Legislature(2019 - 2020)SENATE FINANCE 532
03/23/2020 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB139 | |
| HB96 | |
| HB106 | |
| HB235 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 106 | TELECONFERENCED | |
| += | HB 96 | TELECONFERENCED | |
| += | HB 139 | TELECONFERENCED | |
| += | HB 235 | TELECONFERENCED | |
HOUSE BILL NO. 139
"An Act providing an exemption from the state
procurement code for the acquisition of investment-
related services for assets managed by the Board of
Trustees of the Alaska Permanent Fund Corporation."
9:13:23 AM
Co-Chair von Imhof discussed housekeeping. She assured the
committee that the bill would not move from committee
during this meeting.
9:14:06 AM
JULI LUCKY, STAFF, SENATOR NATASHA VON IMHOF, spoke to the
Committee Substitute (CS). She noted that there was no
Explanation of Changes document as the CS entirely replaced
the previous bill. She related that the bill would still
provide an exemption for certain contracts to provide
investment related supplies or services to support the
operations of the Alaska Permanent Fund Corporation. The
bill also required a written determination of the following
three factors:
That the contract is in the best interest of the
Alaska Permanent Fund Corporation
That the contract is consistent with the
responsibilities of the board of trustees of the
Alaska Permanent Fund and the corporation under AS
37.13.120
That the contractor is qualified to provide the
supplies or services
Ms. Lucky related that the language had been worked out
between the sponsor and the corporation to provide
sideboards on the broad exemption found in the previous
version of the bill.
9:15:13 AM
Senator Wielechowski thought that the CS made the bill
worse. He stated he was told the reason for the bill was to
be able to react to immediate circumstances. He thought the
CS broadened the scope to investment related supplies and
services and had no immediacy requirement; furthermore,
there was no requirement that any documentation be provided
to justify any determination. He thought it was a bad
policy to give a corporation with so much capital the
ability to issue sole source contracts without oversight.
He relayed that he was working on amendments to the
legislation.
Co-Chair von Imhof solicited comments from Ms. Lucky.
Ms. Lucky deferred to the bill sponsor, or representatives
from the Alaska Permanent Fund Corporation (APFC). She said
that the corporation and drafted the language for the CS
and could speak to the intent.
Co-Chair von Imhof called upon invited testimony.
9:16:46 AM
ANGELA RODELL, EXECUTIVE DIRECTOR, ALASKA PERMANENT FUND
CORPORATION, spoke to the CS. She explained that the bill
raised the standard under which the corporation could
procure and incorporated the concept of fiduciary duty. She
noted that fiduciary duty meant that the board could be
held personally liable for acts that were in breach of
fiduciary duty; the state could seek damages from personal
financial accounts in order to recover damages. She
expressed appreciation for the committee and any support
for the CS.
9:18:15 AM
Senator Olson asked whether Ms. Rodell was aware of the
sunset provision in the bill.
Ms. Rodell stated that there was no sunset provision in the
CS.
Senator Olson referenced Senator Wielechowski's concern
about sole-source contracts.
Ms. Rodell thought it was important to remember that APFC
was subject to the public records act. All the contracts
would be subject to the act requirements and payments under
legislative budget appropriation. She reminded the
committee that there would be opportunities to discuss
contracts before they were awarded.
9:19:37 AM
Senator Olson asked whether Ms. Rodell would be opposed to
striking the work supplies from the legislation.
Ms. Rodell responded that the corporation would not be
opposed to an amendment striking the word supplies from
the CS.
9:20:05 AM
Senator Hoffman stated that he had received the CS minutes
ago, he requested more time to review the legislation
before adopting it as a working document. He requested that
committee members be able to compare the CS to the previous
bill version.
9:20:39 AM
Senator Bishop asked Ms. Rodell whether there was a dollar
limit of what could be executed under the CS.
Ms. Rodell stated that there was no dollar limit in the CS,
but there would be in the sense that the budget was
approved and appropriated by the legislature.
Co-Chair von Imhof asked Ms. Rodell how the bill would help
the corporation.
Ms. Rodell explained to the committee that the Permanent
Fund was no longer invested in the way it was at its
inception. The asset allocation had expanded and become
more diverse in securities form private equity, to real
estate, to public equity, to bonds. Over years, the
corporation had taken more of the responsibility in-house
rather than allowing third parties to invest on its behalf.
She asserted that in-house management allowed for the
alignment of the goals of the state with the corporations
strategy, while reducing costs. The purpose of the
exemption was to try to seek all the tools necessary to
pursue services in the most timely, cost-effective manner
possible. She specified that the procurement code could be
cumbersome to getting work done in a timely manner. She
asserted that the legislation would give the corporation
the ability to seek services and be exempt from the code.
9:23:06 AM
Senator Bishop asked whether the CS was more restrictive
than other quasi-state agency policy.
Ms. Rodell stated that it was the corporations view that
the bill created a higher standard than what other boards
(AIDEA, AHFC, ARM) were currently held to because she would
be required to make a written determination whether a
contract was in the best interest of the fund. If it was
found that she had violated the standard, the state could
pursue her personal assets to recoup damages.
9:24:35 AM
Senator Wielechowski pointed out that every corporation had
a fiduciary duty, and such lawsuits to recoup damages were
very rare. He asked whether Ms. Rodell would support an
amendment limiting exemptions to emergency investment
services.
Ms. Rodell responded in the negative.
Senator Wielechowski asked whether Ms. Rodell would support
the committee codifying in state law the AHFC and AIDEA
regulations that applied in emergency procurement
situations.
Ms. Rodell answered in the negative.
9:25:26 AM
Senator Hoffman referenced Line 9 of the bill, which
specified that contracts must be in the best interest of
the fund. He summarized Ms. Rodells testimony that what
was in the interest of the fund might not be in the best
interest of the state. He thought the legislators had to
protect what was in the best interest of the State of
Alaska. He wondered whether this could put the legislature
and the corporation at cross purposes.
Ms. Rodell reiterated that the corporation's duty was to
the fund, and not to the state, and at times the situation
could be conflicted. She used an example that it might not
be in the best interest of the fund to make certain
distributions to the state to help with the economy because
it would prohibit the long-term investment returns and
could violate the standard of care and the corporations
duty to diversify. She emphasized that the corporation was
mandated through statute to consider the fund first.
9:27:49 AM
Co-Chair von Imhof set the bill aside. She noted that the
CS would not be adopted. She stated that the CS had been
sent to members two days prior and expressed her
displeasure that committee members had not reviewed the CS
prior to the meeting. She categorized the hearing as a
show.
9:28:12 AM
Senator Wielechowski took exception to Co-Chair von Imhof's
statement that the hearing was a show.
Co-Chair von Imhof felt that the issues raised at the table
could have been discussed prior to the meeting. She
contended that time was limited, and the committee had 3
bills left to consider.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 96 Work Draft v. E 3.21.2020 Explanation of Changes.pdf |
SFIN 3/23/2020 9:00:00 AM |
HB 96 |
| HB 96 Work Draft v. E 3.21.2020.pdf |
SFIN 3/23/2020 9:00:00 AM |
HB 96 |
| HB 235 Sponsor Statement 2.21.2020.pdf |
SFIN 3/23/2020 9:00:00 AM |
HB 235 |
| HB 235 Support Letters provided by Sponsor.pdf |
SFIN 3/23/2020 9:00:00 AM |
HB 235 |
| HB 235 TVEP Annual Report 2019.pdf |
SFIN 3/23/2020 9:00:00 AM |
HB 235 |
| HB 235.Backup Flow Chart 2.21.2020.pdf |
SFIN 3/23/2020 9:00:00 AM |
HB 235 |
| HB 235 work draft version O.pdf |
SFIN 3/23/2020 9:00:00 AM |
HB 235 |
| HB 139 Work Draft v. S 3.20.2020.pdf |
SFIN 3/23/2020 9:00:00 AM |
HB 139 |