Legislature(2003 - 2004)
04/27/2004 09:02 AM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
CS FOR SENATE BILL NO. 379(JUD) "An Act providing that public members of the Board of Trustees of the Alaska Permanent Fund Corporation may be removed only for cause; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken explained that this legislation, which is sponsored by the Senate Rules Committee by Request of the Governor, would provide the process through which an Alaska Permanent Fund Corporation Board of Trustees public board member could be removed for cause. MIKE BARNHILL, Assistant Attorney General, Commercial/Fair Business Section, Civil Division (Juneau), Department of Law, stated that under current law, a public Board member could be removed from their position on the Board for any reason provided the reason is presented in written format. This bill would change the current scenario in that a Board member trustee could only be removed "for cause." He stated that the bill defines "for cause" to be such things as "inefficiency, misconduct in office, neglect of duties, and conviction while in office of crimes involving moral turpitude." The current process is detrimental to the effectiveness of the Board as there is value in maintaining institutional knowledge and continuity of management of the $28 billion fund. Co-Chair Wilken asked for clarification that Mr. Barnhill is speaking of language in the Judiciary version of the bill, Version 23-GS2142\D. Mr. Barnhill concurred. Mr. Barnhill stated that the bill would allow the aggrieved Board member, through a hearing process, to present witnesses on their behalf, with the final hearing decision regarding their removal being filed with the Lieutenant Governor. He also noted that during the bill's progression through various committees, numerous questions regarding the hearing process arose. In response, a forthcoming committee substitute, Version 23-GS2142\H has been developed that would streamline the process by aligning it with other current "removal for cause" statutes that do not require a hearing process, as detailed in the "Other Alaskan Statutes 'For Cause' Removal Provisions" handout [copy on file] that was compiled by the Department of Law. The streamlined process would, were the Member to challenge the reason for removal, involve the Alaska Court System in the final determination process. Co-Chair Green moved to adopt the Version 23-GS2142\H committee substitute as the working document There being no objection, the Version "H" committee substitute was adopted as the working document. ROBERT STORER, Executive Director, Permanent Fund Corporation, Department of Revenue, explained that typically it takes approximately two years for a Board member to become thoroughly educated on Board matters. The six-member Board consists of two Cabinet members one of whom is the Commissioner of the Department of Revenue, and four members who are appointed by the Governor and who serve four-year, staggered terms with one Board member position expiring on June 30th of each year. The Alaska Permanent Fund Corporation has not been afforded the protection of removal for cause, as have other Boards. Mr. Storer shared that on two different occasions, five of the six Board Members have been replaced when a new Administration took office. He could not say that this has disadvantaged the Permanent Fund Corporation; however, due to the maturity level of the Fund and the length of time that is spent regarding the various investment approaches, adoption of this policy would be beneficial. The Corporation believes that "it is very important" that Board continuity occurs in order for the education and knowledge to be gained in some systemic manner. He noted that the Governor Frank Murkowski Administration retained two Board members and appointed others who had a previous or related experience with the Permanent Fund Corporation. This provided a very smooth transition to occur. Any new Administration would have the ability to replace two members immediately, one being the Commissioner of the Department of Revenue and the other being the Cabinet member. An additional replacement would be possible on June 30th of that year. Mr. Storer also observed that new Board members learn far more quickly when allowed to gleam knowledge from existing Board members. While numerous State boards operate with the removal for cause component, he urged the Committee to support the bill. Senator Hoffman, noting that the Version "D" committee substitute incorporated the definition of "for cause" but the Version "H" did not, asked whether the definition of "for cause" exists within State statute. Mr. Barnhill responded that were a lawsuit filed by the aggrieved Board member, the Alaska Court System would apply a test to determine whether the reason was capricious, arbitrary, or illegal. If the determination were that none of those applied, then the determination would be that it was valid. This is a "common law defined term." Senator Bunde spoke in support of the bill as should there "be mischief at foot" and were a Governor to replace all Board members with people he could control, there might be a way to "manipulate the dividend to the detriment…of the overall investment goal of the Permanent Fund." Senator Bunde moved to report the bill from Committee with individual recommendations and accompanying fiscal notes. There being no objection, CS SB 379(FIN) was REPORTED from Committee with zero fiscal note #2, dated February 4, 2004 from the Department of Law and zero fiscal note #3, dated February 6, 2004 from the Department of Revenue.