Legislature(1995 - 1996)

04/05/1995 01:58 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
 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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