MINUTES SENATE FINANCE COMMITTEE February 11, 2000 10:11 AM TAPES SFC-00 # 26, Side A & B CALL TO ORDER Co-Chair John Torgerson convened the meeting at approximately 10:11 AM PRESENT Co-Chair Torgerson, Senator Leman, Senator Phillips, Senator Wilken, Senator Adams, and Senator P. Kelly. Senator Donley attended via teleconference from Anchorage. Also Attending: GUY BELL, Director, Retirement and Benefits, Department of Administration, SENATOR TAYLOR, SENATOR T. KELLY, and MARK REGAN. Attending via Teleconference: From Anchorage: Senator Donley, BOB MANLEY, Attorney, Hughes, Thorsness, Powell, Huddleston & Bauman; and JIM LYNCH, Interim Vice President of Finance, University of Alaska. From New York: ANN ALLEN, TIAA-CREF. SUMMARY INFORMATION SB 85-CREDITED SERVICE FOR TEMP EMPLOYEES:PERS The Division of Retirement and Benefits testified. The amended bill was passed out of committee. SJR 27-CONST. AM: REVISIONS OF CONSTITUTION Senator Donley and Mark Regan testified. The bill was passed out of committee. SB 114-IMPERSONATE POLICE/EMERGENCY VEHICLE Senator Taylor testified. The bill was passed out of committee. SB 186-COLLEGE TUITION SAVINGS PLAN Senator T. Kelly, Bob Manley, Jim Lynch and Ann Allen testified. A Committee Substitute was adopted and amended. The bill was passed out of committee. CS FOR SENATE BILL NO. 85(L&C) "An Act relating to credited service in the public employees' retirement system for temporary employment." Co-Chair Torgerson opened up the discussion by noting that a motion to adopt Amendment #1 was pending, which would combine Public Employees' Retirement System) PERS and Teachers' Retirement System (TRS) together. He had requested a pertinent draft fiscal note and referenced the third paragraph from the bottom. "There will be no measurable impact on employer contributions on the total funding of PERS and TRS. There is a small impact, a total liability of $700,000." He noted that this liability is not small in amount and wondered where this money would come from. GUY BELL, Director, Division of Retirement and Benefits, Department of Administration noted that this legislation affects only 22 individuals of an overall number of 80,000 retired employees statewide. The Department has not assumed any liability for these individuals because they are eligible for a benefit as the law presently stands. With this change, this small group of 22 people would be eligible for retirement benefits, adding a liability to the system. Between PERS and TRS, the total assets are approximately $12 billion. He added that this $700,000 liability, as a percentage, constitutes five one hundreds of one-percent of an increase in liabilities. This is a very small increase in liabilities, which will have no affect on employer rates since this can effectively be absorbed in the overall asset/liability mix of the system. This is why the Department states that there is no related fiscal impact. The $700,000 is effectively the net present value of those future benefits. It is necessary to preserve an amount to cover the benefits for the expected lifetime of these 22 individuals, hence; the annual cost will be much less than this on a year to year basis. Co-Chair Torgerson asked if this takes into account the amount paid in and accumulated over the years. Mr. Bell confirmed that these individuals have paid into the system over the years, along with the employers. The system has also earned interest on this money too, so the funds are effectively available for use. The proposed amendment to this legislation states that if there is a difference for any one individual, this person is responsible for paying the acturarial cost. This makes it a net zero fiscal impact for the system. A person is entitled, once they leave employment, to take out their own contributions. Once this money is pulled from the system and an employee decides to rejoin the workforce, they must repay the money taken out for an accumulated retirement benefit. This type of situation does not apply to the present 22 individuals that this legislation affects. Co-Chair Torgerson, hearing no objection Amendment #1 was ADOPTED. Senator Wilken made a motion to move SB 85, version 1- LS0373\H from committee with individual recommendations and attached fiscal notes. Hearing no objection SB 85 was MOVED FROM COMMITTEE with a forthcoming fiscal note from the Administration. SENATE JOINT RESOLUTION NO. 27 Proposing amendments to the Constitution of the State of Alaska relating to revisions of the state constitution and providing that a court may not change language of a proposed constitutional amendment or revision. SENATOR DONLEY, as sponsor to this legislation testified by teleconference from Anchorage. He noted that SJR 27 would amend the Alaska State Constitution to make it possible for the Legislature to place constitutional revisions, as well as amendments before Alaskans for a vote. He added that this legislation would also add a new section to the constitution prohibiting a court from changing the wording of constitutional amendments or revisions proposed by the legislature or by a constitutional convention. Senator Donley noted that SJR 27 has become necessary because of the Alaska's Supreme Court decision in Best vs. Ulmer. He offered that in this case, the right of Alaskans to amend the constitution was severely weakened. He stated that in the Best case, the members of the court, for the first time in our history, removed a legislatively sponsored constitutional amendment from the ballot, which was the prisoner's rights limitation amendment. Senator Donley noted that the court also modified the language of another proposed amendment, which was the definition of marriage amendment. He remarked that this decision badly unbalances the constitutional separation of powers in Alaska and destroys a fundamental element of the success of America's democracy, which is the right of the people to amend their own constitution. Senator Donley specified that this precedence sets up the Supreme Court as a gatekeeper or oligarchy of lawyers that can dictate to the public what constitutional issues they can and cannot vote on. Senator Donley continued that the Best decision, for the very first time, created a distinction between amendments and revisions to the state constitution. He noted that there are two ways to amend the state constitution, as outlined in a handout to the Committee. He offered that the first is by a proposed amendment to the people of Alaska by the legislature through a two-thirds vote, and the second is by a constitutional convention. Senator Donley pointed out that the word "revision" appears in the section of the constitution that addresses constitutional conventions, "A convention can propose revisions and amendments." However, this word is not found anywhere else in the constitution. He also noted that the distinction between revisions and amendments was never made clear during the constitutional convention. As a result, he surmised the court concentrated on "revision" when considering the Best case. He told the Committee that the court adopted a vague test called a "hybrid test," based on a California Supreme Court case. He concurred with the dissent opinion in Best that argued that this standard is confusing and is not a hybrid test at all. In Senator Donley's opinion, the ruling decision stated that "we know revisions when we see them. We can't really tell you what they are, but we're going to look at them from a qualitative and a quantitative point of view." Senator Donley continued that in terms of quantitative, this should be based on how many separate articles of a constitution a proposal may amend or affect. He stressed that the impact of this is very dramatic. He added that the ambiguous nature of these definitions, allow the members of the court tremendous latitude as to what constitutional issues Alaskans can and cannot vote on. Senator Donley offered that by usurping the elected legislators constitutionally granted authority to decide an amendment, which is appropriate to place before the people, the court could and now have removed amendments from the ballot. He remarked that this takes the power away from the people to amend their own constitution. Senator Donley continued that since statehood Alaskans have been reluctant to call constitutional conventions due to the uncertainty of what would result at such a forum. He informed that Alaskans have voted 24 times to amend their state constitution. He cited that several of these amendments, especially the right to privacy and the limited entry amendment arguably do not meet the vague test the court adopted in Best vs. Ulmer. He noted that as a result, to force Alaskans to call constitutional conventions to make even single subject changes to their constitution is really poor public policy and could result in bad government. He also pointed out that the Best vs. Ulmer case was really strange in how the court handled it. Attorney Clarkson's analysis to this case is also included in the Committee's packet. Senator Donley noted that the court adopted a simultaneous briefing procedure so that issues were not before both parties in order for them to respond accordingly. He suggested that the Committee review the analysis of the attorney who represented the Legislature in this case. He pointed out that most of these issues, which the court finally decided, were not briefed, considered in the lower court and were not on the points of appeal. He noted that the court did not have the benefit of appropriate briefing or information to make the decision it finally did, according to the analysis of Senator Donley. He added that the California case, which the court heavily relied upon, is very distinguishable from the situation before the court in Alaska. He reported that in California, this state is allowed to conduct constitutional amendments by initiative. He noted that this was an initiative to change the California constitution that affected many sections of the same and it was very extensive. Senator Donley added that this specific proposition 115 was in the Committee's packet. As a comparison, he pointed out that this proposition, which was removed from the ballot was very extensive. He pointed out that this could arguably be an example of a revision, whereas the Alaska amendment is very simple and deals with a single subject. He stressed that for the Alaska court to rely on this California case was really mistaken and causes a serious concern. Senator Donley summed up for the Committee that this situation creates great constitutional uncertainty, the separation of powers has been dramatically altered. He affirmed that every amendment that the public wishes were subject to incredible uncertainty and could be subject to the political whims of the five members of the State Supreme Court. He added that the resolution would simply clarify that the legislature also has the ability to place revisions "so that the court could no longer use that as a hook to exclude specific proposals." He pointed that it would also clarify that the court should no longer modify the language of propositions issued by the legislature to the people, before the latter is allowed to vote on them. He concluded that the constitution clearly gives the power of amendment to the legislature. Senator Adams stated that he opposed this joint resolution. This legislation tries to change the process by which revisions to the constitution are instituted. He added that he did not think that the system was broken to date, in order to do something like this. He noted that the framers of the Alaska Constitution allowed for constitutional conventions every ten years or the issuance of amendments. He offered that the system might not be perfect but it works for Alaskans. He referred to section two of this resolution, page two, line one, which bars the court from altering the language of a propose constitutional amendment. He wondered how many times that the Supreme Court makes language changes to constitutional amendments. He stated that he knew of only one other, which was the same sex marriage issue. In regards to section two, he stated, "what we might be doing is throwing out the baby with the water." He referred to AS01.00.30 regarding severibility, which allows that if the court finds one part of a bill invalid, it does make the rest of the bill invalid. He believed that the courts should be allowed to correct mistakes by the legislature. He also noted the retroactive clause of this legislation, to January 3, 1959, on page two, line six and noted that we've got to ask ourselves, "what does it mean, what measures that we have taken up since then that we would have to look at. I would like the sponsor to name some of those. He hasn't named one of that, and that's Best vs. Ulmer, and that has to do with the Alaska marriage amendment that we worked on. But we need to know, what are these, I think that this proposed amendment is so broad that it would constitute a revision and therefore not be allowed on the ballot." Senator Donley responded that the retroactive clause is to preserve the status quo of the state's constitution. He added that it would protect the existing limited entry amendment that was approved by the people. He stated that it would protect the peoples right to privacy, which was originally approved by the people. He noted that it would protect the creation of the Judicial Counsel to review the performance of judges; it would protect the Commission on Judicial Conduct, which was created by the people to enforce proper conduct among Alaska's judges. Senator Donley continued that it would also protect the other 18 to 20 amendments to our state constitution that the people have approved since statehood. He noted that these might no longer be defensible due to Best vs. Ulmer, not to mention the related hybrid test. He then outlined specific amendments to the constitution that could be affected. Senator Leman responded to Senator Adams question regarding how often the court modifies the language in constitutional amendments. He recollected that this had happened only one time, but he thought this was one time too many. He felt as though this was the high-water mark of arrogance by the court in deciding what is necessary and what is not necessary in a constitutional amendment. He felt as though they need to draw the line and added that he thought this language in section two was absolutely necessary. Senator Adams disagreed with this and noted that the court tries to interpret the legislature's intent as it is codified in statute or regulation. He noted the "one time" change to an amendment as previously referred to, which dealt with same sex marriage, and noted that Senator Leman was too close to this issue perhaps. He felt as though this resolution was so broad, it would not hold muster because of the number of issues as stated previously by the sponsor of the bill. Co-Chair Torgerson agreed with leaving the referred language as it stands. He added that the Supreme Court's duty in regards to the constitutional amendment is to either rule on constitutionality or strike it down, because it is not, or let it stand as written. He stressed that the court should not take the liberty of changing language to meet what they think is the test of constitutionality. He felt as though this was a separation of power issue. Senator Donley responded to the point made about the general severability clause, which presently exists in statute. He felt as though this clause was typically appropriate for legislation. "We can always buy specific provision legislation exempt it from that severibility clause." But, he added that it is not appropriate when the legislature places something before the people for a vote on a constitutional amendment. He noted that this is a very different question regarding legislation, which can simply be remodified by legislative act and a constitutional amendment, which requires a vote of the people for ratification. He stated that he did not believe that the severability clause was appropriate in regards to constitutional amendments. He noted that the court would also retain its fundamental authority to put something on the ballot based on whether it conflicts with our federal constitution. Senator Adams stated that he had not heard from any of his constituents that this change was necessary. MARK REGAN testified on behalf of himself, although he is the Supervising Attorney, for Alaska Legal Services. He testified in favor of SJR 27 for different reasons. He stated that the problem, which the Best vs. Ulmer decision created is not so much the wrong idea completely, but rather the constitutional test that the Alaska Supreme Court is supposed to apply as a result, which does not make any sense. He noted that the Alaska Supreme Court set up a test that is impossible to predict how a case will result and puts proponents of constitutional amendments in a terrible position. He pointed out that the distinction between an amendment and revisions is something, which the constitutional convention discussed. It is an issue that potentially has some value. He commented that the California cases illustrate this. Mr. Regan remarked that one of these centered on a comprehensive rewrite of their constitution. He added that there was no deliberation about this in a constitutional convention, but rather it was a separate document they wished to add in. He remarked that there was some value in "saying well you should go through a revision process rather than an amendment." He added that the other California case had to do with a prisoner's right restriction and here there was fundamental reallocation of powers from the judicial branch to the federal judiciary to decide an individual's rights. He remarked that what the Alaska Supreme Court did in Best vs. Ulmer was to make it impossible to predict how these kinds of cases should be decided and made it impossible for legislators to conduct business during a constitutional convention. He referred to the hybrid test, which means that if there are a whole lot of words without much substance to their meaning, and then there are few words that might affect something important, it is impossible to tell what should stand. Mr. Regan stated that eliminating the distinction between amendments and revisions, while giving the legislature the power to propose [indiscernible.] He affirmed that this gets rid of what could be a valuable distinction. He added that he did not see how the Alaska Supreme Court could back out of the position it has taken and make this comprehensible for the legislature. He stated that for this reason, eliminating the distinction and the uncertainty involved is better than trying to preserve it, while hoping for test cases. He remarked that one of the areas, of which this might come up, if this distinction is preserved, is that of a subsistence constitutional amendment. Mr. Regan commented that it is certainly possible to argue that such an amendment could fail this hybrid test, prompted by a decision by the Alaska Supreme Court, unable to be enacted by the legislature and needed to be considered in a constitutional convention. He stated that he did not know if this was right or not, but a distinction argument does not have much to do with the merits of the issue. Mr. Regan noted that what the Alaska Supreme Court did in Best vs. Ulmer, by taking the second section out of the same sex marriage amendment, is that it did not make sense. They took this authority upon themselves. He felt as though the power of a constitutional amendment should be sufficient enough that the courts should not be able to then craft their own version. He asked the committee to consider an issue he had with the retroactive clause. He cautioned that the danger of this is that an amendment could potentially be considered by the Supreme Court before making it on the ballot. He stated that if the Alaska Supreme Court sees a retroactive clause all the way back to statehood it may well think "this looks more like a revision under the hybrid test than it does a constitutional amendment to us, it has to be done by a revision so we're going to knock that off the ballot. Now, aside from giving you all a good reason to be sitting around here in 2001, debating the same issue, that seems pointless to me. And I would suggest that if there is one point where this was a problem, then a retroactive clause is not necessary." Senator Adams stated that the Committee did not want to fix this, and if the Committee left it as it, including the retroactive clause the court might find it unconstitutional. He noted that he liked the bill as it is, but that he did not support it. Senator Donley noted that retroactive clause was suggested by former Attorney General Cole. He added that this clause would only be a problem if the court goes back and reconsiders some existing constitutional amendments, he stressed. Senator Leman made a motion to move the Finance version of SJR 27, version 1-LS0087\K from the Committee with individual recommendations and attached $1,500 fiscal note from the Alaska Court System. Senator Adams objected. A roll call was taken on the motion. IN FAVOR: Senator Wilken, Senator P. Kelly, Senator Phillips, Senator Leman, Co-Chair Torgerson. OPPOSED: Senator Adams. The MOTION PASSED: (5-1) Co-Chair Torgerson stated that SJR 27 was MOVED FROM COMMITTEE. CS FOR SENATE BILL NO. 114(JUD) "An Act relating to public officials and to impersonating a public servant." SENATOR TAYLOR testified as sponsor to this legislation. The Juneau Police Department came to him a year ago about a person driving around town, on the verge of impersonating an officer. He noted that there is nothing in law that provides for punishment of impersonating a police officer. As his office researched this situation it was determined that historically there had been other such complaints about the misuse by people in the public sector of state trooper positions and the like, such as mayors or other public servants. Senator Phillips asked about car hobbyists and enthusiasts that have legitimate interest in restoring a police car or a fire truck for historical purposes. Senator Taylor stated that he did not think this would be a problem, but would be happy to rework the language of this legislation to include these exceptions. Senator Adams voiced his concern about not hindering volunteers responding to an emergency. Senator Leman noted that he was trying to figure out the intent of restricting public servants. He asked who qualified as a public servant and wanted to make sure that this legislation did not restrict an individual within the political process. Senator Taylor used the specific example of campaign literature with a picture of a state trooper in their official capacity. He offered that this gives the implication that the State Troopers themselves are either supporting or opposing a candidate. He added that these are not normally put out by the state troopers, but rather by an affiliate organization. He noted that this was inappropriate use of this public office and badge. Senator Leman continued to note that partisan political purpose means more than what he would initially interpret this to mean. He noted that partisan would be related to political parties, but there are elections in this state that are non-partisan with contested elections. He asked if this legislation applied to elections such as these. Senator Taylor responded affirmatively. Senator Wilken made a motion to move SB 114, (Judiciary) version 1-LS0690\M with individual recommendations along with an indeterminate fiscal note. Co-Chair Torgerson hearing no objection MOVED FROM COMMITTEE SB 114. CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 186(HES) "An Act relating to a University of Alaska post- secondary education savings program, to the Alaska Higher Education Savings Trust, and to the Alaska advance college tuition savings fund; and providing for an effective date." SENATOR T. KELLY as prime sponsor came forward to testify on SB 186. He stated that because of recent tax legislation passed by Congress, which was a new IRS rule designed to encourage individual savings for higher education, over 40 states have enacted or are in the process of establishing tax deferred savings programs. He added that this legislation continues a long Alaska tradition of supporting higher education by making timely improvements to its current advanced college tuition payment program and establishing a second tool called the Alaska Education Savings Trust. He explained that the program would continue to be administered by the University of Alaska and would require no new general fund expenditures. He pointed out that there was a proposed Committee Substitute before the Finance Committee of which he recommended the adoption. He noted a small technical change to the CS that would not allow someone who is in arrears in child support payments to establish a trust until they have paid this debt. Co-Chair Torgerson stated that he would not be offering amendment number one, which was suggested by the sponsor since it is included in the CS on page two, line two. He added that the other clarification on the exemption from child support payments is on page four, line 16. Tape: SFC - 99 #26, Side B, 10:55 am. ANN ALLEN, TIAA-CREF, [organization's full name not given] testified via teleconference from New York, supported this legislation. She stated that her organization manages similar programs in nine other states. She added that her organization's core business is pension plans for higher education and managing tuition savings account plans. BOB MANLEY, Estate Planning and Tax Attorney, with Hughes, Thorsness, Powell, Huddleston & Bauman, LLC testified via teleconference from Anchorage, stated that he has practiced in this related field for 25 years. He noted that he is part of an informal group of estate and tax attorneys who work pro bono by assisting with technical aspects of legislation. He pointed out that he was not testifying on behalf of any organization and he voiced his support of this legislation. He added that it has significant income tax, estate tax and money management advantages to Alaskans. JIM LYNCH, Interim Vice President of Finance, University of Alaska testified via teleconference from Anchorage, stated that he serves on the Executive Board for the college savings programs and he is the principal drafter of the Advances College Tuition Program for the University. He offered that as part of his role on the Executive Board, he did participate in the drafting of section 529 and he argued the exempt status of the University's program before the national office of the Internal Revenue Service. He noted that he supports this bill. Senator Wilken referred to page three, line 24 of version "V" of the committee substitute and suggested that the Committee insert the word "all" before the word administrative. He thought that the Committee envisioned this program to be self-supporting. He pointed out by inserting this word; the Committee clearly defines for the future, that the Committee expects the participants to pay all administrative fees. Senator Wilken made a motion to adopt version "V" of SB 186. Hearing no objection, it was so moved. He then made a motion to move amendment number two as proposed. Hearing no objection, amendment number two was so moved. Senator Wilken referred to page four, line four, he clarified this section that spoke to the funds on deposit not being considered by the University in regards to eligibility of state funded scholarships. He pointed out that if this was a needs based scholarship, he thought that they should take into account funds on deposit. He thought this section was in need of clarification in how this part of the bill relates to needs based scholarships. Mr. Lynch responded that the intent of this section was not to affect need based scholarships. He added that they could include the language "the state may not limit eligibility for state funded need based scholarships." He added that right now the state has no funded programs for this type of scholarships. Co-Chair Torgerson clarified that they should insert "need based" between funding and scholarship on page four, line five. Senator Wilken made a motion to move amendment number three allowing for on page four, line five, "except for needs- based scholarships" at the beginning of section (e). Hearing no objection it was so moved. Senator Wilken made a motion to move SB 186, version 1- LS1084\V with individual recommendations and attached fiscal note from the Department of Revenue. Senator P. Kelly added that the Department of Revenue fiscal note was dropped after the first Committee Substitute was drafted. He stated that there was no fiscal impact through the Department of Revenue. He continued that at one time they administrated the college pre-paid tuition program and they no longer do this. ADJOURNED Co-Chair Torgerson, hearing no objection to the motion as stated, SB 186 was MOVED FROM COMMITTEE. He adjourned the meeting at 11:05 a.m. SFC-00 SS1 (1) 02/11/00