Legislature(1995 - 1996)
04/05/1995 01:58 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
4/5/95
SJR 14 CONFIRMATION OF MEMBERS OF PUBLIC CORP
WORKSESSION
SENATOR TAYLOR stated the issue before the committee is to make a
definitional change to provide for legislative confirmation of
entities that manage state assets.
TERRI LAUTERBACH, Division of Legal Services, stated the only
definitional problem with the phrase "public corporation" is in
relation to the Commercial Fishing and Agriculture Bank (CFAB)
because it is not designated as a public corporation in statute.
She also noted concern with the term "state assets" since all state
agencies manage funds in one way or another. She suggested
deleting the reference to state assets in SJR 14.
Number 510
SENATOR ADAMS referred to Ms. Lauterbach's memo and stated CFAB is
not included in the list. He thought SJR 14 was designed to cover
the large corporations such as the Permanent Fund Corporation, the
Alaska Industrial Development Authority (AIDA), the Alaska Railroad
Corporation (ARRC), and CFAB. MS. LAUTERBACH noted that is a
policy question for Senator Halford.
MS. LAUTERBACH noted the committee could amend SJR 14 to include an
asset limit and define assets, in terms of loan portfolios or the
size of a corporation's operating budget.
Number 529
SENATOR MILLER commented more detail may create problems because a
verbose constitutional amendment is unlikely to be approved. He
added if legislative confirmation of CFAB members, with assets of
$32 million, is included, all the others on the list will be picked
up. He asserted the decision needs to be made to either include
all of the entities, or limit legislative confirmation to the very
largest.
SENATOR HALFORD explained the term "public corporation" was only
one of the terms suggested by the Division of Legal Services. In
terms of priorities, he had focussed on the Permanent Fund, AHFC,
ARRC, AIDA and the Alaska Science and Technology Foundation (ASTF).
Those entities are prioritized in descending order according to the
amount of assets they control. He discussed the Finance
Committee's concerns with definitional language in SJR 14. The
Administration will oppose anything that puts any requirement on
administrative appointments because that power is constitutionally
determined. Language that defines the significant issues, and
avoids getting into ridiculous applications, such as legislative
involvement with the entity the Permanent Fund Corporation
contracts with to manage their active portfolio, is what needs to
be designed.
Number 566
JIM BALDWIN, Assistant Attorney General, commented the Department
of Law discussed two problems with SJR 14 in the Finance Committee.
The first problem relates to the careful balance of power between
the branches of government created in the Constitution. The power
of confirmation is one of those balances and belongs to the
Governor. It is shared in a limited respect when the Constitution
permits it. He stated a constitutional amendment to change the
situation is a commendable approach, rather than a statutory
change. In researching minutes of the Constitutional Convention,
he found little discussion on this issue, however it appears the
framers intended to ensure that the Legislature had the power to
reach principal department heads. Most of the corporations have
department heads on their boards, although they are not in control
of the corporation. Governor Hammond sought to have the boards of
directors of the larger corporations controlled by the department
heads. Because the corporations have become powers unto
themselves, that might be a separate basis for imposing a separate
right of confirmation.
TAPE 95-17, SIDE B
MR. BALDWIN stated his belief that legislative confirmation power
over department heads should be enough power to affect the workings
of the corporations. If the Legislature chooses to make statutory
changes, it could do as Governor Hammond did, by making the public
corporations controlled by the department heads.
MR. BALDWIN discussed the Department of Law's second concern with
the amendment. The phrase, "at the head of a public corporation
that manages State assets," may create problems, because some of
the corporations contend that once they are created and endowed
with assets, the assets become corporate assets. The corporation
is a creature of statute, and therefore controlled by law, but once
established it has its own assets. The Legislature directs the
corporate board of directors to adopt a resolution to turn over
surplus assets to the state, which comforts Wall Street, since the
corporations are voluntarily giving things back to the state. The
"state asset" language is technically incorrect when referring to
AHFC or the ARRC, but it may apply to the Permanent Fund
Corporation since it is investing a state trust fund. The reason
the corporations were established with a separate and independent
legal existence is to protect the state treasury from the debt
those corporations underwrite.
Number 562
SENATOR HALFORD disagreed with Mr. Baldwin's initial comments about
the disruption of the balance of power since the constitutional
framers did not envision a $15 billion corporation when they
drafted the Constitution. He indicated the language needs to be
targeted to accomplish specific tasks, and that is the purview of
the attorneys who have worked for the Department of Law for years,
and attorneys from the Division of Legal Services.
Number 549
SENATOR ADAMS asked if the Department of Law has any suggested
language to resolve the corporate/state asset problem. MR. BALDWIN
offered to provide suggestions to the committee. He added the
Governor is unable to veto a resolution.
SENATOR TAYLOR agreed the language needs to target those concerns
shared by all. He noted it is ludicrous that the Board of
Hairdressers and Barbers needs to be confirmed by the Legislature,
but people that control hundreds of millions of dollars do not have
to be.
Number 535
SENATOR HALFORD explained the problem is not that this Governor
opposes SJR 14. The former Governor replaced virtually all of the
members of the Permanent Fund Corporation board as well. If these
huge corporations are managing state assets, some kind of
continuity must exist, such as legislative confirmation and fixed
terms. That way, no Governor can change the entire direction of
the Permanent Fund Corporation with a major shift in investment
policy.
SENATOR TAYLOR expressed concern that by defining these entities as
public corporations, new entities created in the future will be
called something else to protect the autonomy of the executive
branch. SENATOR HALFORD stated he had considered the term "public
entity" but as the term is broadened, the question of what entities
are included becomes convoluted.
MR. BALDWIN noted Senator Sharp suggested to the Finance Committee
that the corporation be required to have a dollar limit on its
assets, however including a dollar amount in the Constitution is
inadvisable because of inflation.
SENATOR TAYLOR did not want to include a dollar limitation, but
felt the language needs to be broad enough to include CFAB.
SENATOR ELLIS clarified Senator Sharp's suggestion referred to an
asset floor, not limit.
Number 468
SENATOR HALFORD stated the first step is to define the term to be
used, then to define the things not included by the term, and to
then make sure the term does not allow for the invention of new,
alternative terms to avoid this application. Language that fits
those three criteria would fit the Constitution and be strongly
supported by the voters, and would not do violence to the balance
of power.
SENATOR TAYLOR asked Senator Halford if he contemplated the
constitutional amendment as also relieving the Legislature of the
burden of having to confirm members of other boards and
commissions. SENATOR HALFORD stated he had not contemplated that.
SJR 14 merely adds to the "regulatory or quasi-judicial agency"
appointments.
Number 458
SENATOR GREEN stated SJR 14 does not do anything to change the
Legislature's ability to obtain information from the corporations.
SENATOR HALFORD agreed with Senator Green's concern about a lack of
information. The confirmation process brings those members back to
the table, at which time they can be questioned.
MS. LAUTERBACH commented there is nothing unconstitutional about
increasing reporting requirements, which could be done by statute.
She also suggested changing the term "public corporation" to
"public entity" in SJR 14, then listing the exceptions by function,
such as advisory boards. SENATOR HALFORD suggested using the
phrase "public entities that directly control state assets." MS.
LAUTERBACH noted that would not resolve the issue of what assets
are.
SENATOR TAYLOR discussed an attempt several years ago to establish
a Marine Highway Authority. He wanted the Authority to have
legislative oversight. SENATOR HALFORD felt it could be defined as
a principal department.
MR. BALDWIN indicated art. IX, sec. 11 uses similar language that
says that restrictions on debt don't apply to a public enterprise
or public corporation of the state or a political subdivision. The
only security is the revenues of the enterprise or corporation. He
suggested using language that would include entities that issue
debt.
Number 380
JUDGE STEWART arrived. SENATOR TAYLOR reviewed the issues being
discussed by the participants up to that point. He explained the
committee is trying to find appropriate language that is
sufficiently inclusive to take in those aspects of government now
being operated, such as the Aerospace Energy Authority, without
embroiling the Legislature in the micro-management of those
entities, such as the Permanent Fund Corporation's portfolio
contractors, or union pension fund representatives. The committee
does not feel it would be appropriate for the Legislature to
confirm people elected to those seats. He also discussed the
moving target aspect, and the need to design a definition that will
capture the entities created in the future, by both the Legislature
and Executive branch, that should be confirmed.
SENATOR HALFORD asked Judge Stewart what kind of thought was given
to these kinds of entities at the time of the Constitutional
Convention. He asked for advice on the balance of power issue, and
whether the Legislature is reaching too far, and whether this was
something that was considered in depth at the time of the
Constitutional Convention.
Number 350
JUDGE STEWART began by suggesting revising lines 5-7 to eliminate
a redundancy as follows:
SECTION 26. BOARDS AND COMMISSIONS. When a board or
commission is at the head of a principal department, a
regulatory or quasi-judicial agency, or a public corporation
that manages State assets,....
He noted "State assets" would have to be defined. Regarding the
Constitutional Convention, he stated he managed the business of the
Convention and was not on the floor, but doubted the issue of
confirmation of public corporation members was addressed, since
those corporations did not exist at the time. He thought the
underlying philosophy of the Constitution, on the separation of
branches, would provide for Executive branch determination of the
policy of those agencies so that the people who manage those
agencies express the Governor's philosophies for which he/she was
elected. He stated he, personally, would be reluctant to extend
legislative authority beyond what it is, however, depending on how
the Governor uses this authority, some may see it as a significant
misuse of that authority. He stated it was the philosophy of the
majority of the Convention that the Legislature is not the
Executive branch and should not be overly involved in the execution
of the laws. If they don't like the Executive branch's management,
they can change the laws to restrict the Governor's powers, but
having authority over the election of his/her appointees is too far
of a reach. He recommended, if the Legislature feels the policy
change is necessary, adding a sentence to the end of SJR 14 that
would constitutionally give the Legislature the power, by statute,
to extend the list to these kinds of agencies. That would give the
Legislature something to hang its hat on if it wished to expand or
contract the list.
Number 286
SENATOR MILLER commented the corporations are new beasts that have
come into government in the last 20 years, and he wondered what the
conversation would have been at the Constitutional Convention
regarding the balance of powers if a government agency that was
managing eight times the annual budget existed. JUDGE STEWART
suspected they would have wanted to confirm people selected to do
the job by the Governor. He felt that is consistent with his basic
notion that the Governor runs the Executive branch, not the
Legislature. They put in the basic language to include the head of
a principal department. His concern was more with the Legislature
misusing its confirmation powers to try to bind the Governor and
prevent him/her from selecting his/her people. He stated he would
not have a great problem with extending legislative confirmation
power to the significant governmental agencies. He added there
should be some limiting phrase that would ensure the Legislature
does not get involved in micro-management.
Number 245
MS. LAUTERBACH remarked the limitation could come by the fact that
any statute is subject to veto. Therefore, as the Legislature goes
through the process of making the list, adding future agencies
would be part of the bargaining process with the Governor. JUDGE
STEWART clarified that would work if SJR 14 gives the Legislature
constitutional authority to pass legislation.
SENATOR HALFORD commented at the time the Legislature considered
the purchase of the Alaska Railroad, one of the railroad purchase
packages had a constitutional amendment in it that would allow for
confirmation of the ARRC board. He offered to research that
debate. He agreed if the Legislature passed a bill requiring
legislative confirmation of the Permanent Fund Corporation board,
and fixed terms, the Governor would take a lot of heat from the
public if he/she vetoed it. However, if the battle was over a
small agency because of a management argument between the
Legislature and Executive branch, the public would support a veto.
He added if lines 5-7 of SJR 14 are changed, and a sentence is
added to the end, the implication is that the confirmation of
regulatory and quasi-judicial agencies is optional, not required.
He suggested leaving lines 5-7 as is, and adding a sentence to the
end that allows that any other entity may require confirmation if
provided in the statute that creates the entity.
MS. LAUTERBACH added the issue of whether the Legislature has the
power to relinquish legislative confirmation authority has to be
decided. She noted lines 5-7 were purposely drafted that way
because there is some concern that the current language of the
Constitution is ambiguous. She purposely did not try to resolve
the ambiguity as to whether the "head of" applies to a principal
department only, or to regulatory or quasi-judicial agencies as
well.
Number 171
SENATOR TAYLOR asked MS. LAUTERBACH to work on additional language
to make the suggested changes to SJR 14, especially the last
sentence. He indicated he wanted to move SJR 14 out of committee
in the near future. SENATOR HALFORD stated by adding the final
sentence, the language can be broad since it will not apply until
a law is passed.
JUDGE STEWART commented in territorial days, it was common for the
Legislature to express by statute, its right to confirm. MR.
BALDWIN asked if the confirmations were by one house. JUDGE
STEWART replied it was, however the Convention moved away from that
to a simple majority. MR. BALDWIN added there used to be a statute
that required that confirmation be taken up and considered within
five days.
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