03/14/2006 11:00 AM House RULES
| Audio | Topic |
|---|---|
| Start | |
| HB489 | |
| SB186 | |
| HB273 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| = | HB 273 | ||
| + | SB 186 | TELECONFERENCED | |
| *+ | HB 489 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE RULES STANDING COMMITTEE
March 14, 2006
11:06 a.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chair
Representative John Coghill
Representative John Harris
Representative Vic Kohring
Representative Ethan Berkowitz
Representative David Guttenberg
MEMBERS ABSENT
Representative Lesil McGuire
COMMITTEE CALENDAR
HOUSE BILL NO. 489
"An Act relating to the exemption of charity events from
regulation by the Alaska Public Offices Commission and to the
treatment of charity events under the law governing legislative
ethics; and providing for an effective date."
- MOVED CSHB 489(RLS) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 186(JUD)
"An Act relating to the Alaska Executive Branch Ethics Act; and
providing for an effective date."
- MOVED HCS CSSB 186(RLS) OUT OF COMMITTEE
HOUSE BILL NO. 273
"An Act relating to the dividends of individuals claiming
allowable absences; and providing for an effective date."
- MOVED CSHB 273(RLS) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 489
SHORT TITLE: APOC/LEG ETHICS EXEMPTION: CHARITY EVENTS
SPONSOR(s): FINANCE
03/08/06 (H) READ THE FIRST TIME - REFERRALS
03/08/06 (H) RLS
03/14/06 (H) RLS AT 11:00 AM BELTZ 211
BILL: SB 186
SHORT TITLE: EXECUTIVE BRANCH ETHICS
SPONSOR(s): SENATOR(s) SEEKINS
04/22/05 (S) READ THE FIRST TIME - REFERRALS
04/22/05 (S) STA, JUD
04/26/05 (S) STA AT 3:30 PM BELTZ 211
04/26/05 (S) Moved CSSB 186(STA) Out of Committee
04/26/05 (S) MINUTE(STA)
04/27/05 (S) JUD AT 8:30 AM BUTROVICH 205
04/27/05 (S) Scheduled But Not Heard
04/28/05 (S) STA RPT CS 3NR 1DNP
NEW TITLE
04/28/05 (S) NR: THERRIAULT, WAGONER, HUGGINS
04/28/05 (S) DNP: ELTON
04/28/05 (S) JUD AT 8:30 AM BUTROVICH 205
04/28/05 (S) Scheduled But Not Heard
04/29/05 (S) JUD AT 8:30 AM BUTROVICH 205
04/29/05 (S) LEGISLATIVE ETHICS/MEETINGS
04/30/05 (S) JUD AT 9:00 AM BUTROVICH 205
04/30/05 (S) Scheduled But Not Heard
05/01/05 (S) JUD AT 4:00 PM BUTROVICH 205
05/01/05 (S) Moved CSSB 186(JUD) Out of Committee
05/01/05 (S) MINUTE(JUD)
05/02/05 (S) JUD RPT CS FORTHCOMING 1DP 1DNP 2NR
1AM
05/02/05 (S) DP: SEEKINS
05/02/05 (S) DNP: FRENCH
05/02/05 (S) NR: THERRIAULT, HUGGINS
05/02/05 (S) AM: GUESS
05/02/05 (S) JUD AT 8:30 AM BUTROVICH 205
05/02/05 (S) Moved Out of Committee 5/1/05
05/02/05 (S) MINUTE(JUD)
05/03/05 (S) JUD CS RECEIVED
NEW TITLE
05/04/05 (S) RETURNED TO RLS COMMITTEE
05/08/05 (S) TRANSMITTED TO (H)
05/08/05 (S) VERSION: CSSB 186(JUD)
05/09/05 (H) READ THE FIRST TIME - REFERRALS
05/09/05 (H) STA, JUD
01/31/06 (H) STA AT 8:00 AM CAPITOL 106
01/31/06 (H) Heard & Held
01/31/06 (H) MINUTE(STA)
02/14/06 (H) STA AT 8:00 AM CAPITOL 106
02/14/06 (H) Heard & Held
02/14/06 (H) MINUTE(STA)
02/16/06 (H) STA AT 8:00 AM CAPITOL 106
02/16/06 (H) Moved HCS CSSB 186(STA) Out of
Committee
02/16/06 (H) MINUTE(STA)
02/21/06 (H) STA RPT HCS(STA) 2DP 3NR 1AM
02/21/06 (H) DP: GARDNER, SEATON;
02/21/06 (H) NR: GRUENBERG, ELKINS, RAMRAS;
02/21/06 (H) AM: GATTO
02/23/06 (H) JUD AT 10:00 AM CAPITOL 120
02/23/06 (H) Moved HCS CSSB 186(JUD) Out of
Committee
02/23/06 (H) MINUTE(JUD)
02/24/06 (H) JUD RPT HCS(JUD) NT (TECHNICAL) 3DP 2NR
1AM
02/24/06 (H) DP: WILSON, ANDERSON, MCGUIRE;
02/24/06 (H) NR: COGHILL, GRUENBERG;
02/24/06 (H) AM: GARA
03/14/06 (H) RLS AT 11:00 AM BELTZ 211
BILL: HB 273
SHORT TITLE: PFD: DELAY PAYMENT FOR ALLOWABLE ABSENCES
SPONSOR(s): REPRESENTATIVE(s) WEYHRAUCH
04/18/05 (H) READ THE FIRST TIME - REFERRALS
04/18/05 (H) STA, FIN
05/05/05 (H) STA AT 8:00 AM CAPITOL 106
05/05/05 (H) Heard & Held
05/05/05 (H) MINUTE(STA)
01/12/06 (H) STA AT 8:00 AM CAPITOL 106
01/12/06 (H) Scheduled But Not Heard
01/17/06 (H) STA AT 8:00 AM CAPITOL 106
01/17/06 (H) Heard & Held
01/17/06 (H) MINUTE(STA)
01/19/06 (H) STA AT 8:00 AM CAPITOL 106
01/19/06 (H) Heard & Held
01/19/06 (H) MINUTE(STA)
01/26/06 (H) STA AT 8:00 AM CAPITOL 106
01/26/06 (H) Moved CSHB 273(STA) Out of Committee
01/26/06 (H) MINUTE(STA)
01/30/06 (H) STA RPT CS(STA) NT 5DP 1DNP 1NR
01/30/06 (H) DP: GARDNER, GATTO, RAMRAS, ELKINS,
SEATON;
01/30/06 (H) DNP: LYNN;
01/30/06 (H) NR: GRUENBERG
02/08/06 (H) FIN AT 1:30 PM HOUSE FINANCE 519
02/08/06 (H) Heard & Held
02/08/06 (H) MINUTE(FIN)
02/15/06 (H) FIN AT 1:30 PM HOUSE FINANCE 519
02/15/06 (H) Moved CSHB 273(FIN) Out of Committee
02/15/06 (H) MINUTE(FIN)
02/17/06 (H) FIN RPT CS(FIN) NT 2DP 3NR 2AM
02/17/06 (H) DP: HAWKER, WEYHRAUCH;
02/17/06 (H) NR: STOLTZE, MOSES, MEYER;
02/17/06 (H) AM: KERTTULA, JOULE
03/14/06 (H) RLS AT 11:00 AM BELTZ 211
WITNESS REGISTER
LALANYA SNYDER, Staff
to Representative Mike Chenault
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 489 on behalf of the sponsor,
Representative Chenault.
TAMMY KEMPTON, Regulator
for Lobbying
Alaska Public Offices Commission (APOC)
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Provided remarks on HB 489.
JOYCE ANDERSON, Administrator
Select Committee on Legislative Ethics
Anchorage, Alaska
POSITION STATEMENT: Provided remarks on HB 489.
SENATOR RALPH SEEKINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of SB 186.
REPRESENTATIVE BRUCE WEYHRAUCH
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 273.
ACTION NARRATIVE
CHAIR NORMAN ROKEBERG called the House Rules Standing Committee
meeting to order at 11:06:14 AM. Representatives Rokeberg,
Coghill, Harris, Kohring, Berkowitz, and Guttenberg were present
at the call to order.
HB 489-APOC/LEG ETHICS EXEMPTION: CHARITY EVENTS
11:06:48 AM
CHAIR ROKEBERG announced that the first order of business would
be HOUSE BILL NO. 489, "An Act relating to the exemption of
charity events from regulation by the Alaska Public Offices
Commission and to the treatment of charity events under the law
governing legislative ethics; and providing for an effective
date."
11:07:20 AM
REPRESENTATIVE COGHILL moved to adopt CSHB 489, Version 24-
LS1753\G, Wayne, 3/11/06, as the working document. There being
no objection, Version G before the committee.
11:07:50 AM
LALANYA SNYDER, Staff to Representative Mike Chenault, Alaska
State Legislature, explained that HB 489 would amend current
statute to allow lobbyists to contribute to charitable events as
long as they have been approved by the Legislative Council
Committee. Furthermore, the legislation would allow those
covered by the Legislative Ethics Code to solicit and accept
contributions to charity events from lobbyists so long as it has
been approved by the Legislative Council Committee.
11:08:44 AM
REPRESENTATIVE KOHRING related his assumption that Version G
incorporates the recommendations by the Alaska Public Offices
Commission (APOC).
MS. SNYDER replied yes.
11:08:58 AM
REPRESENTATIVE HARRIS related his understanding that HB 489 came
about due to the Fahrenkamp Classic and the Thanksgiving in
March charitable events. He related his further understanding
that this legislation is not meant to change the rules affecting
lobbyist contributions to legislators.
MS. SNYDER noted her agreement.
CHAIR ROKEBERG explained that the legislation will allow what
the legislature has been doing with regard to soliciting
donations for charity and using staff to invite others to
participate in the events.
11:10:27 AM
TAMMY KEMPTON, Regulator for Lobbying, Alaska Public Offices
Commission (APOC), Department of Administration, confirmed that
Version G has incorporated the concerns she had expressed. She
referred to page 2, line 25 and page 7, paragraph (11), which
refer to "a contribution to a charity event". She informed the
committee that what brought this matter to the attention of APOC
was a letter soliciting for the Fahrenkamp Classic. She
explained that an area of concern was in regard to the request
in the letter for donations of items for goody bags for those
putting. The goody bag is possibly something that isn't going
to the charity. In other words, whoever putts will benefit from
the gifts in the good bags. Therefore, she inquired as to
whether the aforementioned language includes gifts in goody bags
that are possibly distributed to staff and legislators. If so,
she said that would be of concern.
11:13:19 AM
CHAIR ROKEBERG, speaking as a past participant in the Fahrenkamp
Classic, said he didn't recall goody bags. However, if there
was such, he assumed that the goody bags would [include items]
donated from a business through the tournament to the
participant. Furthermore, he pointed out the restriction by
which an active legislator can't receive a gift for which the
value is over $250. He surmised that the aforementioned is a
cap in the other sections of the statute.
MS. KEMPTON agreed.
11:14:34 AM
REPRESENTATIVE COGHILL also pointed out that under the
Legislative Ethics rules, while in session legislators can't
take anything from a lobbyist that can't be consumed.
11:14:50 AM
REPRESENTATIVE HARRIS surmised that anything in the goody bag
would be from the company not from a lobbyist and would have the
company's logo on it. Therefore, the gifts [for the goody bag]
wouldn't be from the lobbyist at all. Although the lobbyists
represent the company within the system, the lobbyist is merely
a figure for the corporation that actually does the donating.
11:15:51 AM
MS. KEMPTON said then that the law doesn't prohibit the employer
or client of the lobbyist from giving such a gift.
REPRESENTATIVE HARRIS further surmised then that a goody bag
could be put together so long as the items came from the
corporation.
MS. KEMPTON replied yes.
11:16:34 AM
REPRESENTATIVE BERKOWITZ referred to page 5, Section 3, which
seems to create an exception that allows minimal gifts of
hospitality. He pointed out that these gifts could be consumed
under [paragraph] (6) and not connected with the recipient's
legislative status or are [gifts of] hospitality. He inquired
as to the definition of hospitality.
MS. KEMPTON pointed out that this particular section applies to
legislators. Under the current lobbying law, a lobbyist is only
allowed to give food and beverage for immediate consumption or
tickets to a preapproved charity event during session. The
problem with the Fahrenkamp Classic is that there isn't a need
for tickets, which is why the issue has been brought forth.
CHAIR ROKEBERG noted that there are tickets for the team
entering in which the captain, the underwriter, of the team pays
the entry fee.
MS. KEMPTON said she wasn't aware of that.
REPRESENTATIVE HARRIS related his understanding that this would
allow a lobbyist, who might sponsor [a team], to be able to
contribute to the charity.
CHAIR ROKEBERG said that would be his assumption.
11:19:09 AM
REPRESENTATIVE HARRIS related his understanding that Section 3
is already in law, the only change is the addition of
[paragraph] (11), which refers back to [paragraph] 10.
CHAIR ROKEBERG stated that the intent of HB 489 is to sanction
the activities of charitable fundraising on the part of the
legislature in order not to inhibit the legislature's ability to
be a conduit for contributions that go to charity.
11:20:36 AM
JOYCE ANDERSON, Administrator, Select Committee on Legislative
Ethics, informed the committee that in 1994 the Select Committee
on Legislative Ethics issued an advisory opinion, 94-06,
allowing legislators and legislative staff to solicit and accept
charitable donations from lobbyists. To date, there hasn't been
a problem with the issue, as far as [the Select Committee on
Legislative Ethics] is concerned. The aforementioned advisory
opinion specified that as long as the contribution received from
a lobbyist by legislators and legislative staff had no financial
benefit to the legislator or legislative staff, then there was
no problem. That advisory opinion further said that the
identity of the recipient of a gift does matter in regard to
whether the solicitation is prohibited. Therefore, Ms. Anderson
said she agreed with Chair Rokeberg in that the intent of the
legislation is not to allow solicitations for the goody bag but
rather just on behalf of the charity itself. She, too,
mentioned that this legislation isn't really changing what is in
place with regard to organizations, corporations, and private
individuals who contribute to charitable events. The
legislation merely clears up an inconsistency in the ethics law
in relation to the lobbying law.
MS. ANDERSON highlighted that in the advisory opinion the
following was noted:
Therefore, you may solicit a charitable contribution
from a lobbyist during a legislative session. The
committee notes that the potential for the appearance
of impropriety is high when legislators and
legislative employees request favors of lobbyists even
on behalf of worthwhile organizations. The committee
therefore urges you to use caution in making a
decision about whether to approach a lobbyist,
especially during a legislative session.
MS. ANDERSON then inquired as to whether the reference to
"contribution" in statute should be changed to "charitable
contribution", which would limit it to donations that go to the
charity. She pointed out that there are many disclosure
requirements currently in the ethics statutes regarding gifts.
Therefore, she inquired as to whether the committee would want
to also consider including [a provision requiring] the
disclosure of gifts received by legislatures and legislative
staff from lobbyists for preapproved charity events.
11:24:34 AM
CHAIR ROKEBERG, speaking to Ms. Anderson's suggested language
change, opined that the syntax in the sentence would make the
change redundant.
11:25:23 AM
REPRESENTATIVE HARRIS strongly disagreed with Ms. Anderson's
latter suggestion regarding disclosure. He opined that if he
has to disclose every time he asks someone to do something for
charity, he would stop doing it. He mentioned the hard work
involved in these charitable events.
11:26:06 AM
CHAIR ROKEBERG opined that it would be difficult and unnecessary
to disclose such.
11:26:29 AM
REPRESENTATIVE COGHILL said that if the member actually received
the contribution, then he could see the need for the disclosure.
However, the legislator doesn't actually receive the
[contribution].
11:27:27 AM
CHAIR ROKEBERG, upon determining no one else wished to testify,
[closed public testimony].
11:27:36 AM
REPRESENTATIVE HARRIS moved to report CSHB 489, Version
LS1753\G, Wayne, 3/11/06, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 489(RLS) was reported from the House Rules
Standing Committee.
SB 186-EXECUTIVE BRANCH ETHICS
11:27:56 AM
CHAIR ROKEBERG announced that the next order of business would
be CS FOR SENATE BILL NO. 186(JUD), "An Act relating to the
Alaska Executive Branch Ethics Act; and providing for an
effective date."
The committee took an at-ease from 11:27 a.m. to 11:30 a.m.
11:30:07 AM
SENATOR RALPH SEEKINS, Alaska State Legislature, sponsor of SB
186, explained that most people have never read the Alaska
Executive Branch Ethics Act, and therefore there is a tremendous
misunderstanding of what it does. He read AS 39.52.010, as
follows:
(a) It is declared that
(1) high moral and ethical standards among public
officers in the executive branch are essential to
assure the trust, respect, and confidence of the
people of this state;
(2) a code of ethics for the guidance of public
officers will
(A) discourage those officers from acting upon
personal or financial interests in the performance of
their public responsibilities;
(B) improve standards of public service; and
(C) promote and strengthen the faith and
confidence of the people of this state in their public
officers;
(3) holding public office or employment is a
public trust and that as one safeguard of that trust,
the people require public officers to adhere to a code
of ethics;
(4) a fair and open government requires that
executive branch public officers conduct the public's
business in a manner that preserves the integrity of
the governmental process and avoids conflicts of
interest;
(5) in order for the rules governing conduct to
be respected both during and after leaving public
service, the code of ethics must be administered
fairly without bias or favoritism;
(6) no code of conduct, however comprehensive,
can anticipate all situations in which violations may
occur nor can it prescribe behaviors that are
appropriate to every situation; in addition, laws and
regulations regarding ethical responsibilities cannot
legislate morality, eradicate corruption, or eliminate
bad judgment; and
(7) compliance with a code of ethics is an
individual responsibility; thus all who serve the
state have a solemn responsibility to avoid improper
conduct and prevent improper behavior by colleagues
and subordinates.
SENATOR SEEKINS opined that the ethics laws must be very clear,
fair, and enforceable. In order to accomplish the
aforementioned, he said he reviewed various state laws,
municipal codes, bar association codes, judicial conduct, et
cetera. Senator Seekins said that he discovered that there is
no uniform ethics code model. He reminded the committee that
during the former Attorney General Gregg Renkes situation, Bob
Bundy, Attorney for Dorsey & Whitney LLC, said that he couldn't
find a clear, bright line as to whether the investment of Mr.
Renkes constituted a violation. Therefore, part of the charge
with this legislation was to establish a clear, bright line. In
so doing, Senator Seekins said that he followed Mr. Bundy's
recommendations. Senator Seekins found that there's no
impropriety if the following applies:
(1) personal or financial interest in the matter is
[INSIGNIFICANT, OR] of a type that is possessed
generally by the public or a large class of persons to
which the public officer belongs; [OR]
(2) action or influence would have insignificant or
conjectural effect on the matter;
(3) financial interest in a matter is held in a blind
trust or the public officer does not have management
control over the financial interest; or
(4) personal or financial interest in a matter is in
regard to a
business and the public officer
(A) does not own a controlling interest in the
business;
(B) does not own stock or options to buy stock that,
when
combined,
(i) equal more than one percent of the stock in the
business; or
(ii) have a total value of more than $10,000;
(C) owns or has an option to buy
(i) less than one percent of the equity interest in
the business; and
(ii) an equity interest in the business worth less
than $10,000;
(D) is not a member of the board of directors or
another governing body of the business;
(E) is not an elected officer of the business;
(F) does not provide or have an option to provide
personal
or professional services to the business;
(G) does not have a contract or have an option for a
contract with the business; and
(H) is not an employee of the business.
SENATOR SEEKINS noted that a previous committee amended the
legislation to also include stock options or ownership options
to the list of situations in which there is no impropriety.
Senator Seekins said that he was also charged with finding and
addressing any other problems in this statute. [Another
problem] in the Alaska Executive Branch Ethics Act was in the
area of confidentiality, which only applies to current and
former public officers. He explained that a public officer is a
public employee, a member of a board or commission, and a state
officer designated by the governor to act as trustee or a person
with trust duties. Furthermore, the Act applies during the
investigation and until a finding of probable cause by the
attorney general and formal proceedings are initiated. After
the aforementioned, the complaint is a public record. Senator
Seekins pointed out that [CSSB 186(JUD)] specified that
knowingly and intentionally making a complaint public or
knowingly and intentionally doing so prior to a finding of
probable cause by anyone would've been a misuse of the act.
Therefore, the penalty currently in law for public employees
would apply to everyone. He pointed out that currently statute
specifies that breaking any part of [AS 39] may result in a
civil penalty in an amount not to exceed $5,000. Senator
Seekins opined that the law should apply to all equally. He
further suggested that if there isn't an equal confidentiality
requirement for everyone, then there should be no such
requirements.
11:38:27 AM
SENATOR SEEKINS then turned to the matter of blind trusts, which
is defined by the American Bankers Association as follows: "A
trust is set up to prevent the owner from having detailed
knowledge of assets in the trust." He noted that government
officials frequently use blind trusts in order to avoid
conflicts of interest between official duties and personal
financial transactions. Senator Seekins noted that many
successful individuals with investments enter into government,
and in some cases, the most qualified person to work on an issue
is the person with a potential conflict of interest due to
his/her portfolio. Returning to the blind trust, Senator
Seekins highlighted that under the Act there has to be full
disclosure of the assets, then when there is a potential
violation there has to be a declaration of a potential
violation. At that point, the person must refrain from taking
any official action relating to the matter until a determination
is made and the matter is disclosed in writing to his/her
immediate designated supervisor and the attorney general.
Therefore, the designated supervisor is provided another option
for a highly qualified individual to work on behalf of the state
on a particular project. This legislation would add the option
of [requiring] the public official's interest to be placed in a
blind trust. He reiterated that the objective with SB 186 is to
make the ethics law clear, fair, and enforceable.
11:41:00 AM
CHAIR ROKEBERG noted that throughout the legislation there are
references to "business associates" and "what a person knows or
reasonably ought to know". He related his understanding that
"business associates" would not cover a minority ownership or a
limited liability company (LLC) in which the covered official is
a limited partner, and asked if that's correct.
SENATOR SEEKINS replied yes. With regard to the language "what
a person knows or reasonably ought to know", Senator Seekins
specified that it's a term of art that isn't a "very wide
brush."
CHAIR ROKEBERG recalled that as an LLC member, he had to
distinguish whether he was a managing or nonmanaging member for
Internal Revenue Services (IRS) purposes. Therefore,
accountants would determine whether the LLC member was a
majority managing partner or minority nonmanaging member of an
LLC. He asked if the legislation makes a similar distinction.
SENATOR SEEKINS answered that [the legislation makes a similar
distinction], although he emphasized that it's not expected that
an individual would know everything about his/her business
associates.
11:43:25 AM
CHAIR ROKEBERG posed an example in which an individual is
appointed to the position of a commissioner and turns his/her
business over to an associate, and inquired as to how that
individual would know what the associate is thinking.
SENATOR SEEKINS replied that the individual wouldn't know what
the associate is thinking, although the individual should have a
reasonable idea as whether there is a conflict of interest.
CHAIR ROKEBERG posed a situation in which a public official is a
business associate who owns 1,000 shares of a business with
which the state is making a deal.
SENATOR SEEKINS explained that if the public official holds over
a $10,000 [interest] or over 1 percent, the public official
would have to declare a conflict to his/her supervisor. He
specified that the public official would have to make a
declaration of a potential violation and refrain from taking any
official action until the determination is made and the matter
would have to be disclosed in writing to the designated
supervisor. If the interest was in a blind trust to begin with,
the aforementioned wouldn't have to be done because the public
official wouldn't know what is in the blind trust. However,
when there is no blind trust, the designated supervisor could
recommend that the employee divest or place the [investment] in
a blind trust for the period during which the public official is
working on the matter in which he/she has a conflict of
interest. The blind trust is meant to take [the investment] out
of [the public official's] direct control, although he/she would
know that he/she has a potential investment.
11:46:55 AM
REPRESENTATIVE BERKOWITZ asked if there is a definition of
"blind trust."
SENATOR SEEKINS said the legislation doesn't currently include a
definition for blind trust, although he said he would have no
problem inserting the earlier mentioned definition from the
American Bankers Association.
REPRESENTATIVE BERKOWITZ suggested that other legal definitions
of "blind trust" would be helpful [to review]. Furthermore, any
time a definition for trust is added, it must [properly]
intersect with the already existing trust statutes.
SENATOR SEEKINS noted that he didn't review that, although he
indicated that he has reviewed the last two major revisions in
the trust law and didn't see any conflict. Still, he offered to
research that matter for the committee. He also offered to
develop a definition for blind trust because he didn't believe
there to be one in statute.
11:48:53 AM
CHAIR ROKEBERG related his plan to offer an amendment that would
insert language such that a blind trust is placed in statute.
REPRESENTATIVE BERKOWITZ commented that he doesn't intend to
support the aforementioned amendment.
SENATOR SEEKINS offered his assistance with [inserting language]
allowing blind trusts.
11:49:38 AM
CHAIR ROKEBERG pointed out that he didn't see a definition of
"campaign period" in the legislation.
SENATOR SEEKINS clarified that the campaign period mainly
applies to the Legislative Ethics Act than the Executive Branch
Ethics Act. However, [if the committee deems it necessary],
then he said he wouldn't have any objection to including the
same campaign period for the Legislative Ethics Act.
CHAIR ROKEBERG inquired as to what is meant by the term "close
social unit."
SENATOR SEEKINS highlighted the varying family unit
configurations, which are difficult to define.
CHAIR ROKEBERG posed a situation in which two to three people
are rooming together. Under the Legislative Ethics Act the
aforementioned group would be considered "economic associates".
Therefore, he asked if that would apply here as well.
SENATOR SEEKINS specified that "if you were working on their
behalf and against the best interest of the state, that is one
of the groups that we would look at." In conclusion, Senator
Seekins said that he has found that those who comment on this
legislation on a regular basis haven't read the Alaska Executive
Branch Ethics Act and don't even understand the provisions being
suggested in SB 186. Therefore, he encouraged everyone to read
the Act in order to understand that only public officials are
held responsible for breaking confidentiality.
11:51:38 AM
CHAIR ROKEBERG, upon determining that no one else wished to
testify, closed public testimony.
11:53:19 AM
CHAIR ROKEBERG moved Amendment 1, labeled 24-LS0874\P.1, Wayne,
3/6/06, which read:
Page 1, line 10, following ";":
Delete "or"
Insert "(3) financial interest in a matter is
held in a blind trust or the public officer does not
have management control over the financial interest;
or
(4)"
Page 3, following line 25:
Insert a new bill section to read:
"* Sec. 8. AS 39.52.210(b) is amended to read:
(b) A public employee's designated supervisor
shall make a written determination whether an
employee's involvement violates AS 39.52.110 -
39.52.190 and shall provide a copy of the written
determination to the public employee and to the
attorney general. If the supervisor determines that a
violation could exist or will occur, the supervisor
shall,
(1) reassign duties to cure the employee's
potential violation, if feasible; or
(2) direct
(A) the divestiture or removal by the
employee of the personal or financial interests that
give rise to the potential violation; or
(B) the placement by the employee of the
financial interest that gives rise to the potential
violation into a blind trust or other investment where
the employee does not have management control over the
financial interest."
Renumber the following bill sections accordingly.
Page 9, lines 3 - 4:
Delete "[ESTABLISHMENT OF A BLIND TRUST,]"
Insert "establishment of a blind trust for a
period of time or under conditions determined
appropriate, placement of the financial interest into
an investment where the employee does not have
management control over the financial interest,"
REPRESENTATIVES BERKOWITZ AND HARRIS objected.
CHAIR ROKEBERG explained that Amendment 1 would reinsert the
blind trust provisions that were deleted in the House State
Affairs Standing Committee. Chair Rokeberg opined that the
blind trust mechanism should be available [because] it's already
difficult enough to recruit competent people in the state, which
is a small state in which people tend to have interlocking
business interests. [Amendment 1] would allow a typical
portfolio to be continued and managed while allowing the
individual to participate in public service without divesting
his/her investment portfolios.
11:54:58 AM
CHAIR ROKEBERG related his understanding that under SB 186 if a
public official didn't have a blind trust prior to an
appointment by the governor, for example, full disclosure of the
contents of the trust [would be required] before it's placed in
a blind trust.
SENATOR SEEKINS replied yes. He related his understanding that
when a [public official] enters [public service] he/she has to
make a disclosure statement. If later that public official
places the [investment] in a blind trust, everyone would know
what's in the blind trust. However, that public official
wouldn't have control over what is sold or not sold and what is
retained or not retained because that would be the charge of the
person controlling the trust. Senator Seekins then suggested
that the governor may own bank stock. He questioned whether the
governor should be forced to sell that bank stock and face the
tax consequences in order to make any decision relating to the
regulation of banking in the state or could he be allowed to
place it in a blind trust under a petition of a conflict of
interest. He reiterated that [a blind trust] merely provides
one more option with full disclosure for the ethics supervisor
in regard to conflicts of interest.
11:57:53 AM
REPRESENTATIVE BERKOWITZ said that Senator Seekins' initial
supposition is incorrect because no one is saying that the
governor has to sell his bank assets. Rather, if there is a
conflict, the individual shouldn't participate in related
decisions or divest. Anyone with a conflict has the
aforementioned choices, he opined.
SENATOR SEEKINS interjected that [under Amendment 1] the option
of a blind trust would be available as well.
11:58:26 AM
REPRESENTATIVE HARRIS pointed out that the governor has to be
involved with every decision, and if he/she had prior business
dealings, he/she would have to place [investments] in a blind
trust, divest it, or not make action. However, the governor is
constitutionally bound to make an action. Therefore, he
questioned why the governor couldn't merely provide full
disclosure.
11:59:52 AM
CHAIR ROKEBERG posed a scenario in which a governor with banking
stock was faced with banking legislation, and asked if
Representative Berkowitz would recommend that the legislation
become law without the governor taking action or should the
governor veto the legislation. He clarified that this situation
wouldn't include the option of a blind trust.
REPRESENTATIVE BERKOWITZ pointed out that in HCS CSSB 186(JUD)
there are eight alternatives, as specified on page 1, line 12
through page 2, line 15. He mentioned his belief that a
governor shouldn't be an elected officer of any business because
there's an inherent conflict. He opined that the instances that
would arise would be relatively few and far between.
Representative Berkowitz further opined that if the governor has
a controlling interest in a banking business, then the governor
shouldn't participate.
SENATOR SEEKINS clarified that it's not a controlling interest,
but rather a $10,000 interest. He emphasized that the reason
[the legislation is before the committee] is because these
situations are few and far between, but the state was caught in
such a situation. Therefore, in order to address this [one must
realize] that for some a $10,000 investment isn't a large sum.
He reiterated that the legislation specifies that with full
disclosure and a letter to the attorney general and the
individual's ethics supervisor relating the conflict, the blind
trust would merely provide another option to AS 39.52.210.
12:03:12 PM
REPRESENTATIVE BERKOWITZ opined that there has never been an
instance in which the governor has had such a conflict.
However, if such a conflict exists, then the governor is
incapacitated for that legislation and the responsibility for
the course of action should be left to the lieutenant governor.
He said that he didn't want to design a system for an instance
that hasn't occurred. He then expressed concern with regard to
creating a blind trust because "we" don't know what it is.
Furthermore, the circumstances under which the blind trust is
created don't necessarily mean that the individual whose assets
are held in the blind trust doesn't know what's in them. For
example, someone could have a blind trust, know what's in it,
and decide to sell the assets in order to capitalize on an
official action, which would be problematic. Therefore, the
stark choice created under the current statute seems
appropriate.
SENATOR SEEKINS commented that he didn't know that the statutes
or the constitution contain a provision allowing the lieutenant
governor to sign legislation. Senator Seekins then specified
that the example with the governor is merely that, although he
said he could provide other examples [with public officials] all
of which are subject to the law. With full disclosure,
knowledge of the investment, and consultation with the ethics
supervisor, he opined that there is protection against possible
problems while allowing the individual [with the investment] the
opportunity to use his/her expertise to the benefit of the
state.
12:05:48 PM
REPRESENTATIVE BERKOWITZ opined that there are ethics [laws] so
that there is a democracy rather than a kleptocracy in order
that individuals don't utilize their official government
positions to enhance their personal position. Representative
Berkowitz emphasized that if one has an inescapable conflict,
then he/she shouldn't be involved in government.
CHAIR ROKEBERG pointed out that in Section 9 of Article III of
the Alaska State Constitution it says: "In case of the
temporary absence of the governor from office, the lieutenant
governor shall serve as the acting governor." Therefore, he
surmised that the governor would have to be absent and thus
Representative Berkowitz's suggestion isn't appropriate.
12:06:47 PM
CHAIR ROKEBERG expressed concern with the 15,000 [public
officials] who could have a retirement plan of their own that
could easily amount to seven figures. He opined that he didn't
believe it to be appropriate for those people to liquidate their
portfolio to serve the government. Therefore, providing a
mechanism by which the individual can have a blind trust in
order that the individual can serve the government is
appropriate, which is the basis of the amendment. Furthermore,
he opined that it's quite defensible.
REPRESENTATIVE BERKOWITZ reiterated the lack of [a definition]
of blind trust in statute and the lack of actual examples beyond
the Renkes incident, which he characterized as a clear conflict
of interest. Although the Renkes incident was a bit difficult
under the statute, a bright line could be inserted in statute to
address such situations.
CHAIR ROKEBERG opined that the $10,000 limitation is a bright
line. He further opined that a blind trust is appropriate so
that one doesn't have to liquidate his/her entire portfolio
because owning $10,000 of a equity position is relatively small.
Chair Rokeberg pointed out that he would have to liquidate his
entire retirement portfolio or major portions of it if he were
appointed to an executive position because of the $10,000 limit.
He characterized [having an equity interest in a business worth
more than $10,000] as common, especially for those who have been
self employed.
12:09:53 PM
REPRESENTATIVE HARRIS posed a situation in which a long-term
employee of the state who had built up retirement under the
Public Employees Retirement System (PERS) was selected to be the
commissioner of Department of Administration. He asked if that
individual, with more than $10,000 worth of retirement, would
have to liquidate the retirement or not participate in decisions
related to the retirement system.
SENATOR SEEKINS answered that the aforementioned individual
would be part of a large group with which that individual
doesn't have control and thus wouldn't be a conflict under the
current law or this legislation. With regard to actual
examples, Senator Seekins opined that before the Renkes incident
there wasn't a clear line. Had such been in place, the
governor, as the attorney general's ethics supervisor, may have
suggested that Mr. Renkes divest himself of the interest and
have nothing more to do with the project or place the interest
in a blind trust with full disclosure. The Renkes situation was
something that wasn't thought of before, and therefore this
legislation attempts to avoid future [similar] situations with
some reasonable and full disclosure on the part of someone who
works for state government and may have a potential conflict.
12:12:51 PM
REPRESENTATIVE GUTTENBERG opined that he would rather have full
disclosure rather than a blind trust, which seems to be a smoke
screen. He noted that in the past there have been situations in
which some chief executives have had control of a blind trust,
although it may not have been direct control.
SENATOR SEEKINS pointed out that under AS 39.52.270 a public
official is required to provide full disclosure, which has to be
screened by that public official's designated ethics supervisor.
CHAIR ROKEBERG surmised then that the asset has to be disclosed
and screened, which seems to overcome Representative
Guttenberg's concern.
12:15:40 PM
REPRESENTATIVE BERKOWITZ informed the committee of AS 39.50.040,
which read:
Sec. 39.50.040. Blind trusts.
(a) A public official may transfer all or a
portion of the official's assets to a blind trust for
the duration of service in public office. The original
assets placed in the blind trust shall be listed by
the official in the statement required to be filed
under this chapter. The instrument creating the blind
trust must be included with the statement.
(b) For a trust to qualify under this section,
(1) assets transferred to the trust shall be
marketable;
(2) the trustee shall be a bank or other
institutional fiduciary;
(3) the trustee shall have full authority to
manage the trust, including the purchase, sale, and
exchange of its assets in accordance with fiduciary
principles;
(4) information regarding the identity and the
nature of its assets shall be confidential from the
trustor for the duration of the trust;
(5) the trustee shall be required to report any
known breach of confidentiality or the termination of
the trust to the office where the trustor is required
to file statements under this chapter; and
(6) {[}Repealed, Sec. 26 ch 25 SLA 1975{]}.
SENATOR SEEKINS highlighted that the ethics law doesn't include
an allowance to accommodate that blind trust.
REPRESENTATIVE BERKOWITZ clarified that once an individual
becomes a public official, nothing prohibits that individual
from establishing a blind trust.
SENATOR SEEKINS noted his agreement, but pointed out that
nothing [in statute] specifies that the individual wouldn't have
a conflict of interest if "there's something there." He
specified [that the statute] doesn't include for a potential
conflict of interest to utilize blind trusts nor does a blind
trust remove the individual from the first conflict, which is
what SB 186 accomplishes.
12:18:10 PM
REPRESENTATIVE HARRIS asked if Senator Seekins would support
Amendment 1.
SENATOR SEEKINS replied yes, adding that blind trusts are a
legitimate method that he opined was originally intended to be
included in statute. In further response to Representative
Harris, Senator Seekins specified that the blind trust provision
was deleted in the House State Affairs Standing Committee.
12:19:24 PM
REPRESENTATIVE HARRIS expressed the desire for the legislation
to include a definition for blind trust, which could be
accomplished through amendment.
SENATOR SEEKINS explained that [AS 39.50.040] doesn't define a
blind trust, although it specifies the elements that qualify it
as a trust. Therefore, the committee may want to cross
reference AS 39.50.040 in SB 186.
12:20:30 PM
REPRESENTATIVE BERKOWITZ opined that there is a substantial
difference between the blind trust referenced in AS 39.50.040
and what Amendment 1 suggests. He related his understanding
that Amendment 1 suggests that once it's determined that a
violation could exist or will occur, then the supervisor shall
direct the placement of the finanical interest of the employee
into a blind trust. The aforementioned is very different than
one transferring all or a portion of his/her assets into a blind
trust for the duration of service in a public office.
CHAIR ROKEBERG said that he tended to agree with Representative
Berkowitz.
SENATOR SEEKINS returned to the situation in which an public
employee enters service and that employee's disclosure is
screened for a potential violation. If the ethics supervisor
determines that there is a potential violation, there are two
options and this [amendment] would provide a third option.
Moreover, if the financial interest in violation is in a blind
trust from the beginning, then it's not a substantial violation
of the ethics code.
12:22:51 PM
REPRESENTATIVE HARRIS inquired as to the problem with
automatically placing the financial interests that are in
violation in a blind trust when the individual takes office.
CHAIR ROKEBERG opined that the aforementioned could be
problematic because there could be certain businesses that one
wouldn't want to place in a blind trust. Therefore, such should
be an optional provision. He commented that one with a broad
portfolio that places the individual under the $10,000
limitation would probably want to utilize a blind trust.
Amendment 1, he explained, specifies that if one has a financial
interest in a blind trust, it would be out of the individual's
control. However, Section 8 allows the establishment of a blind
trust after the supervisory review.
SENATOR SEEKINS noted his agreement.
12:25:05 PM
REPRESENTATIVE KOHRING asked if the chair's intention is to take
an amendment to Amendment 1 to insert the language "as defined
in AS 39.50.040."
CHAIR ROKEBERG said that such an amendment could be offered or
an amendment stripping out the Section 8 language could be
offered. Although he recognized the sponsor's intention to
allow the [ethics] supervisor to have the freedom, he indicated
that he did have a bit of concern with that.
SENATOR SEEKINS opined [that a blind trust] provides a
reasonable alternative that's fully disclosed.
CHAIR ROKEBERG commented that he wasn't sure what would be
gained by the mere act of placing the [financial interest] in
the blind trust because it doesn't eliminate the conflict "if
you know what's already there."
SENATOR SEEKINS reiterated his earlier remarks that sometimes
those with conflicts are the best to have working on the
project.
12:26:38 PM
CHAIR ROKEBERG reviewed the elements of Amendment 1, which
includes the provision to establish a blind trust as a
methodology and the provision that allows the supervisor to
recommend the placement of any assets in conflict in a blind
trust. He asked if the discretionary action, as specified in
the Section 8 provision of Amendment 1, is the primary concern
of Representative Berkowitz.
REPRESENTATIVE BERKOWITZ replied yes.
CHAIR ROKEBERG referred to changes in Amendment 1 to page 9,
lines 3-4, of the legislation.
The committee took an at-ease from 12:28 p.m. to 12:30 p.m.
12:30:06 PM
CHAIR ROKEBERG moved that the committee adopt an amendment to
Amendment 1 such that page 1, lines 7-23 to page 2, line 2, as
numbered on Amendment 1, would be deleted. Therefore, Amendment
1, as amended, would read as follows:
Page 1, line 10, following ";":
Delete "or"
Insert "(3) financial interest in a matter is
held in a blind trust or the public officer does not
have management control over the financial interest;
or
(4)"
Page 9, lines 3 - 4:
Delete "[ESTABLISHMENT OF A BLIND TRUST,]"
Insert "establishment of a blind trust for a
period of time or under conditions determined
appropriate, placement of the financial interest into
an investment where the employee does not have
management control over the financial interest,"
There being no objection, the aforementioned amendment to
Amendment 1 was adopted.
CHAIR ROKEBERG explained that Amendment 1, as amended, leaves
the blind trust concept intact and allows it to be used as a
tool when one enters public service. Therefore, if one has a
blind trust after taking a position, as is allowed currently,
the language allows the individual to operate. He related his
assumption that the blind trust would be defined by AS 39.50.040
without a specific reference because it resides in the same
chapter.
12:32:59 PM
CHAIR ROKEBERG, upon determining there were no objections,
announced that Amendment 1, as amended, was adopted.
12:33:19 PM
REPRESENTATIVE BERKOWITZ, in response to Chair Rokeberg, related
his belief that the language [in Amendment 1 as amended]
adequately sets forth the definition of a blind trust.
Representative Berkowitz then related his understanding that
when the language regarding the criminal sanctions for those who
made mention of a complaint was removed, a section allowing for
the filing of a civil complaint against an individual was
inadvertently left in.
SENATOR SEEKINS responded that he wasn't aware of such, but
offered to review the language if Representative Berkowitz could
direct him to it.
REPRESENTATIVE BERKOWITZ reiterated that the language regarding
the fine was deleted, although the possibility of a civil
complaint with compensatory damages remains in the legislation.
SENATOR SEEKINS pointed out that there still is a wrongful use
of the complaint if it's a frivolous complaint, which would
result [in a civil penalty]. In response to Representative
Harris, Senator Seekins specified that the personnel board
determines whether a complaint is frivolous.
12:35:53 PM
REPRESENTATIVE BERKOWITZ turned attention to Section 15 of HCS
CSSB 186(JUD), which is a negligence standard and thus leaves
open the possibility of a civil complaint.
SENATOR SEEKINS pointed out that the legislation specifies that
the personnel board may recommend sanctions. He noted that the
[House] Judiciary Standing Committee determined that reckless
disregard was the proper standard.
12:37:31 PM
REPRESENTATIVE BERKOWITZ related that reading Section [15] in
conjunction with the Section [14] leaves the complainant open to
a civil suit.
The committee took an at-ease from 12:37 p.m. to 12:40 p.m.
12:40:46 PM
SENATOR SEEKINS explained that currently [AS 39.52].340 requires
confidentiality [and the legislation] clearly sets out where the
confidentiality is. He pointed out that under current law one
would be in violation if he/she talks with his/her attorney.
Therefore, the legislation specifies that the level of
confidentiality can be broken with the specified individuals
under the specified bases. The legislation also describes at
what point the information becomes public. Moreover, any
penalty only applies to a public employee.
CHAIR ROKEBERG pointed out that under Section 15 the sanctions
under AS 39.52.410-AS 39.52.440 only apply as a civil fine to a
public employee.
12:43:39 PM
REPRESENTATIVE HARRIS moved to report HCS CSSB 186(JUD), as
amended, out of committee with individual recommendations and
the accompanying fiscal notes. There being no objection, HCS
CSSB 186(RLS) was reported from the House Rules Standing
Committee.
The committee took an at-ease from 12:44 p.m. to 12:46 p.m.
HB 273-PFD: DELAY PAYMENT FOR ALLOWABLE ABSENCES
12:46:43 PM
CHAIR ROKEBERG announced that the final order of business would
be HOUSE BILL NO. 273, "An Act relating to the dividends of
individuals claiming allowable absences; and providing for an
effective date." [Before the committee is CSHB 273(FIN).]
12:46:52 PM
REPRESENTATIVE COGHILL moved to adopt CSHB 273, Version 24-
LS0871\I, Cook, 3/10/06, as the working document.
REPRESENTATIVE BERKOWITZ objected, and mentioned that in the
House Finance Committee two amendments that received a 4-3 vote
were deemed not to have passed and thus not included in the
House Finance Committee's substitute. However, it's clear, he
opined, that only a majority of the quorum is all that's needed
to adopt an amendment.
12:47:39 PM
REPRESENTATIVE BRUCE WEYHRAUCH, Alaska State Legislature,
sponsor, began by confirming that the House Finance Committee
did deem two amendments that received a 4-3 vote as failed. He
informed the committee that he requested this hearing because of
the interest with regard to anything related to the permanent
fund dividend (PFD) and to address any amendments in committee
rather than on the House floor. He explained that once someone
applies for an allowable absence, of which there are 11, the
individual can continue to receive the PFD if the individual
returns to the state to demonstrate his/her presence. The
aforementioned situation is allowed for a period of 10 years.
However, under HB 273 once an individual has been out of state
for two years and the individual hasn't returned to the state,
the PFD check would be held until the individual returns to the
state. Once the individual returns to the state and establishes
residency again, then all the held checks are given to the
individual. Therefore, the legislation provides a large
incentive to return to the state and provides a bonus because
once residency is established, the individual would receive all
the PFD checks that were held. Representative Weyhrauch related
that he has learned, through the [Permanent Fund Division] and
the Department of Law, that individuals who have been out of
state for three years don't return to the state. In fact, the
allowable absence category in which an individual who is a
dependent of military personnel living outside of the state
could receive a PFD without ever being in the state. He
recalled that the amendments to which Representative Berkowitz
spoke about were related to extending the period of time allowed
for allowable absences. He concluded by informing the committee
that before the committee is essentially the House State Affairs
Standing Committee version of HB 273 because Version I doesn't
include Representative Mike Kelly's amendment adopted in the
House Finance Committee, which would've prohibited individuals
who had been out of state for five years from receiving a PFD.
12:52:40 PM
CHAIR ROKEBERG requested that Representative Weyhrauch explain
the substance of the two amendments that were deemed to have
failed in the House Finance Committee.
REPRESENTATIVE WEYHRAUCH recalled that the amendments addressed
extending the number of years in which a person could be out of
state before collecting the PFD.
REPRESENTATIVE BERKOWITZ informed the committee that
Representative Joule's amendment in the House Finance Committee
would've allowed an exemption for students who were in the state
for at least 90 days.
REPRESENTATIVE WEYHRAUCH recalled that the other amendment
addressed the notion that students are more in need of the PFD
than other categories of excused absences. The concern was that
the needs-based test for receiving the PFD couldn't withstand
legal scrutiny and wouldn't be applied across the board.
REPRESENTATIVE BERKOWITZ specified that Representative
Kerttula's amendment in the House Finance Committee would've
extended by a year, the time period an individual would be able
to collect a PFD under the delayed payment plan.
12:55:01 PM
REPRESENTATIVE WEYHRAUCH reiterated that Version I is
essentially the House State Affairs Standing Committee version,
which included an amendment by Representative Gardner that would
extend the period of time in which one could receive a PFD when
out of state to two years. He highlighted that data relates
that greater than 60 percent of those out of state longer than
two years don't return yet still claim a PFD.
12:55:56 PM
REPRESENTATIVE BERKOWITZ withdrew his objection.
There being no further objection, Version I, was adopted.
12:56:33 PM
REPRESENTATIVE HARRIS moved to report CSHB 273, Version 24-
LS0871\I, Cook, 3/10/06, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, CSHB 273(RLS) was reported from the House Rules
Standing Committee.
12:56:46 PM
ADJOURNMENT
There being no further business before the committee, the House
Rules Standing Committee meeting was adjourned at 12:57 p.m.
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