the committee finds it necessary to do this.                              
 REPRESENTATIVE ROKEBERG indicated there was a minuscule quorum and            
 the whole committee didn't have the opportunity to participate in             
 the decision during the last meeting which required the totality of           
 members to be able to move the bill.                                          
 REPRESENTATIVE ELTON said the overwhelming testimony that was heard           
 was opposed to the bill.  He said he thinks the best testimony the            
 committee heard was from Mr. Dave Rose who said the best solution             
 is not this, but it is a change in attitude.  He said he isn't sure           
 the legislature should be in the practices of changing attitudes by           
 passing statutes.                                                             
 CHAIRMAN KOTT said in essence what they would be doing is trying to           
 change an attitude that currently exists.                                     
 REPRESENTATIVE ROKEBERG said the committee did adopt an amendment             
 that removed the former Section 10.                                           
 Number 2193                                                                   
 REPRESENTATIVE BEVERLY MASEK said then there is no need for the               
 REPRESENTATIVE ROKEBERG explained Section 11 remained and was                 
 renumbered as Section 10.  It does make a statement as to their               
 ability of making in-state adjustments.  He said in essence, it is            
 a "jawboning" bit of statutory language which there was testimony             
 that it was part of the permanent fund specifications in terms of             
 their charge.                                                                 
 CHAIRMAN KOTT asked Representative Elton if he still maintains his            
 REPRESENTATIVE ELTON said he does maintain his objection.                     
 A roll call vote was taken.  Representatives Sanders, Masek and               
 Elton were against the motion.  Representatives Porter, Kubina,               
 Rokeberg and Kott were in favor of the motion.  So CSHB 345(L&C),             
 as amended, was back before the committee.                                    
 Number 2221                                                                   
 REPRESENTATIVE ROKEBERG made a motion to move CSHB 345(L&C), as               
 amended, out of committee with individual recommendations and the             
 attached zero fiscal note.                                                    
 REPRESENTATIVE MASEK objected.                                                
 REPRESENTATIVE ELTON said he understands the motion, but doesn't              
 understand the zero fiscal note.  He said he has a fiscal note but            
 it is not a zero fiscal note.  Representative Elton asked if                  
 somebody could explain to him why the bill is being moved with a              
 zero fiscal note.                                                             
 Number 2248                                                                   
 CHAIRMAN KOTT said that is a good point.  He said to Representative           
 Rokeberg that he would entertain a new motion.  Even though it is             
 a wash, there is a fiscal note to it.                                         
 REPRESENTATIVE ROKEBERG said he agrees, but noted the fiscal note             
 relates back to the 7 percent solution and the other section has              
 been removed from the bill.  He said that is the reason he made the           
 motion with a zero fiscal note.                                               
 REPRESENTATIVE PORTER suggested asking the Department of Revenue              
 for a new fiscal note before the bill moves on to the Finance                 
 Number 2308                                                                   
 BOB STORER, Chief Investment Officer, Treasury Division, Department           
 of Revenue, came before the committee.  He said the Treasury                  
 Division does provide the staff for the Alaska State Pension                  
 Investment Board.  He said with the old Section 10 being excised              
 from the bill and the new language, which talks about the                     
 comparable risk and comparable yield, would make it a zero fiscal             
 note.  The costs of the prior fiscal note were to evaluate the                
 trading costs to see if there would be an impact on the                       
 legislation.  The only possible costs would be a consultant that              
 was uniquely qualified to evaluate Alaskan investments.  Mr. Storer           
 noted he doesn't see that as being an issue.                                  
 REPRESENTATIVE KUBINA asked Mr. Storer what he thinks the bill does           
 with only the one section and he also asked how it will change                
 things.  He asked Mr. Storer asked him if he still looks at the               
 bill as a bad policy to look at Alaska when everything else is                
 equal, the risk is the same, the yield is the same, etc.                      
 MR. STORER said, "The problem he has philosophically is that                  
 anytime you articulate what is essentially policy by statute, then            
 I think you've created a bad situation for bad policy.  No one on             
 the board or myself would quibble with the intent of this language            
 and think that there are potential opportunities in Alaska.  And so           
 - would not quibble with the essence of it.  This language is,                
 however, and it was mentioned before, sort of classic language for            
 economically targeted investments.  And well some large funds do              
 use economically targeted investments and study ice on, only one              
 study but I think it's a very good study, suggests that 83 percent            
 of larger public funds -- public funds with assets in excess of $1            
 billion do not use economically target investments.  So it's not              
 the norm - this kind of language.  It is consistent with the                  
 permanent fund, but again, the permanent fund is different.  They             
 don't have that liability stream, the best interest, the plan and             
 the beneficiaries in my...  I think the board is very interested in           
 seeking opportunities and investing in Alaska at the appropriate              
 time.  They've spent over a year trying to develop a real estate              
 policy and they're meeting tomorrow and Friday and I expect them to           
 increase their asset allocation to real estate from 2 to 8 percent            
 at this meeting as an example.  So I think that I have no quibble             
 with the intention.  I think it's consistent with the board's                 
 desires.  I have had a problem with policy by statute.  I have one            
 concern and I kind of heard it here earlier.  And I want to                   
 emphasize this is a personal opinion and I'm not speaking for the             
 board or Revenue or anything like that.  This question of attitude,           
 and it's been disappointing when one thinks that we don't have a              
 proper attitude towards Alaska.  We do have a brokerage policy that           
 allows 30 percent of the commission's dollars in equity trades are            
 made available to firms -- to the Alaskan offices.  They don't get            
 that much but we try to develop some policy.  So it's always                  
 disturbing when you try to do things that's not perceived as                  
 positive.  The personal opinion is that this kind of language could           
 theoretically, or my concern is that it could create false                    
 expectations.  Risk--comparable risk, comparable yield, at times              
 whether you're a buyer or a seller, you have distinctly different             
 points of view.  And so I have a personal concern that this type of           
 legislation would create false expectations.  We say those yields             
 are inconsistent - risks are inconsistent...."  [END OF TAPE]                 
 TAPE 96-40, SIDE B                                                            
 Number 001                                                                    
 MR. STORER continued, "...or people that have investment                      
 opportunities would disagree and would perpetuate what I think is             
 unfortunate - this attitudinal point of view.  I hope I didn't                
 wander too much, but I hope I answered your question."                        
 REPRESENTATIVE KUBINA referred to if the bill were to become law as           
 it is currently written, and asked Mr. Storer if it would force him           
 to do anything that he really doesn't want to do or if it would be            
 MR. STORER said the bill doesn't force the department to do                   
 anything and it still makes them evaluate whether it is appropriate           
 risk, appropriate yield and one could call it encouragement or                
 recognize that need.  There may be a more rigorous test of proving            
 whether something is or is not of comparable risk/comparable yield.           
 Embedded in risk is liquidity issues -- Is it something that has a            
 comparable yield?  Is it appropriate liquidity measure?  It is                
 things like that could get into sort of prolonged issues and things           
 like that.                                                                    
 Number 048                                                                    
 REPRESENTATIVE ELTON said they could currently do everything that             
 is envisioned with the passage of the bill.                                   
 MR. STORER said that is correct.                                              
 REPRESENTATIVE ELTON said he is somewhat concerned that we've taken           
 the percentage out.  He said he may feel more comfortable with the            
 percentage left in.  Representative Elton said he is interested in            
 Mr. Storer's reaction to whether or not there should be a cap.                
 MR. STORER said he believes that by eliminating the percentage                
 would be better policy because then it is less forcing an issue.              
 The markets and opportunities would dictate what you do.                      
 Number 082                                                                    
 REPRESENTATIVE ROKEBERG asked if it would be advisable sometimes              
 when a portfolio allocation model is sometimes has a very small               
 percentage for a small cap component.  He said for example, in a              
 large retirement pension wouldn't it be suitable to have a small              
 component of a small cap allocation.                                          
 MR. STORER said, "Yes and, in fact, we do evaluate the portfolio              
 from a large cap expected return, volatility measures and small               
 cap.  We segregate those issues as well as other asset classes."              
 REPRESENTATIVE ROKEBERG explained the reason he brought this up is            
 because there is a small money management firm in Anchorage which             
 was featured in Forbes magazine that actually specializes in small            
 cap on a (indisc.) basis.  He said their fees are probably a push             
 because they're inclusive type fees.  If we had the desire to have            
 a component of a small cap and it would fit in, there would be no             
 reason you couldn't go to that group as well as Mr. Rose's group              
 who specializes in fixed income investments quantitative of the               
 equity.  Representative Rokeberg said there are opportunities out             
 there that could be explored and he believes that is the intent of            
 the bill.                                                                     
 REPRESENTATIVE ROKEBERG said the state ombudsman issued a                     
 recommendation to the Speaker and the President of the Senate this            
 year that said all unwritten policies of the state should either be           
 in regulation or in statute, so that there is a clear understanding           
 on the part of the public of what our policies are.  He said he               
 believes this bill does that.                                                 
 REPRESENTATIVE ROKEBERG said the department should be aware that              
 the legislature is past the ninetieth day of the session, so                  
 whenever there is a fiscal note requested, they have two days to              
 get the fiscal note issued.                                                   
 Number 173                                                                    
 MR. STORER informed the committee he worked for Mr. Rose for nine             
 years and he has the highest regard for him personally.  Mr. Storer           
 said he has been following his progress and success in his new firm           
 very closely and has a lot of contact with his firm.  He said he is           
 aware of two equity managers.  One is the one Representative                  
 Rokeberg referenced that uses quantitative methods to structure a             
 portfolio.  Mr. Storer said he hasn't been contacted by this firm.            
 He said he would like to monitor their progress and would not like            
 to read about it in Forbes.  He would like to know quarterly how              
 they are doing and what they are doing.  Mr. Storer said there is             
 a real estate firm that has also made a presentation.  We have stay           
 abreast of what the money management firms are doing.                         
 MR. STORER referred to Representative Rokeberg's point on                     
 regulations or statutes and said, "What we do and one of the                  
 reasons it's been a pleasure working with this new board is I think           
 public money should be managed publicly, and since the creation of            
 this investment board -- as a matter of fact Dave was my mentor,              
 Mr. Rose, and I brought a lot of his views with it and that is to             
 do everything by resolution.  Well, it's not regulations, we do               
 everything by resolution.  We vote it publicly and then they're               
 available for those to see and that includes the asset allocation."           
 Number 245                                                                    
 REPRESENTATIVE PORTER said he appreciates Mr. Storer's comments               
 about policy and statute.  He said to the extent that overall                 
 direction is policy and overall direction, he believes, is the                
 responsibility of the legislature.  Representative Porter asked Mr.           
 Storer if he would have a problem following the law if that gets              
 into statute.                                                                 
 MR. STORER said he absolutely doesn't have a problem with following           
 the law.  Those are the rules of the road and they would do                   
 everything they could to ensure that they're followed.                        
 Number 275                                                                    
 CHAIRMAN KOTT referred to the current version of the bill and asked           
 Mr. Storer if in his opinion will have a negative effect on the               
 retirement funds.                                                             
 MR. STORER said, "There is nothing in this legislation, if we do              
 our job appropriately and thoughtfully as we have done, that would            
 have a detrimental effect to the management of the retirement                 
 Number 304                                                                    
 REPRESENTATIVE ROKEBERG made a motion to move CSHB 345(L&C), as               
 amended, out of committee with individual recommendations and a               
 zero fiscal note.                                                             
 REPRESENTATIVE SANDERS said he would object to make a comment.  He            
 said he has a great deal of respect for Mr. Rose and all the                  
 financial organizations in Alaska.  However, he doesn't think that            
 the bill does anything.  He believes the bill in its current form             
 is the most "do nothing" bill he has seen in four years.  He said             
 he doesn't think it will be the way it currently is the next time             
 the committee members see it.  Representative Sanders said it                 
 reminds him of the dairy farms, grain elevators, the pork                     
 processing plants and everything else.  When a big mistake happens,           
 they'll be able to point back and say, "Well we're the guys that              
 told em to."  Representative Sanders said he isn't going to vote to           
 move the bill, he isn't going to vote for it on the floor and he              
 isn't going to tell them to.  He said if they want to do it, they             
 can do it today without the bill.  There is no reason to pass this            
 CHAIRMAN KOTT indicated that Representative Rokeberg indicated                
 earlier that there was a memorandum from the ombudsman to the                 
 Speaker and the President of the Senate that there should be clear            
 policy either by regulation or statute.                                       
 Number 373                                                                    
 REPRESENTATIVE ROKEBERG said one of the reasons he is going to vote           
 to move the bill out of committee is that there has been some wags            
 in the legislative halls that have indicated that a bill he                   
 introduced was the biggest turkey bill during session and he....              
 REPRESENTATIVE ELTON said he would echo what Representative Sanders           
 said.  He said he also said it is important to note that he is much           
 more comfortable.  It was explained clearly how this board deals              
 with this by resolution so that there is a record, they establish             
 a record and that record can be relied on by the public.  He said             
 he would note that as a former ombudsman that not all the                     
 recommendations he or that office made were the best                          
 recommendations.  He said we're not auditors or attorneys and those           
 recommendations are not always followed and sometimes they're not             
 followed for a good reason.                                                   
 Number 423                                                                    
 REPRESENTATIVE KUBINA said he will vote to move the bill out of               
 committee.  However, he said that doesn't mean he is prepared to              
 vote for it on the floor.  He said he is very sympathetic to what             
 the bill is trying to do.  It is like hiring principals and                   
 superintendents in Alaska, we always think that we'll get a better            
 person out of Minnesota.  We don't know their background, so it is            
 easier on our conscience.  He said he has been participating in the           
 teacher's retirement system for nineteen years.  Representative               
 Kubina said he would like this board, the permanent fund board and            
 everybody else to see we have abilities in Alaska.  If it is in               
 law, maybe they'll look a little more.  He stated he doesn't want             
 them to make bad investments, but he would like to see as much that           
 can be done in Alaska to be done here.  Representative Kubina                 
 indicated he would like to hear some of the debate that will happen           
 in the Finance Committee where they deal with these things.  He               
 stated he would like to see as much happen in Alaska as possible              
 without hurting the investments that are there.                               
 Number 507                                                                    
 REPRESENTATIVE PORTER said he was really disappointed with the                
 testimony the committee heard against the bill.  He said he                   
 believes the committee shaped the bill into probably a better                 
 product than it was because of the specific requirements that were            
 in the first version.  He said he doesn't think there is anything             
 wrong with saying, "We don't want you to jeopardize even 10 cents             
 but we do want you to look at Alaska first."  The only thing the              
 committee heard was, "No, me first."  The Alaska spirit seems to be           
 waning in one area of the state and it is very disappointing                  
 particularly when you look at who it is that furnished that fund in           
 the first place.  He said he intends to support the bill and will             
 vote for it on the floor.                                                     
 Number 550                                                                    
 CHAIRMAN KOTT asked Representative Sanders if he still maintains              
 his objection.                                                                
 REPRESENTATIVE SANDERS indicated he does maintain his objection.              
 A roll call vote was taken.  Representatives Porter, Kubina,                  
 Rokeberg and Kott voted in favor of moving CSHB 345(L&C), as                  
 amended, out of committee.  Representatives Masek, Elton and                  
 Sanders voted against moving the bill.  So CSHB 345(L&C), as                  
 amended, was passed out of the House Labor and Commerce Committee             
 with a zero fiscal note.                                                      
 CHAIRMAN KOTT adjourned the House Labor and Commerce Committee                
 meeting at 4:15 p.m.                                                          

Document Name Date/Time Subjects