Legislature(2007 - 2008)BELTZ 211
04/01/2008 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB198 | |
| HB92 | |
| HB196 | |
| HB351 | |
| SB227 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 227 | TELECONFERENCED | |
| + | SB 228 | TELECONFERENCED | |
| + | HB 196 | TELECONFERENCED | |
| + | SB 198 | TELECONFERENCED | |
| += | HB 92 | TELECONFERENCED | |
| + | HB 351 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 227-DIVEST INVESTMENTS IN SUDAN
CHAIR MCGUIRE announced the consideration of SB 227.
10:32:27 AM
SENATOR FRENCH, Sponsor, said SB 227 is as easy to understand as
any Sunday school lesson. There is genocide happening in Sudan.
Genocide is the deliberate extermination of ethnic or national
groups. The U.S. State Department and President Bush have called
it genocide, and it is being conducted by the Sudanese
government. Tens of thousands of human beings have been
murdered. Our duty is clear. We must not allow any Alaska
dollars to further this terror. SB 227 takes the approach of
targeted divestment. Divestment works. In 1997 the United States
declared sanctions against the Sudanese government and got them
to drop their support for terrorists and to cooperate on
counter-terrorism. The focus in this bill is on companies with
active business operations in Sudan. Not one U.S. company is
doing business there and hasn't since 1997 when sanctions were
put into place. Fourteen states including Texas, Arizona,
Kansas, Florida, and North Carolina have targeted divestment
laws aimed at Sudan. Detractors acknowledge the righteousness of
the cause but point to two problems. One is a slippery slope: if
Sudan, why not tobacco or South Africa? But this case is not
that one. There is a large difference between genocide and
smoking cigarettes. We should all agree not to invest in
companies that are helping a government kill their own citizens.
The second argument is that it will cost money. Costs are wildly
overstated. No one at this table would knowingly invest in a
company that is sponsoring genocide. Why do so as a state?
10:34:48 AM
DIXIE HOOD, Family Therapist, Juneau, said she has been the
beneficiary of the permanent fund dividend, and she supports
humanitarian concerns over possible profits. The international
boycott in South Africa helped end apartheid. She supports
restricting state investments in Sudan until human rights abuses
in Darfur have stopped and not resumed for 12 months.
10:36:15 AM
HELENA FAGAN, Juneau, said the facts in Sudan are clear. She
will give a brief history of her family to point out her
personal devotion to this cause. Her mother lived in the Lodz
ghetto of Poland and was then moved to Auschwitz and Bergen-
Belsen. Her great grandparents were gassed in a truck and dumped
in the mass graves of Chelmno. Her grandfather died in a work
camp. Her grandmother died in the Auschwitz gas chambers. Her
mother is part of a network of survivors who worked to create
the holocaust memorial in Portland, Oregon. Ms. Fagan traveled
with her mother to all the death camps in Poland and collected
soil to deposit in the foundation of the memorial. The soil
holds ashes and bones fragments. The mass grave sites she saw
were as large as football fields. Her mother spoke publically
many times about her experiences, including for Pillars of
America. Every time she spoke she had nightmares, but she
continued so that people -- especially young people -- could
hear what happens when hatred grows and is fed by indifference.
MS. FAGAN said her mother is 78 and has decided that she is done
speaking. "So I figure that now it's my turn to speak."
Indifference killed her family as much as hatred did. Her
grandfather tried to get his family out of Poland for years, and
nobody would help. The United States wouldn't let him in even
though he had money and appropriate paperwork. Her mother was
allowed to enter America many months after she was liberated
from Bergen-Belsen on a stretcher and too emaciated to stand.
During the past month, while people are killed in Darfur, she
has heard state leaders speak of why they hesitate to support SB
227. The director of the permanent fund says that financial gain
is his directive, and by divesting someone else will just buy
in. "But I also believe that we can have financial gain without
contributing to suffering, and I believe that we must not be
indifferent to genocide and hatred."
10:39:50 AM
MS. FAGAN said when she told her mother that she was testifying,
her mother thought she was wasting her time. She wants the
committee to prove her wrong and pass SB 227.
10:40:40 AM
MICHAEL BURNS, CEO, Alaska Permanent Fund Corporation, Juneau,
said he sincerely appreciates the motivation that led to this
bill and is profoundly disturbed by the incomprehensible
situation in Darfur. It is the legislature's prerogative to
direct investments of the permanent fund, and if asked to divest
it will do so. He said to think carefully. In 30 years the fund
has been invested for the financial benefit of Alaskans. Placing
a social investment directive on the fund would be a significant
change to the core mission. The prudent course is to make
investment decisions based only on economics. "After the
question of prudence is the question of efficacy. We are
concerned by the prospect of placing a socially motivated
directive on the permanent fund that will have some costs when
we have not seen definitive proof that these divestment efforts
are or have been effective." He provided a review the effects
that divestment from South Africa had on the decision to end
apartheid. Those researchers said it was other forms of pressure
that caused the South African government to change. The U.S.
treasury and state department are trying to bring an end to
genocide in Darfur. SB 227 is a significant decision that will
impact Alaska's investments well into the future.
10:43:12 AM
MR. BURNS said the two departments spoke to the Senate Banking
Committee in Washington. The common theme was that individual
divestment policies at the state level will hinder their
efforts. Studies of the sovereign wealth funds of the world rank
the permanent fund in the upper decile for best practices,
including making investment decisions only on financial grounds.
SENATOR BUNDE asked about the constitutional language from which
Mr. Burns takes his direction. There is other legislation that
considers assets of the state not available for initiatives.
Assets are supposed to be used for the good of Alaskans.
MR. BURNS said the constitution only requires the protection of
the corpus and that 25 percent of the revenue goes to the
permanent fund. Everything else is statutory, which now is to
invest for maximum return while protecting the principal.
10:46:33 AM
SENATOR FRENCH asked if he has read some of the divestment
materials. Three companies have changed operations in Sudan as a
result of divestment. One is CHC Helicopter Corporation -- the
largest provider of helicopter services in the global offshore
oil and gas industry. It recently ceased all business operations
in Sudan because of concerned investors. The other is Rolls
Royce, which sells oil equipment to Sudan. It announced its
decision to leave citing increasing humanitarian concerns.
Siemens pledged to pull out of the country because of
divestment. The Brooking Institute said: In the view of some
analysts divestment campaigns may prove more effective than
sanctions. He asked if that changes Mr. Burns' view of efficacy.
MR. BURNS said he was not aware and has not seen that report.
Embarrassing a government that is taking part in this kind of
activity is difficult. They are beyond it. "I don't think we're
going to jawbone these people into doing the right thing."
SENATOR FRENCH asked if he disputes it.
MR. BURNS said he didn't he just wasn't aware of it.
SENATOR FRENCH asked him to reconsider in the light of the fact
that three major corporations have ceased operations there. If
corporations don't help the Sudanese government kill their own
citizens, the government wouldn't be able to do it. He said he
means no harm to Mr. Burns, but it is a reality on the planet
being done with the help of corporations that supply bolts,
trucks, and machinery to keep it going.
10:49:36 AM
SENATOR BUNDE said the efficacy thing bothers him. His limited
understanding is that the weapon of choice for Africa is a
machete and doesn't involve Rolls Royce. If Alaska limits its
investment will it keep the leaders from having lunch, or will
the poor people who are being abused have less food?
MR. BURNS said he was not aware of the two companies that
Senator French discussed. If Alaska divested its holdings in the
four or five companies, he doesn't know what effect that would
have on anything. If Alaska sells, someone else will buy. How
does that harm the company and therefore harm the government?
SENATOR BUNDE said he would very much like to see the genocide
stop, but it would be boots on the ground by the United Nations
and African nations to stop it. Over years, divestment might
have an impact. But how many people will die in the interim?
There are quicker ways to protect these people.
10:51:51 AM
SENATOR FRENCH said the bill is not aimed at any company
providing humanitarian aid or anyone importing food or lighting.
It is targeted divestment.
SENATOR STEVENS asked how Mr. Burns would figure out what
companies the fund would divest if this bill passes.
MR. BURNS said there are lists available, but he hasn't thought
it through. He would have to deal with the fund's managers. Some
holdings are in the index funds. "You're either in an index or
you're not in the index." "If you invest in an index fund of the
S&P 500, you are in the S&P 500 with billions of other dollars."
The S&P 498 has a custom benchmark and that is managed
differently at a different expense level. "That's what we tried
to reflect in the fiscal note."
SENATOR FRENCH said, "When you use the word S&P you know that
this S&P doesn't include any targeted companies." Not a single
U.S. company is doing business there.
10:54:02 AM
MR. BURNS said he should have used AEFA [Europe, Australasia,
and Far East index]. "I stand corrected."
PAT GALVIN, Commissioner, Department of Revenue, said the
administration supports SB 227. The bill properly reflects a
proactive action against genocide in Darfur by divesting in
companies that profit from those activities. The situation is an
ongoing human tragedy and Alaska has an opportunity to take a
stand against those atrocities. Congress and the Department of
State have labeled it genocide, and that is an unprecedented
situation. "With that legislation there [was] also language that
would tend to shield, potentially, the decisions of social
investing that may otherwise be subject to potential claims
based upon other precedent, and we are working with the
Department of Law to look at how that congressional action may
affect decisions, absent the passage of this legislation, to
allow the administration to actually take certain actions with
regard to divestiture that would still be compliant with the
state investment laws." There are areas of the legislation that
should be amended and he wants to work with the sponsors in the
finance committee "to try to eliminate some of the burdens with
regard to the machinery of how this bill would affect the
divestiture, in order to minimize some of the costs that don't
change the core principal of affecting the divestiture of state
funds in this manner." There may be some additional language to
shield some of the investment decisions that Alaska can't really
manage and affect, such as passive investments and some index
funds. They should be shielded from this. The administration
would like to work with the bill sponsors on it.
10:57:36 AM
COMMISSIONER GALVIN said it is a difficult decision and the
state has avoided it in the past. But the situation in Darfur is
unique so the state can avoid a slippery slope and still ensure
that state funds are not invested in a way to have any chance of
contributing to the suffering in Darfur.
DEBORAH BOCK, Volunteer, Save Darfur Anchorage, said last year
Congress passed the Sudan Accountability and Divestment Act
prohibiting any company from receiving any contracts with the
federal government because of their complicity with the ongoing
genocide. The act also encourages states to adopt policies of
targeted divestment. It opens the door for every state to divest
from the foreign oil, mining and power companies that are
providing documented substantial support to the government of
Sudan in its genocidal campaign. Currently 24 states have
adopted or are considering divestment policies. When Arizona
joined this group last month, all 90 lawmakers supported the
legislation. It is now Alaska's turn. SB 227 would require the
permanent fund and the Alaska Retirement Management Board to
implement targeted divestment, which would mean selling off
holdings in companies that have been indentified by multiple
international organizations as having documented complicity in
the Darfur genocide. "We sell those foreign holdings and
purchase holdings in American companies that are genocide free -
it's that simple." The permanent fund has about $22 million
invested in six foreign companies that are linked to genocide.
China is the majority shareholder of two of them, Sinopec and
Hong Kong. China is also the leading small arms dealer to the
Sudan government. China sold $55 million worth of small arms to
Sudan from 2003 to 2006 that have been used by the government
against its citizens. This is the first time in history that the
U.S. Congress and president have labeled genocide while it is
occurring. Targeted divestment isn't about sacrificing profits
for the greater good. There are many, many genocide-free
investments that are equally profitable.
11:01:07 AM
MAX CROES, Sudan Divestment Task Force and Genocide Intervention
Network, Washington D.C., said his organization's mission is to
power individuals and communities with tools to stop genocide.
He said the Sudanese government is a global anomaly; it lacks
the ability to produce capital, and it relies solely on foreign
corporations for technology and capital to develop its oil.
Targeting these corporations effects change inside the country
by pressuring the government. It works. Nine corporations have
withdrawn or substantially altered their policies inside Sudan.
In reference to sovereign wealth funds, some of the largest have
elected to adopt investment policies that reflect financial and
moral obligations. The Norwegian government pension fund,
Australian future fund, and New Zealand superannuation fund are
all in this category. Sovereign wealth funds are responsible for
preserving their resources for future generations, but they also
have responsibility to preserve a world that is good. The
permanent fund's actions would not be out of line from similar
funds. This is not a permanent policy; there are four sunset
provisions including if the genocide ends and if the president
or Congress assert that divestment policies interfere with their
ability to make foreign policy.
11:04:01 AM
SENATOR FRENCH moved to report SB 227 from committee with
individual recommendations and attached fiscal note(s).
SENATOR STEVENS objected to say he wishes he knew more about the
Darfur issue. His knowledge of the holocaust is better, and he
can't help but think that if we had done something about that in
1941, some of the suffering would have stopped. He questions the
legislation, but it is an issue worth discussion, and he is
willing to move it to the next committee for that purpose.
CHAIR MCGUIRE said she echoes those thoughts and the slippery
slope and how SB 227 would work in a practical sense. But she
has woken up at night on this issue, and saying nothing and
doing nothing during times of atrocity makes us responsible.
SENATOR STEVENS removed his objection, and SB 227 passed out of
committee.
| Document Name | Date/Time | Subjects |
|---|