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