Legislature(1999 - 2000)
03/06/2000 01:56 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE March 6, 2000 1:55 p.m. MEMBERS PRESENT Senator Robin Taylor, Chairman Senator Rick Halford, Vice-Chairman Senator Dave Donley Senator John Torgerson Senator Johnny Ellis MEMBERS ABSENT COMMITTEE CALENDAR SENATE BILL NO. 286 "An Act relating to the duties and powers of the attorney general." -HEARD AND HELD SENATE JOINT RESOLUTION NO. 14 Proposing amendments to the Constitution of the State of Alaska relating to the election and the duties of the attorney general. -HEARD AND HELD SENATE BILL NO. 163 "An Act relating to a trustee's duties to inform and account to beneficiaries; relating to the revocation, modification, termination, reformation, construction, and trustees of trusts; and relating to transfer restrictions in trusts." -MOVED CSSB 163 (JUD) OUT OF COMMITTEE PREVIOUS SENATE COMMITTEE ACTION SB 286 - No previous action. SB 163 - See Judiciary Committee minutes dated 5-3-99, 5-11-99, 5-12-99. SJR 14 - See State Affairs Committee minutes dated 3/18/99 and 4/7/99. Judiciary Committee minutes dated 4-12-99 and 2- 9-00. WITNESS REGISTER Mr. Mark Johnson Subcommittee on Privatization for the Department of Law 13631 Windward Circle Anchorage, Alaska 99516 POSITION STATEMENT: Testified on SB 286 Mr. Doug Blattmachr Alaska Trust Company Address not furnished Anchorage, Alaska POSITION STATEMENT: Testified on SB 163 Mr. Dick Thwaites Alaska Trust Company Address not furnished Anchorage, Alaska POSITION STATEMENT: Testified on SB 163 Justice Thomas B. Stewart Alaska Court System PO Box 114100 Juneau, Alaska 99811-4100 POSITION STATEMENT: Opposed to SB 286 and SJR 14 ACTION NARRATIVE TAPE 00-12, SIDE A Number 001 CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to order at 1:55 p.m. Present were Senator Torgerson, Senator Donley and Chairman Taylor. The first order of business to come before the committee was SB 286. SB 286-DUTIES AND POWERS OF ATTORNEY GENERAL MR. MARK JOHNSON, representing the Subcommittee on Privatization for the Department of Law (DOL), gave a collective overview of SB 286 and SJR 14. SB 286 emerged from the work of the Subcommittee on Privatization and was introduced by the Senate Judiciary Committee. The bill is an attempt to "re-craft" certain powers of the Attorney General (AG). The most significant part of this legislation is in Section 1(b)(7), perform all other duties required by law [OR WHICH USUALLY PERTAIN TO THE OFFICE OF ATTORNEY GENERAL IN A STATE]; and. Common law powers of the AG may be taken by someone in that position to imply just about anything--this bill clarifies the duties of the AG. There may be powers the AG believes are necessary for carrying out the duties of office, and a way to resolve this may be for the department to come forward and say what it needs and enumerate on that. MR. JOHNSON commented that the second most important item is the effort to redefine where the AG's obligations lie. The law currently states, the AG is the legal advisor of the governor and other state officers. CSSB 286 proposes in section 1, the state, including the governor and other state officers. This is a philosophical difference--an important one. MR. JOHNSON noted that the third item of importance is in section 1(c), The attorney general may, subject to the power of the legislature to make appropriations, settle actions, cases, and offenses under (b) of this section in which the attorney general represents the state and in which the state is a party. Constitutionally in Alaska, an appropriation is required before money is spent. The AG does not settle cases that require new appropriations nor does he make them subject to appropriation. The concept of a settlement term requiring an appropriation and being subject to the legislative power of appropriation does not appear in the law. This is why the Subcommittee on Privatization is proposing that the language in CSSB 286, subsection (c) be added. Number 570 JUDGE THOMAS B. STEWART, retired Superior Court Judge, Secretary of the Constitutional Convention, Senator in the first Alaska State Legislature and Chairman of the State Affairs Committee which wrote the legislation that set up the executive branch, stated he has an immediate concern with section 1 of CSSB 286, (a) The attorney general is the legal advisor of the state, including the governor... It is a mistake to view the AG as representing anything beyond the executive branch. Because the AG's primary duty is to represent the executive branch, it is a conflict of interest for him to be giving advise to the legislature. Each branch of the legislature needs separate counsel because their interests sometimes conflict, and it is especially important that the AG not represent both the governor and the legislature when they are of different parties. The AG is, of necessity, in a conflict position if he seeks to advise the legislature. The language, legal advisor of the state, at least by inference, suggests the AG is legal advisor for both the legislature and the court system. The court system has its own counsel and never calls upon the AG to represent its interest. Number 905 CHAIRMAN TAYLOR noted he has the same concern as Judge Stewart with inserting the language, including the. The AG will have to be true to one side or the other--which side will it be? As concerns the second page of the bill, subject to the power of the legislature to make appropriations...., there have been situations where the governor, through the AG, settled cases where money was appropriated to a new trust that was created solely out of the settlement of a specific case. The money was not appropriated by the legislature even though the funds were due and owing to the State of Alaska. The governor appropriated all the money by creating a mechanism that would disperse those monies as he saw fit and the legislature could find no way in which to affect that settlement. CHAIRMAN TAYLOR noted he is concerned with this type of situation and, at the same time, every case should not have to come back to the legislature for approval--this legislation may makes that necessary. JUDGE STEWART said he has not studied this matter and would be loath to give an opinion. On the face of it though, he does not see a problem with the language, and he is sympathetic with the legislature being the body that determines how state monies will be spent. CHAIRMAN TAYLOR asked how Judge Stewart would amend this legislation to resolve the conflict--will the AG represent the people of the state, the legislature, or the governor? Number 1059 JUDGE STEWART responded the AG should represent the executive branch. The governor is elected by the people to represent them and the AG represents the governor, thus, representing the majority of the people. SENATOR DONLEY asked if the AG has a higher responsibility to the constitution or to the governor. Some governor's have placed the AG in direct conflict with their duty to defend the constitution, and if the AG is serving the people his loyalty will primarily be to the constitution. How does an AG balance his loyalty between his duty to the governor and to the constitution? JUDGE STEWART asked to defer, and stated he will explain his view when the committee is addressing SJR 14. MR. MARK JOHNSON noted he appreciated Judge Stewart's comments regarding the initial proposed amendment and commented that this is an issue the committee needs to reflect on. CHAIRMAN TAYLOR asked Mr. Johnson how he would resolve the conflict of the AG representing both the governor and the state. MR. JOHNSON responded it is the position of DOL that the executive branch already represents the legislature and the judiciary in some matters. Traditionally, if there is a conflict of interest and someone does not call it to the public's attention, the AG will raise the issue and allow the other branch to retain their own counsel. CHAIRMAN TAYLOR asked why the constitutional convention did not include the AG as a constitutionally created officer. JUDGE STEWART responded the legislature had the responsibility to create all departments of the executive branch, and the AG was another department of the executive branch--departments were not created but their functions were described. This is detailed matter that is adapted to being handled by statute. CHAIRMAN TAYLOR noted that in some states the AG is elected to "represent the people," and the governor has separate counsel. Number 1449 SENATOR DONLEY said he would like the committee to consider adding to the duties of the AG, "he or she shall defend the constitution of the State of Alaska against legal challenges." The AG should have a responsibility to say no to the governor if the governor asks him to do something that is in conflict with his duty to the constitution. Number 1541 SJR 14-ELECTION OF ATTORNEY GENERAL CHAIRMAN TAYLOR introduced CSSJR 14(JUD), version 1-LS0588\H, Kurtz, dated 4/13/99. JUDGE STEWART stated this is a more complicated subject than most people recognize and one he has had deep concern for during his whole professional career. One must look to the history of the American scheme of government which is set out very expressly in the Federalists written by Alexander Hamilton and James Madison. Judge Stewart read from the Federalist Paper 70 dated March 18, 1788. There is an idea, which is not without its advocates, that a vigorous executive is inconsistent with the genius of republican government. The enlightened well-wishers to this species of government must at least hope that the supposition is destitute of foundation; since they can never admit its truth, without at the same time admitting the condemnation of their own principles. Energy in the executive is a leading character in the definition of good government. It is essential to the protection of the community against foreign attacks; it is not less essential to the steady administration of the laws; to the protection of property against those irregular and high-handed combinations which sometimes interrupt the ordinary course of justice; to the security of liberty against the enterprises and assaults of ambition, of faction, and of anarchy. Every man the least conversant in Roman story, knows how often that republic was obliged to take refuge in the absolute power of a single man, under the formidable title of dictator, as well against the intrigues of ambitious individuals who aspired to the tyranny, and the seditions of whole classes of the community whose conduct threatened the existence of all government, as against the invasions of external enemies who menaced the conquest and destruction of Rome. There can be no need, however, to multiply arguments or examples on this head. A feeble executive implies a feeble execution of the government. A feeble execution is but another phase for a bad execution; and a government ill executed, whatever it may be in theory, must be, in practice, a bad government. Those politicians and statesmen who have been the most celebrated for the soundness of their principles and for the justice of their views, have declared in favor of a single executive and a numerous legislature. They have with great propriety, considered energy as the most necessary qualification of the former, and have regarded this as most applicable to power in a single hand, while they have, with equal propriety, considered the latter as best adapted to deliberation and wisdom, and best calculated to conciliate the confidence of the people and to secure their privileges and interests. This unity may be destroyed in two ways: either by vesting the power in two or more magistrates of equal dignity and authority; or by vesting it ostensibly in one man, subject, in whole or in part, to the control and co-operation of others, in the capacity of counselors to him. JUDGE STEWART commented that when you look at the problem of the relationship between the AG and the governor you have to look back to this portion of American history. Alaska's state government is modeled after the federal government and a departure from this would be a serious error. JUDGE STEWART noted that a great majority of the states do elect the AG, the AG is the attorney for the people and, therefore, the people should choose him, but this is a shallow concept that does not recognize what the AG does now and should do. The history of the large majority of the states that have an elected AG is one that derives from the latter part of the 1800's--this is when their state constitutions were written. This was a populist era, it was common for the AG and many of the heads of state departments to be independently elected. This was also the history of Alaska from the time it was formed by the Organic Act in 1913 until Alaska became a state in 1959. There have been no recent states in the 19th century to elect an AG. JUDGE STEWART commented that there is and has been for many years the model state constitution that is promulgated by the League of American Cities. This constitution provides for only the governor and legislature to be elected in state government. There are many distinguished people from academic institutions that are unanimous in the view that the AG should be appointed by the governor and serve subject to his pleasure. JUDGE STEWART, having been an AG, has seen first hand how an independent AG, not having to answer to anyone except his own view of what the people might want, can disrupt the operations of the executive branch. An AG is a legal officer and should not be a policy making officer. JUDGE STEWART noted that an elected AG has an ambition to be governor and will take every step he can to make the governor look bad to enable his candidacy. This completely frustrates the fundamental idea that the executive branch should have energy and vigor. If a governor is expending his energy on fighting a subordinate rather than addressing the problems of the executive branch, the whole executive branch has lost the energy of that leadership. A legal officer should not be selected because of his popularity but for his ability. An elected AG will likely be chosen because of his popularity and what is needed is "a tough S.O.B. that can say no." Tape 00-12, Side B JUDGE STEWARD stated it is essential in the relationship between an attorney and the entity he represents that there be loyalty to that entity. Prime governmental decisions are made by the legislature-- there cannot be a statewide meeting of 500,000 people to come and analyze these issues. The people at large are not in a position to sufficiently make a wise decision on who should be a legal advisor. JUDGE STEWART addressed Senator Donley's question--how does an AG balance his loyalty between the governor and the constitution? JUDGE STEWART said the governor is bound by the constitution and his department heads are bound by the constitution, and if the department heads do not agree with the governor's interpretation, it is their responsibility to resign. Setting up a subordinate so they can override the governor's decision sets up an automatic conflict. Number 2143 CHAIRMAN TAYLOR commented that Senator Donley's question comes to the nub of the issue that has frustrated many of the legislators. In the past AG's have found themselves in philosophical disagreements with a governor and have resigned because of the disagreement. What should the legislature do when a governor abuses the constitution and his legal officer, wanting the job too much, goes along with the governor in things that are destructive? Is the only alternative impeachment? JUDGE STEWART responded, "get a new governor--he will be up for election." CHAIRMAN TAYLOR noted there are three more years left to the governor's term. JUDGE STEWART answered that you make the loudest noise you can publicly, attacking the governor on his bad decisions. CHAIRMAN TAYLOR responded it does not matter how much noise is made, the very same people will be in office for the next three years. At what point does the person who holds that office resign, and if they refuse to resign what does the legislature do? JUDGE STEWART reiterated, "you elect a new governor." SENATOR DONLEY noted that the United States Constitution requires that the President of the United States receive a majority of the electorial college votes, and yet the governor of Alaska can be elected with as few as twenty percent of the people voting for him. JUDGE STEWART stated this is a place where the law can be changed, so that the governor will be elected by a majority of the people. SENATOR DONLEY asked if Judge Stewart would support a constitutional amendment requiring the governor to be elected by a majority. JUDGE STEWART answered yes, the governor should not be elected by a plurality that is less than a majority, but it would be a serious mistake to change the structure of the government based on the bad performance of a single incumbent who will eventually be gone. Number 1678 SB 163-TRUSTS AND TRUSTEES CHAIRMAN TAYLOR asked if SB 163 effects the ability of a beneficiary from finding out about their interest. MR. DOUGLAS BLATTMACHR, Alaska Trust Company, explained that SB 163 allows the settlor to decide if they would like to limit notice to beneficiaries who are not entitled to a distribution or who have not received a distribution for a period of time no longer than [indisc] after their death or after becoming incapacitated. This was done because a number of people who are setting up trusts are doing them early in time because of the special advantages they provide, and they do not want their young children to know they are a beneficiary of trust. MR. BLATTMACHR commented Alaska is unique in that it requires the trustee to notify beneficiaries when a trust is set up. This bill still provides the notification requirement if the grantor or settlor does not ask to hold off for a period of time. After the settlor dies or becomes incapacitated, the trustee has to notify the beneficiaries. Beneficiaries have to be notified if they receive a distribution or are entitled to a distribution. This bill is only for a beneficiary not receiving a distribution or not currently receiving a distribution. CHAIRMAN TAYLOR asked where in the bill is it provided that the limiting factor is disability or death of the grantor or principal of the trust and what is the trigger for notification? MR. BLATTMACHR stated in section 1, subsection (b) the language says: The exemption may not exceed in duration the shorter of the settlor's lifetime or a judicial determination of the settlor's incapacity. This gives the settlor some privacy while letting him take advantage of the tax laws and benefits. CHAIRMAN TAYLOR asked if there is anything else in the legislation that precludes notification to a vested beneficiary. MR. BLATTMACHR responded no, if a person is a vested beneficiary receiving distributions or is entitled to a mandatory distribution of income on an annual basis, they have to be notified. Number 1439 SENATOR DONLEY asked Mr. Blattmachr to elaborate on his last response commenting that even if an individual is not entitled to an annual distribution or guaranteed a final distribution, if the settlor dies or there is a judicial determination of incapacity-- notice is required. MR. BLATTMACHR responded yes, even if the grantor said "don't notify my beneficiaries," if a beneficiary received a distribution or if the trust said a distribution had to be made on an annual basis, the beneficiary would still have to be notified at that time. SENATOR DONLEY stated his concern is that once the settlor's lifetime has ended or there is a judicial determination of the settlor's incapacity, that even if the settlor specifically asked that the beneficiary not be notified, the law still requires the beneficiary be notified. MR. BLATTMACHR responded that is correct. CHAIRMAN TAYLOR clarified further that even if the document says to never notify the beneficiary, even after they are dead, the beneficiary will still be notified. MR. BLATTMACHR said they are bound by the original statute to notify beneficiaries. No notification can only be granted during the lifetime of the grantor, notification is automatic after a death. SENATOR DONLEY asked for Mr. Blattmachr to elaborate on the rest of the bill. Number 1275 MR. BLATTMACHR indicated the bill allows for judicial modification of trusts if the original intent of the trust cannot be accomplished or if tax laws change so they are able to either terminate or modify the document. This allows the beneficiary to go to court and say this trust no longer accomplishes the purpose that was set forth or it does not accomplish the tax purpose because of a change in law, allowing the judge to either modify or terminate the document. MR. DICK THWAITES, Alaska Trust Company, stated there is one other change in CSSB 163, section 2 that says, or by a written document after the trust is created, that some people in the trust industry are concerned about. Individuals that are appointed as trustees for their "good friend" very often do not know of the requirement to notify the trustees. It is thought that a written document, after the trust is created, should be sufficient notice to defer the notification requirement until death or legal determination of incapacity so that when the grantor dies, whether or not there is a determination or notice, the corporate trustee must notify the beneficiaries of their present or future interest. CHAIRMAN TAYLOR asked if this is just to confirm the requirement for existing trusts. MR. THWAITES responded yes, the language was added because it is thought to be an oversight. It is suspected that more than half of the trusts in Alaska exist with non-professional trustees who are not notifying beneficiaries--this needs to be clarified. CHAIRMAN TAYLOR noted the clarification is that someone will notify people at some point. MR THWAITES stated it permits the person creating the trust to have protection while leaving the basic statute in tact, which is that notification must be given in all cases except where this specific limited circumstance arises. Number 1121 SENATOR DONLEY expressed his concern with the language in section 2 that reads: or by a written document after the trust is created, relieve the trustee from the duty to provide notification or information to a beneficiary in accordance with AS 13.36.080(b). MR. THWAITES stated that AS 13.36.080(b) is limited to the trustor's lifetime or his judicial incompetency. SENATOR DONLEY noted that the language in AS 13.36.080(b), in accordance, could be interpreted as relief from the requirements of notification. The language should clearly state that a person has to comply with the requirements. CHAIRMAN TAYLOR suggested the words in accordance with should be replaced with subject to. SENATOR DONLEY moved to replace the wording in section 2, line 12, in accordance with to subject to. There being no objection, the motion carried. SENATOR DONLEY moved CSSB 163 as amended from committee with individual recommendations. There being no objections, the motion carried. There being no further business to come before the committee CHAIRMAN TAYLOR adjourned the meeting at 3:20 p.m.