05/05/2021 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB129 | |
| HB109 | |
| SB11 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 129 | TELECONFERENCED | |
| + | HB 109 | TELECONFERENCED | |
| + | SB 11 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE JUDICIARY STANDING COMMITTEE
May 5, 2021
1:33 p.m.
MEMBERS PRESENT
Senator Roger Holland, Chair
Senator Mike Shower, Vice Chair
Senator Shelley Hughes
Senator Robert Myers
Senator Jesse Kiehl
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 129
"An Act relating to information on judicial officers provided in
election pamphlets."
- HEARD & HELD
HOUSE BILL NO. 109
"An Act extending the termination date of the Board of Governors
of the Alaska Bar Association; and providing for an effective
date."
- HEARD & HELD
SENATE BILL NO. 11
"An Act relating to community property and to community property
trusts; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 129
SHORT TITLE: ELECTION PAMPHLET INFORMATION RE JUDGES
SPONSOR(s): SENATOR(s) MYERS
04/21/21 (S) READ THE FIRST TIME - REFERRALS
04/21/21 (S) JUD, STA
05/05/21 (S) JUD AT 1:30 PM BUTROVICH 205
BILL: HB 109
SHORT TITLE: EXTEND BAR ASS'N BOARD OF GOVERNORS
SPONSOR(s): REPRESENTATIVE(s) CLAMAN
02/22/21 (H) READ THE FIRST TIME - REFERRALS
02/22/21 (H) JUD, FIN
03/22/21 (H) JUD AT 1:30 PM GRUENBERG 120
03/22/21 (H) Heard & Held
03/22/21 (H) MINUTE(JUD)
03/24/21 (H) JUD AT 1:30 PM GRUENBERG 120
03/24/21 (H) Moved HB 109 Out of Committee
03/24/21 (H) MINUTE(JUD)
03/25/21 (H) JUD RPT 4DP 2NR 1AM
03/25/21 (H) DP: DRUMMOND, SNYDER, KREISS-TOMKINS,
CLAMAN
03/25/21 (H) NR: EASTMAN, VANCE
03/25/21 (H) AM: KURKA
04/09/21 (H) FIN REFERRAL REMOVED
04/12/21 (H) FIN AT 9:00 AM ADAMS 519
04/12/21 (H) <Bill Hearing Canceled>
04/19/21 (H) TRANSMITTED TO (S)
04/19/21 (H) VERSION: HB 109
04/21/21 (S) READ THE FIRST TIME - REFERRALS
04/21/21 (S) JUD
05/05/21 (S) JUD AT 1:30 PM BUTROVICH 205
BILL: SB 11
SHORT TITLE: COMMUNITY PROPERTY TRUSTS
SPONSOR(s): SENATOR(s) BEGICH
01/22/21 (S) PREFILE RELEASED 1/8/21
01/22/21 (S) READ THE FIRST TIME - REFERRALS
01/22/21 (S) L&C, JUD
03/10/21 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/10/21 (S) -- MEETING CANCELED --
03/12/21 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/12/21 (S) Heard & Held
03/12/21 (S) MINUTE(L&C)
03/19/21 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
03/19/21 (S) Moved SB 11 Out of Committee
03/19/21 (S) MINUTE(L&C)
03/22/21 (S) L&C RPT 4DP
03/22/21 (S) DP: COSTELLO, GRAY-JACKSON, STEVENS,
HOLLAND
05/05/21 (S) JUD AT 1:30 PM BUTROVICH 205
WITNESS REGISTER
THERESA WOLDSTAD, Staff
Senator Robert Myers
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided a PowerPoint on SB 129 on behalf of
the sponsor.
NANCY MEADE, General Counsel
Administrative Offices
Alaska Court System
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of SB 129.
SUSANNE DIPIETRO, Executive Director
Alaska Judicial Council
Alaska Court System
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of SB 129.
MATT CLAMAN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the sponsor of HB 109.
KRIS CURTIS, Legislative Auditor
Legislative Agencies and Offices
Juneau, Alaska
POSITION STATEMENT: Presented audit findings on HB 109.
BEN HOFMEISTER, President
Board of Governors of the Alaska Bar
Office of the Governor
Anchorage, Alaska
POSITION STATEMENT: Spoke as invited testifier on HB 109.
PHIL SHANAHAN, Bar Counsel
Alaska Bar Association
Anchorage, Alaska
POSITION STATEMENT: Spoke as invited testifier on HB 109.
DANIELLE BAILEY, Executive Director
Alaska Bar Association
Anchorage, Alaska
POSITION STATEMENT: Testified during the hearing on HB 109.
SENATOR TOM BEGICH
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 11.
BRIX HAHN, Staff
Senator Tom Begich
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented a sponsor statement and sectional
analysis on SB 11 on behalf of the sponsor.
MATTHEW BLATTMACHR, Attorney; Principal
Peak Trust Company
Anchorage, Alaska
POSITION STATEMENT: Spoke as invited testifier on SB 11.
WILLIAM PEARSON, Attorney
Foley and Pearson
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 11.
ABIGAIL O'CONNOR, Attorney
O'Connor Law Office, LLC
Anchorage, Alaska
POSITION STATEMENT: Spoke as invited testifier on SB 11.
DAVE SHAFTEL, Attorney
Shaftel Delman & Associates
Anchorage, Alaska
POSITION STATEMENT: Spoke as invited testifier on SB 11
ACTION NARRATIVE
1:33:05 PM
CHAIR ROGER HOLLAND called the Senate Judiciary Standing
Committee meeting to order at 1:33 p.m. Present at the call to
order were Senators Myers, Hughes, Shower, and Chair Holland.
Senator Kiehl arrived shortly thereafter.
SB 129-ELECTION PAMPHLET INFORMATION RE JUDGES
1:33:45 PM
CHAIR HOLLAND announced the consideration of SENATE BILL NO.
129, "An Act relating to information on judicial officers
provided in election pamphlets."
1:34:02 PM
SENATOR MYERS, speaking as the sponsor, said SB 129 would
provide voters with additional information on judges standing
for judicial retention. Judges cannot campaign, so voters often
lack information on judges' backgrounds. Since the Alaska
Judicial Council collects information on judges, SB 129 will
require additional background information be included in the
Division of Election voter pamphlet.
1:35:22 PM
THERESA WOLDSTAD, Staff, Senator Robert Myers, Alaska State
Legislature, Juneau, Alaska, began a PowerPoint on SB 129 on
behalf of the sponsor. She paraphrased slide 2 related to the
judicial merit selection retention system:
Alaska established a three-part judicial merit
selection and retention system.
1. Alaska Judicial Council screens and nominates
judicial applicants based on the candidate's moral
character, professional competence, and legal
experience.
2. Alaska governor appoints from the list provided
by the Alaska Judicial Council.
3. Alaska state voters determine whether a judicial
officer will remain on the bench during retention
elections.
MS. WOLDSTAD reviewed the Alaska Judicial Council
recommendations on slide 3:
• The Alaska Judicial Council conducts extensive
performance evaluations, interviews, and public
hearings.
• Surveys assess judicial integrity, temperament,
diligence, impartiality, legal ability, and
administrative skills
• Based upon their research the council will decide
if they will recommend a judicial officer's
retention to the public.
• The Judicial Council's recommendation is
published in the Alaska Official Election
Pamphlet.
1:37:01 PM
MS. WOLDSTAD reviewed slide 4, Judicial Retention and Election
Pamphlets, which depicted information on judicial retention that
is typically included in the election pamphlet.
MS. WOLDSTAD directed attention to the table on slide 5, that
summarizes information the Alaska Judicial Council compiled from
the Judicial Performance Evaluation it conducted.
She pointed out that the Alaska Judicial Council recommendation
indicates whether the judge should be retained.
MS. WOLDSTAD reviewed the table on slide 6, Alaska Judicial
Council Recommendations and Retention Votes. She reported that
voters retained judges about 33 percent of the time when the
Alaska Judicial Council recommended a "No" vote. However, it
sometimes takes two election cycles before the judges are voted
out. The sponsor surmised that voters might need additional
information on judicial performance to make informed decisions
at the polls.
1:38:06 PM
MS. WOLDSTAD read the goal of the bill shown on slide 7.
• The success of the system is based upon providing the
electorate critical information to make informed decisions
regarding judicial retention.
• This legislation will add additional information already
collected by the Alaska Judicial Council to the Alaska
Official Election Pamphlet.
• Information shall be provided except when required by
law to be kept confidential.
• We are currently working [with] the Alaska Court System,
Division of Elections, and the Alaska Judicial Council to
assess word limitations and potential information to be
provided.
CHAIR HOLLAND asked if the sponsor would like to present the
sectional analysis of the bill.
1:38:59 PM
SENATOR MYERS answered no. He stated that he would like to
provide the bill concept today, that he anticipates some
amendments to the bill, including ones the division and court
system suggested. He stated his intention to fine-tune the bill
by adding specificities, such as the judges' affirmation rates
on appeals, the types of clients, or the cases they handled in
their attorney practices. He explained typical affirmation rates
for judges often range in the 80 percent range, so voters may
wish to review judges whose rates are 60 percent or lower. This
downward trend may indicate a lack of voter trust. One goal of
SB 129 is to restore trust and to better inform voters on
judicial performance. He suggested that some information, such
as the law school they attended and the types of clients they
served, may be relevant when initially assessing judges.
However, that information may not be needed for subsequent
retention elections.
1:44:26 PM
SENATOR HUGHES asked what type of information might be relevant
for the first retention but not subsequent ones. She wondered if
it would raise any constitutional issues to differentiate
between them.
SENATOR MYERS responded that it might be helpful to know the
judges' primary practice areas and their primary clients for the
first retention election. Once someone has years of judicial
experience, what they did 20 years ago seemed superfluous and
the court system agreed that information might not be as
relevant.
1:46:28 PM
SENATOR SHOWER suggested that the trend indicates people want to
be more informed about government. People tend not to know as
much about the judiciary, so providing more information on
judges could be beneficial. He offered his view that providing
more transparency in the system could help restore public faith.
1:48:17 PM
SENATOR KIEHL recalled some items that he considered adding to
the voter pamphlet. He asked what value voters would get from
knowing which law school judges attended. He wondered if this
means someone who goes to a prestigious law school will receive
additional consideration.
SENATOR MYERS recalled that there are about 3,000 universities
in the US, but only about [200] law schools, so it's a more
limited pool. He acknowledged that the location could create
bias, but it could also provide a perspective on the judges that
voters may find helpful.
1:51:21 PM
SENATOR KIEHL asked what level of granular information on their
clients is needed. He stated that he does not judge or select
his doctors based on the patients they may have treated.
SENATOR MYERS said the point is not to single out specific
clients. Still, it may be relevant to know the general area of
law an attorney practices to highlight the attorney's experience
brought to the bench. For example, it would be pertinent to know
if the judges spent most of their legal practice representing
oil companies or plaintiffs.
1:53:14 PM
SENATOR HUGHES pointed out that the election pamphlet already
lists education and political involvement in the biographical
information. She asked if the candidate or the Alaska Judicial
Council provided that information. She surmised that the current
information was at the discretion of the judicial candidates.
SENATOR MYERS acknowledged the information on the left side of
slide 4 was discretionary information the judicial candidates
provided to the Division of Elections. The Alaska Judicial
Council provides judicial evaluation information per specific
requirements. He suggested perhaps melding the two pages by
developing discretionary and mandatory requirements. The surveys
from the Alaska Judicial Council are available to the public on
the council's website, but it does take time to find them.
1:56:59 PM
NANCY MEADE, General Counsel, Administrative Offices, Alaska
Court System, Anchorage, Alaska, stated that the court system
has been working with the sponsor to address privacy and
security concerns. Still, it is not opposed to the bill as
currently written. She stated her intent to continue to work
with the sponsor on SB 129.
1:57:40 PM
SENATOR HUGHES asked if those concerns could be remedied. She
asked her to elaborate on the privacy and security concerns.
MS. MEADE referred to page 2, lines 15 to 16, subparagraph (H),
which would require the justices or judges to disclose clients
and employers of members of the justice's or judge's household.
She surmised that some spouses might not wish to disclose their
clients. Further, disclosing information could create security
concerns, including reporting that a judge's child works at a
coffee shop. Additionally, some spouses and adult children have
different levels of privacy needs and security concerns and will
not want their information published.
1:58:58 PM
SENATOR SHOWER acknowledged privacy concerns but wanted to
ensure that a balance was struck. He suggested that the bill be
as transparent as possible within specific parameters. He said
public officials should be required to submit to a certain level
of disclosure.
2:01:09 PM
SUSANNE DIPIETRO, Executive Director, Alaska Judicial Council,
Alaska Court System, Anchorage, Alaska, echoed Ms. Meade's
comment that she has been working with the sponsor to address
issues. She explained that in 1978, the Alaska Judicial Council
first received the authority to put information about judges
standing for retention in the Division of Elections' voter
pamphlets. At that time, the council's submission was limited to
approximately 300 words. The council's evaluation process was
less comprehensive. The council conducted a survey to determine
what information voters wanted before voting. Voters responded
that the voter pamphlet information was helpful, but they wanted
more details. Since then, the council has built up the
information in the voter pamphlet to 600 words. The council
carefully considers what information best reflects the actual
performance of judges. The council has increased the evaluation
process, conducting outreach by posting information on social
platforms and conducting five user surveys instead of only two
to three that it undertook initially. These surveys are sent to
jurors, court employees and the public.
2:03:59 PM
MS. DIPIETRO stated that feedback the council receives indicates
that many voters overlook judges in the voter pamphlet, so the
council provides three layers of information on its website to
provide more detailed information. Besides the council's social
media page, it uses limited paid advertising and conducts
numerous presentations to community groups and via television.
The council's efforts to reach voters are ongoing but can always
be improved. At the sponsor's request, she reviewed voter
participation rates over the past 20 years. The number of voters
casting votes for or against appellate judges has increased by 8
to 10 percent. In 2000, about 78 or 80 percent of voters cast
ballots for judges. By 2020, it grew to 80 to 86 percent. The
council would like it to be 100 percent, she said. In 2020, the
voters also cast the highest percentage of yes votes for judges
in the past 20 years. She surmised that social media outreach
has primarily helped inform voters on judicial retention votes.
She said she shares the concerns that Ms. Meade raised on page
2, lines 15 to 16 of SB 129.
2:08:11 PM
[SB 129 was held in committee.]
HB 109-EXTEND BAR ASS'N BOARD OF GOVERNORS
2:08:19 PM
CHAIR HOLLAND announced the consideration of HOUSE BILL NO. 109,
"An Act extending the termination date of the Board of Governors
of the Alaska Bar Association; and providing for an effective
date."
2:08:50 PM
MATT CLAMAN, Alaska State Legislature, Juneau, Alaska, sponsor
of HB 109, paraphrased the sponsor statement:
HB 109 extends the termination date of the Board of
Governors of the Alaska Bar Association until June 30,
2029, in accordance with the recommendation of the
Legislative Auditor.
The Board is currently scheduled to terminate on June
30, 2021. The Division of Legislative Audit, having
concluded an audit of the Board of Governors,
determined that the board is operating in the public's
interest and has complied with its duties and
responsibilities to the public. It recommends that the
termination date be extended to June 30, 2029.
The Division of Legislative Audit has also determined
that the Board of Governors should again recommend to
the Alaska Supreme Court that it amend the Alaska Bar
Rules so as to increase the number of mandatory
Continuing Legal Education credit hours, commonly
known as "CLE hours." Currently, bar members shall
compete 3 hours of ethics CLE, and "may" complete 9
hours of general CLE.
The Board of Governors serves an important public
service by regulating the practice of law, promoting
reform in the law and in judicial procedure,
facilitating the administration of justice,
investigating complaints, requiring continuing legal
education for membership, and increasing the public
service and efficiency of the Bar.
REPRESENTATIVE CLAMAN disclosed that he is a member of the
Alaska Bar Association.
2:11:06 PM
KRIS CURTIS, Legislative Auditor, Legislative Agencies and
Offices, Juneau, Alaska, presented audit findings on HB 109. She
stated that the audit concluded that the board served the public
interest by effectively admitting qualified members to the
Alaska Bar Association (Bar) and investigating complaints made
against Bar members. She noted that members have a copy of the
audit [Audit control number 41-20119-20] in their packets.
MS. CURTIS turned to the admission and exam statistic table on
page 8 of the audit. The table provides 2017 to 2019 exam
statistics. On average, 120 Bar members were approved each year
and the average Bar exam pass rate was 54 percent. The audit
reviewed a random sample of 15 new member application files and
found all 15 members had completed applications and met
admittance requirements. She referred to page 6 to the Board of
Governors of the Alaska Bar Association Disciplinary Statistics.
Between January 1, 2017, and December 31, 2019, 689 complaints
were filed with the Bar. Of those, 82 percent were not accepted
for further investigation because the complaints were
incomplete, did not identify ethical misconduct, or were not
within the Bar's jurisdiction. Five complaints resulted in
discipline, and 89 complaints were open at the time of the
audit.
2:12:53 PM
MS. CURTIS reviewed the continuing legal education (CLE). In
2011, to promote competency, the board created a committee. She
reported that 91 percent were not in favor of increasing the
hours to promote competency and professionalism. She reported
that active Bar members must obtain three CLE credits per year
and be encouraged to obtain nine additional credits voluntarily.
The number of mandatory CLE requirements for practicing
attorneys is significantly below that of other states. As of
March 2020, 37 states require 12 or more CLE hours. The low
number of mandatory CLE hours was identified as a finding in the
three prior board sunset audits. In 2011, the board formed a
committee to review the mandatory CLE program. The review
included electronically surveying Bar members. Ninety-one
percent of over 900 Bar member respondents did not favor
increasing the number of mandatory CLE credits.
2:13:37 PM
MS. CURTIS reviewed the audit [control number 41-20119-20]
recommendations beginning on page 11.
MS. CURTIS reviewed Recommendation No. 1: The executive director
should ensure meetings are properly posted on the state's Online
Public Notice System and provide time for public comment. Of the
nine reviewed, seven meetings were not published on the state's
Online Public Notice System, and six did not include public
comment as part of the meeting agenda. According to the
executive director, the notices were published in the Bar Rag
publication and posted on the Alaska Bar Association (Bar)
website. However, that notice does not technically comply with
the state's Online Public Notice System.
2:14:11 PM
MS. CURTIS reviewed Recommendation No. 2 on page 12: The board
should improve internal controls over the Bar's online
admissions system and case management database.
She reported that the audit identified two deficiencies that
could affect the security and availability of data contained in
the Bar's online admissions system and case management database.
The audit report does not provide details to ensure the
weaknesses are not exploited. Pertinent details were
communicated to agency management in a separate confidential
document. The agency provided corrective actions it would take
to remedy the two deficiencies.
2:14:37 PM
MS. CURTIS reviewed Recommendation No. 3 on page 12: The board
should recommend an increase in the non-ethics mandatory CLE for
attorneys.
MS. CURTIS stated that although over 99 percent of Bar members
did complete the three hours of mandatory continuing legal
education (CLE), only 55 percent voluntarily completed the
additional 9 hours of continuing legal education. CLE benefits
the public and the profession by ensuring attorneys remain
competent regarding the law and the profession's obligations and
standards.
2:15:12 PM
MS. CURTIS reviewed management's response to the audit. On page
29, the court system's general counsel, Nancy Meade, agreed that
the board should recommend the number of mandatory continuing
legal education hours for its consideration. The board's
response on page 31 agreed with Recommendations 1 and 2.
Regarding Recommendation 3 related to mandatory continuing legal
education (CLE), the board agreed to discuss appointing a
committee to review mandatory CLE at its upcoming board meeting.
2:15:51 PM
SENATOR SHOWER referred to page 6 to the increase in open
disciplinary cases. He asked if she had any explanation for the
rise in cases. Second, he noted the audit recommended extending
the board's termination date for eight years to June 30, 2029.
He asked if five years would be better. He recalled interest in
reducing the sunset review time for improved legislative
oversight.
MS. CURTIS responded that her recommendation of the maximum
number of years between reviews is reserved for those entities
that she believes are well run and have no significant issues in
serving the public interest. She said she has little concern
about this board except for the continuing education issue under
the Alaska Supreme Court's purview. She highlighted that this
issue was raised for the court's consideration. She also noted
that there is a cost to oversight. Thus, she weighed the cost of
conducting an audit with the risk of the public interest. She
maintained that she does not have any problem recommending an
eight-year extension.
SENATOR SHOWER maintained that the committee should consider
shortening the extension time to keep the legislature involved
in the process.
2:18:20 PM
SENATOR HUGHES disclosed that she has two siblings who are
Alaska Bar Association members. She asked for estimated audit
costs.
MS. CURTIS responded that single audit costs are billed out to
agencies. She offered her belief that the audit costs are $79
per hour. The overall cost would depend on the length of time
for an audit. However, she offered her belief that the agency
cannot perform an audit in accordance with standards for less
than 300 hours. Most audits of well-run agencies take 450 hours,
but it could take up to 1,000 hours. She estimated the audit for
the Bar would cost $65,000.
2:19:36 PM
SENATOR HUGHES recalled that medical professionals must perform
100 continuing education hours biennially. Although the Alaska
Supreme Court makes decisions on CLE, members polled themselves
and chose not to opt for additional hours. She asked if
continuing education should be considered statutorily.
MS. CURTIS responded that the Alaska Bar Association is
empowered to make recommendations to the Alaska Supreme Court.
She said she had heard previous testimony on CLE and the Bar
makes good points. For example, the law does not change as
dramatically as the medical or accounting professions. She said
auditors reviewed other states' best practices to determine
their recommendations. She pointed out that the auditors
recommended the Bar reconsider the number of CLE hours.
2:21:13 PM
SENATOR HUGHES remarked on her surprise that the extension is
for eight years because of Bar members' resistance to an
increase in CLE hours. She said she would like to hear from the
Alaska Bar Association on members' resistance.
2:21:47 PM
SENATOR KIEHL asked if the continuing education hours for
medical professionals and attorneys are calculated similarly.
MS. CURTIS answered that an hour is an hour in time. She
explained that an accountant must be in training for 15 minutes
to count for one continuing professional education (CPE) unit
for accounting. She said the accounting profession CPE could
cover technical, management or supervisory training. She
acknowledged that every occupation was different.
2:23:19 PM
REPRESENTATIVE CLAMAN explained that the Alaska Supreme Court
supervises the Bar, so the Alaska Bar Association makes
recommendations, and the court makes the decision on whether to
change continuing legal education (CLE) hours. In fact, on
disciplinary matters, the Bar makes recommendations to the
court. However, the Alaska Supreme Court always has the final
authority on whether to impose the discipline.
REPRESENTATIVE CLAMAN said in 2008 he was president of the Bar
when the decision was made to go from voluntary continuing legal
education (CLE) to requiring three hours of mandatory ethics
CLE. Although he could not speak to the court's decision, he
recalled the Bar's arguments, including that ethics is the core
part of protecting the public. He said there is broad support
for ethics continuing education.
REPRESENTATIVE CLAMAN said the non-ethics CLE is more about
expertise, so it tends to be subject more to market control. He
explained that when practitioners hold themselves out as
providing a certain level of expertise, CLE can help. There was
a sense of letting the market have more control. Second, except
for continuing ethics education, as practitioners get more
experience, CLE seems less relevant to them. He suggested that
tax lawyers would likely sign up for classes that explain the
changes to the tax code.
He said in contrast, basic standards for good trial practice
tend not to change. The court has been less interested in
mandating additional CLE hours other than ethics because the
market tends to drive that more effectively than regulation. He
recalled that the Washington State Bar Association requires 54
hours every three years. He said he spent time last month online
watching CLEs. While some are interesting, others he has heard
repeatedly over the years. The most interesting ones were
appellate updates on US or Alaska Supreme Court decisions. He
said he is also licensed as an Emergency Medical Technician,
which requires more CE hours.
2:26:58 PM
SENATOR KIEHL asked for the audit cost to the entity.
MS. CURTIS said the cost for entities to respond to an audit
certainly would vary. The division spends time preparing a
planning phase and scope of work, estimating the number of hours
to conduct the audit, which is tracked.
2:28:09 PM
SENATOR SHOWER maintained his interest in reducing the time for
the sunset audit review based on legislative oversight and the
limited number of continuing legal education (CLE) hours.
2:29:07 PM
CHAIR HOLLAND turned to invited testimony.
2:29:36 PM
BEN HOFMEISTER, President, Board of Governors of the Alaska Bar,
Office of the Governor, Anchorage, Alaska, turned to the
response to the audit. He reported that two of the audit
recommendations were addressed. In terms of the continuing legal
education credits (CLE), the Alaska Bar Association has a
standing committee that has been reviewing CLE for six months.
The Board anticipates taking up the committee's recommendation
at its meeting on May 6, 2021. Given Ms. Meade's letter
indicating that the Alaska Supreme Court was willing to consider
expanding CLE, he anticipated that something would likely be
proposed. He said the court could make changes even without the
Bar making recommendations. He said the decision to reduce the
time between sunset audit reviews is a policy decision for the
legislature. The Bar is not resistant to increasing the
mandatory CLE credits required for renewal. It is currently
reviewing the requirements and will forward recommendations to
the court.
2:32:16 PM
PHIL SHANAHAN, Bar Counsel, Alaska Bar Association, Anchorage,
Alaska, echoed Mr. Hofmeister's remarks. He agreed the board
would consider CLE requirements at its board meeting on May 6,
2021. He said the Bar has put in significant work on this issue
since its October 2020 meeting. The Alaska Supreme Court has the
authority to determine CLE requirements, but the Bar continues
to work on its recommendations for the court.
2:33:04 PM
DANIELLE BAILEY, Executive Director, Alaska Bar Association,
Anchorage, Alaska, emphasized that in 2008 the Alaska Supreme
Court imposed a requirement for three ethics hours, which made
it the highest of any state. At that time, in the commentary to
the rule, the court said the ethics requirement was to focus on
protecting the public and make sure lawyers remain mindful of
their obligation to their clients and address topics related to
the majority of questions and complaints the Bar receives. She
stated that most states require one hour of ethics training.
2:34:25 PM
SENATOR HUGHES asked if the Alaska Bar Association would report
back to the committee on its recommended CLE hours. She said CLE
is important, that Alaskans can spend a lot of money for an
attorney, so the attorneys must be well equipped to serve the
public.
MS. BAILEY offered to report back any findings to the committee.
She surmised that the Board of Governors could assign a
subcommittee to address CLE. She highlighted that the Bar
submits its annual report to the legislature to keep legislators
informed. She stated that the association will have continued
oversight.
2:36:29 PM
CHAIR HOLLAND opened public testimony and, after first
determining no one wished to testify, closed public testimony on
HB 109.
[HB 109 was held in committee.]
SB 11-COMMUNITY PROPERTY TRUSTS
2:37:02 PM
CHAIR HOLLAND announced the consideration of SENATE BILL NO. 11,
"An Act relating to community property and to community property
trusts; and providing for an effective date."
2:37:27 PM
SENATOR TOM BEGICH, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 11, stated that the bill reintroduces a bill from
a prior legislature. SB 11 would clarify the meaning of what
income and appreciation was intended by a bill introduced in
1997 by then-Representative Joe Ryan. He advised members that he
had reviewed the transcripts from the legislature's
deliberations on Mr. Ryan's bill. When one partner in a
relationship died, the basis for the value of the asset was the
purchase price and any appreciation of the estate to ensure it
had no tax liability. He briefly reviewed what then-
Representative Ryan wanted to address, which was to carry
forward the value of the trust and any appreciation when a
couple voluntarily forms a community property trust. Because it
was not specifically clear in the language, a recent court
hearing raised ambiguity related to estates. Some of today's
invited testifiers brought this matter to his attention.
2:39:26 PM
BRIX HAHN, Staff, Senator Tom Begich, Alaska State Legislature,
Juneau, Alaska, presented a sponsor statement and sectional
analysis on behalf of the sponsor. She read:
[Original punctuation provided.]
Alaska is a state with favorable trust laws and
favorable laws for property ownership between spouses.
Alaska allows for "opt in" community property
ownership between married spouses. Community property
ownership can provide tremendous tax advantages to
spouses. In Alaska, residents can enter into community
property agreements, and residents and nonresidents
can enter into Alaska community property trusts. This
benefits the individuals entering these agreements,
the trust industry of Alaska, increases deposits in
Alaska banks and through the revenue generated by the
formation of a new trust, the state.
Community property is simply a way to own joint
property. A common way to enter a community property
agreement is in conjunction with one's spouse. Each
party must elect into this agreement and the agreement
provides, most commonly, equal ownership and
management of specific property.
Currently, community property has a significant tax
advantage. When a spouse dies, community property is
placed into a category that allows tax advantages when
that property is sold. To realize these advantages,
appreciation and income must be characterized as
community property.
2:40:42 PM
The default rule has generally been that appreciation
and income on community property will be characterized
as community property, unless otherwise declared in
the community property trust. Trust attorneys have
attested to this interpretation, however recent court
rulings have created an ambiguous understanding of
this general criterion. This legislation, consistent
with industry understandings of trusts, seeks to
clearly define community property as including
appreciation and income on community property.
SB 11 establishes a clear definition of appreciation
and income as community property, as intended by The
Community Property Trust Act. This bill also has a
retroactive effective date of May 23, 1998.
2:41:31 PM
MS. HAHN provided the sectional analysis for SB 11. She read
[Original punctuation provided]:
Section 1. Clarifies AS 34.77.030(h), by affirming
legal intent to ensure appreciation and income in
community property trusts are in fact community
property unless expressly otherwise stated in legal
trust documents.
Section 2. Provides that AS 34.77.030(h) is
retroactive to community property trust agreements
entered into after May 23, 1998 and defines "community
property trust" consistent with statute.
Section 3. Adds as a new uncodified law of the State
of Alaska, a savings clause and asserts that Sec. 2 of
this act does not impact court actions or proceedings
that began before the effective date, or a community
property rights accrued before the effective date.
Section 4. Adds as a new uncodified law of the State
of Alaska retroactivity to AS 34.77.030(h).
Section 5. Establishes retroactivity through May 23,
1998.
2:42:46 PM
SENATOR HUGHES asked why the bill had a specific
retroactive date of May 23, 1998.
SENATOR BEGICH answered that this is the effective date of the
Community Trust Act. It will establish continuity but the
savings clause ensures that it does not affect any legal action
before the state today. Essentially, it will establish that the
understanding and intent extended by then-Representative Ryan's
comments during committee hearings was the bill's intent and of
the Community Trust Act established at the time.
SENATOR HUGHES asked whether any appreciation and income would
be considered community property prior to that date.
SENATOR BEGICH deferred to Mr. Blattmachr. He stated that the
Community Trust Act passed the legislature and prospectively
created that relationship. Before 1998, the law did not provide
for it.
2:44:12 PM
CHAIR HOLLAND asked if any dispute had occurred since 1998, such
that the bill would overturn the decision.
SENATOR BEGICH responded that the bill included the savings
clause to clarify that the intent is not to overturn any legal
decisions already made. Instead, the intent is to enforce the
will retroactively. He introduced the bill to correct the
interpretation but not change any specific court outcome.
2:45:16 PM
SENATOR HUGHES disclosed that she had community property with
her husband prior to 1998. She asked whether there was any legal
way to apply SB 11 to community property acquired before May
1998.
CHAIR HOLLAND turned to invited testifiers.
2:46:35 PM
MATTHEW BLATTMACHR, Attorney; President & Chief Executive
Officer, Peak Trust Company, Anchorage, Alaska, spoke in support
for SB 11. He stated that many Alaskan residents had taken
advantage of this law since it passed in 1998. He related a
scenario in which a couple bought an asset together to fund
their grandchildren's education through Alaska's community
property and options. The surviving spouse sold the asset and
funded their grandkids' college education. He characterized this
as a powerful law. In response to the question, if it would
overturn any disputes, he referred to a case in Alaska court. He
explained that the case in question used semantics but did not
consider the law's intent, which was to follow the rules of the
federal property law. The savings clause was specifically added
to protect those parties and ensure that this bill will not
overturn their case.
MR. BLATTMACHR, in response to Senator Hughes' earlier question,
clarified that prior to the passage of the 1998 law, Alaska did
not have the option of community property. It was solely
separate property, and it became optional with the passage of
the Community Property Act.
2:48:52 Pm
SENATOR KIEHL asked what right might have accrued before May 23,
1998, that the bill protects since it only affects community
property.
MR. BLATTMACHR answered that he was not sure any right could
have accrued prior to the passage of the Community Property Act
and any property being converted to community property. The only
protection would be any right that has accrued since 1998 that
was converted during that time.
2:49:56 PM
WILLIAM PEARSON, Attorney, Foley and Pearson, Anchorage, Alaska,
said he is a shareholder with Foley and Pearson. He stated that
the firm believes that SB 11 is a simple but effective statutory
fix. It would create the presumption that the income and
appreciation of an asset transferred to a community property
trust is community property. As Mr. Blattmachr testified, the
bill would clarify that the income and appreciation is community
property. It will provide the double benefit of the step-up in
basis under the federal tax regime, which is the purpose of this
legislation.
2:50:54 PM
ABIGAIL O'CONNOR, Attorney, O'Connor Law Office, LLC, Anchorage,
Alaska, stated that she is an estate planning attorney. She
stated her support for SB 11. She opined that multiple trusts
would be adversely affected without this bill because the income
and appreciation would not be treated as community property. She
said she was aware of at least one trust that would be affected
by this issue. This bill will provide an automatic fix.
2:52:05 PM
DAVE SHAFTEL, Attorney, Shaftel Delman & Associates, Anchorage,
Alaska, stated that he practices in the trust and estate area of
law. He said he is one of a group of attorneys that have worked
with the legislature since the enactment of the enabling
legislation to improve the trust and estate laws. This bill will
correct a trap for the unwary, he said. He stated a false rule
exists. The person drafting a trust must affirmatively state in
the trust that community property includes appreciation and
income to receive federal tax benefits. Absent that affirmative
statement in the trust, the default rule will apply, such that
the appreciation and income will not be considered community
property. Then the estate would lose the entire tax benefit of
community property. SB 11 would reverse the default rule. It
provides that the default rule will be that appreciation in
income will automatically become community property unless
otherwise stated. He acknowledged that a few people might wish
to state otherwise. However, almost all of his clients are
Alaskan residents or nonresidents who will want to opt-in and
use this tax advantage for community property. He explained that
if a married couple owns property in tenants in common or
tenants by the entirety, not by community property when the
first spouse dies, only that spouse's one-half of the community
property will receive an adjustment of basis up to a fair market
value. When that deceased spouse's half is sold, there would not
be any capital gains tax, but when the surviving spouse's half
is sold, there will be a capital gains tax equal to that
appreciation and income. Community property law takes advantage
of a tax rule that dates back to the 1940s. Alaska is one of 13
states with community property laws. Under those provisions,
when the first spouse dies both halves get an adjustment of
basis up to fair market value. The adjustment of basis is the
appreciation and income under discussion. In community property
states, if one spouse dies, both halves will receive an
adjustment of basis up to fair market value. The surviving
spouse can sell the property and not be subject to a capital
gains tax. Thus, community property has a significant advantage,
so Alaska adopted it in 1998. He stated support for the bill.
2:57:46 PM
CHAIR HOLLAND opened public testimony and, after first
determining no one wished to testify, closed public testimony on
SB 11.
[SB 11 was held in committee.]
2:58:28 PM
There being no further business to come before the committee,
Chair Holland adjourned the Senate Judiciary Standing Committee
meeting at 2:58 p.m.