Legislature(2009 - 2010)BARNES 124

04/05/2010 01:00 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
*+ HB 416 PRUDENT MANAGEMENT OF INSTITUTIONAL FUNDS TELECONFERENCED
Moved Out of Committee
+ HCR 21 ECONOMIC DEVELOPMENT PLANNING COMMISSION TELECONFERENCED
Heard & Held
+ HB 389 COMMERCIAL FISHING LOAN ACT TELECONFERENCED
Heard & Held
+ SB 269 ECON. STIMULUS BONDS: REALLOCATION/WAIVER TELECONFERENCED
Moved Out of Committee
+ SB 272 RENTAL CAR CHARGES TELECONFERENCED
Moved Out of Committee
        HB 416-PRUDENT MANAGEMENT OF INSTITUTIONAL FUNDS                                                                    
                                                                                                                                
1:12:14 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON announced  that the first order of  business would be                                                               
HOUSE BILL NO. 416, "An Act  adopting and relating to the Uniform                                                               
Prudent Management  of Institutional  Funds Act; relating  to the                                                               
investment  of money  for  charitable  purposes by  institutions,                                                               
including   governmental  institutions;   and  relating   to  the                                                               
University of Alaska."                                                                                                          
                                                                                                                                
1:12:18 PM                                                                                                                    
                                                                                                                                
KONRAD JACKSON,  Staff, Representative  Kurt Olson,  Alaska State                                                               
Legislature, paraphrased  from the sponsor statement,  which read                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     HB 416  would allow  the State of  Alaska to  adopt the                                                                    
     Uniform Prudent  Management of Institutional  Funds Act                                                                    
     (UPMIFA).                                                                                                                  
                                                                                                                                
     UPMIFA   replaces  obsolete   rules  and   concepts  of                                                                    
     investment and management  of endowments and charitable                                                                    
     funds currently  in use. It provides  current, industry                                                                    
     best   practices   guidelines,  essential   to   proper                                                                    
     management.                                                                                                                
                                                                                                                                
     HB  416  is  will  help  administrators  fulfill  their                                                                    
     fiduciary  responsibilities to  the funds  they manage.                                                                    
     Clear definitions  on prudent practices  and applicable                                                                    
     standards   are   laid   out  for   administrators   of                                                                    
     charitable funds and endowments.                                                                                           
                                                                                                                                
     The  UPMIFA   will  assist  nonprofits   and  volunteer                                                                    
     trustees  to minimize  exposure to  disputes and  legal                                                                    
     challenges  over issues  related  to currently  unclear                                                                    
     administrative rules and practices.                                                                                        
                                                                                                                                
     Traditional    trust     principles    regarding    the                                                                    
     distribution of what might  otherwise be considered the                                                                    
     corpus  differ from  the  UPMIFA.  In conjunction  with                                                                    
     Financial  Accounting   Standards  Board  requirements,                                                                    
     UPMIFA allows  advances against future earnings  to the                                                                    
     extent such  advances are  prudent and  consistent with                                                                    
     the mission and purpose of the endowment.                                                                                  
                                                                                                                                
     At present,  only 3  other states  have not  adopted or                                                                    
     introduced UPMIFA legislation.                                                                                             
                                                                                                                                
1:15:23 PM                                                                                                                    
                                                                                                                                
JIM  LYNCH, Treasurer,  University of  Alaska Foundation,  stated                                                               
that he has  managed the endowments for the  University of Alaska                                                               
for the  past 25 years.   He related that he  worked with Senator                                                               
Paskvan on  the companion bill.   This bill sets  out responsible                                                               
practices  for management  of charitable  funds, consistent  with                                                               
what  the legislature  has  previously adopted  for  trusts.   He                                                               
explained that  this legislation has  already been adopted  by 43                                                               
states, including  the District of  Columbia and the  U.S. Virgin                                                               
Islands.      It   essentially  incorporates   requirements   and                                                               
considerations   that   provide    for   accountability   and   a                                                               
determination of  prudent actions.  It  allows administrators the                                                               
flexibility  needed  to  manage endowments  during  the  volatile                                                               
market conditions.   It  is difficult  to manage  endowments when                                                               
income is "jumping up and down"  every year.  He stated he cannot                                                               
tell students who applied for  and were awarded scholarships that                                                               
they are no longer available due to market fluctuations.                                                                        
                                                                                                                                
MR.  LYNCH related  the bill  would clarify  outdated provisions,                                                               
although  most of  the updates  affect East  Coast colleges  that                                                               
have been  operating for several hundred  years, often containing                                                               
some peculiar  provisions.  This  bill would reduce  the exposure                                                               
for  non-profit  entities and  their  trustees  that may  not  be                                                               
familiar with nuances.   In Alaska, without any  laws that apply,                                                               
it is  difficult to  sort out responsibilities.   He  referred to                                                               
two sections  that directly address  the UA Board of  Regents, to                                                               
indicate how the  Board of Regents will follow  the provisions of                                                               
HB  416.    The  bill corrects  unintended  consequence  of  2005                                                               
statutory  changes on  retirement bills.   The  Board of  Regents                                                               
authority for investment of funds  and the endowments came from a                                                               
cross  reference  that allowed  the  Board  of Regents  the  same                                                               
authority for the  endowments as the state  pension committee has                                                               
for   the  pension   funds.     These  represent   the  fiduciary                                                               
responsibilities,  but  when  the  Alaska  Retirement  Management                                                               
Board was created, the new  statute references changed.  Instead,                                                               
this bill would directly address  the responsibilities that apply                                                               
to the  Board of Regents endowment  administration and non-profit                                                               
funds.                                                                                                                          
                                                                                                                                
1:20:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOLMES  referred  to  page 6,  line  19,  to  the                                                               
definition of  "endowment fund ."   She read, "...which  does not                                                               
include assets of an institution  designated by an institution as                                                               
an endowment fund for its own use;."                                                                                            
                                                                                                                                
MR. LYNCH  answered that the  definition of an endowment  fund is                                                               
fairly broad and this definition  would exclude those funds which                                                               
are designated by  the board as endowments.  He  referred to them                                                               
as quasi-endowments,  which are  treated like endowments  but are                                                               
available  to creditors  and are  unrestricted.   The designation                                                               
was set up by the administrative  board and can be changed by the                                                               
board.   That is  the distinction  between the  "true endowments:                                                               
and  "quasi-endowments."    This definition  would  clarify  that                                                               
endowments  created  by  a  board  are  not  controlled  by  this                                                               
statute.   They are  unrestricted funds and  the board  will make                                                               
the  determinations.   The  other  endowments  are restricted  by                                                               
donors  and  the  institution  cannot  change  the  restrictions.                                                               
Thus, when a donor donates  unrestricted funds, the board can use                                                               
the funds  for anything it  chooses, but if the  donor designated                                                               
funds to  be used for the  math department, the UA  would need to                                                               
abide by the restriction.                                                                                                       
                                                                                                                                
1:23:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HOLMES referred  to page  4, to  line 7  to gifts                                                               
that  "create an  endowment  fund of  permanent  duration."   She                                                               
asked for clarification.                                                                                                        
                                                                                                                                
MR. LYNCH explained that means "in  perpetuity."  Thus, if the UA                                                               
receives  an   endowment  for  a   specific  purposed   then  the                                                               
restrictions  apply.   If  the funds  are be  used  for the  math                                                               
department.  Otherwise, if the  need over time becomes illegal or                                                               
improper,  the  UA   must  go  back  to  the  court   to  make  a                                                               
determination  on what  happens to  the money.   This  bill would                                                               
also  create  a  provision  for small  endowments  of  less  than                                                               
$50,000 for an  expedited procedure since going back  to court is                                                               
expensive.  Thus,  the UA would go through the  Department of Law                                                               
and this  provision would  allow the endowment  to use  the funds                                                               
for a purpose as closely related  to the purposed intent.  If the                                                               
donor states it is an "endowment" then the funds are permanent.                                                                 
                                                                                                                                
REPRESENTATIVE   HOLMES  related   her  understanding   that  the                                                               
provisions  that  would  apply  are  those on  page  5  under  AS                                                               
13.70.040.                                                                                                                      
                                                                                                                                
MR. LYNCH  agreed that either  the UA would  go back to  court or                                                               
use the expedited procedure in instances of a small endowment.                                                                  
                                                                                                                                
1:26:18 PM                                                                                                                    
                                                                                                                                
MR.  LYNCH pointed  out  the  default nature  of  the  bill.   He                                                               
explained that essentially if other  laws affect endowments, then                                                               
the  other provisions  would  apply first,  followed  by the  the                                                               
UPMIFA.  Thus, a formal  trust would take precedence over UPMIFA.                                                               
The  statute provides  the rules  absent a  donor agreement.   He                                                               
restated  that all  of  the agreements  take  precedent over  the                                                               
statute.                                                                                                                        
                                                                                                                                
1:27:38 PM                                                                                                                    
                                                                                                                                
GRANT CALLOW,  Member, Alaska Uniform Law  Commissioner, National                                                               
Conference  of  Commissioners  on Uniform  State  Laws  (NCCUSL),                                                               
explained that  he could  answer questions on  how the  bill came                                                               
about and could  answer any drafting questions.   He offered that                                                               
Kentucky  just  enacted   UPMIFA,  so  Alaska  is   one  of  five                                                               
jurisdictions that  still not  enacted UPMIFA.   This  bill would                                                               
provide much  more flexibility to persons  managing institutional                                                               
funds, but also  provides some controls on the  delegation of the                                                               
management of  the funds.   This bill encourages  gift-giving and                                                               
charity  since it  provides confidence  and assurances  to donors                                                               
that their charitable contributions wishes will be followed.                                                                    
                                                                                                                                
MR.  CALLOW offered  that many  institutional  advisors were  in.                                                               
Some reference to  the attorney general's office.   Deborah Behr,                                                               
Assistant Attorney  General is also  a Uniform  Law Commissioner.                                                               
The  Attorney General's  (AG) office  has reviewed  the bill  and                                                               
does  not have  any issue  with the  AG's role.   He  offered his                                                               
belief   that  in   Alaska,  it   is  preferable   to  have   the                                                               
institutional   funds  managed   here   rather  than   elsewhere.                                                               
Enacting  UPMIFA will  help  ensure  that goal  is  met and  will                                                               
minimize the  conflict in  instances in  which funds  are managed                                                               
outside the  state, but benefit persons  in the state.   Thus, an                                                               
issue of conflicts  of law could arise.  This  is one reason that                                                               
this  law is  designated  as a  uniform law  and  to provide  for                                                               
consistency  among the  states.   In  addition  to being  adopted                                                               
unanimously by the  states at the Commission on  Uniform Laws, it                                                               
was sent to American Bar  Association House of Delegates where it                                                               
was  approved.   This  bill  has been  a  very  popular bill,  he                                                               
stated.                                                                                                                         
                                                                                                                                
1:31:58 PM                                                                                                                    
                                                                                                                                
ERIC WOHLFORTH, Attorney,  Wohlforth, Johnson, Brecht, Cartledge,                                                               
& Brooking, A Professional Corporation  (PC), asked to add to the                                                               
comments already made and thanked members.                                                                                      
                                                                                                                                
1:32:37 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON,  after first  determining  no  one else  wished  to                                                               
testify, closed public testimony on HB 416.                                                                                     
                                                                                                                                
1:32:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOLMES  moved to  report HB  416 out  of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.   There being no objection,  HB 416 was reported  from the                                                               
House Labor and Commerce Standing Committee.                                                                                    
                                                                                                                                
1:33:20 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 1:33 p.m. to 1:35 p.m.                                                                       
                                                                                                                                

Document Name Date/Time Subjects
HB416 Supporting Documents-Letter Foreaker Group.pdf HL&C 4/5/2010 1:00:00 PM
HB 416
HB416 Fiscal Note-UA-Sysbra-03-26-10.pdf HL&C 4/5/2010 1:00:00 PM
HB 416
CSHCR21(EDT) Changes from version E.pdf HL&C 4/5/2010 1:00:00 PM
HCR 21
CSHCR21(EDT) Draft Amendment P.1 (APED).PDF HL&C 4/5/2010 1:00:00 PM
HCR 21
CSHCR21(EDT) Fiscal Note-LEG-COU-3-29-10.pdf HL&C 4/5/2010 1:00:00 PM
HCR 21
CSHCR21(EDT) Sponsor Statement.pdf HL&C 4/5/2010 1:00:00 PM
HCR 21
CSHCR21(EDT) ver P.pdf HL&C 4/5/2010 1:00:00 PM
HCR 21
CSHCR21(EDT) Draft Amendment P.2 (Report to L&C Committees).PDF HL&C 4/5/2010 1:00:00 PM
HCR 21
HCR21 - Legacy outline.pdf HL&C 4/5/2010 1:00:00 PM
HCR 21
HCR21 - Letters of Support.PDF HL&C 4/5/2010 1:00:00 PM
HCR 21
HCR21 - Alaska Forward Project Executive Summary.pdf HL&C 4/5/2010 1:00:00 PM
HCR 21
HCR21 - Other State Incentives.pdf HL&C 4/5/2010 1:00:00 PM
HCR 21
HCR21 Briefing Paper Economic Development in State Government.pdf HL&C 4/5/2010 1:00:00 PM
HCR 21
HCR21 Economic Development Commission Powerpoint.pdf HL&C 4/5/2010 1:00:00 PM
HCR 21
Apr 5 Packet Info.pdf HL&C 4/5/2010 1:00:00 PM
CSHB389(FSH) Fiscal Note.pdf HL&C 4/5/2010 1:00:00 PM
HB 389
CSHB389(FSH) Sponsor Statement.pdf HL&C 4/5/2010 1:00:00 PM
HB 389
CSHB389(FSH) ver C.pdf HL&C 4/5/2010 1:00:00 PM
HB 389
HB389 Changes between ver C and ver S.pdf HL&C 4/5/2010 1:00:00 PM
HB 389
HB389 Commercial Fishing Loan Fund Home Page.pdf HL&C 4/5/2010 1:00:00 PM
HB 389
HB389 DCCED Statistics for Loan Servicing.pdf HL&C 4/5/2010 1:00:00 PM
HB 389
HB389 December 2009 Loan Stats.pdf HL&C 4/5/2010 1:00:00 PM
HB 389
HB389 Memo on HB389 to HFSH.pdf HL&C 4/5/2010 1:00:00 PM
HB 389
CSSB269(FIN) ver E.pdf HL&C 4/5/2010 1:00:00 PM
SB 269
HB338-SB269 Sponsor Statement.pdf HL&C 4/5/2010 1:00:00 PM
SB 269
HB338-SB269 Section Analysis.pdf HL&C 4/5/2010 1:00:00 PM
SB 269
SB269 Fiscal Note-2-1-021010-REV-Y.pdf HL&C 4/5/2010 1:00:00 PM
SB 269
SB269 Fiscal Note-1-2-021010-CED-N.pdf HL&C 4/5/2010 1:00:00 PM
SB 269
HB338-SB269 Supporting Documents Letter-AML 3-3-10.pdf HL&C 4/5/2010 1:00:00 PM
SB 269
SB272 ver A.pdf HL&C 4/5/2010 1:00:00 PM
SB 272
SB272 Fiscal Note-1-1-022410-LAW-N.pdf HL&C 4/5/2010 1:00:00 PM
SB 272
SB272 Sponsor Statement.pdf HL&C 4/5/2010 1:00:00 PM
SB 272
SB272 Supporting Documents - Vehicle Licensing Fee Per State.pdf HL&C 4/5/2010 1:00:00 PM
SB 272
SB272 Supporting Documents - BUSINESSADVISORY re VLF's 083006.pdf HL&C 4/5/2010 1:00:00 PM
SB 272
HB416 Fiscal Note-LAW-CIV-04-02-10.pdf HL&C 4/5/2010 1:00:00 PM
HB 416