Legislature(2003 - 2004)
03/08/2004 08:07 AM House STA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
March 8, 2004
8:07 a.m.
MEMBERS PRESENT
Representative Bruce Weyhrauch, Chair
Representative John Coghill
Representative Bob Lynn
Representative Paul Seaton
Representative Ethan Berkowitz
Representative Max Gruenberg
MEMBERS ABSENT
Representative Jim Holm, Vice Chair
COMMITTEE CALENDAR
HOUSE BILL NO. 466
"An Act relating to investments of Alaska permanent fund assets;
and providing for an effective date."
- MOVED CSHB 466(STA) OUT OF COMMITTEE
HOUSE BILL NO. 439
"An Act relating to the authority to take oaths, affirmations,
and acknowledgments in the state; relating to notaries public;
relating to fees for issuing certificates with the seal of the
state affixed; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 520
"An Act relating to the expenses of investigation, hearing, or
public advocacy before the Regulatory Commission of Alaska, to
calculation of the regulatory cost charge for public utilities
and pipeline carriers to include the Department of Law's costs
of its public advocacy function, to inspection of certain books
and records by the attorney general when participating as a
party in a matter before the Regulatory Commission of Alaska;
and providing for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 466
SHORT TITLE: PERMANENT FUND INVESTMENTS
SPONSOR(S): RULES BY REQUEST OF LEG BUDGET & AUDIT
02/16/04 (H) READ THE FIRST TIME - REFERRALS
02/16/04 (H) STA, FIN
02/26/04 (H) STA AT 8:00 AM CAPITOL 102
02/26/04 (H) Scheduled But Not Heard
03/02/04 (H) STA AT 8:00 AM CAPITOL 102
03/02/04 (H) Heard & Held
03/02/04 (H) MINUTE(STA)
03/08/04 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 439
SHORT TITLE: OATHS; NOTARIES PUBLIC; STATE SEAL
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
02/05/04 (H) READ THE FIRST TIME - REFERRALS
02/05/04 (H) STA, JUD, FIN
03/04/04 (H) STA AT 8:00 AM CAPITOL 102
03/04/04 (H) <Bill Hearing Postponed to Mon. 3/8/04>
03/08/04 (H) STA AT 8:00 AM CAPITOL 102
BILL: HB 520
SHORT TITLE: REGULATORY COMMISSION OF ALASKA
SPONSOR(S): STATE AFFAIRS
02/23/04 (H) READ THE FIRST TIME - REFERRALS
02/23/04 (H) STA, L&C, FIN
03/05/04 (H) STA AT 8:00 AM CAPITOL 102
03/05/04 (H) <Bill Hearing Postponed to Mon. 3/8/04>
03/08/04 (H) STA AT 8:00 AM CAPITOL 102
WITNESS REGISTER
ROBERT D. STORER, Executive Director
Alaska Permanent Fund Corporation (APFC)
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the department
during the hearing on HB 466.
RONALD W. LORENSEN, Attorney at Law
Simpson, Tillinghast, Sorensen & Longenbaugh, P.C.
Juneau, Alaska
POSITION STATEMENT: Testified during the hearing on HB 466.
ANNETTE KREITZER, Chief of Staff
Office of the Lieutenant Governor
Juneau, Alaska
POSITION STATEMENT: Outlined the sectional analysis and its
relation to a committee substitute to HB 439.
SCOTT CLARK, Notary Commission Administrator
Office of the Lieutenant Governor
Juneau, Alaska
POSITION STATEMENT: Discussed changes to HB 439 and answered
questions from the committee.
DANIEL PATRICK O'TIERNEY, Senior Assistant Attorney General
Commercial/Fair Business Section
Civil Division (Anchorage)
Department Of Law
Anchorage, Alaska
POSITION STATEMENT: Addressed changes proposed in the committee
substitute during the hearing on HB 520.
ACTION NARRATIVE
TAPE 04-31, SIDE A
Number 0001
CHAIR BRUCE WEYHRAUCH called the House State Affairs Standing
Committee meeting to order at 8:07 a.m. Representatives Seaton,
Coghill, Lynn, Gruenberg, and Weyhrauch were present at the call
to order. Representative Berkowitz arrived as the meeting was
in progress.
HB 466-PERMANENT FUND INVESTMENTS
Number 0080
CHAIR WEYHRAUCH announced that the first order of business was
HOUSE BILL NO. 466, "An Act relating to investments of Alaska
permanent fund assets; and providing for an effective date."
CHAIR WEYHRAUCH mentioned an amendment regarding allowing the
[Alaska Permanent Fund Corporation (APFC)] board to make loans
of fund assets to the Alaska Natural Gas Development Authority.
He asked Mr. Storer for his feedback.
Number 0144
ROBERT D. STORER, Executive Director, Alaska Permanent Fund
Corporation (APFC), Department of Revenue, responded as follows:
... The board has not discussed the merits of this
issue, so I would just make a couple observations.
One is [that], if in fact the amendment were to go
through, it would definably be a less liquid asset;
but how liquid or how the instrument [would] look ...,
I couldn't speak to right now. But one of the things
that we discussed, Mr. Chair, was the fact that as we
diversify portfolios, we own a lot of stocks. We had
discussion weeks ago about ... filling the basket.
And we own over 4,000 stocks. And I mention this
because, in our publicly traded equity portfolio -
very liquid, large company names - our largest
holding's probably Pfizer or [General Electric
Company], and it's probably around $250 million in
value; that's in a $28 billion fund. So, you can see
the less liquid the ... investment instrument, the
less money one would be willing to commit to. So,
it's a practical matter. If it met the prudent
investor rule, if it met our diversification criteria,
probably the most we would be able to invest in
passing those hurdles would be $50 maybe $100 million
- tops. We do have other ability to make that type
[of] investment, if it's appropriate for the permanent
fund, but that would, of course -- the difference
being giving us explicit direction to at least
consider such an investment.
Number 0290
CHAIR WEYHRAUCH asked if the [APFC] makes investments in
mortgages.
MR. STORER responded that [APFC's] only real mortgage exposure
currently is through the publicly traded mortgage-backed
security market. He noted that in the 80s, the permanent fund
did have a direct mortgage program, perhaps exclusively, through
Alaska banks for Alaska mortgages. However, those securities
were packaged and sold to the banking industry. Mr. Storer said
there are some loans that are made on Alaska property, where the
[APFC] has invested. He cited the Frontier Building in
Anchorage as an example. He concluded, "So, there are some
loans made to real estate assets here in Alaska."
Number 0359
CHAIR WEYHRAUCH [moved to adopt] Amendment 1, which read as
follows:
Page ____, line ____:
Insert new bill sections to read:
"* Sec.____. AS 37.13.120 is amended by adding a
new subsection to read:
(q) In addition to investments made under (g) of
this section, the board may make loans of fund assets
to the Alaska Natural Gas Development Authority for
use in developing North Slope natural gas resources
and in transporting the natural gas. The amount and
terms of each loan made under this subsection shall be
established by the board.
* Sec.____. AS 41.41 is amended by adding a new
section to article 2 to read:
Sec. 41.41.205. Loans from permanent fund. The
authority may enter into loan agreements with the
Alaska Permanent Fund Corporation under
AS 37.13.120(q). Money from a loan may be used only
to carry out one or more of the purposes listed in
AS 41.41.010(a)(1) - (4)."
Number 0363
REPRESENTATIVE SEATON objected for discussion purposes.
CHAIR WEYHRAUCH explained that the first section of Amendment 1
would allow the [APFC] board to make loans of fund assets to the
Alaska Natural Gas Development Authority, while the second
section of Amendment 1 would allow the authority to have loan
agreements with the [APFC] "only if money so loaned by the fund
would meet the fund's fiduciary duties and obligations currently
in statute." He indicated that the amendment would provide some
"legal comfort" to the authority. He interpreted Mr. Storer's
testimony to mean that the [APFC] board has not taken a position
for or against [Amendment 1]. He continued:
It may be a less ... amount of money that could be
available to the fund if it needed those liquid cash
assets, but it still would subject any loan
application to its own fiduciary needs and its own
investment criteria.
And I believe that, in making the amendment, what I
wanted to do is simply have that pool of funds
available to the authority if it can meet the
statutory obligations that the fund already has to
obtain funds. And that's what's behind the amendment.
Number 0558
REPRESENTATIVE LYNN stated that although he understands that the
investments in the fund need diversification, he thinks that
investing in Alaska is really "investing in ourselves." He said
he thinks that "needs to be included in the list of things that
[are] possible where the permanent fund can invest in."
CHAIR WEYHRAUCH responded that there's no clear prohibition on
the ability of the Alaska Natural Gas Development Authority "to
already apply for funds." [Amendment 1] simply clarifies in
statute that the authority may apply "as a source of funds." He
explained that there would be no obligation; [Amendment 1]
provides "a legal path to do it."
Number 0608
REPRESENTATIVE GRUENBERG asked if Amendment 1 would provide any
additional authority to [the APFC's existing authority].
MR. STORER stated his assumption that any loan to the authority
would be illiquid and below investment grade. He stated, "We do
have that authority now through our 5-percent basket clause. If
we were given ... explicit direction by statute, then we would
not need to apply the basket clause to that investment."
REPRESENTATIVE GRUENBERG directed Mr. Storer's attention to the
first part of Amendment 1. He asked Mr. Storer if that would
"take this out of the basket clause."
MR. STORER answered that's correct.
REPRESENTATIVE GRUENBERG noted that [part of AS 37.13.120(g)]
read as follows:
(g) Subject to the limitations contained in this
section, the board may invest fund assets at the
competitive national market rates or prices that are
applicable to each investment only in
REPRESENTATIVE GRUENBERG asked, "Would this make this particular
loan an exception to that requirement?"
MR. STORER answered that the prudent investor rule would still
have to be followed. He noted, "We also have other statutes
that say ... invest in Alaska if the rate of return is
comparable for that same level of risk found elsewhere." He
stated that the [APFC] would use those standards in evaluating
any investment. He suggested, "The difficulty in this may or
may not be to find a comparable investment opportunity to
evaluate it, but we would strive to compare this opportunity
against other alternatives in our analysis."
CHAIR WEYHRAUCH told Representative Gruenberg that it was not
his intent to "force the hand of the fund to invest in the
authority," but simply to provide legal clarity.
REPRESENTATIVE GRUENBERG indicated that the current limit is 5
percent under the basket clause, but [Amendment 1] would allow a
loan to the authority in excess of that. He clarified, "It
would be in addition to the 5 percent."
MR. STORER said that's correct.
REPRESENTATIVE GRUENBERG asked how that would affect the present
policies of the board, regarding the amount they loan out.
MR. STORER responded that that is a difficult question to
answer, because he is not certain what "the nature of the loan
would look like." He continued as follows:
Unless it fell within our real estate policies in some
way, it would probably be a stand-alone policy, which
would mean that we would have to develop unique
criteria and ... qualities to ... identify the
investment.
If what I stated was true, and ... it was $50 million
to $100 million, my assumption [is that] it would be
significantly less liquid than other alternatives,
perhaps, but that it would ... have a nominal effect
on the return. If it was $50 million in a $28 billion
portfolio, it would have, probably, a nominal affect -
good or bad - on the return for the fund.
Number 0965
REPRESENTATIVE SEATON noted that Mr. Storer had previously
stated that "it would be below investment grade." He said he is
trying to figure out the basis for that.
MR. STORER prefaced his response by stating that it is a little
difficult [to explain], without evaluating what the specific
loan would be. He said investment grade securities typically
are publicly traded securities, but they receive a rating from
the nationally recognized rating agencies. He gave some
examples. He said the [APFC] buys "investment grade," which
must be rated as such from Moody's or Standard & Poor's [bond
rating agencies]. He stated his assumption that "one would not
seek a rating from Moody's or Standard & Poor's, because you're
not taking it out on the market." He noted that there's a cost
associated to that rating. He added, "You're simply coming to
the permanent fund to make an evaluation on its own merit."
CHAIR WEYHRAUCH stated his understanding that "this is not the
same kind of a structural investment the fund would make; this
would be simply the ... legal ability to analyze a loan
agreement from the authority to develop whatever the authority
believes it needs to get developed, and look to the fund for a
potential source of cash, and not obligate either one to invest
in it."
Number 1061
REPRESENTATIVE SEATON removed his objection [to Amendment 1].
CHAIR WEYHRAUCH announced that, there being no further
objection, Amendment 1 was adopted.
Number 1094
REPRESENTATIVE GRUENBERG indicated that he had sent a letter
containing questions to Mr. Storer. He asked Mr. Storer if he
would supply the answers to those questions in writing to the
members of the committee.
MR. STORER answered yes. In response to a request from Chair
Weyhrauch, he agreed to also supply those answers to the House
Finance Committee.
Number 1151
REPRESENTATIVE GRUENBERG pointed to the language beginning on
[page 1, line 14] of the bill, which read as follows:
Notwithstanding (g), (h), and (j) of this section or
the percentage investment limitations under (i) of
this section and so long as doing so satisfies the
prudent-investor rule under (a) of this section, the
board may invest up to 15 [FIVE] percent of the total
assets of the fund in either or a combination of the
following:
REPRESENTATIVE GRUENBERG, regarding subsections (h) and (j),
asked Mr. Storer to describe the meaning and implication of
"that."
MR. STORER paraphrased subsection (h), which read as follows:
(h) The board may enter into future contracts for
the sale of investments purchased under (g) of this
section, or for the sale of nondomestic currencies,
only for the purpose of hedging an existing equivalent
ownership position in these investments or as a means
of implementing asset allocation strategies.
Number 1249
MR. STORER stated that there are some strategies within the
hedge fund investment arena, where "you may enter into futures
contracts or forward contracts." He stated, "We believe that
... cleaning it up or acknowledging this is consistent with the
original intent of the basket clause." He qualified that that
does not mean that the [APFC] would accept considerably more
risk. He explained, "In fact, going before the board this week,
we're recommending a policy that's very conservative, that will
have the targeted risk of a bond portfolio, or less."
MR. STORER paraphrased subsection (j), which read as follows:
(j) The assets of the fund may not be used for
the purchase of debt instruments of a corporation or
other entity upon which any regular interest payment
has been defaulted within five years before purchase,
except debt instruments never in default but which
have been outstanding for less than five years.
MR. STORER continued as follows:
This, actually, is a piece of legislation that you saw
a lot in the 70s when the permanent fund statutes were
created. My prior employer in the 70s and early 80s -
the [Los Angeles] County Employees' Retirement System
- had that same criteria. Virtually everyone has gone
away from that approach. How ... a corporation uses
debt is different than how corporations use the bank
(indisc.), because courts are a lot different than
they were 25 years ago. But, embedded in both,
perhaps, hedge funds, but more likely in a private
equity portfolio is a subclass called "buyouts." And
buyouts are where you go in and invest in a distressed
company, and then you financially engineer the company
to earn significant returns in the future. And so,
this is a case where that would probably apply, within
a private equity discipline.
Number 1468
REPRESENTATIVE GRUENBERG asked, "But I don't think you're
planning on doing that with the permanent fund, are you?"
MR. STORER replied as follows:
We are ... about to implement a small private equity
portfolio. So, embedded in that policy is the
potential for investing in a company that may have not
paid debt in the last five years. But it's very
possible that there's investment-grade debt, that by
virtue of upgrades would meet the fund's criteria, but
was in some form of distress and managed to work its
way out where we could potentially take advantage of
that, as well. And there, you have a bond that would
be an investment grade rated by national rating
agencies and still not be applicable to our fund.
Number 1518
REPRESENTATIVE GRUENBERG directed the committee's attention to
page 2, line 3. He mentioned that he and Representative Lynn
had conversed regarding the percentage.
CHAIR WEYHRAUCH questioned whether 15 percent would be an
adequate amount.
MR. STORER responded that the [APFC] has held a number of
discussions with the Department of Law regarding how much the
basket clause can be increased. He said, "While not seeking a
legal opinion, we're under the impression they're comfortable
with increasing the basket clause to 15 percent, but any more
might create a look ... at the constitution, which says
designated by law." He said the [APFC's] ultimate goal would be
to "look like other public funds" and follow the prudent-
investor rule.
Number 1584
REPRESENTATIVE LYNN suggested that 10 percent would be more
conservative than 15 percent, and he asked Mr. Storer how the 15
percent was chosen.
MR. STORER responded as follows:
Even with the 15 percent constraint, ... by statute
and constitution, that would make us one of the most
conservatively public funds in the country. So, I've
suggested even increasing the limits of 15 percent
would still put limitations on the fund.
In the [Senate State Affairs Standing Committee], I
was asked a question about 10 percent, and the answer
is: If we remove the 15 percent down to 10, that
would give the fund the flexibility probably over the
next couple years to manage the assets in the
direction that we would like to go; but we would be
back to ask for an extension beyond that point.
Keep in mind there's two reasons for this objective.
One is the immediate one, which is ... [that] there
are limits in equities in using the basket clause, so
if ... the strategies are as successful as we hope, we
will be forced to arbitrarily liquidate securities,
not because of the markets ... [or] asset allocations,
but because of statute. Increasing from 5 [percent]
to 10 [percent] would expand that flexibility over the
next couple years.
The other reason to go to 15 percent, or even more,
ultimately, is just to give future administrators the
flexibility to address [the] ever-changing dynamic
investment world.
Number 1700
CHAIR WEYHRAUCH asked how [the legislature] would know whether
15 percent was the appropriate figure, without specifically
asking. He asked if the public would be advised through the
[APFC's] annual reports.
MR. STORER described the [APFC's] process as a rigorous one.
The investment process begins with the asset allocation
decision. There are investment policies that develop the
standard, which are actually tighter than statutes, and ... they
are publicly passed by resolutions, after public debate. Next,
the strategies are implemented.
MR. STORER indicated that the APFC produces an annual report and
reports to the legislature its investment returns quarterly.
There is a website listing all [the APFC's] policies and its
minutes, once they're adopted. He noted that the APFC posts its
returns on a monthly basis, not only by asset class, but also by
every discipline and every manager. He added, "And so, one
could follow as closely as they wanted to."
REPRESENTATIVE LYNN suggested examining "that figure" in two
years.
Number 1792
REPRESENTATIVE SEATON noted that Mr. Storer had said that "you
would be having to get out of investments, not by asset
allocation, but by statute." He said, "If we're increasing your
flexibility to add some to your asset allocations, I'm not quite
understanding how that allocation isn't causing you to
redistribute your funds."
MR. STORER explained:
If the board adopts a recommended asset allocation, we
will be very close to our statutory constraint, which
means that as the assets appreciate, we will have to
reduce our exposure - not because of an asset
allocation [decision] ... [or] market decision, but
simply because, by virtue of success, we will have
reached our statutory limitations, which then will
force us to rebalance.
Number 1871
REPRESENTATIVE SEATON asked if the current fund allocation -
which he said he thinks has total equities of "53 percent, plus
or minus 5 percent" - includes the 5 percent basket [clause].
MR. STORER responded, "That's the target, and ... our statutory
limit is 55 percent on equities, and we are about 58 percent
right now, so we are currently using some of the basket clause
that's remaining within our target." He continued as follows:
I don't know if they provided a bar chart of how we
propose to implement the use of the basket clause, but
if you have that before you, you'll see that right now
we're not using all of the basket clause, and the only
degree we are using it, it's in publicly traded
equities. Recommending that we start investing ... 1
percent of our assets in a hedge-fund program - that
can be a bit controversial. I'll note that ... early
in this presentation ... we're actually going to make
it very conservative so it has a targeted risk of
below the bond market. And we are in the throes of
finalizing our private equity policies; at this board
meeting we'll start implementing that strategy. That
will take a few years to put to work. So, probably by
sometime [in] the next year to year and a half, we
will have essentially ... used all of the basket
clause, with some cushion for appreciation of the
assets.
MR. STORER, in response to a question from Representative
Seaton, clarified that "theoretically, one could have a maximum
exposure to 70 percent in the publicly traded equity market";
however, as a practical matter, he said that won't happen. He
revealed that no fund that he has ever overseen has ever
invested more than 60 percent in the U.S. equity market.
Number 1983
REPRESENTATIVE GRUENBERG offered his understanding that the
[Senate State Affairs Standing Committee] "passed it out with a
10 percent, rather than a 15 percent."
MR. STORER said that's correct.
REPRESENTATIVE GRUENBERG offered his understanding that the
history of AS 37.13.120 is that over the last 20-25 years, the
legislature has slowly eased the restrictions incrementally.
MR. STORER concurred. He mentioned the changes that have
occurred over time to allow more investment flexibility to the
permanent fund. He continued as follows:
In ... July of '83, we funded our first equity
manager; that was the product of increased investment
flexibility prior to that. And so, the ...
legislature has given increased flexibility when we've
asked for it, and I believe that the permanent fund
has always used that flexibility judiciously. I would
note that we were given permission four years ago to
use the basket clause, and, in fact, we are only just
now beginning to use the basket clause. So, when we
are given permission, the history of the permanent
fund is that you use that privilege or that authority
very judiciously and make informed decisions.
Number 2056
REPRESENTATIVE GRUENBERG indicated he wanted Mr. Storer to
confirm that the history of the fund was that it had been
"slowly loosened to provide you with flexibility."
MR. STORER answered that's correct. He directed the committee's
attention to page 4 of "that initial presentation" that shows
how the asset allocation of the permanent fund has changed over
time, beginning with the pure bond fund in the late 70s and
early 80s. He offered his understanding that in 1980, the fund
didn't hold a bond with a maturity greater than 2 years. The
asset allocation has been incrementally increased over time in
various asset classes. He stated, "The history of the permanent
fund is one of caution and conservatism."
Number 2127
REPRESENTATIVE LYNN [moved to adopt] Amendment 2, which read as
follows:
Page 2, line 3
Delete "15"
Insert "10"
CHAIR WEYHRAUCH objected.
REPRESENTATIVE LYNN reiterated his previous comment that it is a
conservative fund and he thinks that [changing to 10 percent]
follows the history of incremental changes. He stated that he
has no problem with [the idea of] revisiting the issue in the
future. He concluded, "So, I would recommend also, to go along
with the other body, that we change it to 10 percent."
Number 2188
REPRESENTATIVE BERKOWITZ said, "We revisit this thing all the
time." He explained the reason why is that putting a specific
number in statute is inherently not a conservative method of
investment, because any specific number is a deviation from the
reasonably prudent investor rule; it takes away the flexibility
that a reasonably prudent investor would normally exercise. He
offered his understanding that the statutes that govern private
investments are in Title 13, and he noted that in those statutes
there are no numerical restrictions on the amount or type of
investment - they just outline the prudent-investor rule. He
stated that it's only in Title 37 that false conditions are
imposed on the [APFC] that are restrictive in a way that works
against reasonably prudent investment.
Number 2200
REPRESENTATIVE BERKOWITZ spoke against Amendment 2. He said, "I
think the more we can do to expand the basket, the more we allow
the fund the flexibility to get closer and closer to what a
reasonably prudent investor would truly do, instead of
restricting, based on some arbitrary number."
Number 2220
RONALD W. LORENSEN, Attorney at Law, Simpson, Tillinghast,
Sorensen & Longenbaugh, P.C., opined that Mr. Storer had
accurately and succinctly described the issue regarding the
basket clause. He suggested that there may be a potential
maximum size that the basket clause could not exceed, but [that
size] is yet to be determined. He indicated that the Department
of Law seemed comfortable with the notion that the 15 percent
hasn't "pushed that limit."
MR. LORENSEN referred to the aforementioned comments made by
Representative Berkowitz regarding the prudent-investor rule.
He said, "Certainly it's the way I know the board ... and also
... the investment staff looks at the issue, is that any
limitations that are expressed actually operate to reduce
flexibility that would otherwise be available under the prudent
investor rule, as stated in subsection (a)."
Number 2278
REPRESENTATIVE SEATON stated his concern that "we" are the gate
keepers of the fund, as well, and, although Mr. Storer is saying
that he wouldn't be at 70 percent of equities for any fund he
managed, that's what would be allowed "with this." Regarding
[Amendment 2], he stated the following:
If they haven't used the 3 percent of the basket
clause to this point in time, after several years, I
think the 5 percent - or a doubling of the basket
clause - has been ample opportunity to look at a
number of different investment ways and let's us come
back to the ways. I mean, we're talking about future
markets here, which are ... a little bit outside of
what we normally think the permanent fund would
normally be investing in and what we historically said
we wanted to invest in. And we are talking about $2.7
billion of available money in that 10 percent.
Number 2327
REPRESENTATIVE COGHILL noted that it had already been stated
that the 15 percent is still a limit on flexibility. He said
the [APFC] has shown it has a steady handed management style.
He stated, "I think to be fearful that they would step outside -
especially since they're still under the auspice of the prudent-
investor rule - speaks to giving them the 15 percent." He
concluded that he has no problem with the 15 percent.
Number 2366
REPRESENTATIVE BERKOWITZ stated that when the legislature puts
numbers into statutes affecting the permanent fund, in essence
it's substituting its judgment for that of the fund managers,
which is a bad step to take. He said he realizes that the
statutory restrictions already exist.
TAPE 04-31, SIDE B
Number 2381
REPRESENTATIVE BERKOWITZ [suggested] stripping out the numbers
and going straight to the reasonable prudent-investor rule. He
said, "We hire professional managers to manage the fund; we
ought to let the professionals do their job." He expressed that
one of the government trends he finds problematic is the micro-
management of people hired. He reiterated that he would take
all the numbers out; however, notwithstanding that, he opined
that 15 percent is far preferable to 5 or 10 [percent].
Number 2343
REPRESENTATIVE GRUENBERG said that most Alaskans consider the
permanent fund to be theirs and do not want the legislature
changing "anything with the fund" unless it's done carefully and
conservatively. He indicated that because of the history of
conservative management of the fund, not only by the [APFC] but
by the elected legislators as well, the public confidence in
that management remains high. Representative Gruenberg said
that adopting Amendment 1, and thereby allowing the investment
in the gas pipeline, will effect significant change in the way
the fund is being managed. He emphasized the importance of
keeping the public's confidence, which he explained is why he is
in support of [Amendment 2].
Number 2234
REPRESENTATIVE BERKOWITZ said the question is, in essence, "Who
do you want making your investment decisions: the legislature,
or the [APFC]?" He reiterated that he would choose the latter.
He posited that including Amendment 1 in this discussion is a
"red herring," because the decision whether or not to make
investments in the natural gas pipeline will be based on a
reasonably prudent investor analysis. He stated that he was
sorry he missed discussion regarding Amendment 1, because if the
[APFC] is going to make investments, it will do so based on its
own analysis of what's in the fund's best interest. He
reiterated his opinion regarding leaving the job to the
professionals.
Number 2180
REPRESENTATIVE SEATON clarified:
Our investors didn't tell us 15 percent was where they
wanted to go; they wanted to have all limits off. And
they say that 15 percent is the maximum that they
think they could go, without violating the
constitution. ... In a prudent-investor rule, ...
there are funds all around that are 100 percent
invested in equities, and that can be prudent
investing, depending on the type of fund. So, the
[prudent-investor rule] doesn't necessarily fix the
diversification you have; you can have a very diverse
stock portfolio and it is fully managed for stocks and
equities. So, the idea that we're fixed at 55 percent
or that a prudent investor is only going to be 55- or
only going to be 60-percent invested in stocks -
that's not the case.
Number 2142
REPRESENTATIVE LYNN stated, "One of our principal jobs here is
to oversee what is going on in departments and functions that
professionals manage."
REPRESENTATIVE BERKOWITZ brought attention to AS 13.36.235,
which read as follows:
Sec. 13.36.235. Diversification.
A trustee shall diversify the investments of the trust
unless the trustee reasonably determines that, because
of special circumstances, the purposes of the trust
are better served without diversifying.
REPRESENTATIVE BERKOWITZ said the idea that the [APFC] would
want to invest 100 percent in equities, real estate, bonds, or
any other type of asset, flies in the face of the legal
description of what a reasonably prudent investor would do. He
listed some of the other components of what a reasonably prudent
investor is required to take into account as follows: general
economic conditions, expected tax consequences, the role that
each investment plays with the overall trust portfolio, expected
total return, other resources of the beneficiary, the need for
liquidity, and the special relationship or special value to the
beneficiary. Representative Berkowitz stated that the prudent-
investor rule guards strongly against the notion that the fund's
monies could or would be inducted in a single place. He
concluded, "To the extent that this committee might have any
concerns that we might wind up with 100 percent in equities, I
think that that would not be ... the course that a prudent
investor would follow. And I think that, again, it's sort of a
phantom concern."
Number 2025
REPRESENTATIVE GRUENBERG noted that the [prudent-investor rule]
for the fund is in subsections (a) through (c) of AS 37.13.120.
He said it largely mirrors what Representative Berkowitz just
said, but "they have their own mini prudent-investment standard
right in this statute."
Number 2009
CHAIR WEYHRAUCH reminded the committee that earlier testimony
had revealed that 15 percent would still make the fund one of
the most conservatively managed in the country. The other
reason to go to 15 percent is because it gives more ability [to
the APFC] to invest to benefit the fund. He said he hasn't
heard any reason for the 10 percent, other than to go
incrementally up to the 15 percent. He explained that's why he
will vote against [Amendment 2].
Number 1970
A roll call vote was taken. Representatives Seaton, Lynn, and
Gruenberg voted in favor of Amendment 2. Representatives
Coghill, Berkowitz, and Weyhrauch voted against it. Therefore,
Amendment 2 failed by a vote of 3-3.
Number 1934
REPRESENTATIVE GRUENBERG moved [to report HB 466, as amended,
out of committee with individual recommendations and the
accompanying fiscal note.] There being no objection, CSHB
466(STA) was reported out of the House State Affairs Standing
Committee.
HB 439-OATHS; NOTARIES PUBLIC; STATE SEAL
Number 1900
CHAIR WEYHRAUCH announced that the next order of business was
HOUSE BILL NO. 439, "An Act relating to the authority to take
oaths, affirmations, and acknowledgments in the state; relating
to notaries public; relating to fees for issuing certificates
with the seal of the state affixed; and providing for an
effective date."
Number 1873
REPRESENTATIVE GRUENBERG moved to adopt the committee substitute
(CS) [for HB 439, Version 23-GH2022\D, Bannister, 3/6/04], as a
work draft. There being no objection, it was so ordered.
Number 1850
ANNETTE KREITZER, Chief of Staff, Office of the Lieutenant
Governor, noted that Version D is the CS that was requested to
put the bill in the form of legislative drafting. She noted
that there are many small changes that resulted; the first most
notable change is the title change.
MS. KREITZER read the description of Section 1 in the sectional
analysis [see analysis included in committee packet]. She said,
"When Lieutenant Governor Leman came into the lieutenant
governor's office, this was a surprise to us the first time we
went through the business of administering the oath to folks who
are new to the legislature [and] returning members. So, that's
been added."
MS. KREITZER noted that Sections 2, 3, 4, and 5 are conforming
sections of the Alaska Civil Procedure concerning notarial acts.
She noted that this is where the sectional deviates from
[Version D]. She stated that there is a new Section 4, which
was added by attorneys in [Legislative Legal and Research
Services] as a necessary measure to make the bill conform to
legislative drafting standards. She said an explanation of that
can be found in the Legislative Legal and Research Services memo
dated March 6, 2004, written by Theresa Bannister [included in
the committee packet].
Number 1773
CHAIR WEYHRAUCH asked when the last time "this statutory scheme
was amended."
MS. KREITZER answered 1961.
CHAIR WEYHRAUCH asked, "So, is this sort of an omnibus amendment
bill to notary statute?"
MS. KREITZER answered yes.
CHAIR WEYHRAUCH said he would like to get "a bigger picture."
Number 1748
REPRESENTATIVE GRUENBERG noted that when he served [in the
legislature] before, he "tried to amend this." He said he had
introduced HB 394 in the Seventeenth Alaska State Legislature.
He said that because of one senator, "we couldn't get this thing
updated." He commented that this has been a long time in
coming.
Number 1733
MS. KREITZER stated that [the proposed legislation] is important
to the 12,000 notaries in the state, as well as to the banks and
insurance companies. She said [HB 439] will fix statutes.
MS. KREITZER returned to outlining the sectional analysis.
Regarding [Section 5 of the sectional analysis, which is Section
6 in Version D], she said the fee per notarial certificate will
be increased and the outdated term "folio" will not be used.
Ms. Kreitzer noted that [Section 6 of the sectional analysis,
which is Section 7 in Version D] specifies there will be two
categories of notaries: a notary public without limitation and
a limited governmental notary public. She noted that [Section 7
of the sectional analysis, which is Section 8 in Version D] will
make changes to qualifications. She reviewed the changes [see
Section 7 of the sectional analysis].
Number 1617
REPRESENTATIVE BERKOWITZ asked how many [felons] with notary
certificates would lose them due to that provision.
MS. KREITZER answered, "We don't know; we don't track that."
REPRESENTATIVE BERKOWITZ added, "But there's been no indication
that there are felons out there who are doing things as notaries
that are inappropriate."
Number 1570
SCOTT CLARK, Notary Commission Administrator, Office of the
Lieutenant Governor, proffered that he has received a few phone
calls from people who indicated that there might be felons
serving as notaries. He said "But since it's not against the
law right now, we don't follow up on it."
Number 1536
REPRESENTATIVE LYNN turned to [page 5, line 8, paragraph (4), of
Version D] where the language states that a notary "shall reside
legally in the United States;". He said, "I wonder if anybody
on this committee would have any objection to that, considering
some of the other legislation that's pending, ... how we
determine who is and is not residing legally in the United
States, and if we could possibly be putting anybody out of
work."
Number 1528
CHAIR WEYHRAUCH asked Representative Lynn to "hold that thought"
for later.
Number 1523
REPRESENTATIVE GRUENBERG said this would be a lifetime
disqualification [for a convicted felon]. He said a person may
have been fully restored to his/her civil liberties and "not to
be able to even be a notary public seems pretty harsh."
CHAIR WEYHRAUCH said, "Yet another example why I think we need
an expungement statute."
Number 1500
MS. KREITZER named several felony charges. She said, "The
question is: These folks who commit these, do you want them
being notaries?" She said that's the policy call of the
legislature.
REPRESENTATIVE GRUENBERG responded, "Those are the easy cases,
let's look at the harder cases." He offered to explore [the
issue] with Ms. Kreitzer.
Number 1479
MS. KREITZER returned to her overview of the sectional analysis.
She stated that [Section 9 of the sectional analysis, which is
Section 10 in Version D] deals with antiquated language, while
[Section 10 of the sectional analysis, which is Section 11 in
Version D] sets out what a notary public cannot do and specifies
the elements that must be present for a notary public to
notarize a document. She indicated that new sections in statute
[Secs. 44.50.067-.068] would give the lieutenant governor the
ability to address the issues regarding complaints. She
indicated there was concern that people not be taken advantage
of by a notary public.
Number 1411
REPRESENTATIVE BERKOWITZ stated that he is not sure why the
state even has notary publics. He said, "If people sign or
affirm things independently, that ought to suffice. Am I wrong
in that?"
Number 1396
CHAIR WEYHRAUCH revealed that he is currently involved in a case
where the notary [public's] signature is the critical element of
the case. He added that the case has to do with the government
accepting an application and transferring rights.
REPRESENTATIVE BERKOWITZ responded as follows:
It just strikes me as a very paternalistic type of
government, where government says your signature's no
good unless it gets an official stamp of approval from
somebody, who has a bear minimum of qualification, you
paid a fee to. It just seems like another one of
these bureaucratic hurdles that government sets up to
cause consternation for those of us who have to run
around and get notary signatures.
CHAIR WEYHRAUCH responded that in the case in which he is
involved, there would have been far less consternation and
expense if there had been an original notary. He stated that
it's the abhorrent cases that perhaps make it necessary to
continue the system.
REPRESENTATIVE BERKOWITZ suggested that the focus should be on
the jurisdiction of notaries, instead of "making it uniform."
In response to Chair Weyhrauch's suggestion that a person could
simply go to the post office to "just get it stamped,"
Representative Berkowitz remarked that that would still require
a person to go somewhere to get somebody else to approve his/her
signature. He said he knows his signature is good. He said,
"There's this presumption that somehow I'm not telling the
truth."
CHAIR WEYHRAUCH said, "It's not a matter of veracity of a
statement, it's that you're saying who you say you are."
Number 1283
REPRESENTATIVE LYNN echoed the chair's last statement and added
that a person who goes to a notary would have to have some form
of identification, such as a driver's license.
Number 1253
REPRESENTATIVE GRUENBERG stated, "This is an Act that really
cries out for a uniform Act." He asked Ms. Kreitzer if there is
a uniform or model notary public Act.
MS. KREITZER answered yes. She informed Representative
Gruenberg that it is "much more bureaucratic than this one."
REPRESENTATIVE GRUENBERG stated that California's process for
getting a notary public is complicated and expensive, which he
opined is not appropriate for Alaska. He said he has litigated
cases involving notarizations. Some of the cases dealt with
whether or not the notarization itself was a forgery. He
indicated that "it" shouldn't be an impediment. He asked Ms.
Kreitzer, "Does this require the keeping of a journal?"
MS. KREITZER answered it does not.
REPRESENTATIVE GRUENBERG noted that that issue was a big deal at
the time he had introduced his bill. He asked why [a journal
would not be required].
MS. KREITZER indicated that although [the Office of the
Lieutenant Governor] thinks it is important to keep a journal,
it doesn't have the ability to enforce that people are [keeping]
a journal, because it only has one [notary commission
administrator]. She explained that one of the things that [the
Office of the Lieutenant Governor] is trying to accomplish with
"this rewrite" is a move to more of a Web-based, educational
system. She said this would be more efficient considering the
limited staff.
Number 1111
REPRESENTATIVE GRUENBERG shared that when he introduced his bill
in the past, the keeping of the journal was something that the
notary public was required to do and didn't require any
additional bureaucracy or staff.
REPRESENTATIVE GRUENBERG turned to page 14, [beginning on line
9], which he noted was in regard to acknowledgments. He said
acknowledgments are already covered under AS 09.63. He asked,
"Why do you have your own separate acknowledgment statute when
we already have a perfectly good uniform acknowledgment Act?"
Number 1038
MR. CLARK said Representative Gruenberg is correct in his
observation. He noted that some language was amended on page 3,
[lines 2-3 of Version D], regarding AS 09.63.090. He stated,
"With that change, it would be fine to remove all acknowledgment
sections from the bill."
REPRESENTATIVE GRUENBERG stated his interest in working with
[Ms. Kreitzer and Mr. Clark] on the legislation.
Number 1000
REPRESENTATIVE LYNN stated the following:
If you said to examine the journal part, I can see
where it would be appropriate to put it in there,
because I'm concerned that we don't mandate someone to
have a journal so we can -- if it becomes a problem in
the future, then we have something to look at.
Number 0988
REPRESENTATIVE BERKOWITZ surmised that he should declare a
conflict, because his wife is a notary public; although he
revealed that she doesn't make any money at it and she can't
notarize for him. He stated that when the right time comes, he
will offer an amendment to do away with the entire notary
system.
Number 0963
REPRESENTATIVE GRUENBERG surmised that he too should declare a
conflict, because he is a notary public.
CHAIR WEYHRAUCH responded that when the time comes to vote "we
can declare those."
Number 0945
MR. CLARK agreed that notary journals are an important aspect of
functioning as a notary public and the office has always
stressed the need to keep a journal and will continue to do so.
He said the notaries are personally liable for everything they
do; the notary journal not only protects the public, but also is
the only evidence that the notary will have that he/she has
performed the act according to the letter of the law.
Conversely, he stated that in his four years experience, and
after viewing records from the past, he has not found that the
lack of a legal requirement to keep a notary journal has caused
anybody any problem.
REPRESENTATIVE GRUENBERG stated that [during his involvement
with the past legislation] he worked with the [National Notary
Association (NNA)], and this issue was a "big deal with them."
He offered an example of a child custody case where the children
may have benefited from a journal having been available. He
said he is quite certain that the national organization would be
able to find out whether [the keeping of journals] has been
helpful in other states. He observed that "it's mainly an issue
of proof." He suggested that if people kept the journal for
five years, for example, they would be able to prove that they
notarized deeds on certain dates, and that would facilitate
lawyers and courts.
Number 0832
REPRESENTATIVE LYNN asked, "When we do a notary here, and then
we travel all over the United States, if we did not have a
notary public here, would that affect the validity of some kind
of a document in one of the other 49 states ...?"
REPRESENTATIVE GRUENBERG answered as follows:
Let's say you're litigating a will in Nebraska, and it
involves an Alaska deed. Under certain Rules of
Evidence, if these are notarized, they could be what
are called, "self-authenticating," and it would
definitely affect litigation in other states - the
validity of Alaska documents.
REPRESENTATIVE BERKOWITZ said it seems to him that the
government has the ability to authenticate deeds and wills
independently from any notary. He noted that a driver's license
or birth certificate doesn't have a notary's signature on it.
He suggested moving to a system where people could "self-
notarize."
REPRESENTATIVE GRUENBERG said that even though he is in the same
political party as Representative Berkowitz, his views may be
opposite on this issue.
[HB 439 was heard and held.]
HB 520-REGULATORY COMMISSION OF ALASKA
Number 0670
CHAIR WEYHRAUCH announced that the last order of business was
HOUSE BILL NO. 520, "An Act relating to the expenses of
investigation, hearing, or public advocacy before the Regulatory
Commission of Alaska, to calculation of the regulatory cost
charge for public utilities and pipeline carriers to include the
Department of Law's costs of its public advocacy function, to
inspection of certain books and records by the attorney general
when participating as a party in a matter before the Regulatory
Commission of Alaska; and providing for an effective date."
Number 0646
DANIEL PATRICK O'TIERNEY, Senior Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department Of Law, stated that he is testifying on behalf of the
attorney general. He said he is quite familiar with not only
the bill, but also with the Regulatory Commission of Alaska
(RCA) in the public advocacy function, having served on the
commission under two prior governors from 1989 to 1994. He
continued as follows:
This bill is before you ... as a ... "follow-on" to
last year's Executive Order [EO] 111, which
transferred the responsibility from the Regulatory
Commission of Alaska personnel for public advocacy
before the commission, to the attorney general's
office. And that executive order also established the
public advocacy function within the Department of Law.
RCA personnel were historically responsible for
representing the public and the public interest before
the commission, and those personnel now act under the
authority and the direction of the Department of Law.
So, the bill before you would essentially complete
what's already occurred - the prior transfer of
authority.
Number 0562
CHAIR WEYHRAUCH asked, "Why not simply do this by another
executive order?"
MR. O'TIERNEY replied that that had been considered but was
judged as inappropriate, because an executive order has limited
applicability and only exists to transfer existent statutory
responsibilities. He explained that that transfer has already
occurred. He clarified that [HB 520] would actually provide
"some of the wherewithal for execution of the authority that's
already been transferred."
MR. O'TIERNEY continued as follows:
This bill contains, principally, four provisions, the
first of which would clarify that regulatory cost
charge receipts - not general fund - would continue to
pay for the general costs of public advocacy function
that's now administered by the Department of Law and
by the attorney general as the public advocate, just
as those same RCC receipts historically paid for
public advocacy costs when the function was performed
under the RCA.
MR. O'TIERNEY, in response to a question from Chair Weyhrauch,
explained that RCC stands for regulatory cost charge, which is
the existent statutory mechanism that funds the regulatory
commission of Alaska, and historically also funded the public
advocacy function, which was exercised within the commission.
He called it "off-budget," and said it's not generally funded.
He said he thinks the RCC is premised on a user-fee concept; the
utility providers are essentially tied to pay for the regulation
that administers the services and the rates that "they provide
under their monopoly." In response to a question from Chair
Weyhrauch, he said that, under the statute itself, the RCC
administers the regulatory cost-charge formula and its
applicability. He noted that there is a statutory cap that
exists on the total amount of funds that can be administered
under the RCC.
Number 0268
CHAIR WEYHRAUCH clarified he wants to know: At what point does
the public pay for "every and all costs"; who is it that
arbitrates what is reasonable or not; where is the cap set; and
why should the public continually "pay this up" when it doesn't
know what goes on in the disputes.
MR. O'TIERNEY answered that the statute provides a specific
decimal number cap, as well as explicitly providing that any
given utility may pass through the regulatory cost charge to its
consumers. That charge is shown at the bottom of any given
[utility] bill. The consumers are the beneficiaries of the
advocacy that's provided on their behalf before the commission.
Mr. O'Tierney continued as follows:
Absent that advocacy ... you would essentially have
one hand clapping, for the most part, at any given
utility rate proceeding, because the utility comes
before the commission and it's generally asking for a
rate increase, not a rate decrease, and absent some
other party on behalf of the public, there would
simply be the utility making its case without any
meaningful ... cross-examination or review. So, it
seems perfectly logical, and prudent, and appropriate
that consumers would ultimately bear the cost; it's
consistent with the entire user-fee concept, which is
certainly not held in disfavor [at the] current time.
Number 0068
CHAIR WEYHRAUCH stated his belief that the public does need an
advocacy position in these hearings, because its interests are
seldom represented; therefore, [the public] should have a
legitimate role to play and some legitimate costs incurred for
that role. However, he noted that simply having that advocacy
role may create an adversarial situation for the utilities to be
involved, which in turn "ramps up the cost to the public because
of the overhead involved with advocating its own interest
against the public's interest."
TAPE 04-32, SIDE A
Number 0001
CHAIR WEYHRAUCH indicated that everything would get paid for
through the regulatory cost charge. He said it's a conundrum
and he is expressing concern. He invited Mr. O'Tierney to
continue.
MR. O'TIERNEY responded that he appreciates Chair Weyhrauch's
comments; however, he surmised that the bottom line is that
consumer protection has to be funded in some fashion, and under
the current scheme ... - as exists in statute and as promulgated
by prior legislature - it is paid for by the consumers who
benefit. He noted that the vast majority of states have a
variation of a regulatory cost charge mechanism.
Number 0117
CHAIR WEYHRAUCH offered his understanding that the attorney
general's office defines the public's interest; it doesn't
conduct a poll of the representatives of the state in the
legislature, but makes its independent determination of what the
public's interest is and then advocates that interest.
MR. O'TIERNEY answered that's correct. He said that's what EO
111 provides for and it is not unlike the existent context in
most other states. He noted that he has discussed with Attorney
General Renkes the notion of adopting something similar to what
exists in Washington State, which is a type of consumer input
panel whose members are nominated by the attorney general as a
means of having some kind of a consumer representative council
that provides ongoing input and can keep the public advocate "on
the pulse of consumer interests and concerns." He added that
that's not something that necessarily needs to be embodied in
statute.
CHAIR WEYHRAUCH said something like that may be critically
important to gain the public's trust in the process, whether
it's a consumer input panel or whether the department's position
is publicly noticed with an opportunity for the public to
comment. He said, "I know you need to act and react without
having a cumbersome public process. I know that there's a
tension here between being able to be involved in these
proceedings, yet also representing the public's interest." If
the Department of Law purports to represent the public's
interest, he said, then the public must necessarily be involved
in expressing what those interests are.
MR. O'TIERNEY said he thinks it's useful to recall that, in
terms of what the public interest did, "it certainly includes -
first and foremost - rate payer interest, consumer interest."
He offered his understanding that those interests are generally
defined in terms of taking a hard look at whether or not the
type of expenses that the utility suggests are legitimate for
inclusion in rate base are, in fact, legitimate and can be
adequately justified. He explained, "Those are the stuff of
which rates are made, and I think most consumers are interested
in making sure that rates are ... not higher than they can
honestly and legitimately be justified."
CHAIR WEYHRAUCH stated that that too is subject to some debate,
because it may be in the public's interest to pay the least
amount for the utility services it's obtaining, but it may be
also important to pay now in order to pay less later. He
illustrated that many companies, particularly in utilities
markets, must invest in research and development in order to
obtain technology that eventually is going to reduce costs in
the long term, which requires a higher investment today for
greater return on the investment tomorrow. He said there's a
public process in adequately explaining that to the public so it
knows what it's getting.
MR. O'TIERNEY replied that that's part of the balance. He
indicated the question of balance is often the focus of the
commission. He added, "Ultimately, of course, the commission
itself, as the adjudicator, gets to make the call."
Number 0386
REPRESENTATIVE GRUENBERG emphasized that he likes the idea of
having a citizen advisory commission to the attorney general,
since the citizen protection arm office has been moved "from the
agency itself to the attorney general." He stated that he does
not support an elected attorney general but likes the idea of an
appointed one, even though it's subject to some continuing
criticism on the close relationship between the [governor's
office] and the attorney general.
REPRESENTATIVE GRUENBERG asked if the commission still regulates
garbage disposal.
MR. O'TIERNEY answered yes.
REPRESENTATIVE GRUENBERG noted that part of the City of
Anchorage's solid waste services are from the municipality,
while part of those services are from [a private company]. He
said part of his district is served by one and part by the
other. He said the rates are similar; however, he offered his
recollection that the municipality will pick up four refuse
containers, while [the private company] will only pick up three.
He opined that that is unfair and suggested that the commission
could consider that issue.
Number 0798
MR. O'TIERNEY continued with his testimony. He stated that the
second principal area of the bill addresses providing the
Department of Law - in its public advocacy function and with
respect to that function only - the same access to utility
records that formerly had been obtainable by the RCA's public
advocacy staff. He said that although it speaks to a
substantive aspect of things, it is not a substantive change,
because the intent is to transfer the same access to records
previously possessed by the RCA to the Department of Law.
MR. O'TIERNEY stated that the third principal area of the bill
is one that "would explicitly exempt state agencies from paying
the cost of the RCA - another state agency - its proceedings to
which a state agency is a party." The current situation is that
the RCA interprets the existing statute, which does not either
expressly include or exclude cost allocation of its proceedings
to other state agencies. The proposed legislation, he
indicated, would explicitly exempt other state agencies from
being cost allocated and then paying those costs to the RCA. He
continued as follows:
Not only is there no net fiscal benefit into the
current arrangement, but ... it's compounded because,
for example, if the Department of Law is cost
allocated, it then has to come to the legislature to
get a special appropriation in order to pay the cost
allocation to another state agency.
Number 0943
MR. O'TIERNEY noted that "the proposed legislation would provide
for direct payment, in a specific proceeding, by the utility, of
the cost of any expert assistance that may need to be retained
by the Department of Law to represent the public in that
specific proceeding." He said the utilities could recover that
case-specific cost in the same manner as any other rate case
expense. He continued:
It's consistent with the cost-causer principle and
user-fee principle that is the basis of the RCC. It's
also ... analogous to other existent mechanisms in
state statute, those being, in particular, one which
exists in the insurance code, which allows the
director of insurance to have the insurer being
examined pay the costs of any expert that the director
needs to retain to do the examination. It's also
analogous ... to a mechanism in the Alaska Stranded
Gas Development Act, which provides that the
commissioner may, essentially, pay an independent
contractor expert for a review, and that those
expenses would be paid for by the applicant. ...
This is also a mechanism that exists in numerous other
states, including Connecticut, Iowa, and North
Carolina.
Number 1038
CHAIR WEYHRAUCH, reading an excerpt from a comparison by
amendment of the original bill version and the proposed
committee substitute [included in the committee packet], spoke
as follows:
It says, "the attorney general participates in an
adjudicatory proceeding before the commission". If
the commission makes a final determination and the
attorney general believes it's in the best interest of
the public to proceed in superior court, either as an
appellant or as party to a proceeding that goes to
superior court, can the same costs be passed through?
Because this doesn't allow it - it only says "before
the commission", not before a superior court.
MR. O'TIERNEY answered that's correct. He said, "It anticipates
that that being the fact finding forum, ... anything beyond that
would be in an appellate context and would simply be a challenge
to some of the findings of fact or the conclusions of law, but
it wouldn't be, basically, relitigated."
CHAIR WEYHRAUCH suggested that the issue could be discussed
further at the next hearing of HB 520.
[HB 520 was heard and held.]
ADJOURNMENT
Number 1097
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 10:01
a.m.
| Document Name | Date/Time | Subjects |
|---|