Legislature(1999 - 2000)

03/06/2000 01:56 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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,                                                                 
SJR 14 - See State Affairs Committee minutes dated 3/18/99 and                                                                  
          4/7/99.  Judiciary Committee minutes dated 4-12-99 and 2-                                                             
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                                                                   
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                                                                   
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                                                             
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                                                                  
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                                                               
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,                                                                 
     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                                                                
     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                                                                  
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                                                                 
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                                                              
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                                                                  
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                                                                  
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                                                              
There being no further business to come before the committee                                                                    
CHAIRMAN TAYLOR adjourned the meeting at 3:20 p.m.                                                                              

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