02/16/2010 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB241 | |
| HB292 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 241 | TELECONFERENCED | |
| + | HB 292 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
February 16, 2010
8:07 a.m.
MEMBERS PRESENT
Representative Bob Lynn, Chair
Representative Paul Seaton, Vice Chair
Representative Carl Gatto
Representative Peggy Wilson
Representative Max Gruenberg
Representative Pete Petersen
MEMBERS ABSENT
Representative Craig Johnson
COMMITTEE CALENDAR
HOUSE BILL NO. 241
"An Act relating to certain investments of the Alaska permanent
fund, the state's retirement systems, the State of Alaska
Supplemental Annuity Plan, and the deferred compensation program
for state employees in companies that do business in Iran, and
restricting those investments; and providing for an effective
date."
- FAILED TO MOVE HB 241 OUT OF COMMITTEE
HOUSE BILL NO. 292
"An Act relating to grants to victims of a disaster in this
state; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 241
SHORT TITLE: DIVEST INVESTMENTS IN IRAN
SPONSOR(s): REPRESENTATIVE(s) GATTO
04/18/09 (H) READ THE FIRST TIME - REFERRALS
04/18/09 (H) STA, FIN
02/09/10 (H) STA AT 8:00 AM CAPITOL 106
02/09/10 (H) Heard & Held
02/09/10 (H) MINUTE(STA)
02/16/10 (H) STA AT 8:00 AM CAPITOL 106
BILL: HB 292
SHORT TITLE: GRANTS TO DISASTER VICTIMS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/19/10 (H) READ THE FIRST TIME - REFERRALS
01/19/10 (H) MLV, STA, FIN
02/02/10 (H) MLV AT 1:00 PM BARNES 124
02/02/10 (H) Heard & Held
02/02/10 (H) MINUTE(MLV)
02/04/10 (H) MLV AT 1:00 PM BARNES 124
02/04/10 (H) Moved Out of Committee
02/04/10 (H) MINUTE(MLV)
02/05/10 (H) MLV RPT 5DP 1AM
02/05/10 (H) DP: LYNN, T.WILSON, HARRIS, BUCH, GATTO
02/05/10 (H) AM: KAWASAKI
02/16/10 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
THOMAS REIKER, Staff
Representative Carl Gatto
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
241, on behalf of Representative Gatto, prime sponsor.
JERRY BURNETT, Deputy Commissioner
Treasury Division
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Testified during the hearing on HB 241.
PATRICK GALVIN, Commissioner
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
241.
McHUGH PIERRE, Deputy Commissioner/Chief of Staff
Office of the Commissioner/Adjutant General
Department of Military & Veterans Affairs
Fort Richardson, Alaska
POSITION STATEMENT: Presented HB 292 on behalf of the House
Rules Committee, sponsor by request of the governor.
MIKE O'HARE, Deputy Director
Division of Homeland Security/Emergency Management
Department of Military & Veterans Affairs
Fort Richardson, Alaska
POSITION STATEMENT: Offered information regarding HB 292, on
behalf of the House Rules Committee, sponsor by request of the
governor.
ACTION NARRATIVE
8:07:23 AM
CHAIR BOB LYNN called the House State Affairs Standing Committee
meeting to order at 8:07 a.m. Representatives Seaton, Gatto,
Wilson, Gruenberg, Petersen, and Lynn were present at the call
to order.
HB 241-DIVEST INVESTMENTS IN IRAN
8:08:01 AM
CHAIR LYNN announced that the first order of business was HOUSE
BILL NO. 241, "An Act relating to certain investments of the
Alaska permanent fund, the state's retirement systems, the State
of Alaska Supplemental Annuity Plan, and the deferred
compensation program for state employees in companies that do
business in Iran, and restricting those investments; and
providing for an effective date."
[Before the committee was the committee substitute (CS) for HB
241, Version 26-LS0680\E, Kane, 2/8/10.]
8:08:41 AM
REPRESENTATIVE GATTO moved to adopt the committee substitute
(CS) for HB 241, Version 26-LS0680\S, Kane, 2/15/10, as a work
draft.
8:08:54 AM
REPRESENTATIVE SEATON objected for discussion purposes.
8:09:04 AM
REPRESENTATIVE GATTO, as prime sponsor of HB 241, directed
attention to a memorandum dated 2/15/10 [included in the
committee packet], which addresses the changes that were made in
Version S. He reviewed the changes, which would amend AS
37.10.072 as follows: First, Version S would delete the word
"all" from Section 1(d), to guard against misinterpreting the
statute as a mandate for the Department of Revenue to
investigate every publically traded company, as opposed to just
those companies relating to Alaska's investment portfolio.
Second, to eliminate confusion regarding language in Section
1(j)(1)(B)(v), "gasoline and related products" was changed to
"petroleum products". Third, new wording was added in Section
1(j)(3), to more clearly define "direct investment". Under the
new language, "direct investment" that would be subject to the
$20 million threshold for scrutiny "directly and significantly
contributes to the enhancement of Iran's ability to develop
petroleum resources, military equipment, and nuclear
capabilities". Fourth, a new provision was inserted in Section
1(j)(9)(B), to clarify that, for the purposes of HB 241, a
parent company is only responsible for the practices of a
subsidiary or jointly owned company in which it holds a
controlling interest. Representative Gatto explained that the
provision was designed to address the concern that the bill
could be broadly read to include any dealings with a
"scrutinized company" or narrowly read to exempt any company
that merely formed a subsidiary to administer its interests in
Iran.
8:12:13 AM
THOMAS REIKER, Staff, Representative Carl Gatto, Alaska State
Legislature, in response to Representative Gruenberg, said the
sponsor and his staff spoke with the bill drafter to ensure that
there were no issues regarding federal law, that the bill
complies with the Iran Sanctions Act of 1996. Much of the
language in the bill came from that federal Act.
8:13:02 AM
REPRESENTATIVE SEATON removed his objection to the motion to
adopt the committee substitute (CS) for HB 241, Version 26-
LS0680\S, Kane,2/15/10, as a work draft. [There being no
further objection, Version S was before the committee as a work
draft.]
8:13:30 AM
JERRY BURNETT, Deputy Commissioner, Treasury Division,
Department of Revenue, stated that his job is to administer the
investment policies of the Alaska Retirement Board in relation
to HB 241. He said he is not the fiduciary - the board is, and
the board has not taken any position on the proposed
legislation. He said when, in the past, the House State Affairs
Standing Committee considered the issue of divestment from
Sudan, the discussion was about the amount of securities held
that would "come under that definition," and it was in the $13
million-range. As of yesterday, he reported, there were close
to a billion dollars of securities that would likely "fall under
this list." He said that is out of $33 billion that is
invested. About half of the department's investments are in
retirement funds. He said based on the types of current
investments, he expects "a higher percentage of this is in
retirement funds than in the other." Mr. Burnett told committee
members he wants them to know the magnitude of the proposed
legislation: approximately $750,000,000 of funds might have to
be divested.
8:15:27 AM
MR. BURNETT, in response to Representative P. Wilson, said he
cannot predict whether or not the state would lose money;
however, he noted that there would be transaction costs involved
- about four cents per share of stock. He said, "If you look at
... an average share price of $20, as an example, and you have a
billion dollars worth of stock, you're looking at two-hundredths
of a percent of the cost of the stock." He said it is not a
huge cost relative to the value, but potentially this could
affect 5 percent of the holdings of the retirement funds that
may match the list of companies provided by the bill sponsor.
Mr. Burnett stated, "Depending on the size of our holdings here,
as you trade anything, if you have to do a forced sale you may
not sell it at the best time .... You might lose some percent
of your value as a result of having to do a forced sale." Mr.
Burnett emphasized that he is not to attempting to influence the
committee one way or the other, he just thinks the members
should have an idea of the magnitude of what is being
considered.
8:17:42 AM
MR. BURNETT, in response to Representative P. Wilson, said the
proposed legislation gives the department 90 days to divest from
companies on the list. He said this is a doable timeframe. In
response to Representative Petersen, he said there are over 400
matches spread across 30 funds the state manages. In response
to a follow-up question, he said he does not recall which would
be the largest.
REPRESENTATIVE PETERSEN surmised, "So, if you say there's 400 of
them, and we've got $900 million, chances are we don't have a
huge holding in any one particular stock."
MR. BURNETT replied that the holdings are small because the
state diversifies for a number of reasons.
8:20:09 AM
REPRESENTATIVE GATTO said he understands when Mr. Burnett says
the state could lose money; however, asking whether or not the
state will lose money from divesting is a rhetorical question.
He said it may be just as likely that the state would avoid
losing money by divesting because "half the free world is
selling them." He said his point is that divesting should be
done for moral reasons.
8:21:16 AM
MR. BURNETT relayed that in December 2009, the chief investment
officer wrote to a number of active fund managers asking about
"holdings that they had on this," because "we perceive a market
risk from holding stocks that other people put on their list."
He said Representative Gatto is correct that effects could
happen in both directions. He reiterated that he is not
addressing the good or bad; he is just letting the committee
know about the magnitude of the issue.
8:22:57 AM
REPRESENTATIVE GRUENBERG directed attention to the 90-day
provision, which he said does not give the managers of the fund
permission to keep funds on the list past 90 days. He concluded
that this means "the only thing this prevents you from doing
potentially from a financial point of view is making money." He
asked Mr. Burnett if he concurs.
MR. BURNETT responded, "I think I agree with you on that."
MR. GRUENBERG said the provision would not prevent the managers
of the fund from losing money, because "you'd be getting out of
it anyway," but if the managers wanted to keep the stocks for
investment reasons, they could not. He asked Mr. Burnett if the
managers of the fund would prefer the provision to require "due
deliberate speed" rather than a "hard and fast" deadline.
MR. BURNETT said he cannot speak to that issue. He said if the
legislature is serious about doing this, some deadlines will
have to be put in place. In response to a follow-up question
from Representative Gruenberg, he opined that 90 days is long
enough, because it starts from the time the list would be
finished, not from the time the bill would be signed.
8:26:02 AM
REPRESENTATIVE PETERSEN asked Mr. Burnett if he looked at the
list and recognized any of the companies as ones that are
currently doing business in Alaska.
8:26:19 AM
MR. BURNETT answered yes, but said he cannot speak to which
companies they are, since he does not presently have the list
with him.
REPRESENTATIVE PETERSEN suggested that the committee may want to
consider that if the state divests from companies on the list
that are presently doing business within Alaska, those companies
may choose to pull out from the state.
8:26:42 AM
REPRESENTATIVE SEATON directed attention to language beginning
on page 2, line 12, midway through line 16, of Version S, which
read as follows:
(c) The commissioner shall create and update
quarterly, before the first day of the immediately
succeeding calendar quarter, a list of scrutinized
companies.
(d) The commissioner shall make reasonable
efforts to investigate publicly traded companies to
determine whether the company is a scrutinized company
for the purposes of this section.
REPRESENTATIVE SEATON said he had asked the commissioner of the
Department of Revenue to let him know what kind of time frame,
burden, or investigative effort would be involved, and at what
cost.
8:28:04 AM
PATRICK GALVIN, Commissioner, Department of Revenue, reported to
Representative Seaton that he was advised from the Department of
Law that the current standard would allow the Department of
Revenue to rely upon primarily the list and should not impose an
undue burden in complying with the standard. He noted that
since then, the language has improved with the elimination of
the word "all" in relation to publicly traded companies.
8:28:52 AM
REPRESENTATIVE SEATON said a second question he had asked was in
regard to language on page 2, line 6, of Version S - "other
business structure" - and whether consideration was being given
only to stocks of a publicly traded company, or also to a
situation in which Alaska is a partner with the company or
provides tax credits to a company doing business in the state.
8:30:21 AM
COMMISSIONER GALVIN replied that the Department of Law advised
that a company not on the scrutinized list doing business in
Alaska would not create violation of bill, but would create a
question as to whether the intent of the bill was being fully
established. He acknowledged that is a concern that
Representative Petersen just raised.
8:31:14 AM
REPRESENTATIVE GATTO directed attention to language on page 2,
line 14, of Version S, which states that the commissioner "shall
make reasonable efforts to investigate publicly traded
companies". He asked Commissioner Galvin if he considers the
investigation of the lists currently published a reasonable
effort or thinks the department would also have to make separate
investigations.
8:32:08 AM
COMMISSIONER GALVIN said the issue the Department of Law raised
which caused concern is that the language of the bill that
addresses which companies would be on the Alaska scrutinized
list is broader than compliance with the federal law. He said
because the bill is an amalgam of language from the Sudan
divestiture bill and makes reference to the federal divestiture
law, it creates an additional standard beyond that of a company
described in the federal law. He said the proposed legislation
would require further investigation beyond the lists, but he
said he thinks that could be addressed through an amendment
allowing the identification of companies that fall under the
description of the federal law as companies that fall under the
Alaska scrutinized company list.
8:33:36 AM
COMMISSIONER GALVIN, in response to Representative Gatto, said
if the standard for determining whether a company should be on
the list or not is the same being applied by others states or
entities in the development of their list, then it could be
argued that a "reasonable inquiry" would be to examine those
lists to find the commonality. He reiterated that an area of
concern would be if there is a different standard for the Alaska
list. In response to a follow-up question from Representative
Gatto, he restated that it is the addition of language
apparently from the former Sudan divestiture bill which goes
beyond the federal law.
8:36:06 AM
REPRESENTATIVE P. WILSON directed attention to subsection (d),
on page 2, lines 14-17 [text provided previously]. She said the
language does not state that the commissioner may make a
reasonable effort to investigate the public list that other
states have, and she questioned whether it would make a
difference to amend subsection (d).
8:37:23 AM
COMMISSIONER GALVIN responded that he does not think that is
really the issue at hand. He opined that the proposed
requirement obligating the commissioner to make reasonable
inquiries and allowing him/her to utilize existing lists is a
reasonable approach by which to establish a standard and allow
for a way to comply with that standard. He reiterated that the
issue raised by the Department of Law could be addressed either
by the House State Affairs Standing Committee or a subsequent
committee of referral, to identify the federal law as the
controlling aspect of that standard.
8:38:14 AM
COMMISSIONER GALVIN, in response to Representative P. Wilson,
said he does not have a copy of the bill with him, but said it
is the section of the bill with the definition of "scrutinized
company" which needs to be more narrowly restricted to simply
identify companies that are out of compliance with the federal
law.
REPRESENTATIVE P. WILSON noted that the definition of
"scrutinized company" begins on page 4, line 24, and continues
through page 5, line 1.
8:39:18 AM
MR. BURNETT pointed out that the definition of "business
operations" is found on page 3, beginning on line 12, and he
offered his belief that that is the portion of the bill language
that was imported from the aforementioned Sudan divestiture
bill. He recommended that the committee eliminate the
definition of "business operations" and identify the
"scrutinized companies" as those engaging in any and all
business [operations] that are subject or liable to sanctions
under Public Law 104-172.
8:40:48 AM
REPRESENTATIVE SEATON directed attention to language on page 2,
lines 23-31, subsections (e) and (f), which read as follows:
(e) The commissioner shall provide written notice
and an opportunity to comment in writing to each
company identified as a scrutinized company under (d)
of this section.
(f) The commissioner shall add a company identified
under (d) of this section to the list of scrutinized
companies not earlier than 90 days after providing
written notice under (e) of this section, unless the
company demonstrates to the commissioner that it does
not conduct or have direct investments in business
operations in Iran that exceed the $20,000,000
threshold referred to in Public Law 104-172 (Iran
Sanctions Act of 1996), as amended.
REPRESENTATIVE SEATON asked Mr. Burnett if he interprets this
language to mean that even if the department relies on a list,
it would have to notify each company in writing and give each an
opportunity to comment.
8:41:42 AM
MR. BURNETT said he believes the department would have to
identify a potential list, notify the companies and give them a
chance to respond, identify a final list, and demand divestiture
from all the fund managers based on that list. He said this
plan would result in divestiture from any company on the list
that is part of the fund, not any company that is not part of
the fund. He stated, "We do have more companies that do
business in Iran than Sudan, for sure." He remarked, "There's
nothing that prevents us from divesting from any company at any
time if it's a good business decision."
8:43:00 AM
REPRESENTATIVE SEATON stated his intention is that the state may
abide by a list, while still providing due process under the
Constitution of the State of Alaska to the companies involved.
8:44:47 AM
COMMISSIONER GALVIN clarified that neither the Department of
Revenue nor the Alaska Retirement Management (ARM) Board nor the
Alaska Permanent Fund Board would have the authority to
independently implement a divestiture policy, with regard to
Iran, without the statutory authority to do so, which is why a
bill, such as HB 241, would be necessary to put in place an Iran
divestiture policy.
8:45:55 AM
REPRESENTATIVE GRUENBERG asked whether there is any possible
legal argument a company could use to say it has some right to
"some kind of relief" that is granted under HB 241. He
questioned whether it should be specified in the bill that
companies would not have that right to a hearing, for example.
8:47:57 AM
COMMISSIONER GALVIN responded that the issue is not so much one
of due process. He said this is a matter of fairness. He
opined that if a company is going to be identified publicly as
being unworthy of Alaska's investment, the state owes that
company the right to say that the state got the facts wrong and
to prove that the company does not belong on the list. He said
he thinks there may [emphasis on "may"] be some exposure with
regard to slander or liable or some sort of interference "with
their other contractual relationships" if the proposed law is
followed. For that reason, he said, it is in the interest of
the state to ensure that the department has provided those
companies with the opportunity to clarify whether or not they
belong on the list.
REPRESENTATIVE GRUENBERG said the board of a targeted company
may be concerned about everybody dumping its stock. He said he
hopes that the bill sponsor seriously considers including
language in the bill that would prevent a company from using
Alaska as a forum to justify its actions and not only delay the
process, but also "gum up the works in other states."
CHAIR LYNN said, "They could challenge that; we can't tell
somebody else what their rights are."
REPRESENTATIVE GRUENBERG emphasized, "We can tell them what
their rights are under this Act, absolutely. We do it all the
time; we limit liability."
8:51:12 AM
REPRESENTATIVE GATTO returned to the comment made by
Commissioner Galvin that without statutory authority, the boards
determining which stocks to buy or sell would have no authority
to make a policy regarding divestiture from Iran, and he said it
is understandable. However, he asked if that same board of
directors, upon observing that those companies on scrutinized
lists are "having a downward pressure from many states, the
federal government, and from other companies," would be able to
make a policy without statutory authority that maintains that
those stocks are risky because they are more likely to lose
value than to gain value.
8:52:17 AM
COMMISSIONER GALVIN said the answer, in general, would be yes;
if it was determined there would be likely market movement in
regard to certain stocks, the boards could utilize that as a way
to avoid companies that have that type of risk profile. He
noted that beyond the Iran divestiture issue, there is a
tremendous amount of other movement towards divestiture policies
for a variety of reasons that would have to also be scrutinized
and evaluated to determine whether they would have a legitimate
impact on the market.
8:53:50 AM
COMMISSIONER GALVIN, in response to a question from
Representative Gatto as to whether the federal government would
prohibit states from investing in companies that invest in Iran,
offered his understanding that the furthest U.S. Congress has
gone in imposing divestiture is in language that shielded states
from actions under prudent investor requirements associated with
a Sudan divestiture policy. He said the language stated there
was a safe harbor for imposing a divestiture policy that was to
be protected under federal law. He concluded, "I guess it's
possible; although you have to think about federalism
constitutional issues there."
8:55:15 AM
REPRESENTATIVE GATTO remarked that the embargo with Cuba shows
that the federal government has the ability to impose
restrictions on the whole country.
COMMISSIONER GALVIN offered his understanding that a requirement
similar to that for Cuba is in place for Iran, which is why
there is no direct investment by American companies in Iran or
materials supplied from the U.S. to Iran.
8:56:00 AM
CHAIR LYNN stated his wish to have any necessary amendments made
and a motion made to move HB 241 today.
8:56:33 AM
REPRESENTATIVE SEATON said HB 241 proposes a sanction on "a
company," and he said he anticipates that to be problematic and
asked the commissioner to comment.
CHAIR LYNN said he wonders if any other state has addressed this
question.
8:57:47 AM
COMMISSIONER GALVIN told Representative Seaton that the
department did utilize the Department of Law extensively in
developing the process that is used here, because it was
borrowed from the Sudan divestiture bill. He said the
Department of Law advised that the Department of Revenue
include a provision to ensure it meets its obligations to the
companies that may be on the list. He said he does not think
the department specifically received the conclusion that there
was a constitutional right to due process; however, he said he
thinks it was an issue of ensuring that the department did not
expose itself unnecessarily to claims either of that nature or
other violations of their rights. In response to Chair Lynn's
question as to whether other states have addressed this issue in
their divestiture legislation, he said he is not aware of other
states' processes on this issue. He asked Mr. Burnett if he
knew of any other states that have addressed this question.
CHAIR LYNN noted that Mr. Burnett shook his head no.
REPRESENTATIVE SEATON questioned if not allowing a company the
opportunity to change would be removing the main impetus of the
bill to have companies change their behavior.
CHAIR LYNN commented that he does not think the proposed
legislation is directed toward changing the behaviors of
different companies, but rather is an issue of national
security.
9:00:15 AM
COMMISSIONER GALVIN responded that the whole purpose of a
divestiture policy is to keep companies from providing support
for the targeted country. The intent, therefore, would not
necessarily be to do so solely through divestiture action,
because a divestiture of stock does not directly affect the
company itself. It is the act of placing a company on a list
and putting it up for public scrutiny as a company that is
engaged in what the U.S. considers to be improper behavior that
is an attempt to motivate that company's behavioral change. For
that reason, he said, he supports Representative Seaton's
comment that if the purpose of the proposed bill is to hold
companies up to that kind of scrutiny and to give them the
opportunity to change their behavior and prove they should no
longer be on the list, then the state should probably provide
those companies with the means for "making the change in
behavior effective for that purpose."
9:01:54 AM
REPRESENTATIVE GRUENBERG said he thinks the committee is
flagging this issue, and he expressed his hope that the
department will work with the Department of Law to ensure that
"this isn't used as a forum by these companies" and to prevent
delays from injunctions.
9:02:41 AM
REPRESENTATIVE GRUENBERG stated his assumption that the
department would work on an amendment related to the definition
language.
COMMISSIONER GALVIN confirmed that is correct.
9:03:06 AM
REPRESENTATIVE GRUENBERG directed attention to language on page
3, lines 9-10, which gives the commissioner authority to adopt
regulations under AS 44.62 "to carry out the purposes of the
section." He noted that Sections 2 and 3, on page 5, are
"directing the retirement boards to comply with this." He
stated his assumption that those boards currently have
regulatory authority to carry out the purposes of this section,
and it is not necessary to put similar language in Sections 2
and 3 as is found in the aforementioned language on page 3,
lines 9-10.
9:04:12 AM
MR. BURNETT responded as follows:
Regulations are to ... carry out the purposes in
adopting the list. The ... Alaska Retirement
Management Board and the Permanent Fund are to follow
this list and divest. They shouldn't need specific
regulatory authority in this bill. They have
regulatory authority for their purposes within their
statute, so they would be able to adopt regulations
under their general regulatory authority.
9:04:56 AM
REPRESENTATIVE GRUENBERG directed attention to Section 6, on
page 6, which would required notice by the Department of Law to
the U.S. Attorney General. He remarked that that is unusual,
and asked why that requirement is in the proposed legislation.
MR. BURNETT said he is not certain of the answer to that
question. Notwithstanding that, he surmised that there may be
something in federal law.
REPRESENTATIVE GRUENBERG asked for that information to be
provided.
9:07:24 AM
COMMISSIONER GALVIN, in response to Representative P. Wilson,
said he does not expect the companies put on the list to
respond, because, in general, they will not want to put their
activities and involvement in Iran up for public scrutiny. He
stated, "Unless ... we have our facts wrong, and they do not
have engagement in the activities that led to them being listed
by other states, I don't expect to hear back from the company."
9:08:09 AM
REPRESENTATIVE PETERSEN stated his belief that the purpose of
the proposed bill is not to punish any of the companies in which
the state has invested. He said the reason the U.S. Government
has, in the past, put sanctions on another nation has been to
effect change in that nation's behavior. He opined that in most
cases that has not been very effective; however, starting some
sort of military conflict might be a worse alternative.
9:09:48 AM
REPRESENTATIVE GATTO directed attention to language on page 3,
lines 12-14, which read as follows:
(1) "business operations"
(A) means power production activities,
mineral extraction activities, oil-related activities,
or the production of military equipment;
REPRESENTATIVE GATTO noted that the subject of mineral
extraction appears again on page 4. He asked Commissioner
Galvin if it would be helpful to adopt a conceptual amendment
that would delete subparagraph (A) and the related text on page
4. He said he does not want to create additional chores that
would require additional personnel, but he wants to ensure that
the list is observed.
COMMISSIONER GALVIN said that conceptually "that does bring it
closer to alignment with ... the federal Act and would make it
easier to implement."
9:11:05 AM
MR. BURNETT suggested removing language in Section 1, subsection
(j), paragraphs (1), and paragraphs (3) through (8).
9:12:52 AM
CHAIR LYNN closed public testimony.
9:13:01 AM
REPRESENTATIVE GATTO indicated his concurrence with some of the
deletions recommended by Mr. Burnett.
9:13:47 AM
REPRESENTATIVE GATTO moved to adopt Conceptual Amendment 1, to
delete the language in subparagraph (A), on page 3, lines 13-14,
and the language on page 4, lines 3-23. There being no
objection, Conceptual Amendment 1 was adopted.
9:14:33 AM
REPRESENTATIVE SEATON moved to adopt Conceptual Amendment 2, as
follows:
On page 4, line 25:
Following "company"
Delete "engaging in any and all active business
operations that are subject or"
REPRESENTATIVE SEATON explained, "It takes us back to the
federal list and eliminates the burden to investigate nonprofit
lists and other things."
CHAIR LYNN asked if there was any objection to Conceptual
Amendment 2. There being no objection, it was so ordered.
9:15:53 AM
REPRESENTATIVE GATTO moved to report CSHB 241, Version 26-
LS0680\S, Kane, 2/15/10, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
9:16:16 AM
REPRESENTATIVE SEATON objected. He said there has been mixed
information given. For example, he stated that there has been
testimony purporting that weapons are being supplied by Iran [to
terrorists], and he said there is no evidence to support that.
Representative Seaton said he has heard testimony given by
military commanders before the U.S. Congress via C-SPAN that
Iran could be much more unhelpful than it currently is. He said
the Pakistani side of the border is the one that has nuclear
weapons. He stated, "The basis for this bill is evidence that I
don't think we have on the table here." He emphasized that he
is not speaking in support of Iran; he said he has friends who,
15 years ago, barely escaped Iran. Representative Seaton
reiterated that he thinks the committee needs accurate
information in order to determine whether to support the
proposed legislation.
9:20:49 AM
REPRESENTATIVE P. WILSON said she does not want the bill to pass
out of committee without making changes to the part of the
proposed legislation addressing the responsibilities of the
commissioner.
The committee took an at-ease from 9:21:57 AM to 9:22:48 AM.
9:22:55 AM
REPRESENTATIVE SEATON removed his objection to the motion to
report CSHB 241, Version 26-LS0680\S, Kane, 2/15/10, as amended,
out of committee with individual recommendations and the
accompanying fiscal notes.
REPRESENTATIVE GATTO withdrew his motion to report CSHB 241,
Version 26-LS0680\S, Kane, 2/15/10, as amended, out of committee
with individual recommendations and the accompanying fiscal
notes.
9:23:49 AM
REPRESENTATIVE P. WILSON moved to adopt Conceptual Amendment 3,
as follows:
On page 2, line 15:
Following "whether the company is a scrutinized
company"
Delete "for the"
Insert "on a list of any of the states"
On page 2, lines 16-22:
Delete all material
9:24:50 AM
REPRESENTATIVE SEATON objected for discussion purposes. He
offered his understanding that a previous motion resulted in
making a scrutinized company one that is liable to sanctions
under federal law. Adding other states' [lists], he opined,
would increase the burden of the commissioner of the Department
of Revenue to "balance between different companies."
REPRESENTATIVE P. WILSON asked, "So, we just need to delete that
whole section then?"
REPRESENTATIVE GATTO said, "We've already made..."
REPRESENTATIVE P. WILSON interjected, "But this contradicts
that."
REPRESENTATIVE GATTO responded, "I don't see it that way."
9:26:00 AM
REPRESENTATIVE PETERSEN suggested the following language:
"determine whether the company is on the federal list".
REPRESENTATIVE SEATON agreed that a period could be placed after
"scrutinized company", since that term has already been defined
as a company on the federal list, and all subsequent language,
as outlined in Conceptual Amendment 3, could be deleted.
9:26:43 AM
MR. REIKER related that there is no federal list, only federal
criteria with which companies should be scrutinized. States
create their own lists based on that federal criteria. He
relayed that currently Florida, Ohio, and Utah have the most
expansive lists.
REPRESENTATIVE P. WILSON maintained her motion to adopt
Conceptual Amendment 3.
9:27:41 AM
REPRESENTATIVE SEATON removed his objection.
REPRESENTATIVE GATTO asked if the word "scrutinized" includes
the states' lists.
MR. REIKER responded yes.
9:28:10 AM
REPRESENTATIVE GATTO objected to Conceptual Amendment 3 for
clarification.
9:28:23 AM
REPRESENTATIVE P. WILSON restated the changes proposed in
Conceptual Amendment 3.
REPRESENTATIVE GATTO remarked that it is scrutinized companies
that are on the list of any of the states; therefore, the
inserted language in Amendment 3 is redundant.
REPRESENTATIVE SEATON said he does not think it would be
redundant, because among the language that would be deleted by
Conceptual Amendment 3 is paragraph (1), which lists nonprofit
organizations, research firms, and international organizations
as sources for lists that could be used by the commissioner. He
said Conceptual Amendment 3 would narrow the breadth of the
issues that the Department of Revenue would have to consider.
9:29:52 AM
REPRESENTATIVE GRUENBERG [nodded]. He offered his understanding
that "that's defined in Title I."
9:30:03 AM
REPRESENTATIVE P. WILSON noted that with Conceptual Amendment 3,
the language would read as follows:
(d) The commissioner shall make reasonable
efforts to investigate publicly traded companies to
determine whether the company is a scrutinized company
on a list of any other state.
REPRESENTATIVE GRUENBERG noted that the term "state" is defined
in AS 01.10.060(13).
REPRESENTATIVE GATTO removed his objection to Conceptual
Amendment 3.
9:31:13 AM
MR. REIKER said it is important for paragraph (1) to remain in
the bill. He explained that other states use two nonprofit
organizations and two research firms to determine which
companies should be on the list, and although Alaska could
change its list to match, "that could be challenged, because
they're using research firms and nonprofit organizations."
9:31:58 AM
CHAIR LYNN reminded everyone that this is a conceptual
amendment.
9:32:08 AM
REPRESENTATIVE GATTO clarified that the language that would be
deleted through Conceptual Amendment 3 would include paragraph
(1).
9:32:38 AM
REPRESENTATIVE GRUENBERG interpreted Mr. Reiker's comments to
mean that if two non-profit organizations and two research firms
agree, than a company will be put on that state's list.
However, he offered a hypothetical situation in which another
state passes a law that does not use the same procedure, which
means that state could add a number of companies [to its list]
that are not on the recognized list. He said that could be
problematic.
9:33:47 AM
REPRESENTATIVE P. WILSON commented that she thinks the
commissioner is smart enough to not use a list that is wildly
erratic.
9:34:01 AM
CHAIR LYNN asked if there was any further objection to
Conceptual Amendment 3. No further objection was stated;
therefore, Conceptual Amendment 3 was adopted.
9:34:12 AM
REPRESENTATIVE GATTO moved to report CSHB 241, Version 26-
LS0680\S, Kane, 2/15/10, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
9:34:29 AM
REPRESENTATIVE SEATON objected.
9:34:33 AM
REPRESENTATIVE PETERSEN said although the adopted amendments
improved the proposed legislation, he does not think HB 241 is
quite ready to move. He said he would like to get feedback from
Legislative Legal and Research Services.
9:35:18 AM
REPRESENTATIVE GRUENBERG said he told the sponsor he would vote
to move the bill, but said he thinks it needs a lot of work.
CHAIR LYNN, in response to a question from Representative
Petersen, offered his understanding that the final committee of
referral for HB 241 is the House Finance Committee.
9:36:38 AM
REPRESENTATIVE SEATON said he does not think the House State
Affairs Standing Committee should be sending substantive issues
to the House Finance Committee to decide. Another issue he
pointed out is that while the bill proposes divestiture, the
state would still be able to have a partnership with the same
companies.
9:37:27 AM
REPRESENTATIVE GATTO said the proposed bill has been thoroughly
reviewed and amended, and has been made easy for the
commissioner; it is not a difficult bill. He related that
Secretary of State Hillary Clinton has said Iran is on its way
to becoming a military dictatorship. He said he does not think
anyone sitting on the committee would say that Iran just wants
"some peaceful nuclear energy." He said he cannot support
sitting idly and hoping that things go well "over there." He
stated that the only effect of the bill would be that the
investments that may earn or lose money would have to be
switched to other investments that could earn or lose money.
9:40:08 AM
CHAIR LYNN said as co-sponsor of HB 241, he thinks the proposed
legislation is both practical and moral. He said the practical
basis is that "they" are apparently involved in a nuclear
weapons program, which is a direct threat to [the United
States]. He said "they" have threatened to annihilate Israel,
and if an attempt was made to do so, the U.S. would be dragged
into the middle of World War III. Regarding the issue of
morality, Chair Lynn said everything he has heard or read has
shown that "they" are taking action that directly affects U.S.
Troops in Iran. He said he thinks HB 241 is a small step toward
national security. Chair Lynn asked, "Would we be having this
same discussion about divesting investments in the railroad that
took Jews to Auschwitz?" He said he thinks this is the same
basic issue.
9:41:49 AM
A roll call vote was taken. Representatives Gatto, Gruenberg,
and Lynn voted in favor of reporting for HB 241, Version 26-
LS0680\S, Kane, 2/15/10, as amended, out of committee with
individual recommendations and the accompanying fiscal notes.
Representatives Seaton, Wilson, and Petersen voted against it.
Therefore, the proposed committee substitute (CS) for HB 241,
Version 26-LS0680\S, Kane, 2/15/10, as amended, failed to be
reported out of committee by a vote of 3-3.
REPRESENTATIVE GRUENBERG moved to form a subcommittee.
REPRESENTATIVE GATTO objected.
REPRESENTATIVE GRUENBERG withdrew the motion to form a
subcommittee.
HB 292-GRANTS TO DISASTER VICTIMS
9:43:07 AM
CHAIR LYNN announced that the final order of business was HOUSE
BILL NO. 292, "An Act relating to grants to victims of a
disaster in this state; and providing for an effective date."
9:43:43 AM
McHUGH PIERRE, Deputy Commissioner/Chief of Staff, Office of the
Commissioner/Adjutant General, Department of Military & Veterans
Affairs, presented HB 292 on behalf of the House Rules
Committee, sponsor by request of the governor. He said the
department gives out two disaster-related grants. One is for
public assistance, for example, to cover public utilities or
city infrastructure after a declared disaster. The other grant
is given to individual households and has a cap of $5,000. That
cap has not changed since 1977. Mr. Pierre noted that $5,000 in
1977 is equal to $18,000 in 2010. The proposed bill would
adjust the amount of the cap to connect it with the consumer
price index; it would be half of what the federal government
gives out during a disaster, which he opined is a reasonable
amount of money. Mr. Pierre deferred to Mr. O'Hare for further
details.
9:45:26 AM
MIKE O'HARE, Deputy Director, Division of Homeland
Security/Emergency Management, Department of Military & Veterans
Affairs, offered information regarding HB 292, on behalf of the
House Rules Committee, sponsor by request of the governor. He
stated that the proposed legislation would modernize the
individual assistance grant program to the current economy. He
said the department set up a multi-agency task force to
determine what, if any, increase is needed. The [task force]
was comprised of a diverse group of individuals, including those
from: the Department of Commerce, Community, & Economic
Development, the Department of Health and Social Services,
Alaska Voluntary Organizations Active in Disaster (AKVOAD), the
Alaska Housing Finance Corporation, the American Red Cross, the
United States Department Agriculture (USDA), and rural
organizations. The model formulated by the task force would
make the grant cap half of the federal individual assistance,
which fluctuates with the economy through the consumer price
index. Currently, the maximum for the federal individual
assistance grant is approximately $30,000; therefore, the
proposed grant from the State of Alaska would be approximately
$15,000.
9:47:37 AM
MR. O'HARE said this proposed legislation came about after the
devastating floods in Interior Alaska in 2009, which affected 40
communities along the Yukon-Kuskokwim Rivers. These residents,
he reported, received federal individual assistance up to the
$30,000 maximum. He said there were approximately 30 victims of
the disaster in those communities who were not eligible because
they were not in that federally declared zone, and all the State
of Alaska was able to give those people was $5,000, which was
insufficient. Mr. O'Hare reiterated that under the proposed
legislation, during a state-declared disaster, the governor
would be allowed to provide up to half the [amount of the
federal] individual assistance grant program to those affected
in the disaster.
9:48:39 AM
MR. PIERRE emphasized that the state adheres to a strict and
stringent process by which it hands out the grant money. For
example, people are not automatically given the maximum amount.
Of the households affected in a disaster, about 30 percent
receive the maximum allowable amount, which Mr. Pierre
reiterated is currently $5,000. He explained that the money is
given in an effort to get people back on their feet to rebuild
their homes and lives. He offered further details related to
the determination of how much money a person is awarded. A
person who has money in the bank and is prepared for a disaster
may not receive any money at all, for example.
9:49:36 AM
MR. O'HARE said the department interviews victims and reviews
photographs to determine whether the victim does not have the
capability to make him/herself whole again without financial
help.
9:50:24 AM
REPRESENTATIVE GRUENBERG related his understanding that there
have been no claims under the state fund since the first of
2010. He then opined that it is not enough to increase the
amount given by the state to one half of that given by the
federal government. He said the people who need money have been
"wiped out" and are left with nothing. He asked why the cap is
proposed to be half, and he said he is prepared to offer an
amendment to increase the amount to "the maximum."
9:51:12 AM
MR. O'HARE answered that the concept of state declared disaster
is "a smaller version of a federally declared disaster."
Furthermore, state declared disasters happen more often. He
stated that the concept of giving money is an opportunity to
help in part of the process of a victim being whole again.
9:52:09 AM
MR. PIERRE added that the money the state pays comes through its
disaster relief fund, which is not supported by the federal
government. It would not be until a federal disaster is
declared that the State of Alaska would receive federal support,
and then it would be federal dollars that would be given as
individual assistance to the victims. He stated, "A household
... could not double-dip."
REPRESENTATIVE GRUENBERG remarked that the fiscal note is about
$600,000.
9:52:57 AM
MR. O'HARE, in response to Representative Gruenberg, said the
fiscal note is speculative, because disasters cannot be
anticipated. He said the fiscal note reflects the increase from
the original $5,000 to an approximate $15,000. He indicated
that in one disaster, only 30-35 percent of applicants qualified
for the maximum $5,000. The aforementioned taskforce has said
the best model to follow would be half of the federal amount.
9:54:46 AM
MR. PIERRE, in response to Representative Gruenberg, emphasized
that the numbers of disaster victims affected would not be
changed by the proposed legislation. The numbers showing on the
fiscal note, he said, have been a good average since 2002. He
said changing the amount of the state's grant cap to equal that
of the federal grant would double the fiscal note. He related
that Alaska experiences 5-6 state disasters per year, and he
reiterated that not all of those disasters are eligible for
federal assistance. To illustrate his point, Mr. Pierre relayed
that in 2009, there were two disasters declared by the President
of the United States, while Alaska declared 3-4 state disasters.
Mr. Pierre stated that the one federally declared disaster was a
mud slide in Kodiak that was "not eligible for individual
assistance" - it was "only a public assistance disaster."
MR. PIERRE explained that in some disasters, only public
assistance - for roads and utilities - is awarded; public
assistance, he reminded the committee, is not awarded for damage
of individual homes. The bill addresses those who have
experience damage to their homes. He said the department
heavily emphasizes being proactive with the community and
lending a hand, rather than a full handout. He said there are
representatives from the department who travel to communities
that typically experience flooding to ask residents if they have
followed prevention tactics. The emphasis is in ensuring the
safety of these people.
9:57:22 AM
MR. PIERRE, in response to Representative Seaton, confirmed that
the fiscal note reflects the difference between the current
average and the proposed amount.
MR. O'HARE, in response to Representative Seaton, related that
in the past two-three years, the Alaska State Legislature had
the vision to forward-fund the disaster relief fund. Currently,
there are approximately $100,000 left in that fund. He added
that the department must obtain permission from the legislature
to spend more than $1 million per disaster. The department has
"a very good measure of capping expenditures" and a
responsibility to provide its finance plan to the legislature.
9:59:27 AM
MR. PIERRE, in response to a concern expressed by Representative
Gatto, said the state is not discriminating between rural and
urban residents. He explained that there are two types of
disasters described in statute: AS 26.26, which addresses
natural disasters, and AS 26.44, which addresses economic
disasters. He said economic disasters are handled by the
Department of Commerce, Community, & Economic Development.
Communities that experience disaster file a declaration to the
state. The state analyzes the declaration, and, if warranted,
holds a disaster policy cabinet to determine whether or not to
declare a state disaster based on the local response. The state
would ask the federal government for help once it has spent all
its resources.
MR. O'HARE, in response to a hypothetical example of a chemical
spill disaster offered by Representative Gatto, echoed Mr.
Pierre's outline of the steps that would be taken, first by the
community, next by the state, and finally by the federal
government, as necessary. He stated, "What we're talking about
here is ... individual assistance for the recovery of the
disaster." If the chemical spill had resulted in the death of
family members, the state could give money to help pay for
funeral costs. If the hypothetical spill had affected the
homes, the grant money could be applied.
10:03:46 AM
CHAIR LYNN announced that HB 292 was held over.
10:04:24 AM
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 10:04
a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 16 ohio divestment policy.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 17 florida divestment policy.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 18 Congressional Report- Iran Sanctions.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 19 state-by-state divestment laws.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 02 HB0241A.pdf |
HSTA 2/9/2010 8:00:00 AM HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 04 sponsor statement HB 241.pdf |
HSTA 2/9/2010 8:00:00 AM HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 05 sectional summary HB 241 Version R.pdf |
HSTA 2/9/2010 8:00:00 AM HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 20 state-by-state scrutinized company lists.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 21 Louisiana Constructive Engagement Summary 02-2010.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 22 articles on recent iran developments.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 23 Louisiana Prohibited Nations Summary August 2009.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 01-B explanation of changes from 1st CSHB241 to 26-LS0680S.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 07 background info 1, HB 241.pdf |
HSTA 2/9/2010 8:00:00 AM HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 08 background info 2, HB 241.pdf |
HSTA 2/9/2010 8:00:00 AM HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 09 background info 3, HB 241.pdf |
HSTA 2/9/2010 8:00:00 AM HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 14 HB241-REV-TRS-02-05-10 Iran Divestiture.pdf |
HSTA 2/9/2010 8:00:00 AM HSTA 2/16/2010 8:00:00 AM |
HB 241 |
| 01 HB0292A.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 292 |
| 02 gov letter hb 292.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 292 |
| 03 HB0292-1-2-011910-MVA-Y.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 292 |
| 04 hb 292 statute history.pdf |
HSTA 2/16/2010 8:00:00 AM |
HB 292 |