Legislature(1997 - 1998)
02/25/1997 08:05 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 25, 1997
8:05 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Ethan Berkowitz
Representative Fred Dyson
Representative Kim Elton
Representative Mark Hodgins
Representative Ivan Ivan
Representative Al Vezey
MEMBERS ABSENT
All members present.
COMMITTEE CALENDAR
*HOUSE BILL NO. 81
"An Act relating to the members of the board and staff of the
Alaska Permanent Fund Corporation."
- HEARD AND HELD
*HOUSE CONCURRENT RESOLUTION NO. 8
Creating the Deferred Maintenance Task Force.
- MOVED HCR 8 OUT OF COMMITTEE
*HOUSE CONCURRENT RESOLUTION NO. 7
Proposing an amendment to the Uniform Rules of the Alaska State
Legislature relating to notice of committee meetings held during
the first week of a first regular session.
- MOVED HCR 7 OUT OF COMMITTEE
*HOUSE BILL NO. 67
"An Act relating, for purposes of eligibility for a permanent fund
dividend, to an absence from the state while on an unpaid
sabbatical under the longevity bonus program; and providing for an
effective date."
- HEARD AND HELD
*HOUSE BILL NO. 112
"An Act amending the definition of `political party' except as the
definition of the term applies to the regulation of contributions
and expenditures in state and municipal election campaigns, an
amendment that also has the effect of changing the definition of
`political organization' as applied to the regulation of games of
chance and contests of skill."
- MOVED HB 112 OUT OF COMMITTEE
*HOUSE JOINT RESOLUTION NO. 5
Proposing an amendment to the Constitution of the State of Alaska
relating to freedom of conscience.
- SCHEDULED BUT NOT HEARD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 81
SHORT TITLE: PERMANENT FUND BOARD MEMBERS & STAFF
SPONSOR(S): REPRESENTATIVE(S) JAMES
JRN-DATE JRN-PG ACTION
01/22/97 122 (H) READ THE FIRST TIME - REFERRAL(S)
01/22/97 122 (H) STATE AFFAIRS, FINANCE
02/20/97 (H) STA AT 8:00 AM CAPITOL 102
02/20/97 (H) MINUTE(STA)
02/25/97 (H) STA AT 8:00 AM CAPITOL 102
BILL: HCR 8
SHORT TITLE: DEFERRED MAINTENANCE TASK FORCE
SPONSOR(S): REPRESENTATIVE(S) PHILLIPS, Foster
JRN-DATE JRN-PG ACTION
02/07/97 264 (H) READ THE FIRST TIME - REFERRAL(S)
02/07/97 264 (H) STATE AFFAIRS
02/10/97 297 (H) COSPONSOR(S): FOSTER
02/25/97 (H) STA AT 8:00 AM CAPITOL 102
BILL: HCR 7
SHORT TITLE: AMEND UNIFORM RULES:COM. MEETING NOTICE
SPONSOR(S): REPRESENTATIVE(S) GREEN
JRN-DATE JRN-PG ACTION
01/22/97 121 (H) READ THE FIRST TIME - REFERRAL(S)
01/22/97 121 (H) STATE AFFAIRS
02/25/97 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 67
SHORT TITLE: LONGEVITY BONUS SABB'TCL:PFD ELIGIBILITY
SPONSOR(S): REPRESENTATIVE(S) RYAN
JRN-DATE JRN-PG ACTION
01/15/97 66 (H) READ THE FIRST TIME - REFERRAL(S)
01/15/97 67 (H) STATE AFFAIRS, LABOR & COMMERCE, FIN
02/25/97 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 112
SHORT TITLE: AMEND DEFINITION OF "POLITICAL PARTY"
SPONSOR(S): REPRESENTATIVE(S) VEZEY
JRN-DATE JRN-PG ACTION
02/03/97 219 (H) READ THE FIRST TIME - REFERRAL(S)
02/03/97 220 (H) STATE AFFAIRS
02/25/97 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
PATRICK LOUNSBURY, Legislative Assistant
to Representative Jeannette James
State Capitol, Room 102
Juneau, Alaska 99801-1182
Telephone: (907) 465-3743
POSITION STATEMENT: Provided testimony on HB 81.
JAMES BALDWIN, Assistant Attorney General
Governmental Affairs Section
Civil Division
Department of Law
P.O. Box 110300
Juneau, Alaska 99811-0300
Telephone: (907) 465-3600
POSITION STATEMENT: Provided testimony on HB 81 and HB 112.
SPEAKER GAIL PHILLIPS
Alaska State Legislature
State Capitol, Room 208
Juneau, Alaska 99801-1182
Telephone: (907) 465-2689
POSITION STATEMENT: Sponsor of HCR 8.
REPRESENTATIVE JOE GREEN
Alaska State Legislature
State Capitol, Room 118
Juneau, Alaska 99801-1182
Telephone: (907) 465-4931
POSITION STATEMENT: Sponsor of HCR 7.
JEFFREY A. LOGAN, Legislative Assistant
to Representative Joe Green
State Capitol, Room 118
Juneau, Alaska 99801-1182
Telephone: (907) 465-4931
POSITION STATEMENT: Provided testimony on HCR 7.
REPRESENTATIVE JOE RYAN
Alaska State Legislature
State Capitol, Room 420
Juneau, Alaska 99801-1182
Telephone: (907) 465-3875
POSITION STATEMENT: Sponsor of HB 67.
DEBORAH VOGT, Deputy Commissioner
Office of the Commissioner
Department of Revenue
P.O. Box 110400
Juneau, Alaska 99811-0400
Telephone: (907) 465-2300
POSITION STATEMENT: Provided testimony on HB 67.
GAIL FENUMIAI, Election Coordinator
Central Office
Division of Elections
Office of the Lieutenant Governor
P.O. Box 110017
Juneau, Alaska 99811-0017
Telephone: (907) 465-5347
POSITION STATEMENT: Provided testimony on HB 112.
KEN JACOBUS, Legal Counsel
Republican Party of Alaska
425 "J" Street, Suite 920
Anchorage, Alaska 99501
Telephone: (907)
POSITION STATEMENT: Provided testimony on HB 112.
ACTION NARRATIVE
TAPE 97-19, SIDE A
Number 0001
The House State Affairs Standing Committee was called to order by
Chair Jeannette James at 8:05 a.m. Members present at the call to
order were Representatives James, Berkowitz, Dyson, Elton, Hodgins,
and Ivan. Member absent was Vezey.
HB 81 - PERMANENT FUND BOARD MEMBERS & STAFF
The first order of business to come before the House State Affairs
Standing Committee was HB 81, "An Act relating to the members of
the board and staff of the Alaska Permanent Fund Corporation."
CHAIR JEANNETTE JAMES called on Patrick Lounsbury, Legislative
Assistant to Representative Jeannette James, to present the bill.
Number 0069
PATRICK LOUNSBURY, Legislative Assistant to Representative
Jeannette James, stated he was here to tell the truth about HB 81
and the Alaska Permanent Fund. He explained on January 3, 1959
Alaska became the 49th state, and the state's constitution, which
was approved by a public vote three years prior to statehood,
became law. In 1969, the state received $900 million in bonuses
from the Prudhoe Bay oil lease sale. The total unrestricted
General Fund revenue was $112 million. In 1974, construction began
on the Trans Alaska Pipeline System. In 1976, the voters approved
by a margin of 75,588 to 38,518 for a constitutional amendment to
establish the Permanent Fund. In 1980, the legislature created the
Permanent Fund Corporation and approved a $900 million special
appropriation to the corpus of the fund. The legislature also
passed a bill that increased from 25 percent to 50 percent the
Permanent Fund share in certain mineral earnings to be deposited.
The legislature also approved the first version of a Permanent Fund
Dividend Program-later to be ruled unconstitutional by the United
States Supreme Court-while the first billionth barrel of oil rolled
through the pipeline. In 1981, the legislature made a second
appropriation to the Permanent Fund of $1.8 billionth. In 1982,
the first Permanent Fund Dividend Check was sent to the citizens in
the amount of $1,000. Also, at the request of the Board of
Trustees, inflation proofing was adopted. In 1983, the Permanent
Fund made its first investment in the stock market. In 1984, the
assets of the corporation reached $5 billionth. In 1986, the fifth
billionth barrel of oil rolled through the pipeline. In 1987, the
corporation celebrated its tenth birthday with an historical rate
of return of 11.5 percent. In 1989, the Permanent Fund grew to $10
billion and the legislature allowed for the non-domestic exchange
of securities. In 1991, the eighth billionth barrel of oil rolled
through the pipeline. In 1993, the market value of the Permanent
Fund was $15 billion. In 1995, the stock portfolio of the
Permanent Fund stretched to over $7 billion. In 1996, the
legislature approved another appropriation of over a billion
dollars to the fund. In 1997, the Permanent Fund breached over $20
billion.
MR. LOUNSBURY further stated that continuity and stability were
critical and vital to the fund's existence. House Bill 81 was an
act relating to the board and to the staff of the Permanent Fund
Corporation. It was designed to create continuity within the board
and allowed for any Governor to remove members for cause.
MR. LOUNSBURY explained Sec. 1 increased the board members from six
to seven. The Governor would be allowed to appoint one public
member at his discretion.
MR. LOUNSBURY explained Sec. 2 required that at least one member
would have competence and experience in investment portfolio
management.
MR. LOUNSBURY explained Sec. 3 was a technical change to conform
with the increase in the number of public members in order that two
members did not expire in the same year. Mr. Lounsbury stated,
"This provision would allow the Governor to still stack the deck in
the course of his term."
MR. LOUNSBURY explained Sec. 4 was the heart of the bill. It
allowed the Governor to remove trustees for cause. The term
"cause" was defined as incompetency, misfeasance or malfeasance.
Mr. Lounsbury referred the committee members to a letter dated,
January 30, 1997 from a former chairman of the board, John T.
Kelsey, and read, "The problems presented to new board members in
the matter of `learning the system' and becoming comfortable with
making important decisions of major proportions affect almost all
citizens of the State of Alaska. Further, making major decisions
without proper education on the operation of such a large fund
could be damaging to future earnings that might very well impact
budget consideration in the twenty-first century. Removing all
board members, or even a majority of them, and appointing new
members is unfair to those newly seated and could well adversely
affect the state."
MR. LOUNSBURY explained Sec. 5 was new. It required that the
Governor base his decision to appoint new members solely on the
best financial interest of the fund-otherwise it was an ethical
violation.
MR. LOUNSBURY explained Sec. 6 provided that the executive director
served at the pleasure of the board for a two year period.
MR. LOUNSBURY explained Sec. 7 required that each member of the
board should have a fiduciary responsibility to the fund.
MR. LOUNSBURY stated, in conclusion, that identical legislation
passed the Alaska State Legislature with bi-partisan support last
year. It passed the Senate with a vote of 16 to 4, and it passed
the House of Representative with a vote of 35 to 1. In addition,
the Board of Trustees urged the Governor not to veto the bill. Mr.
Lounsbury stated, "Madame Chair, if this Administration continues
to oppose this particular legislation, I would maintain that this
Administration is open and ready for business, as usual."
Number 0637
REPRESENTATIVE KIM ELTON commented he was confused about the term
"cause." He assumed that a trustee who missed two out of every
three meetings, for example, could be removed for cause. He asked
Mr. Lounsbury what were the standards applied towards cause?
MR. LOUNSBURY replied a past chairman of the board also mentioned
what Representative Elton described-missed meetings. The term
"cause" meant in HB 81 incompetency, intentional or unintentional
failure to perform ones duties.
Number 0720
REPRESENTATIVE ELTON stated he did not have a problem maintaining
the integrity of the board, if the trustees were doing their
expected duties. He wondered, however, if the Governor determined
the cause or if the chairman of the board determined the cause. He
assumed from the language in the bill that the Governor determined
the cause.
Number 0753
MR. LOUNSBURY replied, "Madame Chair, that's correct." The
Governor would determine the cause. The Hickel Administration and
the Knowles Administration wiped out the entire board except for
one person. He declared, "It's just not good business to wipe out
the board, put the burden on the new members, and maybe the one
other member to keep this machine rolling."
Number 0783
REPRESENTATIVE ELTON wondered if it would be a case of cause if the
board was wiped out entirely. He reiterated there was a loose
determination of cause, which was the only part of the bill that
bothered him.
Number 0819
CHAIR JAMES asked Representative Elton what was loose? Governor
Knowles' excuse for cause could have been that Governor Hickel
filled the board with political appointees, for example. House
Bill 81 would preclude either Hickel or the current Governor from
removing them all. The law specifically addressed cause as
intentional or unintentional failure to perform one's duties. In
addition, it would be up to the Governor to define the failure and
to pursue a legal challenge.
Number 0892
REPRESENTATIVE ELTON replied the final determination would be made
by a judge who was not involved with the system. This created a
situation where the best judgement of the trustees and the best
judgement of the Governor would be second guessed by the best
judgement of a judge.
Number 0987
CHAIR JAMES wondered if Representative Elton would choose to not
have the provision "for cause," therefore, creating the potential
for the two situations to repeat themselves again. She asked
Representative Elton which was the best way to protect the
Permanent Fund?
Number 1003
REPRESENTATIVE ELTON replied he would want the Governor to be
responsible for making the decision because he answered directly to
the people of the state of Alaska.
Number 1029
MR. LOUNSBURY stated he found that the board usually took action
unanimously. Last year, the board unanimously urged the Governor
not to veto the bill. He had also spoken to six other prior
trustees who all felt that this bill was in the best interest of
the state.
Number 1068
REPRESENTATIVE ETHAN BERKOWITZ explained the term "for cause" was
a legal bone of contention, therefore, there was a lot of legal
history and precedence attached to the term.
Number 1088
CHAIR JAMES stated there were other provisions in statute that
addressed the removal of the board members for cause as opposed to
serving at the pleasure of the Governor. The question was whether
or not it was a rational and prudent decision for it to be that
way.
Number 1115
REPRESENTATIVE BERKOWITZ asked Mr. Lounsbury to distinguish the
term "best interest" from the term "financial best interest."
Number 1138
MR. LOUNSBURY replied an interesting example was brought up during
the tobacco tax hearing in the House State Affairs Standing
Committee, whereby, it was stated that the Permanent Fund had about
$65 million worth of Phillip Morris stock. He said, "We can all
have our thoughts on how and where and why to invest our money--
turns out those are good stocks and that would be in the best
financial interest of the fund."
Number 1184
REPRESENTATIVE BERKOWITZ asked Mr. Lounsbury to distinguish the
term "financial best interest" from the term "fiduciary duty."
Number 1191
MR. LOUNSBURY replied the terms "fiduciary duty" and "financial
best interest" went hand in hand. It was like a realtor's
fiduciary responsibility to his clients and to the lending
institutions. The trustees, therefore, had a fiduciary
responsibility to the Permanent Fund, to the corporation and in
turn to the state of Alaska.
Number 1219
REPRESENTATIVE BERKOWITZ commented that the evolution of the term
"fiduciary duty" was related to investment in South Africa during
the 70's and 80's where the concept got away from a strict return
on investment and began to incorporate broader social concerns. He
asked Mr. Lounsbury if he would incorporate any of those
developments into this definition?
Number 1239
MR. LOUNSBURY replied, "Madame Chair, not being a member of the
Board of Trustees, I would have a tough time answering that."
Number 1267
JAMES BALDWIN, Assistant Attorney General, Governmental Affairs,
Section, Civil Division, Department of Law, explained that the
Governor vetoed an identical bill last year. Therefore, he wanted
to review some of the points raised last year. "I thought I had
you going with me on some of them, but the bill moved out of
committee and received a very favorable vote on the House," he
said. The most important point was the removal for "cause." "If
you want to do this, it may require a constitutional amendment and
the reason that I arrive at that conclusion is by looking at
Article III, Sec. 26 which talks about the appointment of boards
and commissions." It was the only place that provided the ability
of the legislature to remove for cause. He explained that the
Permanent Fund Board was created by statute to administer a
constitutionally established fund. Thus, there was a strong
argument to be made that the only way to provide removal for cause
would be through a constitutional amendment. The power of
appointment was an executive power unless given to the legislature.
He cited the confirmation process as an example. The Permanent
Fund Board was not a quasi-regulatory or judicial body, therefore,
there was no provision for confirmation in the constitution or for
removal for cause. He cited the court case of Bradner v. Hammond
where, the Alaska Supreme Court ruled that unless there was a
specific provision in the constitution allowing the legislature to
encroach upon the power of appointment, it would not be authorized;
it was not within the state's constitutional framework. "It's a
hard thing to hear about the limitations on legislative power, but
I think I need to convey that to you today."
Number 1464
MR. BALDWIN further explained that the Administration had problems
removing a board member for cause. When a board member received a
salary or a property right, it was very, very difficult to remove
him. "It can be so difficult that it is nearly impossible," he
declared. It required a trial like proceeding, usually in front of
an independent fact finder. It was also a protracted and an
expensive process. It was not as simple as writing a letter as HB
81 indicated. In addition, the board members received a per diem
payment of around $300. He was not conceding here on the record,
however, that the per diem was a property right.
Number 1566
MR. BALDWIN further stated that the Governor answered to all of the
people for his appointments because he stood for election. "He's
the one that has to pay the price if he makes a bad decision."
That was how the system was set up and he did not want the
Governor's executive powers further eroded by the bill.
Number 1601
MR. BALDWIN further stated that the standards for cause were vague.
The statutes under the Board of Game, the Board of Fish and other
regulatory boards were fairly specific in regards to the grounds
for cause. Whereas, HB 81 was very broad. He referred the
committee members to page 2, lines 17-20, and read, "(2)
misfeasance or malfeasance in office, which included the failure of
the trustee to exercise prudent judgement in the affairs of the
corporation or intentionally taking action for reasons other than
the financial best interest of the corporation."
MR. BALDWIN further stated that the term "financial best interest"
had yet to be defined. And, it probably would not be known until
it went through a few court decisions. "I don't know if that's
going to service the best interest of the fund or not. Lawyers and
judges attempting to define this when perhaps that should be done
in the legislature."
Number 1650
MR. BALDWIN referred to Sec. 6 and explained it was designed to
solve a problem when there was difficulty removing a high level
person due to a philosophical difference during the change from one
Administration to the next.
MR. BALDWIN further stated that the employees of the board were
exempt. Therefore, it was difficult to remove them if not done
correctly. "That's just a fact of life in employment law. It's a
rapidly changing area of our law, and one where the courts are
inclined to recognize the rights the people have in their job even
though they may be in the exempt service." The attempt in HB 81
was to allow for the removal "at pleasure," which was the
Administration's understanding of what it meant to be an exempt
employee. He also said, "I think the intent here is to say it
doesn't matter what. You can be out the door at 4:00 and I'm here
to say that it just isn't that simple. It isn't going to do away
with litigation and courts protecting the rights of people."
Number 1729
MR. BALDWIN further addressed the issue of investment
responsibility. He explained there were a lot of people at the
corporation who did things in connection with investment. There
were three or four who directly make investment policy and a lot of
other people who implemented the policies. He wondered if the bill
was discussing those who made policies or those who implemented
them. It was broad enough to cover both. He reiterated the intent
was unclear. He did not have a solution to the problem at this
point, however.
Number 1771
MR. BALDWIN further addressed the philosophical problem of
fiduciary responsibility to the fund. He referred the committee
members to page 3, lines 12-14, and read, "Each board member has a
fiduciary duty to the fund, and each member shall perform official
actions solely in accordance with that duty." He stated it sounded
good and mirrored the language in Title 37 and Title 14 regarding
the responsibilities of the pension investment board. It was also
very similar to the responsibilities of the employees in the
Department of Revenue in regard to the General Fund. However,
there were a few concepts being mixed together. Fiduciary
responsibility not only included the fund, but the beneficiaries as
well. And, in this case the board members would be responsible to
the state while the bill indicated that the board members were
responsible to the fund. "It seems a little confusing. Who is the
beneficiary here. Who do you owe your duty to. Is it just to
continue the Permanent Fund, or is your fiduciary responsibility
owed to the state." He reiterated, "Maybe, what you want to
accomplish here would best be accomplished in a constitutional
amendment that would tackle some of those issues as well. If you
want to establish the Permanent Fund as a trust, which seems to be
the underlying theme here, by bringing in all these references to
fiduciary obligations, then it seems to me that would be a better
approach in the form of a constitutional amendment with a
constitutionally established board with a constitutionally
established for cause removal or confirmation or for whatever the
legislature wants."
Number 1915
CHAIR JAMES stated that she was willing to work with the
Administration to solve some of the concerns raised by Mr. Baldwin
today. She did not want the Administration to follow and argue the
bill again. She would look at the constitutional issue further.
She did not recall that issue being discussed last year.
CHAIR JAMES further stated that the Permanent Fund was the biggest
and most important asset of the state. Therefore, continuity was
needed for the board and removal for no particular reason should
not be allowed. She also believed that at least one person on the
board should have extensive knowledge regarding investment
portfolio management. She also believed it was important to run
the board in a smooth and efficient way. "Pulling people out for
various reason can be harmful." She also believed, however, that
the process to remove someone could also be destructive. She asked
Mr. Baldwin what his real intent was on the bill?
Number 2055
MR. BALDWIN replied the Administration did not support the bill, in
its current form. The Administration was willing to work on the
fringe provisions and was willing to try to find common ground
surrounding the for cause issue. In addition, the Governor stated
in his veto message that the constitution presented a major problem
which was the main reason for the veto.
Number 2113
CHAIR JAMES commented she did not understand why "for cause" was
such a problem. She asked Mr. Baldwin if it was a personal thing?
Did he not want to remove people and replace them? Or, Was it a
constitutional problem? "We certainly can put forth a resolution
to make a constitutional amendment. That's not out of the
question, if that's what's required."
Number 2145
MR. BALDWIN replied there were two levels of discomfort surrounding
the issue of for cause. The first level was the constitutional
concern. And, the second level was the near impossibility of
removing someone from a board. He reiterated, "It becomes a quasi-
judicial proceeding. It becomes one in which the individual is
entitled to due process of law, a public hearing, a record and it's
long and protracted." It would appear that if a board member was
found for malfeasance, he or she should be removed immediately.
TAPE 97-19, SIDE B
Number 0001
CHAIR JAMES replied she found it hard to believe that the state
would have such a terrible person ever serving on the board in the
first place. This was a very prestigious board and she did not
expect the same types of problems as other boards faced, such as,
the Board of Fisheries. "This is not so political as that. In
fact, this ought not to be as political as that. This ought not be
political at all."
Number 0042
MR. BALDWIN agreed that the people currently serving on the Board
of Trustees and those that had served in the past were of the
highest caliber. He was concerned about the future, however.
Number 0105
REPRESENTATIVE BERKOWITZ stated the Governor should be flattered of
the confidence shown for his appointments today. It appeared "for
cause" was at one end of the spectrum of dismissal and "at will"
was at the other end of the spectrum. He asked Mr. Baldwin what
was in between?
Number 0120
MR. BALDWIN replied what existed now was in between. The Governor
could remove at will. The removal was done publicly and in
writing. It was the middle ground reached when the corporation was
created.
Number 0140
CHAIR JAMES commented that the Governor did not have to say "why,"
however.
Number 0145
MR. BALDWIN replied, according to existing law, the Governor had to
state the reason for the removal in writing.
MR. BALDWIN also explained that the Governor knew his appointments
would be protected by the removal of the for cause provision, but
it did not affect his view about the bill.
Number 0168
REPRESENTATIVE BERKOWITZ asked Mr. Baldwin how the removal of the
board members by Governors Hickel and Knowles affected the return
on the investments?
Number 0179
MR. BALDWIN replied, "I don't think it affected it at all. The
Permanent Fund operated under the theory that the best people were
hired. The board ultimately made the policy, and the policies were
implemented by advisors, employees, and account managers. "I think
you'd see the permanent fund return going steady up."
Number 0211
REPRESENTATIVE BERKOWITZ asked Mr. Baldwin, if there was a conflict
of investment strategy between a board and an incoming Governor,
for example, would that conflict rise to a level of cause based on
financial best interest?
Number 0223
MR. BALDWIN replied, "I don't know." The statute did not say; it
was too vague.
Number 0237
REPRESENTATIVE ELTON said that Mr. Baldwin commented the additional
language in Sec. 6 clouded the issue of exempt service, and he also
questioned the language added in Sec. 7. He wondered if Mr.
Baldwin suggested that Sec. 6 and Sec. 7 were not necessary. He
saw the sections as fringe elements.
Number 0292
MR. BALDWIN replied it was a policy decision to interpret the
service "at pleasure" concept. It was at odds with and was
redundant to a two year duration. The bottom line was that one
served at the pleasure of the board, and left when the board said
so. The bill implied a covenant that went along with employment
and good faith dealings. Therefore, there would be legal problems.
Number 0394
CHAIR JAMES stated that serving at the pleasure of a board was a
deterrent to hiring the best person. Whereas, a two year contract
would allow for the hiring of a good person. Furthermore, the
language in the bill said that the board "may" enter into a two
year contract.
CHAIR JAMES further stated now that the fund was at $20 billion, it
should be run more like a business than a political entity. She
declared, "That's my whole problem with this issue."
Number 0499
MR. LOUNSBURY stated that the fringe elements were in line with the
board's philosophy-to remain objective to the safety of its
principle and to maximize the total return on its investment. The
board also believed that the corporation should always act to
assure the level of investment risk was prudent and that it did not
jeopardize the primary objective which related to the fiduciary
responsibilities. He further stated any Governor that decimated
a board was the person acting irresponsibly. He also believed that
the state constitution wanted a strong Governor. The conversation
today was an erosion of power. That was the bottom line. The bill
was to prevent any Governor from jeopardizing the Permanent Fund.
Number 0570
REPRESENTATIVE BERKOWITZ stated that something more sweeping was
needed to be done to protect the interest of the Permanent Fund by
making sure that every board members was truly the best available
candidate. "Perhaps we should contemplate an entirely different
scheme for selecting them."
Number 0597
CHAIR JAMES asked Mr. Baldwin if he would get back to her in a few
days with some suggestions. She reiterated she would look further
at the constitutional issue discussed today. There was public
support for continuity on the board. So, let's work together. "I
don't want to face another veto," she stated.
Number 0734
REPRESENTATIVE ELTON suggested taking a careful look at Sec. 6 and
Sec. 7. He was concerned about the delineation of investment
responsibilities addressed in Sec. 6. He was also concerned that
adding a layer that had not been tried before would complicate the
exempt service factor. In addition, the new language in Sec. 7
also added confusion. He reiterated that Chair James look further
at Sec. 6 and Sec. 7 because they created unnecessary baggage and
questions.
Number 0801
CHAIR JAMES replied that Sec. 6 was extremely important to secure
the type of person that the board would want to hire.
Number 0819
REPRESENTATIVE ELTON suggested taking out the first part of the
sentence only.
CHAIR JAMES replied she would consider his suggestion.
Number 0829
MR. BALDWIN explained the board was in town now. He would take
these issues back to the board.
Number 0838
CHAIR JAMES stated she would yield to their concerns, as well, and
take their suggestions.
CHAIR JAMES announced for the record that Representatives Berkowitz
and Elton had to leave due to another meeting.
HCR 8 - DEFERRED MAINTENANCE TASK FORCE
The next order of business to come before the House State Affairs
Standing Committee was HCR 8, Creating the Deferred Maintenance
Task Force.
CHAIR JAMES called on Speaker Gail Phillips, sponsor of the bill,
to present the resolution.
Number 907
SPEAKER GAIL PHILLIPS, Alaska State Legislature, stated that
deferred maintenance was the result of years of unmet maintenance
of Alaska's public facilities. She was referring not just to
buildings, or to the university campus; but to roads, harbors, and
airports-everything that the state considered an asset. Meeting
the maintenance needs was not about building a skywalk from the
court building to the capitol, she cited. It was about a capitol
building that leaked every spring causing severe damage to the
building. It was about docks that were rotting and falling into
harbors. It was about an infrastructure that needed mending. It
was those types of needs that needed to be taken care of all across
the state. The cost estimates placed Alaska's unmet maintenance
needs at well over $1 billion. "I happen to personally think it'll
be more closely to $2 billion."
SPEAKER PHILLIPS further stated that the resolution would establish
a legislative task force to make recommendations to the Governor
and to the legislature on how to address the unmet maintenance
costs. The task force would be made up of five members from the
House and five members from the Senate. The Speaker of the House
and the President of the Senate would also serve as non-voting
members. The task force would be specifically charged with the
following:
1) To review and evaluate existing reports and publications about
deferred maintenance recommendations previously made;
SPEAKER PHILLIPS stated that over the last few years several of the
Administrations had concentrated on this issue, therefore, a lot of
work had already been done, and all of the reported needed to be
compiled. She cited work had already been done for specific areas,
such as, the university.
SPEAKER PHILLIPS continued to list the duties that the task force
would be charged with.
2) To identify and evaluate all current and deferred maintenance
needs;
3) To solicit public comment on the topic from all over the state;
4) To submit a report of their findings and recommendations to
the Governor and to the legislature by the convening of next
session; and,
5) To forward recommendations about the funding.
SPEAKER PHILLIPS explained the recommendations about the funding
would be the second part of the task force.
SPEAKER PHILLIPS continued by stating that the task force would
begin work as soon as the members were appointed. In conclusion,
she announced the Governor agreed with the concept and pledged his
support from his office and from all of his commissioners. She
also announced that she had received written and spoken support
from the Truckers Association, the Associated General Contractors
of Alaska, and the Laborers International Union of North America,
AFL-CIO illustrating the wide-spread support from around the state.
Number 1090
CHAIR JAMES stated she admired the courage of Speaker Phillips for
bringing this issue forward. "It is a huge, huge task; and it's
like climbing a mountain with no shoes."
Number 1098
REPRESENTATIVE FRED DYSON asked Speaker Phillips if most of the
work would be done during the interim?
SPEAKER PHILLIPS replied most of the work would be done during the
interim. In addition, she also explained a zero fiscal note was
attached. The work would be done by the appointed legislators and
their staff. And, there would be public teleconference hearings
across the state.
Number 1124
REPRESENTATIVE DYSON asked Speaker Phillips if the travel expenses
incurred and the per-diem would come out of the legislative budget?
SPEAKER PHILLIPS replied, "Right."
Number 1148
REPRESENTATIVE IVAN IVAN wondered if the report would need to be
done by the convening of the second session of the Twentieth Alaska
State Legislature. He asked Speaker Phillips if he was correct?
Number 1160
SPEAKER PHILLIPS replied, "Right. Right. With recommendations not
only on what the needs are but how we're going to pay for them."
Number 1175
CHAIR JAMES called for a motion to move the bill out of the
committee.
Number 1178
REPRESENTATIVE HODGINS moved that HCR 8 move from the committee
with the attached fiscal note(s) and individual recommendations.
Number 1200
REPRESENTATIVE DYSON stated that he had spent most of his life
working as an engineer so he understood the importance of the
resolution. He was apprehensive that the Chair would appoint him
to the task force. "And, if it was going to happen during the
interim, I was going to object to the passing of the bill out of
self interest."
REPRESENTATIVE DYSON further stated that the resolution was long
overdue. "We in the maintenance business say, `pay me now or pay
me later' and, in fact, its do the work now or do an awful lot more
work at less convenient times in the future." He commended the
efforts of Speaker Phillips.
Number 1239
CHAIR JAMES stated that when she dealt with this issue no one
wanted to talk about the money part. So, she suggested bonding as
a solution. However, the solution was met with adversity for fear
of going into debt. "My point is we are already in debt, if we do
a bonding package or some other package, that allows us to pay our
debt."
CHAIR JAMES stated there was no objection to the motion. House
Concurrent Resolution 8 was so moved from the House State Affairs
Standing Committee.
HCR 7 - AMEND UNIFORM RULES:COM. MEETING NOTICE
The next order of business to come before the House State Affairs
Standing Committee was HCR 7, Proposing an amendment to the Uniform
Rules of the Alaska State Legislature relating to notice of
committee meetings held during the first week of a first regular
session.
CHAIR JAMES called on Representative Joe Green, sponsor of HCR 7,
to present the resolution.
Number 1334
REPRESENTATIVE JOE GREEN, Alaska State Legislature, explained that
Mr. Jeffrey A. Logan would present the resolution today.
Number 1349
JEFFREY A. LOGAN, Legislative Assistant to Representative Joe
Green, explained the need for HCR 7 was to allow for committee
meetings to be scheduled the first week of session. The resolution
was the result of trying to schedule a meeting during the first
week of session which was denied by the Office of the Chief Clerk
in accordance with the Uniform Rules. "It is not our intent in any
way to criticize or condemn the Clerk's office because they do a
wonderful job and they have gone beyond and above the call of duty
to help us on a number of occasions. It's just that that's where
the action took place." As a result, the sponsor went to Tamara
Cook, Director, Legislative Legal and Research Services,
Legislative Affairs Agency, to discuss the matter. She stated that
the concern had been a problem for a number of years and suggested
that he take care of it.
MR. LOGAN explained the issue further. On the preceding Thursday,
a notice had to be given to the Clerk's office. But, the chair
would not necessarily be the same when the hearing took place
because the Committee on Committees report was not adopted until
the first day of session. Therefore, the chair on the preceding
Thursday was not the chair on the first legislative day, and the
chair on the first legislative day had already missed the preceding
Thursday deadline. Thus, the resolution asked for a 24 hours
notice of a meeting during the first week of session. He noted
that the five day notice would still be maintained.
Number 1601
CHAIR JAMES called for a motion to move the bill out of the
committee.
Number 1613
REPRESENTATIVE IVAN moved that HCR 7 move from the committee with
attached fiscal note(s) and individual recommendations. There was
no objection, HCR 7 was so moved from the House State Affairs
Standing Committee.
HB 67 - LONGEVITY BONUS SABB'TCL:PFD ELIGIBILITY
The next order of business to come before the House State Affairs
Standing Committee was HB 67, "An Act relating, for purposes of
eligibility for a permanent fund dividend, to an absence from the
state while on an unpaid sabbatical under the longevity bonus
program; and providing for an effective date."
CHAIR JAMES called on Representative Joe Ryan, sponsor of HB 67, to
present the bill.
Number 1700
REPRESENTATIVE JOE RYAN, Alaska State Legislature, explained there
was a companion bill to HB 67 in the Senate. Last year, a bill was
passed to allow for the elderly to take a sabbatical, once every
five years for up to one year, for medical care. However, as a
result, they lost their eligibility for their Permanent Fund
dividend and had to reestablish their eligibility upon return.
Therefore, HB 67 added another provision to the statutes to allow
for a person to take a sabbatical from the state for no more than
once every five years without loosing eligibility for the dividend.
It was tailored specifically for those that were on a justified
sabbatical. "It was one of those things where a society that's not
mean spirited makes allowances for youth and for the elderly." The
state also benefitted by saving money because they did not receive
their longevity bonus while on a sabbatical.
Number 1836
CHAIR JAMES asked Representative Ryan to define the term
"sabbatical?"
Number 1846
REPRESENTATIVE RYAN replied it was defined in AS. 47.45.035.
Number 1876
CHAIR JAMES commented that this provision opened it up so that
every man, woman and child could take a sabbatical every five years
and not lose their residency for their permanent fund dividend.
She asked Representative Ryan if that was his intent?
Number 1889
REPRESENTATIVE RYAN replied a sabbatical was for senior citizens.
"It's not for everybody and his brother. It's for the elderly."
Number 1947
CHAIR JAMES stated that the text in the bill did not indicate it
was an unpaid sabbatical leave under the longevity program.
Number 1966
REPRESENTATIVE RYAN replied the bill allowed for a new reason to be
eligible to leave the state without loosing one's permanent fund
dividend.
Number 1980
CHAIR JAMES asked Representative Ryan wasn't it true that anybody
could have an unpaid sabbatical?
REPRESENTATIVE RYAN replied that one had to be a longevity
bonus....
CHAIR JAMES replied that was not indicated in the text of the bill.
Number 1990
REPRESENTATIVE RYAN explained he was referencing the bill that was
passed last year that allowed for a sabbatical.
Number 2012
CHAIR JAMES replied the problem with the bill was that it would
benefit a select group of people. Other people took sabbaticals,
not just senior citizens. Therefore, she wondered how this
provision would not be discriminatory.
Number 2090
REPRESENTATIVE RYAN replied it was a policy decision. "That's why
we're here. We set up the program and pass the laws for
eligibility and so forth. And, it's up to us to feel, if we do,
that this is a good thing to do; to allow these elderly people to
take this once-every-five-year sabbatical and not loose their
permanent fund and not have to come back and reestablish
eligibility, or we decide that, no, we don't want to do that." The
bill proposed that the state allowed for the sabbatical.
Number 2142
CHAIR JAMES stated that she received the longevity bonus.
Therefore, she would be affected by the bill. She declared a
conflict of interest.
Number 2163
REPRESENTATIVE RYAN replied, "We won't hold that against you."
CHAIR JAMES replied she did not like the bill anyway so it was not
a problem. She reiterated the bill was discriminatory. She wanted
to review it further to see if there was a constitutional problem.
Number 2198
REPRESENTATIVE IVAN stated he was also concerned about the intent
of the bill.
TAPE 97-20, SIDE A
Number 0000
CHAIR JAMES stated the bill was honorable, and she liked to do
things for the senior citizens. However, she would like to get a
legal opinion from Legislative Legal Services to see if the bill
passed constitutional muster.
Number 0091
DEBORAH VOGT, Deputy Commissioner, Office of the Commissioner,
Department of Revenue, explained that the bill established an
additional allowable absence for the Permanent Fund dividend
program. The longevity bonus program allowed for an unpaid
sabbatical, while HB 67 made the same sabbatical an allowable
absence for the Permanent Fund program. The person would continue
to be paid the dividend even though he or she would be out of the
state for an entire year. That was what the Department of Revenue
objected to; it did not establish parity between the programs.
MS. VOGT further explained that the issue could be fixed to
parallel the longevity bonus program in regulations.
MS. VOGT further stated that the department shared the same
concerns that Chair James expressed of the bill benefitting a
small, select group of people not shared by the larger population.
She did not know if that presented a legal problem, however. There
were other allowable absences narrow in scope, such as, the Peace
Corps. She reiterated HB 67 presented a question of equity.
The record reflected the arrival of Representative Al Vezey at 9:28
a.m.
Number 0354
CHAIR JAMES asked Ms. Vogt if the allowable absence of "(F) other
reasons which the commissioner may establish for regulation;" was
where the department would address the issue in regulations?
Number 0380
MS. VOGT replied, "Yes." The department would not make it an
allowable absence, however. It would make it an eligibility
requirement for those who came back.
Number 0394
CHAIR JAMES wondered if the seniors would get paid their permanent
fund while they were gone.
MS. VOGT replied, "That's exactly right."
CHAIR JAMES said she still did not understand the term
"sabbatical."
Number 0453
MS. VOGT replied for the purposes of the longevity bonus program it
was a long vacation. A sabbatical meant, during one's working
years, a paid absence from work. According to AS 47.45.035 a
sabbatical was limited to once every five years. Therefore, one
could just take a vacation.
Number 0523
CHAIR JAMES announced she wanted to look at this issue further.
The thought behind the bill made a lot of sense. The permanent
fund program was for residents of the state; for people who were
here now. The longevity bonus program was originally for people
who were here before statehood. It made sense to give the people
on the longevity bonus a chance to leave the state for one year and
upon return be able to get their longevity bonuses. However,
allowing one year just for senior citizens created a problem with
residency. She reiterated she would look at the issue further.
Number 0656
MS. VOGT stated that once a person under the longevity bonus lost
his eligibility he could never get it back.
Number 0668
CHAIR JAMES replied, "That's the problem. That's why we had to do
that for the longevity bonus."
MS. VOGT further stated that under the permanent fund program a
person could be gone for a year, return, then reestablish one's
eligibility and get paid for future years.
CHAIR JAMES stated that a senior citizen could possibly loose two
years, depending on the timing, of the permanent fund.
CHAIR JAMES announced she would hold the bill over to Thursday,
February 27, 1997.
HB 112 - AMEND DEFINITION OF "POLITICAL PARTY"
The next order of business to come before the House State Affairs
Standing Committee was HB 112, "An Act amending the definition of
`political party' except as the definition of the term applies to
the regulation of contributions and expenditures in state and
municipal election campaigns, an amendment that also has the effect
of changing the definition of `political organization' as applied
to the regulation of games of chance and contests of skill."
CHAIR JAMES called on Representative Al Vezey, sponsor of HB 112,
to present the bill.
Number 0755
REPRESENTATIVE AL VEZEY explained that HB 112 was an endeavor to
change the nature of the general election for statewide offices.
Currently, the system included a primary election and then "I would
characterize this thing-a lottery-that followed that." There had
been candidates elected to statewide offices, most notably to
governor, that had received as little as 36 percent of the votes.
It had been a long time since anyone received more than 42 percent
of the votes. One of the reasons was because current election law
encouraged groups of people who wanted to call themselves a
political party to run a candidate for governor. "That is our
measurement of how we establish a political party for most of
Alaska Statutes." House Bill 112 would change that by creating
another option to establish a political party. It did not take
away the right of people to get together and run a candidate for
governor and qualify as a political party, but rather the bill
provided an alternative for groups to be recognized as a party. He
explained that the figure 10,000 was equivalent to approximately 3
percent of the votes, in the last general election. In addition,
the party did not have to run a candidate for governor to retain
its qualification, and it was hopeful that if the bill became law
as many as three parties would no longer feel a need to throw a
candidate into the general election.
Number 0934
REPRESENTATIVE IVAN asked Representative Vezey if this would allow
the undeclared or undecided voters to form a political party?
Number 0951
REPRESENTATIVE VEZEY replied, "Not declaring a party affiliation
under this bill would not classify those people as a member of a
political party." However, if they wished to create a party called
"undeclared" or "independent" and they got 10,000 registered voters
then it would become a political party. There would still be on
the voter registration card a category, by default, called
"undeclared."
Number 1041
JAMES BALDWIN, Assistant Attorney General, Governmental Affairs
Section, Civil Division, Department of Law, explained that the
definition of a "political party" involved substantial litigation
in the past, particularly over the 3 percent requirement. He cited
the Vogler case where the threshold was reduced from 10 percent to
3 percent. It was possible to add another threshold, but he
believed the legislature should create a record to justify the
10,000 registered voter requirement. "It just isn't something
that, I think, that can be done arbitrarily and successfully
defended." There needed to be a compelling interest on the part of
the state to impose such a limitation, and it needed to be the
least restrictive. He did not know how the sponsor arrived at the
10,000 figure, but until that was put into a record, there wasn't
much to defend.
MR. BALDWIN further stated there was the issue of political
affiliation disclosure. He cited a federal case, NAACP v. Button
where it was found that there was a strong First Amendment right to
keep one's political affiliation private. In addition, the largest
percentage of the registered voters in Alaska were non-partisan or
no-party. He assumed that was because Alaskans did not like to
disclose their party affiliation publicly. Therefore, one
unintended result would be to require a disclosure of one's party
affiliation in order to qualify for the second prong of the
proposed definition.
MR. BALDWIN further stated, in its current form, the department did
not support the bill.
Number 1250
CHAIR JAMES asked Mr. Baldwin if he had any suggestions? If the
bill said "registered voters or 3 percent of the last election,"
for example, what would that do? It still made a person disclose
his or her party affiliation. What if a person did not have to do
disclose it every time, for example?
Number 1280
MR. BALDWIN replied there was a problem tracking political
affiliation. Voter registrations were open and available to the
public. They were a valuable tool to the political parties and to
campaigns. "One option that could be considered would be some
limited way of making this information confidential perhaps to the
administration that's making that determination as to whether or
not they met the basic threshold." Consequently, the political
parties would not have access to the information that they valued.
Number 1358
GAIL FENUMIAI, Election Coordinator, Central Office, Division of
Elections, Office of the Lieutenant Governor, stated the division
believed that this new definition of a political party would be an
additional expense and be administratively burdensome. Presently,
the division tracked party affiliation of only the recognized
parties. She cited: Democrat, Republican, Alaskan Independence,
Green, Undeclared, Non-Partisan, and Other. The voter registration
system was not set up to handle a wide variety of other political
party affiliations that somebody could put down if they checked the
"other" category. At present, they were all lumped together into
this category. She reiterated this bill would cause some problems
for the division.
Number 1429
REPRESENTATIVE HODGINS asked Ms. Fenumiai if she saw any advantages
of the bill if the logistics were in place?
Number 1438
MS. FENUMIAI replied she could not see any other advantage other
than creating another avenue for a group of people to become a
political party.
Number 1458
KEN JACOBUS, Legal Counsel, Republican Party of Alaska, was the
first person to testify via teleconference in Anchorage. He
supported HB 112. He called it a good idea and it should be
passed. A small political party should not have to undertake the
expensive gubernatorial campaign each election to retain its
status. He agreed with Mr. James Baldwin that a legislative record
was needed.
MR. JACOBUS further stated that the parties would oppose any
confidentiality of the records. He referred the committee members
to a memorandum dated January 29, 1997, from Mr. Jack chenoweth,
Legislative Counsel, and stated consideration should be given to
making a uniform definition of a "political party" throughout the
Alaska Statutes. There were two definitions now, and if the bill
was enacted there would be three. Moreover, the Republican Party
of Alaska had a problem with the issue of defining a political
party for the purpose of campaign financing. The legislature
should consider input from all of the political parties to ensure
that the parties did not have any problems.
Number 1571
CHAIR JAMES asked Mr. Jacobus if he would comment on the issue of
the constitutionality of the bill addressed earlier by Mr. James
Baldwin?
Number 1580
MR. JACOBUS replied the NAACP v. Button case dealt with disclosure
of the membership records of the NAACP which was a different issue.
"I don't think you're really going to run into a problem because a
political party will have two ways now in order to exercise its
right to political affiliation." He cited the 3 percent route and
the 10,000 route. The 10,000 route was a free choice because
registered voters needed to be obtained. "I don't see that it's a
big problem, myself."
Number 1648
CHAIR JAMES called for a motion to move the bill out of the
committee.
Number 1650
REPRESENTATIVE DYSON moved that HB 112 move from the committee with
the attached fiscal note(s) and individual recommendations. There
was no objection, HB 112 was so moved from the House State Affairs
Standing Committee.
ADJOURNMENT
Number 1670
CHAIR JAMES adjourned the House State Affairs Standing Committee
meeting at 9:53 a.m.
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