Legislature(1997 - 1998)
03/07/1997 01:32 PM Senate JUD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE
March 7, 1997
1:32 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chair
Senator Drue Pearce, Vice-chair
Senator Mike Miller
Senator Sean Parnell
Senator Johnny Ellis
MEMBERS ABSENT
None
COMMITTEE CALENDAR
SENATE BILL NO. 106
"An Act relating to the bond required of a notary public."
PASSED SB 106 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 101(L&C)
"An Act relating to certain irrevocable transfers in trust, to the
jurisdiction governing a trust, to challenges to trusts or property
transfers in trust, to the validity of trust interests, and to
transfers of certain trust interests; and providing for an
effective date."
PASSED CSHB 101(JUD) OUT OF COMMITTEE
SENATE BILL NO. 3
"An Act authorizing prosecution and trial in the district court of
municipal curfew violations."
PASSED CSSB 3(JUD) OUT OF COMMITTEE
PREVIOUS SENATE COMMITTEE ACTION
SB 106 - No previous Senate committee action.
HB 101 - No previous Senate committee action.
SB 3 - See Health, Education, and Social Service Committee minutes
dated 2/21/97.
WITNESS REGISTER
Representative Al Vezey
Alaska State Capitol
Juneau, Alaska 99801-1182
POSITION STATEMENT: Sponsor of HB 101
Rich Hompesch
119 North Cushman, Suite 400
Fairbanks, AK 99701
POSITION STATEMENT: Supports HB 101
Doug Blattmacher
Alaska Trust Company
840 K St.
Anchorage, AK
POSITION STATEMENT: Supports HB 101
Mr. Jeffrey Schoenblum
Vanderbilt University Law School
(615) 322-2668
Bob Manley
Hughes, Thorsness, Powell, Huddleston and Bauman
324 E. Captain Cook
Anchorage, AK 99501
POSITION STATEMENT: Supports HB 101.
David Dobbs
9410 Dundee Circle
Anchorage, AK 99515
POSITION STATEMENT: Supports HB 101
W. Finley Abbott
Yukon Island
Homer, AK 99603
POSITION STATEMENT: Supports HB 101.
Allan Johnston
101 W. Benson, Suite 500
Anchorage, AK 99503
POSITION STATEMENT: Supports HB 101.
Ms. Diane Borgeson
P.O. Box 74046
Fairbanks, AK 99707
POSITION STATEMENT: Supports HB 101.
Ms. Jo Kuchle
P.O. Box 73784
Fairbanks, AK 99707
POSITION STATEMENT: Supports HB 101.
Ms. Shelley Ebenal
P.O. Box 74468
Fairbanks, AK 99701
POSITION STATEMENT: Supports HB 101.
Mr. E.M. Cox
1410 So. Cushman
fairbanks, AK 99701
POSITION STATEMENT: Supports HB 101.
Johne Binkley
5325 Chena Small Tracts
Fairbanks, AK 99703
POSITION STATEMENT: Supports HB 101.
Linda Hurlbert
110 South Cushman
Fairbanks, AK 99701
POSITION STATEMENT: Supports HB 101.
Kevin Walsh
330 Barnette, Suite 101
Fairbanks, AK 99701
POSITION STATEMENT: Supports HB 101.
ACTION NARRATIVE
TAPE 97-17, SIDE A
Number 000
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to
order at 1:32 p.m. Present were Senators Pearce, Miller, and Chair
Taylor. The first order of business before the committee was SB
106.
SB 106 NOTARY PUBLIC BOND
MR. DOUG WOOLIVER , Administrative Attorney for the Alaska Court
System, explained SB 106 is a housekeeping measure aimed at shaving
time off of the notary public application process. Under a statute
enacted in 1961, notary public applicants need to post a $1,000
bond, which must be signed by the Superior Court clerk. The court
clerk makes sure the bond form is filled out correctly and signed,
but does not investigate or analyze it. The form is then sent to
the Lieutenant Governor's Office, which has authority over license
issuance for notaries. SB 106 deletes the provision that requires
the court clerk to sign the bond since it is unnecessary and will
shorten the application process by one to two weeks.
SHANNON HASTY , Notary Administrator in the Lieutenant Governor's
Office, clarified SB 106 will not shorten the application
processing time because she commissions the notaries prior to
sending the applications to the court system.
Number 063
SENATOR MILLER moved SB 106 out of committee with individual
recommendations. There being no objection, the motion carried.
Number 084
HB 101 TRUSTS & PROPERTY TRANSFERS IN TRUST
VICE-CHAIR PEARCE called the meeting back to order at 1:40 p.m. and
announced HB 101 was next on the agenda.
REPRESENTATIVE AL VEZEY , sponsor of HB 101, gave the following
summary of the measure. HB 101 is the result of a desire to find
out what needs to happen to help make Alaska, and particularly
Anchorage, a financial service center for the world. Anchorage is
advantageously located and has a communication network that makes
it conducive to becoming an international financial services
center. There is a market demand for a strong form of trust; one
that is exempt from the Uniform Law Against Perpetuities.
Currently, a trust of this nature is not available in the United
States and persons worldwide must go to an overseas trust company.
In Alaska, the statute against perpetuities establishes a very
finite period of time. HB 101 exempts a trust from that statute.
More and more in our society, the statute against perpetuity is
being waived. Alaska recognizes that corporations can be
established in perpetuity, as well as Native Corporations, and
national and state park systems.
REPRESENTATIVE VEZEY continued. A second component the trust
market is looking for is strong protection of the trust corpus from
invasion by creditors. HB 101 establishes that the trust, once set
up, is managed according to all laws. Extreme care must be taken
to ensure that no fraudulent transfers occur upon creation of the
trust, and that no intent to defraud future creditors exists. A
statute of repose was specifically defined for fraudulent
transfers. He emphasized much of HB 101 is set up to preclude
fraudulent transfers, but if one occurs, the corpus of the trust
can be invaded. Distributions are considered ordinary income. In
essence, HB 101 is an attempt to meet a market demand for financial
services.
RICK HOMPESCH , a Fairbanks attorney, testified in support of HB
101. This measure allows Alaskans to create trusts and protect
their assets for the benefit of their families and will expand its
trust industry by providing more work for financial advisors,
accountants, attorneys and appraisers. One year ago, he traveled
to the Cook Islands to investigate its trust business. In an
island with a population of 10,000, about 150 jobs are attributable
to the trust industry. Alaska has many advantages over the Cook
Islands: it has political stability as part of the United States;
and is located midway between three of the largest financial
districts of the world - London, Tokyo, and New York. Trustees
will want to travel to Alaska, enhancing the tourism market. He
urged the committee to pass HB 101.
Number 225
DOUGLAS BLATTMACHER informed committee members he has over 24 year
of trust management experience and spent 10 years in the trust
industry in Alaska. He believes HB 101 will bring significant
business to the State of Alaska and create quality jobs.
SENATOR PARNELL asked Mr. Blattmacher to address the proposed
amendments submitted by the Attorney General's Office. MR.
BLATTMACHER replied Mr. Hompesch was more prepared to respond to
the legal and technical aspects of the amendments.
BOB MANLEY , a member of Hughes, Thorsness, Powell, Huddleston, and
Bauman Law Firm, state chairman of the American College of Trust
and Estate Counsel, and a fellow of the American College of Tax
Counsel, testified in support of HB 101 because it will bring a
clean industry to Alaska. Delaware has modified its laws to become
an attractive situs for corporations and limited partnerships.
South Dakota modified its interest law provisions to attract
central processing for credit cards nationwide. South Dakota also
repealed its rule against perpetuities and developed a very
significant business in the trust area dealing with generations
skipping transfer trusts. HB 101 provides an opportunity for
Alaska to make changes to establish, not only the partial repeal of
the rule against perpetuities, but self-settlor trusts, whereby
creditors of a settlor cannot make the trustee pay the money out
even if the settlor is a beneficiary, provided there was no
fraudulent conveyance initially and the statute of repose had not
expired. These kinds of provisions are available in a large number
of off-shore jurisdictions and have resulted in billions of dollars
flowing out of the United States to foreign locations.
Number 276
DAVID DOBBS , Vice-President and Trust Officer at National Bank of
Alaska, stated his support of HB 101 because it can be properly
managed by industries in Alaska.
PROFESSOR JEFFREY SCHOENBLUM , Vanderbilt University Law School,
stated he was asked by the Attorney General's Office to
specifically comment on the rule against perpetuities provision in
HB 101, and a proposed amendment to except real property from being
placed in trusts. He stated his support of that amendment because
the abolition of the rule against perpetuities creates a great risk
that real property in Alaska will be tied up indefinitely, will be
fractionalized as families expanded over generations, and because
the history of similar actions in other countries has been very
negative. He added the economic decline of the Ottoman Empire was
specifically attributed to the absence of any rule. Many of the
off-shore jurisdictions have not completely eliminated the rule
against perpetuities but have set forth a specific time period for
the rule, such as 80 or 100 years. He urged the committee to
retain the rule with regard to real property.
PROFESSOR SCHOENBLUM said he also strongly supports the provision
that excepts out spouses' elective share. It is crucial that HB
101 not result in the denial of protection for surviving spouses,
and be used as a way to defeat spousal claims by placing property
in trusts. Regarding the general utility of these sorts of
provisions with regard to asset protection and bringing offshore
funds to Alaska, he cautioned legislators about having high
expectations because foreign jurisdictions have an entirely
separate sovereignty; Alaska does not. Alaska is subject to the
full faith and credit clause, and other governing principles about
enforcement of judgments within the United States. The matter of
whether persons who are seeking asset protection will find Alaska
more appealing than offshore jurisdictions remains to be seen.
Number 329
VICE-CHAIR PEARCE noted Alaska has something no other country has;
at least 226 separate sovereignties at the moment. She asked
Professor Schoenblum to stay on line in order to address specific
amendments.
SENATOR ELLIS advised he has visited the capital of the Ottoman
Empire, and moved amendments 1-4.
W. FINLEY ABBOT T , testified via teleconference from Anchorage, and
asked whether HB 101 strengthens irrevocable trusts so that they
are not as attachable. REPRESENTATIVE VEZEY responded HB 101 would
only apply to a form of irrevocable trust and is designed to
strengthen the trust and make it last for multiple generations.
MR. ABBOTT noted his strong support of the measure and added he has
seen, in the last two years, cases of children losing family
homesteads that were set up in trusts. At present he is concerned
if he puts land into a trust it will be more liable because the
whole thing can be attached, rather than subdivided.
MR. ALLAN JOHNSTON, manager of Wedbush Morgan Securities, stated
investment firms, in general, are very supportive of the concept of
the bill. Creating more high-end jobs in Alaska will benefit
everyone. Although there will not be any direct investment
business for several years to come, the essence of HB 101 will make
Alaska business-friendly.
SENATOR ELLIS asked Mr. Johnston to elaborate on his statement that
there will be no significant economic impact from HB 101 for
several years. MR. JOHNSTON said he does not believe there will be
direct investment business to investment firms for awhile, but he
does believe the bill will make Alaska look more business-friendly
and may encourage people to buy second homes here.
Number 381
DIANE BORGESON , a financial consultant in Fairbanks, testified she
fully supports the bill, as modified.
JO KUCHLE testified from Fairbanks in strong support of HB 101 as
it will bring a lot of investment money into Alaska. Off-shore
jurisdictions cannot offer the U.S. court system which provides
surety as to what laws apply. HB 101 does not impact Alaska's
natural resources, and only adds to the State in the form of
investment trust work, financial planning, and visits from those
investing here. If Alaska does not take this opportunity now,
another state will.
E.M. COX , a Fairbanks CPA, strongly urged the Legislature to vote
for HB 101 as it will benefit individuals and Alaska's business
community. If HB 101 does not pass, other states will take the
lead.
SHELLEY EBENAL , an attorney with Hompesch and Associates,
Fairbanks, testified in support of HB 101 because of the economic
advantages it will bring to Alaska.
Number 421
VINCENT USERA , Assistant Attorney General, advised the
Administration has not taken a position on the bill per se. He
noted last year's bill contained three problematic areas: whether
these trusts could be used to avoid the marital share in a probate
situation; whether a person could avoid child support obligations
by use of this trust; and whether it makes sense to waive the rule
against perpetuities. The first two areas of concern were
addressed by the drafters of HB 101, but technical flaws remain.
The first two sections contain references back and forth between
the sections that deal with the augmented estate of a spouse, to
make certain the intent is transferred from one section to the
other. The bill as drafted, only has one section in AS 34.30.110;
the change there refers to the probate code (AS 13.12.205). The
Department of Law (DOL) has proposed an amendment to add in cross
references to ensure that those provisions apply equally in all
situations.
Regarding child support, MR. USERA explained HB 101 provides that
distributions from the trust to a beneficiary could be attached by
the Child Support Enforcement Agency (CSED). This adds nothing to
present law and, in fact, could be construed to place child support
exclusively in favor of other creditors. DOL has submitted an
amendment to delete that provision as it does not change the status
quo and could be misinterpreted.
The third amendment discussed by MR. USERA also pertains to child
support payments. HB 101 voids the trust of a settlor who is in
default by 30 days or more of making a child support payment. DOL
recommends changing the provision from "a child of the settlor" to
"a child," to encompass situations in which a settlor has incurred
child support obligations for a stepchild or another relationship
that has arisen.
Number 454
VICE-CHAIR PEARCE asked which drafters Mr. Usera referred to. MR.
USERA said he was referring to the person who originally drafted
the bill, Jonathan Blattmacher from New York, as well as proponents
of the bill here in Alaska.
SENATOR MILLER noted Alaska has prioritized the attachment of child
support payments from other revenue, permanent fund dividends being
one, and asked why the DOL would support that policy elsewhere, but
not in HB 101. MR. USERA replied DOL's concern is that by
specifying that distributions from the trust are subject to child
support obligations in statute, that language could be construed to
exclude any other creditor from collecting.
MR. USERA noted the fourth amendment, pertaining to the rule
against perpetuities, makes a substantive change. The rule against
perpetuities was intended to prohibit the generational tie-up of
tangible or intangible property to prevent it from becoming subject
to alienation. HB 101 waives the rule against perpetuities for
every type of property. DOL recommends that real property be
excepted from that waiver because it differs from intangible
property. The value of intangible property, such as stocks, is of
interest, not the stock certificate. In the case of real property,
the value may increase, but the focus and interest remains in the
land itself and the land size itself can never increase. At some
point in time there could be so many beneficiaries of the trust
that there can be no agreement among them, yet the trustee is
obligated to perpetuate the trust and the land would not be subject
to alienation. Alaska's rule against perpetuities provides that an
interest must set within 90 years. DOL believes that is a long
enough period of time to keep property in a trust. If the trust
beneficiaries so desire, they could recreate another trust after 90
years.
REPRESENTATIVE VEZEY believed the proposed amendments do nothing
for the bill, particularly the amendment excepting land from the
waiver of the rule against perpetuities, and although there may be
things in the bill that are unnecessary, those things reaffirm the
existence of other Alaska law, such as the status of child support
payments.
Number 527
JOHNE BINKLEY testified from Anchorage in support of HB 101.
SENATOR ELLIS moved to adopt Amendment 1 as follows.
Page 2, line 3:
Following "transfer"
Insert ", including a transfer in trust with a transfer
restriction under AS 34.40.110(a),"
Page 4, line 13:
Following "provided in"
Insert "AS 13.12.205(2) and"
Page 6, line 4:
Following "(b)"
Insert "Except as provided in AS 13.12.205, if"[If]
SENATOR MILLER objected for the purpose of discussion.
MR. HOMPESCH stated the first three amendments, in his view, are
inconsequential. In most planning situations, both spouses will
waive the right to elect. In Alaska, as in other states, it is
illegal to disinherit your spouse unless he or she agrees by way of
a pre- or post-nuptial agreement. The augmented estate and the
right to elect provisions provide that if that happens, the
disinherited spouse may take approximately one-third of the estate.
To protect the surviving spouse from being defrauded by way of an
Alaska trust, the Administration urged the drafter to include
provisions regarding the augmented estate, which is included in HB
101. As a practical matter, it is a non-issue for a very important
tax reason. When gifts are made to one of these trusts, it is
important that the gift be a completed gift under the federal-state
tax rules. If a surviving spouse has the right to pull back one-
third of the assets in this trust under the augmented estate
provisions, the gift is not complete and the entire trust fails and
is included in the deceased spouse's estate. Therefore, from a
planning standpoint, when two spouses set up a trust, it is best to
have both waive their rights to elect and those under the augmented
estate provisions. He concluded, as a practical matter for
attorneys in the field, the technical changes are a non-issue
because they will be waived in every instance, otherwise there will
be serious estate tax implications and the plan will fall apart.
He said the three technical changes could better be addressed in a
technical corrections bill, if absolutely necessary.
TAPE 97-17, SIDE B
Number 00
MR. SCHOENBLUM emphasized the concern is that an individual who
wished to disinherit his/her spouse could transfer property to
trust in Alaska and Alaska would become known as the haven for
defeating rights of surviving spouses. Even surviving spouses in
other states could be left in a difficult economic situation with
everyone looking to Alaska where the assets were located. This is
precisely what certain off-shore jurisdictions have offered to
clients from Europe, not only with regard to spousal rights, but
with regard to childrens' rights. The question is whether Alaska
wishes to serve that purpose because there is a very strong demand
for trusts, on the part of many persons who do not wish to provide
for spouses.
SENATOR PARNELL asked Mr. Hompesch whether the provision against
disinheriting one's spouse is part of the Uniform Probate Code.
MR. HOMPESCH answered it is, and he believed 12 to 16 states have
adopted very similar provisions to legislation adopted in Alaska
during the last session.
PROFESSOR SCHOENBLUM agreed many states have similar provisions to
protect the spouse, but emphasized the problem is the confusion
between the various sections of the bill. The purpose of the
proposed amendments is to clarify the confusion because HB 101
creates the possibility that any other provision regarding the
elective share could be defeated through the creditor protection
trusts because the spouse could be regarded as a creditor.
Number 549
REPRESENTATIVE VEZEY clarified HB 101 expressly states that a trust
set up in this manner is part of the augmented estate so if a state
did not have a Uniform Probate Code, they would still have that
hurdle to get over.
SENATOR ELLIS asked how that would relate to people in foreign
countries or other jurisdictions. MR. HOMPESCH answered the spouse
in the outside jurisdiction still has rights under Alaska law. In
addition, if someone were setting up one of these trusts to defraud
his/her spouse, the spouse would have four years to sue the trust
under the fraudulent conveyance provision. He repeated DOL's
concerns are unfounded.
MR. USERA stated the concern is not with the people married at the
time the trust is created, but with those who create a trust and
marry after the four year statute of limitation period. In such a
case, the planning would have been done with no spouse to talk to
about waiving the augmented estate. The confusion between the
sections could lead to that result.
SENATOR MILLER maintained his objection to the adoption of
Amendment 1. The motion to adopt Amendment 1 failed 3 to 1 with
Senators Miller, Pearce and Parnell voting nay, and Senator Ellis
voting yea.
SENATOR ELLIS moved to adopt Amendment 2 which reads as follows.
Page 6, line 21:
Following "under a"
Insert "child"
Page 6, line 21:
Delete "for a child of the settlor"
SENATOR MILLER objected.
Number 514
In response to Senator Parnell, MR. HOMPESCH said that there are
two parts to the amendment; both are of little consequence. The
first amendment attempts to change the provision to include any
child, not just the child adopted or born to the decedent. He
questioned whether this point should occupy a significant amount of
CSED's time and felt it should be addressed in the form of a
technical corrections bill.
VICE-CHAIR PEARCE did not understand Mr. Hompesch's point regarding
a technical bill. MR. HOMPESCH said that he had never known a
person who was obligated to pay child support for a child that was
neither adopted nor born to that person. He pointed out the
Administration has had the bill for six months yet he only learned
of the proposed amendment yesterday.
VICE-CHAIR PEARCE believed that if the change made sense, some
attention should be given to it. She asked if there was further
discussion. Hearing none, a hand vote was taken and Senators
Pearce, Parnell, and Ellis voted "Yea" and Senator Miller voted
"Nay." Therefore, Amendment 2 was adopted.
SENATOR ELLIS moved to adopt Amendment 3 as follows.
Page 6:
Delete lines 25-29.
SENATOR MILLER objected for clarification.
MR. USERA explained Amendment 3 deletes the provision that allows
child support to be taken from distributions of the trust. Mr.
Usera said the provision is unnecessary because current law
provides for such attachment and specifying it in HB 101 could be
construed to exclude other creditors from collecting any payment.
Under current law, other creditors could be excluded in the order
in which the creditor takes precedent, but they would be able to
share in attaching distributions.
SENATOR MILLER said, "I can follow that reasoning, it's just that
I don't want to see this come back and part of the argument that
the Administration used last year was that we didn't protect child
support payments. I don't want to see this argument coming back
from the Administration as a reason to veto this bill because we
didn't protect them."
MR. USERA stated, `Our concerns about child support were addressed
and this was a specific - there are two specific provisions in the
bill to address the child support concerns. One was the 30 day in
arrears provision which included the language "child of a settlor"
that you just addressed. And the other provision is this making it
very clear that distribution is subject to attachment, but it's not
necessary.'
SENATOR MILLER replied, "I understand that but all I'm saying is I
don't want the Administration to come back and say that the bill
did not protect child support, like we heard last year. I just
don't want - because it's not in other places - I'm just a little -
not as trustworthy of the Administration as you may be, Senator
Ellis." SENATOR MILLER removed his objection to Amendment 3.
Without further objection, Amendment 3 was adopted.
Number 450
SENATOR ELLIS moved that Amendment 4 be adopted and reads as
follows.
Page 5, line 16:
Following " created"
Insert ", except that this provision does not apply to
real property"
VICE-CHAIR PEARCE objected and asked Mr. Hompesch to explain.
MR. HOMPESCH advised that Amendment 4 is bad policy and is
difficult to understand. Corporations may be made perpetual and
real estate can be transferred to a corporation that is perpetual;
a legal practice in every state. There is no restriction on
alienation because the president of the corporation can sell the
real estate. Mr. Hompesch did not understand why it would be bad
for real estate to be conveyed to a perpetual trust for the benefit
of the beneficiaries since the trustee, like the corporate
president, has the power to sell the real estate. Mr. Hompesch
informed the committee, as the trustee of a trust of 23
beneficiaries that own a house in Green Valley, AZ, he is in the
process of selling the real estate and distributing the proceeds 23
ways. The concern regarding the splintering of the interest and
the real estate is not an issue and is based on faulty reasoning.
Mr. Hompesch believed such a policy would affect Alaskan residents
negatively. If Amendment 4 was adopted, residents of states
outside of Alaska will transfer their real estate to limited
liability companies and then transfer their shares in the limited
liability companies to their perpetual trust in Alaska. Many
Alaskans will want to convey their real estate directly to a trust.
Alaskans would have to first form a limited liability company or
limited partnership to get around this rule. That would create
additional attorneys' fees. He stated he is opposed to this
amendment and does not want to be accused of creating a situation
to benefit himself. He repeated this amendment is unnecessary.
Number 422
MR. USERA countered that although a trustee can always sell the
property, the trustee is obligated to do what is best for the
trust, not necessarily the beneficiaries. A piece of property
could be growing in value to the extent that the trustee would not
be discharging his fiduciary obligations if he sold the property,
because that would not be in the best interest of the trust.
Although one could form a corporation or limited liability company
and have that entity own the land, and the shares in that entity be
held by the trust, the shares would be held by the trust, not the
land itself.
MR. SCHOENBLUM agreed with Mr. Usera and added the rule against
perpetuities does not relate to all future interests, it only
relates to contingent future interests. It is not a question of
owning property in perpetuity, but a question of creating the kind
of conditional interest that is essentially contingent. It might
be possible for a settlor to restrict the powers of the trustee so
the trustee would not be in the position to sell the property or
divide it.
REPRESENTATIVE VEZEY advised there are many ways to get around an
exception for real property and urged the committee to vote against
Amendment 4.
VICE-CHAIR PEARCE maintained her objection. The motion to adopt
Amendment 4 failed with Senator Ellis voting "yea," and Senators
Pearce, Miller and Parnell voting "nay."
KEVIN WALSH , a Fairbanks CPA, testified in support of HB 101 as it
fixes some problems in the law with respect to the rule against
perpetuities, and serves the public purpose. There are many
instances in which land is held in perpetuity, i.e. for the state.
It is possible to alienate property in other ways, i.e. one can
provide for a conservation easement. The arguments being made are
an attempt to kill a very good bill for political reasons. If some
of the projected abuses occur, the legislature can amend the law.
LINDA HULBERT , an insurance agent, testified from Fairbanks in
support of HB 101. Many of her clients would like to establish
trusts to pass their property to their children.
Number 342
SENATOR ELLIS asked Representative Vezey to provide an estimate of
the number of jobs HB 101 might bring to the Anchorage area.
REPRESENTATIVE VEZEY did not have an estimate, but noted this
market, on a global scale, is a multimillion dollar market per year
and the management fees are substantial.
SENATOR PARNELL moved CSHB 101(JUD) from committee with individual
recommendations. There being no objection, the motion carried.
SB 3 MINORS' CURFEW VIOLATION HEARD IN DISTRICT COURT
SENATOR PEARCE , sponsor of the measure, said SB 3 establishes a
uniform approach to handling curfew violations for those
communities that wish to enact a curfew ordinance. Recently, the
City of Juneau attempted to enact a youth curfew but found no
avenue to prosecute offenders. SB 3 mandates that all juvenile
curfew violations be handled in District Court, with a parent or
legal guardian present during the proceedings. SB 3 will allow for
more effective and expeditious handling of these offenses.
SENATOR PEARCE added Juneau is fortunate to have Judge Froehlich
who has taken it upon himself to spend a great deal of time on
youth cases, particularly alcohol and drug offenses. Judge
Froehlich estimates about 75 percent of the young people out after
Juneau's proposed curfew time are the group who end up as the more
serious alcohol, drug and tobacco offenders. He believes
communities need all of the tools available to handle youth
intervention as early as possible.
SENATOR PEARCE explained SB 3 has a fiscal note from the Court
System because it calls for court hearings for curfew violators.
She noted the Municipality of Anchorage (MOA) has proposed an
amendment to allow for a community work option if the offender
cannot afford to pay a fine, or if the parents choose not to pay
the fine. The amendment is permissive, because a recent court
decision requires that a youth offender who is sentenced to a
certain amount of community work has the right to a jury trial.
She was unsure whether youth courts can be used in place of a jury
trial.
SENATOR ELLIS asked whether the fiscal note accounts for the
amendment. SENATOR PEARCE said she would provide the committee
with an updated fiscal note. SENATOR ELLIS asked Mr. Christensen
to speak to the assumption in the fiscal note that no municipality
will criminalize curfew violations.
CHRIS CHRISTENSEN , Alaska Court System, stated last year the MOA
adopted an ordinance making curfew violations a civil offense and
issued 1500 citations. Those cases are currently being handled by
a municipal hearing officer. Offenders have the right to appeal
those cases to a court, but a $750 bond is required, and so far
there has only been one appeal. Currently cities cannot
criminalize curfew violations, because only the Division of Family
and Youth Services (DFYS) can prosecute juveniles. SB 3 adds
curfew infractions to the list of crimes for which minors can be
prosecuted. SB 3 raises two issues: are curfews good public
policy; and how will this policy affect the court system. He
explained Alaska is one of only five states with a fully unified
court system meaning the state courts do everything. Other states
have city and county courts. Therefore when municipalities create
a crime by ordinance, that crime is prosecuted in the state courts.
Sometimes the Legislature has passed laws giving municipalities the
right to take actions, and they have done so in a much more
expansive way than the Legislature expected. He gave the example
of the MOA's authority to enact traffic ordinances and its use of
a photo-radar operation which resulted in an increase of 8,000
traffic tickets in one year. Those tickets cannot be paid by mail
and require interaction with the court system. No one guessed the
fiscal impact MOA's action would have.
MR. CHRISTENSEN explained the fiscal note for SB 3 contains a
conservative estimate of 3,000 curfew violations, since some of the
violators will simultaneously receive an underage drinking ticket.
Although SB 3 allows municipalities to treat curfew violations as
misdemeanors as well as infractions, he prepared the fiscal note
assuming municipalities will not charge curfew offenders with
misdemeanors because they will be required to provide a public
defender and the court system will have to provide a six person
jury. Most infractions are on bail schedules, and most people pay
them by mail or at the counter. Also problematic is that SB 3
allows municipalities to demand that curfew offenders make a court
appearance, even if the curfew violation is treated as an
infraction. He suggested, if it is not the committee's intent to
treat curfew violations as misdemeanors and/or to force the
offenders to make a court appearance, that SB 3 be amended to read
the offenses should be treated as infractions and should be on the
municipality's bail schedule. With respect to the court decision
(Booth v. State) referred to by Senator Pearce, a 1995 appeal was
based on a law authorizing judges to impose mandatory work service
for felonies and misdemeanors, but not for infractions. The Booth
decision requires if the sentence for a crime is mandatory, not
optional, community service, the person has the right to a jury
trial and a public defender.
Number 153
SENATOR PEARCE clarified on page 1, line 18 of the amendment,
community service is clearly provided as an option.
SENATOR ELLIS asked Senator Pearce if it is her intent to require
offenders to make a court appearance. SENATOR PEARCE believed it
best to have the option to require a court appearance if those
involved feel it will be useful for a particular child to go before
a judge. It has had a positive impact in Juneau.
Number 123
SENATOR ELLIS questioned whether a municipality would have to apply
the same policy to all offenders, or whether offenders could be
treated differently based on circumstances. MR. CHRISTENSEN
replied a municipality could choose to, for example, put first
offenders on a bail schedule, and have second offenders make a
court appearance. He repeated the court system's fiscal note is
based on the assumption that all municipalities will not require a
court appearance, so it contains a conservative estimate. He added
with infractions on the bail schedule, the court sees only about
one-third of the offenders.
SENATOR PEARCE stated her intent is to provide another tool for
local governments, and she hopes they would not throw all cases
into the court system, but instead would take advantage of this
tool for second offenders. She said she is open to ideas as to how
to best accomplish that goal. She felt the court system's fiscal
note is not outrageous, especially if SB 3 keeps one minor out of
jail for one year.
SENATOR ELLIS noted his support of the amendment, but inquired
whether it was requested by the Anchorage Assembly. SENATOR PEARCE
responded it was not. Assemblyman Murdy expressed support of the
bill but she introduced it in response to Juneau's situation.
Assemblyman Murdy requested that community work be an option
because in some instances parents refuse to pay the fine and there
is no way to force the child to do anything as an alternative.
Number 076
SENATOR ELLIS asked if it is safe to assume the Anchorage Assembly
has no objection to the approach in SB 3. SENATOR PEARCE said no
one has expressed objection. She added she has had no indication
that the MOA will rush to criminalize curfew violations.
SENATOR ELLIS questioned whether a parent will be compelled to be
present during a court hearing under SB 3. MR. CHRISTENSEN said
the language in the bill regarding the presence of parents is in
existing law. It is current practice with minor traffic
violations, among others, but does cause problems because cases
often have to be held over because someone cannot attend.
Number 046
SENATOR ELLIS asked for more detail on the practical application of
that provision. MR. CHRISTENSEN offered to provide Senator Ellis
with more information at a later date.
TAPE 97-18, SIDE A
Number 000
STEVEN GRUENSTEIN , representing Guardians for Family Rights,
testified in favor of SB 3. Teenagers need limits, quick
consequences, and early intervention, when they step out of line.
SB 3 will prevent jail time in many cases. He supports the
community service option and a system with teeth.
SENATOR MILLER offered Amendment 1. There being no objection to
the adoption of Amendment 1, it was so ordered.
SENATOR PEARCE repeated her willingness to entertain suggestions
for improvements or alternatives to SB 3, but stated her belief
that early intervention is less costly than incarceration.
SENATOR PARNELL moved SB 3 as amended from committee with
individual recommendations. There being no objection, the motion
carried.
SENATOR PEARCE announced the Senate Judiciary Committee will meet
at 1:30 p.m. on Monday, Wednesday and Friday of the following week,
and adjourned the meeting at 3:20 p.m.
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