Legislature(1997 - 1998)
01/29/1998 08:05 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HJR 50 - PERMANENT FUND PUBLIC CORPORATION Number 0370 CHAIR JAMES noted the next order of business was HJR 50, "Proposing amendments to the Constitution of the State of Alaska relating to a public corporation established to manage the permanent fund," sponsored by Chair James. Number 0383 PATRICK LOUNSBURY, Legislative Secretary to Representative James, read the statement of intent. "HJR 50 is in direct response to the Administration's constitutional concerns regarding HB 81, 'An Act relating to the board and staff of the Alaska Permanent Fund Corporation,' which was heard last year. The Department of Law explained that the Permanent Fund Board was created by statute to administer a constitutionally established fund, thus the only way to provide removal for cause would be through a constitutional amendment. We believe HJR 50 addresses this matter on point while striving for the goal of continuity which is the major intent of HB 81. Specifically it addresses Article 9, Section 15 of the constitution by adding a new section to read that the permanent fund shall be managed by public corporation established by law. A member of the board of the corporation who is not the head of principal department is subject to confirmation by majority of the members of the legislature in joint session and may only be removed as provided by law." CHAIR JAMES said HB 81 suggests that members of the Permanent Fund Board should only be removed for cause. She stated both Governor Knowles and Governor Hickel, when they came into office, completely removed the board. She said since the permanent fund is our biggest asset, we should have more continuity on the board. Number 0495 JIM BALDWIN, Assistant Attorney General, Civil Division, Department of Law testified before the committee. He indicated he testified on HB 81 last year and thanked the committee for taking him up on his legal analysis that a constitutional amendment would be necessary. MR. BALDWIN said there are still some issues which would basically insulate the Permanent Fund Board by making them removable only for cause. He stressed it is difficult to carry out a for cause removal and it exceeds what you are intending to achieve. Trying to do it in context with other boards where there have been violations of crime, for example the individual alleged did not effect their service on the board but struck a cord in the community and the public felt they should not continue to serve. MR. BALDWIN said the board should be responsive to a statewide elected official and not just being protected by the standard of for cause. He believes that is an important consideration why the Administration continues to have reservations about this approach. Number 0583 CHAIR JAMES asked, if not for cause, what other language would protect us from having the clean sweep that we had by the last two changes of governors. MR. BALDWIN replied in existing law there is the provision that the governor can remove but he must state his reasons in writing. He believed that was sufficient protection of the public interest. The governor must go on record. CHAIR JAMES said, "As opposed to serving at the pleasure of the governor." MR. BALDWIN said at pleasure means the governor can remove a member without stating a reason. When this law was enacted in the early 80s, this was a compromise between those who wanted more protection and those who wanted to be just at pleasure. This is one notch above that, it requires the governor to go on record publicly and state his reasons. It must not be arbitrary or capricious. CHAIR JAMES stated we do not currently have that standard. MR. BALDWIN replied in existing law we have that he must have reasons. CHAIR JAMES asked if it referred to the Permanent Fund Board. Number 0665 MR. BALDWIN replied yes, he must state his reasons, that's in existing law (Title 37.13.070). He said, "The governor may remove a member of the board from office - the Permanent Fund Board. Removal by the governor must be in writing and must state the reason for the removal. A member who was removed by the governor may not participate in board business that may not be counted for purposes of establishing (indisc.) quorum, that's in existing law." CHAIR JAMES asked Mr. Baldwin to provide a copy of Governors Hickel's and Knowle's reasons for removing all the board members. MR. BALDWIN said he would provide that to the committee. Number 0728 REPRESENTATIVE DYSON asked Mr. Baldwin to explain his authority in saying the governor cannot be arbitrary and capricious in removing members. MR. BALDWIN replied he could site those cases and would provide a memo to that effect. When public officials act, they cannot act arbitrarily or capriciously. That is a basic level of standard that public officials must live up to. REPRESENTATIVE DYSON asked Mr. Baldwin to show him, in his memo, how that has worked and how public officials have been called on the carpet and forced to live by that standard. CHAIR JAMES said the people who have been appointed to the board are exemplary, they are well respected, people with a background that lends them to this type of responsibility. It was never brought to her attention that there was ever a problem with anybody who served on this board. She asked when they give their reasons can it be personal. MR. BALDWIN replied it can be any reason. CHAIR JAMES asked if they were from the wrong political party would that be a good reason. MR. BALDWIN said he did not believe that has been any of the reasons that have been given. Number 0813 CHAIR JAMES said that does not necessarily evaluate that person's ability to serve on this board no matter what their party affiliation is. Number 0845 MR. BALDWIN stated he did not believe it would be an appropriate reason to say that it was for a partisan political reason, however, some of the documents that have been referred to refer to a governmental philosophy on how government should operate or how it should carry forth its policy-making functions. Partisan political is probably not the appropriate reason, but there are other reasons which are not related to partisanship. Politics is defined in the government to mean the art of governing or the act of governing. CHAIR JAMES noted Representative Berkowitz and she are leaving in ten minutes and that Vice-Chairman Ivan will complete the meeting. It is assumed that Governors Hickel and Knowles took it upon themselves to remove the Permanent Fund Board for philosophical reasons when it is the most important asset we have and the management of it. She said, "I'm a partisan person but there's just some places that I think partisan politics doesn't fly and I think this is one of them." Number 0947 REPRESENTATIVE BERKOWITZ said the implied covenant of good faith and fair dealing governs most contracts between individuals and entities. He indicated Mr. Baldwin said there is an arbitrary and capricious standard. He asked is there something comparable to the implied covenant and good faith and fair dealing that is also at play. MR. BALDWIN said he is not aware of a standard like that. He believed he said the courts have applied general standards when officials take their actions are required by statute to do something. Generally the basic standard is whether the act was arbitrary or capricious. That depends on the kind of act that the official is required to do, a court will give more latitude depending on the type of act. If it is an act regarding a leasing decision, the court may apply a harder look at the actions of the official. If it is an appointive decision, the governor has more discretion in what he can or can't do. The courts do have a basic limit that they will apply to the reasonableness of the action. He indicated there are many cases applying this standard to executive conduct, the conduct of public officials. REPRESENTATIVE ELTON asked if anybody had been removed from a board or commission for cause. MR. BALDWIN said he cannot recall, in the 20 years that he has been in the Office of the Attorney General, that anyone has been removed. He had been engaged in a couple of efforts where they have attempted to. One involved the "Board of Fish and Game" where the individual was convicted of fishing in a closed area, fortunately the individual decided to resign on his own. Number 1133 MR. BALDWIN said the individual had been convicted of fishing is a closed area and he was on the 'Board of Fish'... The governor has to give him a hearing and then he's gone. He said, "It turned into -- he got a lawyer, we had a team of lawyers. We had discovery on his side, discovery on our side, ... we have to appoint an independent hearing officer now. The hearing officer considered himself, or herself, to be a judge. We were involved in a full- blown trial proceeding which was going to take at least a year to conclude. And then they were going to go to the superior court after that, then the supreme court after that. So it's not an easy process." MR. BALDWIN asked the committee do you want the body, that controls $22 billion, to be that insulated from the public. Do you want them to be that far beyond their reach. He indicated if the answer is yes, they are right in supporting this resolution. But if the answer is no, that you want them to be more responsive, they would have to rethink this approach entirely. Number 1197 CHAIR JAMES said she would be very surprised with their established credibility, if there would be any cause why the Permanent Fund Board should be removed. REPRESENTATIVE DYSON jokingly said he was recently informed legislators have immunity and are free to be arbitrary and capricious and unreasonable without fear of removal, that should make them feel at ease. Number 1278 ORAL FREEMAN testified via teleconference from Ketchikan. He said he served six terms in the state House beginning in 1959. His last term was in 1982-1983. During his time in the legislature they created the permanent fund and the Permanent Fund Corporation. He indicated he was appointed to the board of trustees in 1987 and served two and a half years. After he had a difference of opinion over the Education Endowment Fund with the governor, the governor did not reappoint him to the board of trustees. MR. FREEMAN stated Governor Hickel wiped out the whole board when he was elected in 1991. He mentioned Governor Hickel reappointed him to the board, but when Governor Knowles took office he wiped out the whole board. MR. FREEMAN stated when we first created the Permanent Fund Corporation, we had some differences of opinion as to how to go about it. We ended up with four public members and two cabinet members, one of which had to be the commissioner of [the Department of] Revenue. He said the four public members served four-year staggered terms. Every July 1, one of the terms was up. The assumption was that gives the governor - he has the power to appoint and remove us. If he didn't like the job somebody was doing, when their term was up, he'd replace them. And we didn't foresee this drastic (indisc.) axe approach of just coming in and chopping off everybody. Number 1451 MR. FREEMAN said to have a group that manages that much money, has that much responsibility, it is ridiculous to have a new governor come in and remove them without cause or without reason. He indicated, while he was with the board, the governor wanted somebody with his own philosophy. MR. FREEMAN said there should be something on the books that prevents a governor from coming in, for whatever reason, and wiping out a board that has that much responsibility. It is important that you have continuity. Mr. Freeman wholeheartedly approved the approach the committee is taking and applauded them. CHAIR JAMES informed the committee that Vice-Chairman Ivan was now chairing the meeting. Number 1609 HUGH MALONE testified before the committee. He said, "Like Mr. Freeman, I have been interested in and worked on issues involving the permanent fund since its inception." MR. MALONE said, "There is, I think, a central issue that is touched on by this legislation. A central issue that is at the core of the whole idea of the permanent fund, especially one as large as ours is in Alaska today, and that is accountability. The accountability of the corporation, or the fund itself, the accountability of the board and the staff, the accountability of an institution that controls, even in a fiduciary role, more wealth than all the rest of Alaskans put together and then some. Probably, I suppose, certainly in liquid form." MR. MALONE indicated it was a troubling issue to him, it is not one that was resolved when the permanent fund was created, it was not one that, in his mind, was resolved or solved by the legislation or the laws that we have on the books today. It troubles him so much, he wondered, as the fund grows, whether we should not simply find some way to abolish the fund before the accountability issue turns into a serious political and social problem to the state of Alaska. For example, we have enough money in the fund now to build several Susitna dams if we wanted to do that. We could probably do even more damage on the social and political fronts. Mr. Malone indicated HJR 50 touches on accountability. He noted it is a tough issue to deal with and favors the legislation. He believes it provides some stability for the board. Number 1769 MR. MALONE said, like Mr. Freeman, he had the honor of serving on the board. He indicated he was appointed by Governor Sheffield as a public member and was also a member of Governor Cowper's cabinet. One of the things he noticed about serving on the board, was the "halo-effect." For example, you put someone on the board of the fund, he gets a halo around his head and he suddenly becomes one of the anointed few that are in control of this money. The reason the people who served on the board want this legislation is they want continuity. It is not an easy thing to come on the board to learn about the investment program, to learn all about the fiduciary responsibilities, to get some understanding of the nuances that exist in the permanent fund's relationship with the other elements of the Alaska government. (Indisc.) it takes some people longer than others. During that period of time, the board members are not as much a utility to the operation as he or she could be after they have gone through that process. MR. MALONE said, "The idea of having a major turnover and a difficulty of what to do as the financial markets change and as the policies of the fund need to be reviewed, is something the people are concerned about. Really, the board members are concerned with the continuity issue and the ability to do their job. I think when we extend that into the political (indisc.) we encounter the shadow of chronyism or hacks. I mean, there is no particular reason why the political hacks that say Governor Knowles appointed to the board are any worse than the political hacks that Governor Hickel appoints to the board. And so on that basis I don't think that this legislation could be justified." One set could be better or worse than another. MR. MALONE said Mr. Baldwin is the senior member of the Department of Law and is most knowledgeable about this issue and encouraged the committee to continue consulting with Mr. Baldwin. Number 1975 MR. MALONE said, "The bill does a couple things that start to take some of the political cronyism, or the idea that the appointees are just political hacks away from the board. And I think in that sense it does make the board more accountable. The primary one's on page 3 where there's language to clarify what is assumed and that it the board members have, there are in fact fiduciaries. They have a fiduciary responsibility. And I think that fiduciary responsibility and that language - making it clear in the statute goes a long way to improve the accountability. It is commented that it's difficult to remove somebody from the Permanent Fund Board if this law would (indisc.). Mr. Baldwin pointed out that removal for cause is a debatable issue, it can be litigated in the courts and so forth." MR. MALONE said , "I'm not sure you'd want to remove a person from the Permanent Fund Board if they were convicted of fishing in a closed area because it's irrelevant. What's relevant here is whether the person is carrying out his or her fiduciary responsibility. And if they're not carrying out that, I don't think that you would have a lot of difficulty convincing the court if it came to that. I think that's an important thing that that standard be set in the legislation in that it is made explicit." Number 2120 MR. MALONE continued. "The other thing that the board does is it adds a member -- the board doesn't, excuse me, would add a member that would provide for -- one of the members must have recognized competence and experience in investment portfolio management. The other qualifications for the board membership are a bit blurry, recognize competence and wide experience in finance investment and other business management related fields which could be anything from running your own fishing boat to a pull-tab parlor to Lord knows what. This additional language does make it clear that we are talking about a fairly specialized type of expertise and I think that's a good addition to the board." MR. MALONE said, "On the constitutional amendment, which I am certainly not a lawyer, but I certainly agree that it is necessary if the nature, the appointments to the board and the removal of the board is going to take place. My comments are that I believe that the confirmation process, that's set out in the legislation, should result in improved scrutiny of the appointees. Right now the legislature certainly has the capability to review the appointees to the board and make their own decision as to their qualifications and competence. That decision isn't necessarily binding on the governor of course, some might regard as a useless exercise. I think that sometimes the confirmation process itself is a useless exercise. It's merely a rubber stamp. But it doesn't have to be that, and this would certainly give the legislature the real power to decide that person who has been named is not going to be a member of the board and to give that person an opportunity to explain the reasons why he or she, having accepted the nomination, would be able to carry out the duties. I think that's actually a major improvement in the process in the accountability issue for the fund." It does not solve the accountability issue, but it improves it. It is nebulous talking about the accountability, because we have not had a serious question arise as to the accountability of the fund." Number 2284 MR. MALONE said when he was on the board there were investment areas that they did not talk about and got out of it as quickly as they could. He thought if they had become public there would have been a cause for debate that would put the fund in a bad light, but it could have possibly made it more likely for those people that basically want to steal the money and run off through some sort of political maneuver be able to do that. That is a risk the fund faces every day. The fund, approaching $25 billion invested globally represents such a complex chain of transactions today that no one, not the staff on a daily basis, certainly not the board or the general public, and certainly not a governor that is busy with everything else can follow. ... Presenting a scenario for those, who are daring and to some extent strongly motivated by their self- interest to take advantage of the situation, whether it is building the Susitna or syphoning off money for some other purpose in the heat of the moment. That can happen and could cause a lot of damage in the state. He believes the accountability will grow even though changes like this are made in the law. Mr. Malone indicated he thought about that issue for 20 years but did not have a real solution to it. MR. MALONE concluded he believed the points that are raised by Mr. Baldwin are good points that have to be considered carefully. He said, "But I do think, in making an explicit standard beyond this general one that is listed in the legislation, the general one would be the incompetency and malfeasance, and so forth (page 2). But making it clear that these people have a fiduciary responsibility, which I would argue they have now, regardless of this language in this law, that making it clear on the face of the statute that they are not only a name but legally trustees, I think does put some real meaning into this cause." TAPE 98-9, SIDE A Number 0010 REPRESENTATIVE ELTON noted fishing in a closed area does not have anything to do with fiduciary. He asked if it is a breach of your fiduciary duty if you show up as a board member one out of three times, is it a breach of fiduciary duty if you are convicted in federal court for not paying your income tax. Would that be a breach of fiduciary duty or would it be a reason for cause removal of a board member? Number 0042 MR. MALONE explained the fiduciary language in the bill adds an element for cause. He did not think it substitutes for the (indisc.) language. In the first case, yes it is a fiduciary responsibility. Fiduciary responsibility requires that person must be diligent. The second, if you are convicted of some crime that shows you are not trustworthy with money, he indicated he was not able to answer that question. VICE-CHAIR IVAN indicated HJR 50 would be heard again. MR. MALONE continued. "...I think does put some real meaning into this provision that would be proposed (indisc.) statute by this bill." REPRESENTATIVE ELTON said a lot of the members of the legislature in the past, who were there at the birth of the permanent fund continue to get service to the permanent fund through service on the board and I think the most recent example probably is former Representative Clark Gruening. He said, "You used the analogy that fishing in a closed area may not have anything at all to do with fiduciary duty of a member of the board. I want to give you two scenarios and have you respond to those." REPRESENTATIVE ELTON asked, "The first scenario is, is it a breach of your fiduciary duty if you show up as a board member one out of three times." REPRESENTATIVE ELTON stated, "The second example that I'd like to have you comment on is, is it a breach of fiduciary duty, or could you reach a conclusion that it's a breech of fiduciary duty if you're convicted in federal court for not paying your income taxes. ... In those two incidences, would that be a breech of fiduciary duty or would it be a reason for a for cause removal of a board member." MR. MALONE said he believes the fiduciary language in HJR 50 adds an element to the for cause, it does not substitute for the basic language that is in there. In a way it is a higher standard. Number 0042 MR. MALONE said, "It seems to me in the first case is very clear, yes, it is a breech of fiduciary responsibility for your fiduciary responsibility, the duty of fiduciary requires that that person be diligent. You can't be diligent if you show up sporadically for meetings, or for one out of three and so forth. I suppose the meetings could be arranged and organized so that only every third meeting had any real meat to it, but assuming that each meeting has something important, absolutely, that's a breach of your fiduciary responsibility whether it's voluntary or involuntary. You have to be diligent." MR. MALONE said, "The second one, you know if you were convicted of some crime that shows that you weren't trustworthy with money, I can't really answer that question." He concluded, "I think we've raised a presumption that you might not want that person watching your money." NUMBER 0133 REPRESENTATIVE VEZEY said, "I don't think any of us want to see the board become a political ping-pong ball. I was seriously concerned when Governor Hickel replaced the entire board. I was perhaps even more seriously concerned when Governor Knowles replaced the entire board. What is the continuity, I think that's a serious breech of fiduciary responsibility? ... We don't hold the governor to standard of fiduciary responsibility regarding the permanent fund, that's just the board." REPRESENTATIVE VEZEY asked do you support this constitutional amendment, or do you have proposed revision to it. MR. MALONE reiterated that he does favor HJR 50, both the legislation and the associated constitutional amendment are worthwhile changes in the relationship in the permanent fund and to the people of Alaska, they are both good ideas. MR. MALONE said he believes the issues that are raised by Mr. Baldwin are valid issues. He said, "You could have a case similar to the one raised by, using for example the one raised by Representative Elton where something's going on and nobody is quite clear - its breech of fiduciary responsibility and it may not be - like some specific clear cause - other cause - classic cause removal such as somebody being convicted in some crime involving misuse of funds or something like that where - you know we could be in a real jackpot. Whereas, today, the governor could say, 'Well, I'm not going to take the heat on this, I'm not taking the fall, this person is getting booted off the board right now.' So, I think the issues that have been raised are valid ones." Number 0321 MR. MALONE concluded, "The legislation as written, and the constitutional amendment as proposed, does improve both the continuity, and I'm not as much concerned with that as the accountability. I think it actually improves both those things." REPRESENTATIVE VEZEY stated you don't think the continuity is a concern. MR. MALONE replied, "It is a concern, I put accountability above all other concerns when it comes to - by that I mean..." REPRESENTATIVE VEZEY interjected, "I assume you mean fiduciary responsibility." MR. MALONE replied yes fiduciary responsibility, the accountability to perform that. Number 0377 REPRESENTATIVE VEZEY said, "But you don't think that its material to the performance of the (indisc.) and material to the fiduciary obligation to the people of the state of Alaska that we have continuity on the board, maybe I'm concerned about something I shouldn't be concerned about." MR. MALONE agreed continuity is important in any job if you want people to do it. He said, "I don't think its paramount, but I think it's very important and that's why I do think it is appropriate to put a for cause provision in the statute..." REPRESENTATIVE VEZEY asked Mr. Malone what changes would he suggest. MR. MALONE replied, "The only possible change that I'd considered in making this legislation is to insert some language that makes it clear that the permanent fund itself, the (indisc.) of the fund is a public trust, but beyond that, it's pretty well set out in the statutes. Beyond that, I would not change this." REPRESENTATIVE VEZEY asked what are we doing in Section 1, changing the constitution. MR. LOUNSBURY responded Section 1 simply adds an 'a' to add Section B. REPRESENTATIVE VEZEY said, "Section B is the only area that you're really commenting on now. You support putting in the constitution that we'll have a public corporation and that the chairman of the board, head of the board, will be a public member in essence." MR. MALONE replied, "You're right, I didn't specifically comment on those things, I said I do support this constitutional amendment. But if we look at the changes in the constitution, the public corporation -- I've given that some thought, I don't have a better idea, I don't have unbounded faith in the corporate structure as a mechanism for delivering accountability, but I don't have a better idea and I think that that suffices there and it's probably better than leaving it to the legislature at the time. Of the risk is sounding a little smug, I'd say that. And I do believe that the chair person of the board should be one of the public members." Number 0589 MR. MALONE stated, "When I was on the board, it was by agreement of the members that neither of the two department heads would serve as chair of the board. It was by agreement of the members. There's nothing in the rules like that or anything. It was recognized that would put that member under time pressure (indisc.). But I think this constitutional amendment marginally does improve the accountability of the fund, it provides for additional scrutiny of the board members as appointed, it subjects all of them rather than just the two now to confirmation, and I think it is a useful improvement." REPRESENTATIVE BERKOWITZ said, "We're talking about the reason we (indisc.) a rules if it's something etched in stone. From what I understand, there's a lot of change going on and most of it's borne out of the idea that social input has an impact on what a reasonably prudent investor would do. And that came out of the move to divest assets from South Africa. And now we're seeing sort of a resurrection of that concept, particularly in regards to tobacco stocks. If there is a collision of a notion as to what constitutes a reasonably prudent investor, what proper fiduciary duty is, that is a governor might think it's okay to hold tobacco stocks and a sitting board member might think not. Would that amount to a cause in your mind for removal?" MR. MALONE replied, "The constitutional amendment that established the fund, -- this provides here the principal of which shall be used only for those income producing investments, specifically designated by law is eligible for permanent fund investment, which means that the legislature has, under this constitutional amendment the authority - we call it a designated list - to decide, either generally or specifically what the fund will be invested in. My judgement would be, as long as the board was staying within the list that's provided by the legislature which is right now very broad of course, and would include tobacco stocks and arms stocks, cloning stocks, whatever. It might push people's buttons. It's not a breech of fiduciary responsibility because the constitution makes it clear that the investments per say, or what the board is allowed to invest in are designated by law. So I don't think it's a breech of fiduciary responsibility to invest in something that is a social pariah, but that's my opinion and I admit that the whole area of fiduciary responsibility is an evolving one." Number 0815 REPRESENTATIVE BERKOWITZ said he understands that position. He said, "What I'm suggesting is that if there's a different position, if you're sitting on the board to say it's not a breech of fiduciary responsibility, there's a governor who says it is a breech of fiduciary responsibility. Does that amount to cause that would suffice for removal?" MR. MALONE replied, "Of course, I certainly can't give a definitive answer to that. I think the responsibility is an evolving thing, it's evolving more rapidly I suppose in recent years with increasing numbers of funds bringing into existence (indisc. - noise) the last generation, the growing awareness of how fiduciary responsibilities affect people lives not just in the handling of the trust and the direct benefits to the beneficiaries, but the indirect ones, the society at large, particularly from public trust like the (indisc.). So, I would agree that, there might be a scenario where a case like that could be made." REPRESENTATIVE BERKOWITZ said if that's the case, if there's essentially a political difference over what constitutes fiduciary duty, and there's an effort to remove someone for cause over that distinction, then you're stuck in the (indisc.) process that Mr. Baldwin described where you go through hearings, you go to court and essentially some form of paralysis takes over. MR. MALONE said he believes that is right. He doesn't believe you can devise a mechanism that is insulated from politics and doesn't think you can devise a mechanism that at some point or another won't jam up on you. Mr. Malone doesn't think it's humanly possible to do that. We have maybe not always happily, but we have always agreed to the courts as arbiters and our disagreements in this country and it's probably way better than the alternative in settling those differences. Number 0940 REPRESENTATIVE BERKOWITZ said because of all of that, he would suggest that they look for an alternative to the term cause. He reiterated, "I understand the need for continuity, but if there's an elevated standard we should be looking for it." MR. MALONE said to be more specific in regard to the causes. VICE CHAIRMAN IVAN indicated he would like Mr. Baldwin to be present at the next State Affairs Committee meeting. REPRESENTATIVE VEZEY said he did not see what the amendment accomplishes. He asked Mr. Malone to explain his comment that he did not believe continuity is important but he supports that members of the board should be removed only for cause. Representative Vezey said, "Right now we allow the governor to do it for whatever reason the governor so desires, which is more often than not just political motivation." REPRESENTATIVE VEZEY continued, "Changing the statute to make it for cause, I don't think we need to change the constitution to do that. Changing the statute to make it for cause makes it a matter subject to litigation. The problem I see is that we allow the board to continue to function with a member removed under the existing statutes. There's no pressure to settle a dispute between cause or not. Do we need to be concerned about making it difficult to remove someone from office or maybe the fact that we're offended by the board getting fired every four years, it may just be a political (indisc.), maybe it's not a fiducial (indisc.)." Number 1094 MR. MALONE stressed he believes continuity is very important. He said, "It's an issue, in my mind it's related to accountability and I think accountability is more important. ... And I think that, because - it certainly is a clever person who has the resources and time and the political connections could turn the funds to purposes different than many of us would like to see." MR. MALONE continued, "I think it is important to have the board, to some extent, insulated from the political process. I admit that raises additional questions of accountability. But I think it's important to do that." MR. MALONE concluded, "On the constitutional amendment, what it does in my mind, is it makes it clear what the management structure would be, which we have that in statute of course, it's pretty clear right now, but it makes that even more clear. The other thing it does, is that it provides for mandatory legislative scrutiny of the appointees to the board through the confirmation process. They don't get confirmed, they don't get taken up, if they don't get acted on by the legislature, they're out of there. So, that I think it is an improvement because, to my mind, the legislative oversight of the Alaska Permanent Fund, since its inception has been inadequate and this would improve that somewhat. I'm in favor of both the statutory change and the constitutional amendment that accompanies it." VICE CHAIRMAN IVAN indicated HJR 50 would be heard again in the House State Affairs Standing Committee.
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