01/29/1998 08:05 AM House STA
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE
January 29, 1998
8:05 a.m.
MEMBERS PRESENT
Representative Jeannette James, Chair
Representative Ivan Ivan, Vice Chairman
Representative Ethan Berkowitz
Representative Fred Dyson
Representative Kim Elton
Representative Mark Hodgins
Representative Al Vezey
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION 5
"Proposing an amendment to the Constitution of the State of Alaska
relating to freedom of conscience."
- MOVED HJR 5 OUT OF COMMITTEE
* HOUSE JOINT RESOLUTION 4
"Proposing amendments to the Constitution of the State of Alaska
relating to terms of legislators."
- MOVED HJR 4 OUT OF COMMITTEE
HOUSE BILL 304
"An Act relating to the location of the convening of the
legislature in regular session; repealing provisions relating to
student guests of the legislature; and providing for an effective
date."
- MOVED HB 304 OUT OF COMMITTEE
* HOUSE JOINT RESOLUTION NO. 50
"Proposing amendments to the Constitution of the State of Alaska
relating to a public corporation established to manage the
permanent fund."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HJR 5
SHORT TITLE: CONSTIT AMNDMNT: FREEDOM OF CONSCIENCE
SPONSOR(S): REPRESENTATIVES(S) MARTIN
Jrn-Date Jrn-Page Action
01/13/97 22 (H) PREFILE RELEASED 1/3/97
01/13/97 22 (H) READ THE FIRST TIME - REFERRAL(S)
01/13/97 23 (H) STATE AFFAIRS, JUDICIARY, FINANCE
02/25/97 (H) STA AT 8:00 AM CAPITOL 102
02/25/97 (H) MINUTE(STA)
02/27/97 (H) STA AT 8:00 AM CAPITOL 102
02/27/97 (H) MINUTE(STA)
01/20/98 (H) STA AT 8:00 AM CAPITOL 102
01/20/98 (H) MINUTE(STA)
01/27/98 (H) STA AT 8:00 AM CAPITOL 102
01/29/98 (H) STA AT 8:00 AM CAPITOL 102
BILL: HJR 4
SHORT TITLE: LIMITING TERMS OF STATE LEGISLATORS
SPONSOR(S): REPRESENTATIVES(S) THERRIAULT, ROKEBERG
Jrn-Date Jrn-Page Action
01/13/97 22 (H) PREFILE RELEASED 1/3/97
01/13/97 22 (H) READ THE FIRST TIME - REFERRAL(S)
01/13/97 22 (H) STATE AFFAIRS, JUDICIARY, FINANCE
01/29/98 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 304 MOVE LEGISLATURE TO ANCHORAGE
SPONSOR(S): REPRESENTATIVES(S) GREEN, ROKEBERG, Ryan, Cowdery
Jrn-Date Jrn-Page Action
01/12/98 2024 (H) PREFILE RELEASED 1/2/98
01/12/98 2024 (H) READ THE FIRST TIME - REFERRAL(S)
01/12/98 2024 (H) STA, L&C, FINANCE
01/15/98 2056 (H) COSPONSOR(S): RYAN
01/27/98 (H) STA AT 8:00 AM CAPITOL 102
01/27/98 (H) MINUTE(STA)
01/28/98 2167 (H) COSPONSOR(S): COWDERY
01/29/98 (H) STA AT 8:00 AM CAPITOL 102
BILL: HJR 50
SHORT TITLE: PERMANENT FUND PUBLIC CORPORATION
SPONSOR(S): REPRESENTATIVES(S) JAMES, Vezey
Jrn-Date Jrn-Page Action
01/21/98 2099 (H) READ THE FIRST TIME - REFERRAL(S)
01/21/98 2099 (H) STA, JUDICIARY, FINANCE
01/29/98 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
REPRESENTATIVE GENE THERRIAULT
Alaska State Legislature
Capitol Building, Room 511
Juneau, Alaska 99801
Telephone: (907) 465-4797
POSITION STATEMENT: Testified as sponsor of HJR 4.
REPRESENTATIVE NORMAN ROKEBERG
Alaska State Legislature
Capitol Building, Room 24
Juneau, Alaska 99801
Telephone: (907) 465-4968
POSITION STATEMENT: Testified as sponsor of HJR 4.
REPRESENTATIVE JOE GREEN
Alaska State Legislature
Capitol Building, Room 118
Juneau, Alaska 99801
Telephone: (907) 465-4931
POSITION STATEMENT: Testified as co-sponsor of HB 304.
PATRICK LOUNSBURY, Legislative Secretary
to Representative James
Alaska State Legislature
Capitol Building, Room 102
Juneau, Alaska 99801
Telephone: (907) 465-3743
POSITION STATEMENT: Testified on behalf of Chair James on HJR 50.
JIM BALDWIN, Assistant Attorney General
Civil Division
Department of Law
P.O. Box 110300
Juneau, Alaska 99811
Telephone: (907) 465-3600
POSITION STATEMENT: Testified on HJR 50.
ORAL FREEMAN
2743 Third Avenue
Ketchikan, Alaska 99901
Telephone: (907) 225-3507
POSITION STATEMENT: Provided information on HJR 50.
HUGH MALONE
90 Spruce Street
Juneau, Alaska 99801
Telephone: (907)586-3370
POSITION STATEMENT: Provided information on HJR 50.
ACTION NARRATIVE
TAPE 98-8, SIDE A
Number 0001
CHAIR JEANNETTE JAMES called the House State Affairs Standing
Committee meeting to order at 8:05 a.m. Members present at the
call to order were Representatives James, Ivan, Dyson, Elton,
Hodgins and Vezey. Representative Berkowitz arrived at 8:08 a.m.
HJR 5 - CONSTIT AMNDMNT: FREEDOM OF CONSCIENCE
Number 0093
CHAIR JAMES announced the first order of business was HJR 5,
"Proposing an amendment to the Constitution of the State of Alaska
relating to freedom of conscience," sponsored by Representative
Martin.
Number 0127
REPRESENTATIVE MARK HODGINS made a motion to move HJR 5 from the
committee with individual recommendations and attached fiscal
note(s).
UNIDENTIFIED SPEAKER objected.
Number 0187
CHAIR JAMES asked for a roll call vote. Representatives Dyson,
Hodgins, Ivan, Vezey and James voted to move HJR 5. Representative
Elton voted against it. HJR 5 moved from the House State Affairs
Standing Committee.
Number 0195
HJR 4 - LIMITING TERMS OF STATE LEGISLATORS
CHAIR JAMES announced the next item up was HJR 4, "Proposing
amendments to the Constitution of the State of Alaska relating to
terms of legislators," sponsored by Representative Therriault.
Number 0224
REPRESENTATIVE GENE THERRIAULT, Alaska State Legislature, read his
sponsor statement:
"HJR 4 proposes to limit terms by limiting the number of regular
legislative sessions a person may serve. The resolution proposes
that a person may not serve consecutively more than 12 full regular
sessions in the legislature. A person many not again serve in the
legislature as a result of an election or appointment to fill a
vacancy until at least two consecutive regular sessions have
elapsed. In addition, when tabulating the number of sessions
served, special sessions shall not be counted nor shall time served
as the result of appointment to fill a vacancy.
"Alaskan voters demonstrated their desire for congressional term
limits through 1994's ballot measure number 4, which passed by a
margin of 62 percent. Alaskans have also expressed support for
term limits on the municipal level with many communities adopting
some form of term limits for local elected officials. HJR 4 will
now give Alaska voters the chance to change the state constitution
to limit terms of state legislators.
"Term limits are a positive legislative reform, guaranteeing that
new legislators are elected along with new ideas. The popularity
of term limits indicates that a majority of our citizens do not
prefer career politicians representing them. Term limits will also
level the playing field for challengers facing long-term incumbents
whose power is oftentimes derived primarily from seniority.
"Placing a constitutional amendment limiting the terms of state
legislators on the ballot is a measure, that in my opinion, is long
overdue."
Number 344
REPRESENTATIVE THERRIAULT read the sectional analysis:
Section 1, amends Article II, Section 3 of the constitution by
limiting a person from serving more than 12 consecutive
sessions and places the stipulation that the person may not
serve again until two regular sessions had elapsed.
Section 2, exempts periods served during the interim, or
between sessions. We did not want there to be any ambiguity
that we were called back to a special session, that should be
counted as one of the regular sessions. In addition, periods
served as a result of appointment to fill a vacancy would also
not be counted because it may be only part of one of a regular
session and we wanted to make it clear that that would not
count toward the count of twelve.
Section 3, regular sessions served in the legislature before
the convening of the first regular session of the Twenty-Third
Legislature would be considered in the calculation for term
limits. When this measure was considered before, this
language was added in on the House floor so it would basically
apply the measure retroactively so that a person that had
served 15, 20 years, or 12 years would not necessarily get
another 12 years before being limited.
Section 4, places the proposed amendments on the ballot at the
next general election.
Number 0446
REPRESENTATIVE THERRIAULT pointed out two fiscal notes. The only
cost associated is $3,000 to put the measure on the ballot.
REPRESENTATIVE THERRIAULT said the National Federation of
Independent Business of Alaska (NFIB) did a survey of its
membership, 76 percent supported term limits. Another question
asked was whether the limit should be placed at no more than 12
consecutive years, the support was 69 percent.
Number 0501
CHAIR JAMES asked Representative Therriault if the term limit is 12
regular sessions, which is six years. There is a first and second
session, which is considered regular sessions.
REPRESENTATIVE THERRIAULT replied no. A legislature is comprised
of two regular sessions. One hundred twenty days [incorrectly
stated 121], is one regular session.
CHAIR JAMES said you cannot serve more than 12 years, that would be
six years.
Number 0562
REPRESENTATIVE THERRIAULT agreed they cannot serve more than 12
years, It would not be six years because there is only one regular
session in a year. He indicated constituents view their time in
Juneau as time in the legislature and do not differentiate between
the bodies [House or Senate].
CHAIR JAMES asked if this would be retroactive.
REPRESENTATIVE THERRIAULT said it would be retroactive starting
with the Twenty-Third Legislature, the question would go on the
ballot this year. For example you could have somebody who has
already served 12 years be elected to the Senate, the term limit
kicks-in and now they cannot take the seat they were elected to.
This allows them to fill the four-year term and then everything
would kick-in four years after the date. Many states had a period
of time that elapses to take care of that question.
Number 0658
CHAIR JAMES said everything counts before the Twenty-Third
Legislature, since she served for six years she would have four
more years, or would it be ten.
REPRESENTATIVE THERRIAULT agreed it would be four years,
retroactively, she would have only served ten years so she would
have two more years in which she could serve.
CHAIR JAMES stated that would preclude her from running for the
Senate seat which will be up in two years. She said, "... anyone
that started when we started, that person then could run for one
Senate term and then they would be done." She indicated it doesn't
make any difference whether you spent the time in the House or
Senate.
Number 0764
REPRESENTATIVE HODGINS said suppose you spent five years in the
House and then were elected to the Senate, which is a four-year
term, that would put you at fourteen years or seven sessions.
Would that person then be precluded from running for the Senate?
REPRESENTATIVE THERRIAULT replied no. Subsection (a) allows a
legislator to move to the Senate, serve the term, and serve more
than the twelve years. He referred to page 2, line 3,
"Notwithstanding (a) of this section, a person may complete a new
term to which elected if the person has served consecutively during
no more than eleven regular sessions."
REPRESENTATIVE HODGINS referenced the NFIB poll which indicated
there were certain terms they found more acceptable than others.
He asked if this poll reflected only Alaska.
Number 0825
REPRESENTATIVE THERRIAULT replied the questions listed are the way
it was put to their membership. He did not have the number of
respondents.
Number 0849
REPRESENTATIVE HODGINS indicated 12 years seems like a long time
for a citizen legislature. He asked if there were other times that
NFIB found more acceptable, or if they just had the two choices.
Number 0864
REPRESENTATIVE THERRIAULT said he believes this is the way the
section was worded. Twelve years was derived earlier in
shepherding this legislation through the House. He indicated there
are some people who believe a shorter period would be adequate.
Some people believe in 16 years. He tried to strike a balance with
the concern of rapid turnover which increases the influence of
staff, of lobbyists, and control of the administration, and people
in the state agencies.
REPRESENTATIVE THERRIAULT said he tried to strike the balance
between how people viewed the number of years that would be
adequate. He indicated, if a person stayed in the House of
Representatives, they would have chance at being the speaker. He
believed, within 12 years, they could prove themselves, a person
that is elected that has not served on a city council, or perhaps
on a board of directors, can come up to speed and be very
effective.
Number 0957
REPRESENTATIVE ETHAN BERKOWITZ said, "In the United States
Constitutional Amendment, it is sort of similar to something else
we are looking at." He believes HJR 4 divides Alaskans into two
classes, one that can run for office and one that cannot. He asked
if there were equal protection problems with this.
REPRESENTATIVE THERRIAULT did not believe there were equal
protection clause problems, however, there are limitations.
REPRESENTATIVE BERKOWITZ asked if it had been challenged on those
grounds.
REPRESENTATIVE THERRIAULT replied there were a number of term
limitations in the nation. He did not believe there is a
legitimate constitutional equal protection challenge.
Number 1000
REPRESENTATIVE BERKOWITZ asked if that would be true of any other
amendment that would divide Alaska into two classes.
REPRESENTATIVE THERRIAULT replied he did not believe so, that is
the way that our government has been set up to allow this. That
issue was not brought up in previous committee hearings.
Number 1035
CHAIR JAMES asked if term limits of the United States Congress, for
senators and representatives, were determined to be
unconstitutional.
REPRESENTATIVE THERRIAULT replied yes.
CHAIR JAMES asked if any other states, that have applied term
limits, have been challenged in the court.
REPRESENTATIVE THERRIAULT replied there are a number of states that
have been challenged. He indicated those working their way through
the courts are believed to be found to be constitutional.
Number 1086
REPRESENTATIVE IVAN IVAN referred to the sponsor statement. He
said the voters approved 62 percent for congressional term limits
and noted municipalities expressed their support. He asked if this
had been researched.
REPRESENTATIVE THERRIAULT replied he did not do a statewide poll,
he polled his own constituency. He said, "I take it that the
number of municipalities that actually wanted (indisc.) and
assembly, is an indication that people in the state of Alaska are
supportive of the concept, and certainly the statewide vote on the
congressional terms, although that mechanism would not be
successful. Congressional terms is an indication that the
population is supportive of the concept of having a turnover in
elected officials."
REPRESENTATIVE IVAN asked if a person wanted to run again in the
future would that person have to wait two years.
REPRESENTATIVE THERRIAULT replied only two years.
REPRESENTATIVE IVAN asked would that person start with a clean
slate.
Number 1165
REPRESENTATIVE THERRIAULT replied in the affirmative. He said this
is not a brick wall, it is considered a speedbump. A person could
still have a long career in politics if their voters wanted to
return them to office. He wanted the voters to see that someone
else can fulfill the function and maybe fill it even better than
the previous legislator.
REPRESENTATIVE HODGINS said while he served on the Kenai Borough
Assembly he kept asking for term limits which his colleagues did
not like. He indicated approximately 80 percent of the people that
voted were in favor it, those who vocally opposed it are no longer
in office.
REPRESENTATIVE KIM ELTON said he was the author of the charter
amendment that limited terms for the Juneau Assembly to a total of
three terms. He said some people characterized it as a loophole,
that you can sit out and can come back. Part of the discussion was
that it creates a situation for choice. He believes the same
experience happened in California, California courts may have just
tossed out term limits.
Number 1412
REPRESENTATIVE ELTON stated you have somewhat the same situation in
California where you have seat-swapping. People would hit their
term limit, run for mayor, and then come back and start over. He
believed HJR 4 might be encouraging that same situation. He asked
Representative Therriault why he decided that a person could serve
for 12 years, sit out for two years and come back.
REPRESENTATIVE THERRIAULT responded he did not want to preclude
someone from serving again. He said amendments could be offered to
consider the length of time, maybe two years is too short, not
everyone has the opportunity to swap back and forth. The 12-year
bar was to prevent the clock from running on the House side. He
indicated a person can run for the Senate and swap back and forth
to the House, two people can hold seats in the same Senate
district.
CHAIR JAMES stated she knows people want term limits and campaign
finance reform and are not happy with the general concept of
government. A legislative staff person has experience and is ready
to hit the ground running compared to someone who has not worked
for a legislator. Chair James said, "Why don't we count staff time
because you are very influential in doing things down here [in
Juneau] during that period of time and you don't need all the
learning experience because you already have it when you get here."
Number 1669
CHAIR JAMES indicated she would support HJR 4 but has mixed
feelings because she does not believe it is in the best interest of
the state to curtail the decisions of the voters in the respect
that they might lose a good legislator and get a bad one. It
already restricts who can afford to run, especially young people
who have families.
REPRESENTATIVE THERRIAULT said we currently have term limits for
our governor and term limits for the president. He said you hear
no clamoring that the people's right to elect the president to a
third consecutive term is a bridge done fairly, or the same
argument for governor.
CHAIR JAMES said she was not in favor of dumping the governor out
in eight years either, she indicated Alaska usually dumps them out
in four years. Distress in agencies causes chaos and costs extra
money. She indicated there are people who are not willing to serve
long-term because they know they are only going to be in Juneau for
a short period of time.
Number 1820
REPRESENTATIVE BERKOWITZ said he heard people complain about two
term limits, particularly after President Reagan served there was
a big move about repealing the constitutional amendment. He
counted only three members in the 40-member House that have served
more than 12 years, only one would fall inside this amendment.
REPRESENTATIVE THERRIAULT replied we do have a healthy turnover in
the state. He indicated the turnover in the Senate in the past ten
years is 85 percent. The turnover in the House is 90 percent. He
indicated these figures do not calculate the person who left the
House and went to the Senate, some legislators gather up seniority
and clout, maybe it gives them a little more power than someone who
is new.
REPRESENTATIVE NORMAN ROKEBERG, Alaska State Legislature, testified
as cosponsor to HJR 4. He said Representative Therriault did an
excellent job of crafting the need for balance on this issue and
asked for the committee member's support.
Number 1940
REPRESENTATIVE AL VEZEY made a motion to move HJR 4 from committee
with individual recommendations and attached fiscal notes.
REPRESENTATIVE ELTON objected. He suggested holding HJR 4 until
the next meeting to let the idea simmer.
CHAIR JAMES stated it was discussed as it affects the state, it
will be thoroughly evaluated in the Judiciary Committee from a
legal standpoint.
REPRESENTATIVE ELTON withdrew his objection.
Number 2024
CHAIR JAMES stated without objection HJR 4 moved from the House
State Affairs Standing Committee.
HB 304 - MOVE LEGISLATURE TO ANCHORAGE
Number 2031
CHAIR JAMES announced the next order of business was HB 304, "An
Act relating to the location of the convening of the legislature in
regular session; repealing provisions relating to student guests of
the legislature; and providing for an effective date," sponsored by
Representative Green.
CHAIR JAMES noted HB 304 had received extensive discussion,
however, it did have the votes to pass at its last hearing. The
sponsors indicated they now have the votes.
Number 2040
REPRESENTATIVE JOE GREEN, Alaska State Legislature, testified
before the committee. He mentioned some members were absent at the
previous hearing.
REPRESENTATIVE ELTON said HB 304 recommends that the state does
something that no other state has ever done and that is separate
the executive branch from the legislative branch. That is dramatic
and is the kind of policy that is destructive. He referred to the
argument that the Capitol Building is not safe and that the state
needs to reinvest. He stressed he objects to reinvesting in
buildings and new quarters for the legislative branch before they
reinvest in a school building (which he visited) which is sliding
down a hill.
REPRESENTATIVE ELTON said, "If we are going to invest in a new
building, and we are going to invest in new quarters, we should
invest first in Alaskans and invest last in legislators who are
supposed to be looking at the needs of all Alaska." He believes
they might spend an awful lot of energy on it and at the end of
session and they are going to say, "Why did we do this, and why
didn't we invest our energy working on something constructive
rather than trying to redivide the pie for somebody else."
Number 2134
CHAIR JAMES stated people in her district did not vote to move the
capital due to the cost. Although she will vote to move HB 304 out
of committee, she will be a no vote on the bill unless someone
proves to her there is a savings.
CHAIR JAMES agreed with Representative Elton. She said, "My big
challenge is to fix our fixed assets, and taking any money for
doing other things that I don't think needs to be done now, or in
the immediate future, I think is not necessary. I will agree, and
I believe that probably without this piece of legislation that the
legislature may have the authority to rove, in which case, you know
I have some support for that in my district because it will allow
some districts to have access to the legislature that don't now.
And you know the problem with that is where do you do it, and do
you have the facilities, and we don't. So that would be up to the
private sector to come up and provide a place for us to do that.
So I think, even though contrary to Representative Elton's
statement that no other state has a legislative group separate from
their administrative group, Alaska is like no other state, and we
do have a huge state with disproportionate amount of people in some
parts of the area that are not served, and so there is a good
arguement to that. I just wanted to put on the record what my
position is on this issue. It is the money issue with me and so I
don't think the public is going to like us spending money that's
unecessary at this time."
Number 2206
REPRESENTATIVE FRED DYSON said, like Representative Elton, he
suspected HB 304 is going nowhere. He asked Representative Green
if it is not in the best interest for the people of the state to
have the executive and legislative branches geographically in
separate locations. Does the executive branch have the authority
to move any and all portions of its operations?
REPRESENTATIVE GREEN said many functions of the Administration have
already moved to Anchorage. There are more employees in the
Department of Natural Resources and Environmental Quality
[Department of Environmental Conservation] in Anchorage than there
are in Juneau.
Number 2289
REPRESENTATIVE DYSON asked again, does the executive branch have
the authority to relocate any and all executive branch offices.
REPRESENTATIVE GREEN replied, "With the possible exception of his
office, he does." He noted one of the commissioners publicly
announced that she will locate her office in Anchorage.
REPRESENTATIVE HODGINS stated his district has difficulty in
getting to local government. He would like to see a roving session
and suggested holding session one year in the Fairbanks area, one
year in Southcentral and one year in Southeast. He indicated the
Kenai Borough Assembly visited different locations which gave the
people a lot of access which they would not otherwise have.
REPRESENTATIVE HODGINS said the square footage in the building that
the state purchased last year in Anchorage is probably more than
the rest of the state combined, or fairly close to it. In common
sense thinking, the capital is already in Anchorage because that is
where the bulk of state services is. He indicated he had no
problem with moving the session there. There will be an impact on
the rest of the state.
Number 2427
REPRESENTATIVE IVAN said his constituents favor less expensive
access to express their needs.
TAPE 98-8, SIDE B
Number 0001
REPRESENTATIVE IVAN indicated he would support HB 304. At the same
time Alaska continually has other needs.
REPRESENTATIVE ELTON said we cannot continue to define 'access' the
same way we did 30 years ago. Access now means that we can pull up
every bill, committee minutes, whatever we want through the
Internet. We can sit down in front of a video teleconference unit
and we can testify face to face. The Legislative Information
Offices also provides access.
REPRESENTATIVE ELTON stated the other thing that tends to bother
him about this debate is it has been discussed before and is
debilitating to some regions of the state. When do we learn to set
aside some issues and concentrate on issues that are perhaps more
important?
Number 0132
REPRESENTATIVE ELTON said maybe we should put it in the context of
moving the capital to the wealth producing part of the state,
closer to areas that are actually funding state government. He
indicated they would be on the North Slope, Dillingham, Kodiak or
Dutch Harbor. Maybe bump it out of the context of where the people
are and move it to the people who are paying the bills for state
government.
REPRESENTATIVE ELTON said access is no longer defined by somebody
coming into their office and shaking their hand. Access is also
defined by Public Opinion Messages, E-Mail, 1-800 telephone
numbers, video or audio teleconferencing.
REPRESENTATIVE GREEN said Representative Elton mentioned several
means of communication that we did not have years ago, the
historical convening of the governor and the legislature was
because they did not have communication. He indicated the public
would have to purchase a computer or go to a Legislative
Information Office to send messages which is still not face to
face. That is one reason that there is no more a necessity to have
the legislature convening where the governor lives.
Number 0267
REPRESENTATIVE HODGINS pointed out the City and Borough of Juneau
have been extremely helpful in providing "Gavel to Gavel" in trying
to establish communications. He concluded you still have the
majority of the population in one area, and that is where
government should be.
CHAIR JAMES indicated having the capital in Juneau restricts a lot
of people from running for office. She jokingly asked have you
ever wondered what it would be like if we put a call on the House
in Anchorage.
Number 0338
REPRESENTATIVE HODGINS made a motion to move HB 304 from the
committee with individual recommendations and attached fiscal
notes.
UNIDENTIFIED SPEAKER objected.
CHAIR JAMES requested a roll call vote. Representatives Berkowitz,
Dyson, Hodgins, Ivan and Chair James voted in favor of moving the
bill. Representatives Elton and Vezey voted against it. HB 304
moved from the House State Affairs Standing Committee by a vote of
5-2.
HJR 50 - PERMANENT FUND PUBLIC CORPORATION
Number 0370
CHAIR JAMES noted the next order of business was HJR 50, "Proposing
amendments to the Constitution of the State of Alaska relating to
a public corporation established to manage the permanent fund,"
sponsored by Chair James.
Number 0383
PATRICK LOUNSBURY, Legislative Secretary to Representative James,
read the statement of intent. "HJR 50 is in direct response to the
Administration's constitutional concerns regarding HB 81, 'An Act
relating to the board and staff of the Alaska Permanent Fund
Corporation,' which was heard last year. The Department of Law
explained that the Permanent Fund Board was created by statute to
administer a constitutionally established fund, thus the only way
to provide removal for cause would be through a constitutional
amendment. We believe HJR 50 addresses this matter on point while
striving for the goal of continuity which is the major intent of HB
81. Specifically it addresses Article 9, Section 15 of the
constitution by adding a new section to read that the permanent
fund shall be managed by public corporation established by law. A
member of the board of the corporation who is not the head of
principal department is subject to confirmation by majority of the
members of the legislature in joint session and may only be removed
as provided by law."
CHAIR JAMES said HB 81 suggests that members of the Permanent Fund
Board should only be removed for cause. She stated both Governor
Knowles and Governor Hickel, when they came into office, completely
removed the board. She said since the permanent fund is our
biggest asset, we should have more continuity on the board.
Number 0495
JIM BALDWIN, Assistant Attorney General, Civil Division, Department
of Law testified before the committee. He indicated he testified
on HB 81 last year and thanked the committee for taking him up on
his legal analysis that a constitutional amendment would be
necessary.
MR. BALDWIN said there are still some issues which would basically
insulate the Permanent Fund Board by making them removable only for
cause. He stressed it is difficult to carry out a for cause
removal and it exceeds what you are intending to achieve. Trying
to do it in context with other boards where there have been
violations of crime, for example the individual alleged did not
effect their service on the board but struck a cord in the
community and the public felt they should not continue to serve.
MR. BALDWIN said the board should be responsive to a statewide
elected official and not just being protected by the standard of
for cause. He believes that is an important consideration why the
Administration continues to have reservations about this approach.
Number 0583
CHAIR JAMES asked, if not for cause, what other language would
protect us from having the clean sweep that we had by the last two
changes of governors.
MR. BALDWIN replied in existing law there is the provision that the
governor can remove but he must state his reasons in writing. He
believed that was sufficient protection of the public interest.
The governor must go on record.
CHAIR JAMES said, "As opposed to serving at the pleasure of the
governor."
MR. BALDWIN said at pleasure means the governor can remove a member
without stating a reason. When this law was enacted in the early
80s, this was a compromise between those who wanted more protection
and those who wanted to be just at pleasure. This is one notch
above that, it requires the governor to go on record publicly and
state his reasons. It must not be arbitrary or capricious.
CHAIR JAMES stated we do not currently have that standard.
MR. BALDWIN replied in existing law we have that he must have
reasons.
CHAIR JAMES asked if it referred to the Permanent Fund Board.
Number 0665
MR. BALDWIN replied yes, he must state his reasons, that's in
existing law (Title 37.13.070). He said, "The governor may remove
a member of the board from office - the Permanent Fund Board.
Removal by the governor must be in writing and must state the
reason for the removal. A member who was removed by the governor
may not participate in board business that may not be counted for
purposes of establishing (indisc.) quorum, that's in existing law."
CHAIR JAMES asked Mr. Baldwin to provide a copy of Governors
Hickel's and Knowle's reasons for removing all the board members.
MR. BALDWIN said he would provide that to the committee.
Number 0728
REPRESENTATIVE DYSON asked Mr. Baldwin to explain his authority in
saying the governor cannot be arbitrary and capricious in removing
members.
MR. BALDWIN replied he could site those cases and would provide a
memo to that effect. When public officials act, they cannot act
arbitrarily or capriciously. That is a basic level of standard
that public officials must live up to.
REPRESENTATIVE DYSON asked Mr. Baldwin to show him, in his memo,
how that has worked and how public officials have been called on
the carpet and forced to live by that standard.
CHAIR JAMES said the people who have been appointed to the board
are exemplary, they are well respected, people with a background
that lends them to this type of responsibility. It was never
brought to her attention that there was ever a problem with anybody
who served on this board. She asked when they give their reasons
can it be personal.
MR. BALDWIN replied it can be any reason.
CHAIR JAMES asked if they were from the wrong political party would
that be a good reason.
MR. BALDWIN said he did not believe that has been any of the
reasons that have been given.
Number 0813
CHAIR JAMES said that does not necessarily evaluate that person's
ability to serve on this board no matter what their party
affiliation is.
Number 0845
MR. BALDWIN stated he did not believe it would be an appropriate
reason to say that it was for a partisan political reason, however,
some of the documents that have been referred to refer to a
governmental philosophy on how government should operate or how it
should carry forth its policy-making functions. Partisan political
is probably not the appropriate reason, but there are other reasons
which are not related to partisanship. Politics is defined in the
government to mean the art of governing or the act of governing.
CHAIR JAMES noted Representative Berkowitz and she are leaving in
ten minutes and that Vice-Chairman Ivan will complete the meeting.
It is assumed that Governors Hickel and Knowles took it upon
themselves to remove the Permanent Fund Board for philosophical
reasons when it is the most important asset we have and the
management of it. She said, "I'm a partisan person but there's
just some places that I think partisan politics doesn't fly and I
think this is one of them."
Number 0947
REPRESENTATIVE BERKOWITZ said the implied covenant of good faith
and fair dealing governs most contracts between individuals and
entities. He indicated Mr. Baldwin said there is an arbitrary and
capricious standard. He asked is there something comparable to the
implied covenant and good faith and fair dealing that is also at
play.
MR. BALDWIN said he is not aware of a standard like that. He
believed he said the courts have applied general standards when
officials take their actions are required by statute to do
something. Generally the basic standard is whether the act was
arbitrary or capricious. That depends on the kind of act that the
official is required to do, a court will give more latitude
depending on the type of act. If it is an act regarding a leasing
decision, the court may apply a harder look at the actions of the
official. If it is an appointive decision, the governor has more
discretion in what he can or can't do. The courts do have a basic
limit that they will apply to the reasonableness of the action. He
indicated there are many cases applying this standard to executive
conduct, the conduct of public officials.
REPRESENTATIVE ELTON asked if anybody had been removed from a board
or commission for cause.
MR. BALDWIN said he cannot recall, in the 20 years that he has been
in the Office of the Attorney General, that anyone has been
removed. He had been engaged in a couple of efforts where they
have attempted to. One involved the "Board of Fish and Game" where
the individual was convicted of fishing in a closed area,
fortunately the individual decided to resign on his own.
Number 1133
MR. BALDWIN said the individual had been convicted of fishing is a
closed area and he was on the 'Board of Fish'... The governor has
to give him a hearing and then he's gone. He said, "It turned into
-- he got a lawyer, we had a team of lawyers. We had discovery on
his side, discovery on our side, ... we have to appoint an
independent hearing officer now. The hearing officer considered
himself, or herself, to be a judge. We were involved in a full-
blown trial proceeding which was going to take at least a year to
conclude. And then they were going to go to the superior court
after that, then the supreme court after that. So it's not an easy
process."
MR. BALDWIN asked the committee do you want the body, that controls
$22 billion, to be that insulated from the public. Do you want
them to be that far beyond their reach. He indicated if the answer
is yes, they are right in supporting this resolution. But if the
answer is no, that you want them to be more responsive, they would
have to rethink this approach entirely.
Number 1197
CHAIR JAMES said she would be very surprised with their established
credibility, if there would be any cause why the Permanent Fund
Board should be removed.
REPRESENTATIVE DYSON jokingly said he was recently informed
legislators have immunity and are free to be arbitrary and
capricious and unreasonable without fear of removal, that should
make them feel at ease.
Number 1278
ORAL FREEMAN testified via teleconference from Ketchikan. He said
he served six terms in the state House beginning in 1959. His last
term was in 1982-1983. During his time in the legislature they
created the permanent fund and the Permanent Fund Corporation. He
indicated he was appointed to the board of trustees in 1987 and
served two and a half years. After he had a difference of opinion
over the Education Endowment Fund with the governor, the governor
did not reappoint him to the board of trustees.
MR. FREEMAN stated Governor Hickel wiped out the whole board when
he was elected in 1991. He mentioned Governor Hickel reappointed
him to the board, but when Governor Knowles took office he wiped
out the whole board.
MR. FREEMAN stated when we first created the Permanent Fund
Corporation, we had some differences of opinion as to how to go
about it. We ended up with four public members and two cabinet
members, one of which had to be the commissioner of [the Department
of] Revenue. He said the four public members served four-year
staggered terms. Every July 1, one of the terms was up. The
assumption was that gives the governor - he has the power to
appoint and remove us. If he didn't like the job somebody was
doing, when their term was up, he'd replace them. And we didn't
foresee this drastic (indisc.) axe approach of just coming in and
chopping off everybody.
Number 1451
MR. FREEMAN said to have a group that manages that much money, has
that much responsibility, it is ridiculous to have a new governor
come in and remove them without cause or without reason. He
indicated, while he was with the board, the governor wanted
somebody with his own philosophy.
MR. FREEMAN said there should be something on the books that
prevents a governor from coming in, for whatever reason, and wiping
out a board that has that much responsibility. It is important
that you have continuity. Mr. Freeman wholeheartedly approved the
approach the committee is taking and applauded them.
CHAIR JAMES informed the committee that Vice-Chairman Ivan was now
chairing the meeting.
Number 1609
HUGH MALONE testified before the committee. He said, "Like Mr.
Freeman, I have been interested in and worked on issues involving
the permanent fund since its inception."
MR. MALONE said, "There is, I think, a central issue that is
touched on by this legislation. A central issue that is at the
core of the whole idea of the permanent fund, especially one as
large as ours is in Alaska today, and that is accountability. The
accountability of the corporation, or the fund itself, the
accountability of the board and the staff, the accountability of an
institution that controls, even in a fiduciary role, more wealth
than all the rest of Alaskans put together and then some.
Probably, I suppose, certainly in liquid form."
MR. MALONE indicated it was a troubling issue to him, it is not one
that was resolved when the permanent fund was created, it was not
one that, in his mind, was resolved or solved by the legislation or
the laws that we have on the books today. It troubles him so much,
he wondered, as the fund grows, whether we should not simply find
some way to abolish the fund before the accountability issue turns
into a serious political and social problem to the state of Alaska.
For example, we have enough money in the fund now to build several
Susitna dams if we wanted to do that. We could probably do even
more damage on the social and political fronts. Mr. Malone
indicated HJR 50 touches on accountability. He noted it is a tough
issue to deal with and favors the legislation. He believes it
provides some stability for the board.
Number 1769
MR. MALONE said, like Mr. Freeman, he had the honor of serving on
the board. He indicated he was appointed by Governor Sheffield as
a public member and was also a member of Governor Cowper's cabinet.
One of the things he noticed about serving on the board, was the
"halo-effect." For example, you put someone on the board of the
fund, he gets a halo around his head and he suddenly becomes one of
the anointed few that are in control of this money. The reason the
people who served on the board want this legislation is they want
continuity. It is not an easy thing to come on the board to learn
about the investment program, to learn all about the fiduciary
responsibilities, to get some understanding of the nuances that
exist in the permanent fund's relationship with the other elements
of the Alaska government. (Indisc.) it takes some people longer
than others. During that period of time, the board members are not
as much a utility to the operation as he or she could be after they
have gone through that process.
MR. MALONE said, "The idea of having a major turnover and a
difficulty of what to do as the financial markets change and as the
policies of the fund need to be reviewed, is something the people
are concerned about. Really, the board members are concerned with
the continuity issue and the ability to do their job. I think when
we extend that into the political (indisc.) we encounter the shadow
of chronyism or hacks. I mean, there is no particular reason why
the political hacks that say Governor Knowles appointed to the
board are any worse than the political hacks that Governor Hickel
appoints to the board. And so on that basis I don't think that
this legislation could be justified." One set could be better or
worse than another.
MR. MALONE said Mr. Baldwin is the senior member of the Department
of Law and is most knowledgeable about this issue and encouraged
the committee to continue consulting with Mr. Baldwin.
Number 1975
MR. MALONE said, "The bill does a couple things that start to take
some of the political cronyism, or the idea that the appointees are
just political hacks away from the board. And I think in that
sense it does make the board more accountable. The primary one's
on page 3 where there's language to clarify what is assumed and
that it the board members have, there are in fact fiduciaries.
They have a fiduciary responsibility. And I think that fiduciary
responsibility and that language - making it clear in the statute
goes a long way to improve the accountability. It is commented
that it's difficult to remove somebody from the Permanent Fund
Board if this law would (indisc.). Mr. Baldwin pointed out that
removal for cause is a debatable issue, it can be litigated in the
courts and so forth."
MR. MALONE said , "I'm not sure you'd want to remove a person from
the Permanent Fund Board if they were convicted of fishing in a
closed area because it's irrelevant. What's relevant here is
whether the person is carrying out his or her fiduciary
responsibility. And if they're not carrying out that, I don't
think that you would have a lot of difficulty convincing the court
if it came to that. I think that's an important thing that that
standard be set in the legislation in that it is made explicit."
Number 2120
MR. MALONE continued. "The other thing that the board does is it
adds a member -- the board doesn't, excuse me, would add a member
that would provide for -- one of the members must have recognized
competence and experience in investment portfolio management. The
other qualifications for the board membership are a bit blurry,
recognize competence and wide experience in finance investment and
other business management related fields which could be anything
from running your own fishing boat to a pull-tab parlor to Lord
knows what. This additional language does make it clear that we
are talking about a fairly specialized type of expertise and I
think that's a good addition to the board."
MR. MALONE said, "On the constitutional amendment, which I am
certainly not a lawyer, but I certainly agree that it is necessary
if the nature, the appointments to the board and the removal of the
board is going to take place. My comments are that I believe that
the confirmation process, that's set out in the legislation, should
result in improved scrutiny of the appointees. Right now the
legislature certainly has the capability to review the appointees
to the board and make their own decision as to their qualifications
and competence. That decision isn't necessarily binding on the
governor of course, some might regard as a useless exercise. I
think that sometimes the confirmation process itself is a useless
exercise. It's merely a rubber stamp. But it doesn't have to be
that, and this would certainly give the legislature the real power
to decide that person who has been named is not going to be a
member of the board and to give that person an opportunity to
explain the reasons why he or she, having accepted the nomination,
would be able to carry out the duties. I think that's actually a
major improvement in the process in the accountability issue for
the fund." It does not solve the accountability issue, but it
improves it. It is nebulous talking about the accountability,
because we have not had a serious question arise as to the
accountability of the fund."
Number 2284
MR. MALONE said when he was on the board there were investment
areas that they did not talk about and got out of it as quickly as
they could. He thought if they had become public there would have
been a cause for debate that would put the fund in a bad light, but
it could have possibly made it more likely for those people that
basically want to steal the money and run off through some sort of
political maneuver be able to do that. That is a risk the fund
faces every day. The fund, approaching $25 billion invested
globally represents such a complex chain of transactions today that
no one, not the staff on a daily basis, certainly not the board or
the general public, and certainly not a governor that is busy with
everything else can follow. ... Presenting a scenario for those,
who are daring and to some extent strongly motivated by their self-
interest to take advantage of the situation, whether it is building
the Susitna or syphoning off money for some other purpose in the
heat of the moment. That can happen and could cause a lot of
damage in the state. He believes the accountability will grow even
though changes like this are made in the law. Mr. Malone indicated
he thought about that issue for 20 years but did not have a real
solution to it.
MR. MALONE concluded he believed the points that are raised by Mr.
Baldwin are good points that have to be considered carefully. He
said, "But I do think, in making an explicit standard beyond this
general one that is listed in the legislation, the general one
would be the incompetency and malfeasance, and so forth (page 2).
But making it clear that these people have a fiduciary
responsibility, which I would argue they have now, regardless of
this language in this law, that making it clear on the face of the
statute that they are not only a name but legally trustees, I think
does put some real meaning into this cause."
TAPE 98-9, SIDE A
Number 0010
REPRESENTATIVE ELTON noted fishing in a closed area does not have
anything to do with fiduciary. He asked if it is a breach of your
fiduciary duty if you show up as a board member one out of three
times, is it a breach of fiduciary duty if you are convicted in
federal court for not paying your income tax. Would that be a
breach of fiduciary duty or would it be a reason for cause removal
of a board member?
Number 0042
MR. MALONE explained the fiduciary language in the bill adds an
element for cause. He did not think it substitutes for the
(indisc.) language. In the first case, yes it is a fiduciary
responsibility. Fiduciary responsibility requires that person must
be diligent. The second, if you are convicted of some crime that
shows you are not trustworthy with money, he indicated he was not
able to answer that question.
VICE-CHAIR IVAN indicated HJR 50 would be heard again.
MR. MALONE continued. "...I think does put some real meaning into
this provision that would be proposed (indisc.) statute by this
bill."
REPRESENTATIVE ELTON said a lot of the members of the legislature
in the past, who were there at the birth of the permanent fund
continue to get service to the permanent fund through service on
the board and I think the most recent example probably is former
Representative Clark Gruening. He said, "You used the analogy that
fishing in a closed area may not have anything at all to do with
fiduciary duty of a member of the board. I want to give you two
scenarios and have you respond to those."
REPRESENTATIVE ELTON asked, "The first scenario is, is it a breach
of your fiduciary duty if you show up as a board member one out of
three times."
REPRESENTATIVE ELTON stated, "The second example that I'd like to
have you comment on is, is it a breach of fiduciary duty, or could
you reach a conclusion that it's a breech of fiduciary duty if
you're convicted in federal court for not paying your income taxes.
... In those two incidences, would that be a breech of fiduciary
duty or would it be a reason for a for cause removal of a board
member."
MR. MALONE said he believes the fiduciary language in HJR 50 adds
an element to the for cause, it does not substitute for the basic
language that is in there. In a way it is a higher standard.
Number 0042
MR. MALONE said, "It seems to me in the first case is very clear,
yes, it is a breech of fiduciary responsibility for your fiduciary
responsibility, the duty of fiduciary requires that that person be
diligent. You can't be diligent if you show up sporadically for
meetings, or for one out of three and so forth. I suppose the
meetings could be arranged and organized so that only every third
meeting had any real meat to it, but assuming that each meeting has
something important, absolutely, that's a breach of your fiduciary
responsibility whether it's voluntary or involuntary. You have to
be diligent."
MR. MALONE said, "The second one, you know if you were convicted of
some crime that shows that you weren't trustworthy with money, I
can't really answer that question." He concluded, "I think we've
raised a presumption that you might not want that person watching
your money."
NUMBER 0133
REPRESENTATIVE VEZEY said, "I don't think any of us want to see the
board become a political ping-pong ball. I was seriously concerned
when Governor Hickel replaced the entire board. I was perhaps even
more seriously concerned when Governor Knowles replaced the entire
board. What is the continuity, I think that's a serious breech of
fiduciary responsibility? ... We don't hold the governor to
standard of fiduciary responsibility regarding the permanent fund,
that's just the board."
REPRESENTATIVE VEZEY asked do you support this constitutional
amendment, or do you have proposed revision to it.
MR. MALONE reiterated that he does favor HJR 50, both the
legislation and the associated constitutional amendment are
worthwhile changes in the relationship in the permanent fund and to
the people of Alaska, they are both good ideas.
MR. MALONE said he believes the issues that are raised by Mr.
Baldwin are valid issues. He said, "You could have a case similar
to the one raised by, using for example the one raised by
Representative Elton where something's going on and nobody is quite
clear - its breech of fiduciary responsibility and it may not be -
like some specific clear cause - other cause - classic cause
removal such as somebody being convicted in some crime involving
misuse of funds or something like that where - you know we could be
in a real jackpot. Whereas, today, the governor could say, 'Well,
I'm not going to take the heat on this, I'm not taking the fall,
this person is getting booted off the board right now.' So, I
think the issues that have been raised are valid ones."
Number 0321
MR. MALONE concluded, "The legislation as written, and the
constitutional amendment as proposed, does improve both the
continuity, and I'm not as much concerned with that as the
accountability. I think it actually improves both those things."
REPRESENTATIVE VEZEY stated you don't think the continuity is a
concern.
MR. MALONE replied, "It is a concern, I put accountability above
all other concerns when it comes to - by that I mean..."
REPRESENTATIVE VEZEY interjected, "I assume you mean fiduciary
responsibility."
MR. MALONE replied yes fiduciary responsibility, the accountability
to perform that.
Number 0377
REPRESENTATIVE VEZEY said, "But you don't think that its material
to the performance of the (indisc.) and material to the fiduciary
obligation to the people of the state of Alaska that we have
continuity on the board, maybe I'm concerned about something I
shouldn't be concerned about."
MR. MALONE agreed continuity is important in any job if you want
people to do it. He said, "I don't think its paramount, but I
think it's very important and that's why I do think it is
appropriate to put a for cause provision in the statute..."
REPRESENTATIVE VEZEY asked Mr. Malone what changes would he
suggest.
MR. MALONE replied, "The only possible change that I'd considered
in making this legislation is to insert some language that makes it
clear that the permanent fund itself, the (indisc.) of the fund is
a public trust, but beyond that, it's pretty well set out in the
statutes. Beyond that, I would not change this."
REPRESENTATIVE VEZEY asked what are we doing in Section 1, changing
the constitution.
MR. LOUNSBURY responded Section 1 simply adds an 'a' to add Section
B.
REPRESENTATIVE VEZEY said, "Section B is the only area that you're
really commenting on now. You support putting in the constitution
that we'll have a public corporation and that the chairman of the
board, head of the board, will be a public member in essence."
MR. MALONE replied, "You're right, I didn't specifically comment on
those things, I said I do support this constitutional amendment.
But if we look at the changes in the constitution, the public
corporation -- I've given that some thought, I don't have a better
idea, I don't have unbounded faith in the corporate structure as a
mechanism for delivering accountability, but I don't have a better
idea and I think that that suffices there and it's probably better
than leaving it to the legislature at the time. Of the risk is
sounding a little smug, I'd say that. And I do believe that the
chair person of the board should be one of the public members."
Number 0589
MR. MALONE stated, "When I was on the board, it was by agreement of
the members that neither of the two department heads would serve as
chair of the board. It was by agreement of the members. There's
nothing in the rules like that or anything. It was recognized that
would put that member under time pressure (indisc.). But I think
this constitutional amendment marginally does improve the
accountability of the fund, it provides for additional scrutiny of
the board members as appointed, it subjects all of them rather than
just the two now to confirmation, and I think it is a useful
improvement."
REPRESENTATIVE BERKOWITZ said, "We're talking about the reason we
(indisc.) a rules if it's something etched in stone. From what I
understand, there's a lot of change going on and most of it's borne
out of the idea that social input has an impact on what a
reasonably prudent investor would do. And that came out of the
move to divest assets from South Africa. And now we're seeing sort
of a resurrection of that concept, particularly in regards to
tobacco stocks. If there is a collision of a notion as to what
constitutes a reasonably prudent investor, what proper fiduciary
duty is, that is a governor might think it's okay to hold tobacco
stocks and a sitting board member might think not. Would that
amount to a cause in your mind for removal?"
MR. MALONE replied, "The constitutional amendment that established
the fund, -- this provides here the principal of which shall be
used only for those income producing investments, specifically
designated by law is eligible for permanent fund investment, which
means that the legislature has, under this constitutional amendment
the authority - we call it a designated list - to decide, either
generally or specifically what the fund will be invested in. My
judgement would be, as long as the board was staying within the
list that's provided by the legislature which is right now very
broad of course, and would include tobacco stocks and arms stocks,
cloning stocks, whatever. It might push people's buttons. It's
not a breech of fiduciary responsibility because the constitution
makes it clear that the investments per say, or what the board is
allowed to invest in are designated by law. So I don't think it's
a breech of fiduciary responsibility to invest in something that is
a social pariah, but that's my opinion and I admit that the whole
area of fiduciary responsibility is an evolving one."
Number 0815
REPRESENTATIVE BERKOWITZ said he understands that position. He
said, "What I'm suggesting is that if there's a different position,
if you're sitting on the board to say it's not a breech of
fiduciary responsibility, there's a governor who says it is a
breech of fiduciary responsibility. Does that amount to cause that
would suffice for removal?"
MR. MALONE replied, "Of course, I certainly can't give a definitive
answer to that. I think the responsibility is an evolving thing,
it's evolving more rapidly I suppose in recent years with
increasing numbers of funds bringing into existence (indisc. -
noise) the last generation, the growing awareness of how fiduciary
responsibilities affect people lives not just in the handling of
the trust and the direct benefits to the beneficiaries, but the
indirect ones, the society at large, particularly from public trust
like the (indisc.). So, I would agree that, there might be a
scenario where a case like that could be made."
REPRESENTATIVE BERKOWITZ said if that's the case, if there's
essentially a political difference over what constitutes fiduciary
duty, and there's an effort to remove someone for cause over that
distinction, then you're stuck in the (indisc.) process that Mr.
Baldwin described where you go through hearings, you go to court
and essentially some form of paralysis takes over.
MR. MALONE said he believes that is right. He doesn't believe you
can devise a mechanism that is insulated from politics and doesn't
think you can devise a mechanism that at some point or another
won't jam up on you. Mr. Malone doesn't think it's humanly
possible to do that. We have maybe not always happily, but we have
always agreed to the courts as arbiters and our disagreements in
this country and it's probably way better than the alternative in
settling those differences.
Number 0940
REPRESENTATIVE BERKOWITZ said because of all of that, he would
suggest that they look for an alternative to the term cause. He
reiterated, "I understand the need for continuity, but if there's
an elevated standard we should be looking for it."
MR. MALONE said to be more specific in regard to the causes.
VICE CHAIRMAN IVAN indicated he would like Mr. Baldwin to be
present at the next State Affairs Committee meeting.
REPRESENTATIVE VEZEY said he did not see what the amendment
accomplishes. He asked Mr. Malone to explain his comment that he
did not believe continuity is important but he supports that
members of the board should be removed only for cause.
Representative Vezey said, "Right now we allow the governor to do
it for whatever reason the governor so desires, which is more often
than not just political motivation."
REPRESENTATIVE VEZEY continued, "Changing the statute to make it
for cause, I don't think we need to change the constitution to do
that. Changing the statute to make it for cause makes it a matter
subject to litigation. The problem I see is that we allow the
board to continue to function with a member removed under the
existing statutes. There's no pressure to settle a dispute between
cause or not. Do we need to be concerned about making it difficult
to remove someone from office or maybe the fact that we're offended
by the board getting fired every four years, it may just be a
political (indisc.), maybe it's not a fiducial (indisc.)."
Number 1094
MR. MALONE stressed he believes continuity is very important. He
said, "It's an issue, in my mind it's related to accountability and
I think accountability is more important. ... And I think that,
because - it certainly is a clever person who has the resources and
time and the political connections could turn the funds to purposes
different than many of us would like to see."
MR. MALONE continued, "I think it is important to have the board,
to some extent, insulated from the political process. I admit that
raises additional questions of accountability. But I think it's
important to do that."
MR. MALONE concluded, "On the constitutional amendment, what it
does in my mind, is it makes it clear what the management structure
would be, which we have that in statute of course, it's pretty
clear right now, but it makes that even more clear. The other
thing it does, is that it provides for mandatory legislative
scrutiny of the appointees to the board through the confirmation
process. They don't get confirmed, they don't get taken up, if
they don't get acted on by the legislature, they're out of there.
So, that I think it is an improvement because, to my mind, the
legislative oversight of the Alaska Permanent Fund, since its
inception has been inadequate and this would improve that somewhat.
I'm in favor of both the statutory change and the constitutional
amendment that accompanies it."
VICE CHAIRMAN IVAN indicated HJR 50 would be heard again in the
House State Affairs Standing Committee.
ADJOURNMENT
Number 1225
VICE CHAIRMAN IVAN adjourned the House State Affairs Standing
Committee at 10:01 a.m.
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