Legislature(1995 - 1996)
04/24/1996 03:12 PM House L&C
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ 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
SHORT TITLE: SUPPORT FOR COMMUNITY COLLEGE SYSTEM
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
SHORT TITLE: PENSION INVESTMENT BOARD PROCUREMENTS
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
important.
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
research.
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
chancellor."
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
not.
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
diminished;".
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
bill.
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
objection.
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
Committee.
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
imprudent.
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
system."
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
bill.
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.
ADJOURNMENT
CHAIRMAN KOTT adjourned the House Labor and Commerce Committee
meeting at 4:15 p.m.
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