Legislature(1993 - 1994)

01/28/1994 09:00 AM STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                 SENATE STATE AFFAIRS COMMITTEE                                
                        January 28, 1994                                       
                           9:07 a.m.                                           
  MEMBERS PRESENT                                                              
  Senator Loren Leman, Chair                                                   
 Senator Mike Miller, Vice Chair                                               
 Senator Johnny Ellis                                                          
 Senator Jim Duncan                                                            
  MEMBERS ABSENT                                                               
 Senator Robin Taylor                                                          
  COMMITTEE CALENDAR                                                           
 Proposing an amendment to the Constitution of the State of Alaska             
 relating to the rights of victims of crimes and to penal                      
 SENATE JOINT RESOLUTION NO. 38                                                
 Proposing amendments to the Constitution of the State of Alaska               
 relating to revenues from natural resources, the Alaska permanent             
 fund, the appropriation limit and the budget reserve fund; and                
 providing for an effective date for the amendments.                           
 SENATE BILL NO. 170                                                           
 "An Act relating to income of the permanent fund."                            
 SENATE BILL NO. 244                                                           
 "An Act relating to investments of the permanent fund in certain              
 limited partnerships each of whose principal purpose is investment            
 in securities of public or private companies; and providing for an            
 effective date."                                                              
 SENATE BILL NO. 245                                                           
 "An Act relating to investments of the permanent fund involving               
 equity interests in and debt obligations secured by mortgages on              
 real estate; and providing for an effective date."                            
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SJR 2 - See State Affairs minutes dated 1/21/94 and 1/26/94.                  
 SJR 38 - See State Affairs minutes dated 1/26/94.                             
 SB 170 - See State Affairs minutes dated 1/26/94.                             
 SB 244 - no previous senate committee action.                                 
 SB 245 - no previous senate committee action.                                 
  WITNESS REGISTER                                                             
 Margo O. Knuth, Assistant Attorney General                                    
 Criminal Division, Department of Law                                          
 P.O. Box 110300, Juneau, AK 99811-0300¶465-3428                               
  POSITION STATEMENT:  testified on SJR 2                                      
 Senator Dave Donley                                                           
 State Capitol, Juneau, AK 99801-1182¶465-3892                                 
  POSITION STATEMENT:  prime sponsor of SJR 2                                  
 Scott Goldsmith, Economist                                                    
 Institute for Social & Economic Research                                      
 5331 Sillary, Anchorage, AK 99508¶337-2285                                    
  POSITION STATEMENT:  opposed to SJR 38                                       
 Roger Cremo                                                                   
 425 G Street, Anchorage, AK 99501¶333-8188                                    
  POSITION STATEMENT:  in favor of SJR 38                                      
 William H. Scott, Executive Director                                          
 Permanent Fund Corporation                                                    
 P.O. Box 25500, Juneau, AK 99802-5500¶465-2047                                
  POSITION STATEMENT:  in favor of SB 245                                      
 Jim Kelly, Research & Liaison Officer                                         
 Permanent Fund Corporation                                                    
 P.O. Box 25500, Juneau, AK 99802-5500¶465-2047                                
  POSITION STATEMENT:  in favor of SB 245                                      
 ACTION NARRATIVE                                                              
 TAPE 94-5, SIDE A                                                             
 Number 001                                                                    
 CHAIRMAN LEMAN calls the Senate State Affairs Committee to order at           
 9:07 a.m.                                                                     
 Number 003                                                                    
 ADMIN as the first order of business before the committee today.              
 Number 005                                                                    
 SENATOR MILLER moves the adoption of CSSSSJR 2(STA).  There being             
 no objection, it was so ordered.                                              
 Number 008                                                                    
 MARGO KNUTH, Department of Law, Criminal Division, believes the               
 change from penal administration to criminal and juvenile justice             
 in section 1 is a good change and will make more specific that SJR
 2 refers to the entire process and not just sentencing and post-              
 sentencing.  Adding community condemnation of the offender and the            
 rights of victims of crimes will achieve the purpose of the                   
 legislature.  She does, however, believe the use of the term                  
 restitution to be repetitious of the rights of victims of crimes.             
 If we differentiate restitution from the rights of victims of                 
 crimes, what other differentiations should be made?  Restitution is           
 the principal right of a victim of crime and is set out in new                
 section 24.  There is, therefore, a logical inconsistency in                  
 explicitly setting restitution out in SJR 2.                                  
 Number 046                                                                    
 MS. KNUTH states that in section 2, subsection (b) of SJR 2 the               
 Department of Law is still concerned rights will be created for               
 victims of crimes, whether there is clarification from the                    
 legislature or not.  The main concern is that it may create                   
 liability for the state, and that there ought to be limits on the             
 liability, which could be achieved through language in the section.           
 There is also a concern that victims may want and may be given a              
 control in state prosecutions.  This would represent a radical                
 departure from the way the system was originally created and has              
 been operating in the United States for several hundred years now.            
 Number 105                                                                    
 MS. KNUTH introduces a proposed amendment which would change                  
 subsection (b), adding the same language currently in the victim's            
 rights act in Alaska State Statutes.                                          
 Number 117                                                                    
 CHAIRMAN LEMAN asks if any members have questions for Ms. Knuth.              
 Number 122                                                                    
 SENATOR ELLIS asks if when "penal administration" was changed to              
 "criminal and juvenile justice", it was discussed in the last                 
 committee meeting.  The chairman replies that it was discussed in             
 the last meeting.  The term "criminal and juvenile justice" was               
 chosen because it seemed to be more encompassing than penal                   
 Senator Ellis asks Ms. Knuth what the specific ramifications are of           
 SJR 2 applying to juvenile justice.                                           
 Number 140                                                                    
 MS. KNUTH responds that the juvenile justice system is designed               
 differently than the adult justice system, the juvenile justice               
 system having been designed primarily to treat the offender.  She             
 thinks it would perhaps be more consistent with the committee's               
 intent to use the term "criminal justice administration", and leave           
 out the "...juvenile justice administration", or there may be a               
 change in our juvenile justice system that we have not anticipated.           
 Number 164                                                                    
 CHAIRMAN LEMAN asks where the terms being discussed originated.               
 Number 168                                                                    
 SENATOR DONLEY replies the term "penal" refers to any system                  
 whereby someone suffers some penalty.  That includes the juvenile             
 justice system.  The language change was suggested in order to make           
 the language more understandable.  He thinks the average person               
 could look at SJR 2 and understand it much better than the language           
 that is currently in the constitution.  He does not think the                 
 language change will alter who will be affected by SJR 2.                     
 Number 200                                                                    
 SENATOR ELLIS supports victim's rights, but wants more discussion             
 on the impacts of SJR 2.  In particular, he wants to know how it              
 would affect the juvenile justice system.                                     
 Number 223                                                                    
 MS. KNUTH states she is involved in the adult offender process, and           
 not in the juvenile offender process, so is not in the best                   
 position to address the consequences of the impact of SJR 2 on the            
 juvenile justice system.  She says SJR 2 may dramatically change              
 the juvenile justice system.                                                  
 Number 240                                                                    
 SENATOR DONLEY responds that everything in section 2 is qualified             
 by subsection (b).  For this reason, he does not believe the                  
 amendment proposed by the Department of Law is a good idea.  The              
 caveat is already there, it being that enforcement can be provided            
 by statute.  The problem with the amendment is it would put into              
 the constitution a sweeping grant of immunity to the state.  What             
 other constitutional rights do we have which we would want to give            
 immunity to the state for violating?  Freedom of speech?  Freedom             
 of religion?  Should we say, "This is a right, but if the state               
 violates it, it's ok?"  Senator Donley does not believe that                  
 attitude is appropriate for a constitutional amendment.  He would             
 like the committee to consider that point.                                    
 Number 266                                                                    
 CHAIRMAN LEMAN questions Ms. Knuth about insertion of the word                
 "restitution".  He realizes that in section 24 there is provision             
 for the right to restitution, so he wonders if also having                    
 "restitution" in section 12 would be repetitious.  The chairman               
 also asks Ms. Knuth to clarify who would qualify for restitution,             
 whether there would also be a corporate or state right to                     
 restitution.  Chairman Leman notes as an example of the corporate             
 right to restitution DWI offenders having to pay the state up to              
 $1000.00 of the cost of prosecution.  He wants secondary victims,             
 such as society or the state, and not just primary victims, to have           
 the right to restitution.                                                     
 Number 285                                                                    
 MS. KNUTH replies that currently the word "restitution" refers only           
 to payment being made to a primary victim of a crime.  It is not a            
 term that has been used for making everyone, including the system,            
 whole.  She cannot think of a word that would refer to making the             
 system whole.  To a certain extent, fines have served the purpose             
 of restitution to the state; although fines are also punitive in              
 nature.  She will try to come up with a word that would better                
 define restitution to the state between now and when SJR 2 is heard           
 in the Senate Judiciary Committee.                                            
 Number 310                                                                    
 SENATOR ELLIS asks if the list of penal administration guidelines             
 on lines 9 through 11 are equal or if they are listed in order of             
 Number 316                                                                    
 MS. KNUTH responds they are ranked in order of priority.                      
 Number 321                                                                    
 SENATOR ELLIS expresses he does not necessarily agree with the                
 order of priority.  He asks what "community condemnation of the               
 offender" means.                                                              
 Number 330                                                                    
 MS. KNUTH answers that "community condemnation of the offender"               
 means punishment of the offender.                                             
 Number 333                                                                    
 SENATOR ELLIS declares he did not realize it was a legal term, and            
 to him it sounds as though the meaning might be to egg someone's              
 house after they get out of prison.  He does think restitution                
 should be in the list of principals of penal administration.                  
 Senator Ellis wants to know, since the principal of reformation is            
 the most important factor in the juvenile justice system, how                 
 reordering the principals of penal administration for both the                
 adult and juvenile justice systems will affect the juvenile justice           
 Number 346                                                                    
 MS. KNUTH comments Senator Ellis has raised the interesting thought           
 that SJR 2 might run afoul of the United States Constitution.                 
 States may not have the right to make punishment of the offender or           
 restitution to the victim a higher priority than reformation of the           
 Number 362                                                                    
 SENATOR ELLIS asks why the committee prefers the term community               
 condemnation of the offender, rather than punishment of the                   
 Number 364                                                                    
 SENATOR DONLEY responds that the language was developed over the              
 interim, and punishment entails less than community condemnation of           
 the offender.  Community condemnation is a more encompassing                  
 Number 374                                                                    
 SENATOR ELLIS expresses his opinion that community condemnation of            
 the offender sounds a lot more wimpy than punishment.                         
 Number 381                                                                    
 SENATOR DONLEY adds a comment to the question raised by Ms. Knuth             
 regarding the possible unconstitutionality of the prioritization of           
 the principals of penal administration under the U.S. Constitution.           
 He is not concerned with possible unconstitutionality under the               
 federal constitution, because federal constitutional concerns would           
 be primary to state constitutional concerns.  If the prioritization           
 turns out to be unconstitutional under the U.S. Constitution, the             
 state constitution would simply defer to the federal constitution.            
 It would not cause the type of constitutional crisis we now have              
 with subsistence.                                                             
 Number 391                                                                    
 MS. KNUTH makes a last point regarding creating a new section 24,             
 rights of victims of crimes.  She states that one possible negative           
 affect of creating additional rights for victims of crimes would be           
 that victims might not be required to press charges or testify if             
 they do not wish to do so.  As a result, the effect could be to               
 drop charges against a defendant if the victim chooses to not press           
 charges.  The state would not have the choice of going forward with           
 a case if the victim was not in favor of doing so also.  This would           
 probably have the greatest impact on domestic violence cases in               
 which the victim recants.  Currently, the state has the right to go           
 ahead with prosecutions, even when the victim recants because the             
 Department of Law knows it is the right thing to do statistically.            
 Prosecution does break the chain of violence.  It's not fun for the           
 victim at the time, but it is a massive improvement in their                  
 situation, and is the only basis for optimism that something will             
 get better there.  Most people probably do not like the idea of               
 someone being able to buy their way or influence their way out of             
 a prosecution, but this is what could happen if victims have the              
 final say in whether or not to prosecute.                                     
 Number 424                                                                    
 CHAIRMAN LEMAN states that it is certainly not his intent to allow            
 cases to be dropped if the victim chooses not to testify or chooses           
 not to press charges, and he would like the record to reflect that.           
 Number 428                                                                    
 SENATOR DONLEY states the language in SJR 2 came straight from the            
 constitution of Michigan, and Michigan has not articulated any                
 concern with the implementation of the language.  In addition, the            
 language is modified by section (b).  He thinks that it would be a            
 stretch of the law for it to arrive at the effect Ms. Knuth just              
 described, and if that were to happen, it could be addressed with             
 a statute from the legislature.                                               
 Number 448                                                                    
 SENATOR ELLIS states he does not have confidence that the concerns            
 he voiced today will be adequately resolved or addressed in the               
 Senate Judiciary Committee.  He requests the Department of Law to             
 note, in writing, the specific effects of SJR 2, should it be                 
 Number 468                                                                    
 CHAIRMAN LEMAN repeats the request Senator Ellis just made to Ms.             
 Number 476                                                                    
 SENATOR MILLER motions CSSSSJR 2(STA) be moved from committee with            
 individual recommendations.                                                   
 Number 479                                                                    
 CHAIRMAN LEMAN, hearing no objections, discharges CSSSSJR 2(STA)              
 from the Senate State Affairs Committee with individual                       
 Number 488                                                                    
 INCOME will be held until Wednesday, February 1, 1994, as the                 
 representative from the administration was unable to be in                    
 attendance this morning.                                                      
 Number 502                                                                    
 next order of business before the Senate State Affairs Committee              
 today.  The chairman calls a witness from the Institute for Social            
 & Economic Research (ISER).                                                   
 Number 513                                                                    
 SCOTT GOLDSMITH, Economist, Institute for Social & Economic                   
 Research (ISER), testifying from Anchorage, states he has talked to           
 Mr. Cremo about his plan (SJR 38), and thinks it is an interesting            
 concept.  Mr. Goldsmith has five comments he would like to make               
 regarding SJR 38, which he will submit in further detail in writing           
 to the committee.  They are:                                                  
  1) The Permanent Fund is at risk if this plan is adopted.                    
  2) The need for safety valves must be considered.                            
  3) The plan appears to be simple, but it is not.                             
  4) The plan is not a magic and painless solution.                            
  5) Less radical alternatives should be considered.                           
 Number 533                                                                    
 MR. GOLDSMITH details the previously listed five points.                      
 TAPE 94-5, SIDE B                                                             
 Number 562                                                                    
 MR. GOLDSMITH continues with his detailing of the previously listed           
 five points.                                                                  
 Number 529                                                                    
 MR. GOLDSMITH suggests potential solutions to budget problems.                
 They are:                                                                     
  1) Solution for economic instability from year to year: cap                  
 the budget at 2.5 billion dollars for four years.                             
  2) Solution for price-induced fluctuations in petroleum                      
 revenues from year to year: restructure constitutional budget                 
 reserve to fill all or a portion of any short-fall between current            
 revenues and the budget.                                                      
  3) Solution for long-run petroleum revenues declining with                   
 production: cap the budget at 2.5 billion dollars for four years,             
 the same as number 1.                                                         
  4) Solution to minimize long-term Prudhoe Bay-type economic                  
 boom and busts: double the Permanent Fund contribution rate for               
 royalties on newly discovered natural resource production to 100%.            
  5) Solution to maximize the return on the Permanent Fund: base               
 the dividend on the long-term averaged total return of the fund,              
 including unrealized gains and losses.                                        
 Number 506                                                                    
 CHAIRMAN LEMAN thanks Mr. Goldsmith for his comments and asks that            
 he submit his testimony in writing to the committee by Monday, in             
 order for members to review it before the meeting Wednesday,                  
 February 2, 1994.  The chairman asks Mr. Cremo if he would like to            
 comment on any part of the testimony made by Mr. Goldsmith.                   
 Number 496                                                                    
 MR. CREMO declines, saying he would like to see a copy of Mr.                 
 Goldsmiths' written comments, so he could intelligently respond to            
 Number 488                                                                    
 CHAIRMAN LEMAN asks if there is anyone else who would like to                 
 testify on SJR 38.  Hearing none, he announces SJR 38 will be held            
 until the committee meeting Wednesday, February 2, 1994.                      
 Number 483                                                                    
 CHAIRMAN LEMAN announces the committee will now take up SB 245                
 PERMANENT FUND INVESTMENTS IN REAL ESTATE and calls Mr. Scott and             
 Mr. Kelly of the Permanent Fund Corporation to the committee table.           
 Number 476                                                                    
 JIM KELLY, Research and Liaison Officer, Permanent Fund                       
 Corporation, passes out four Permanent Fund real estate portfolios.           
 Number 470                                                                    
 BILL SCOTT, Executive Director, Permanent Fund Corporation                    
 introduces himself, Mr. Kelly, and Malcolm Goepfert, the portfolio            
 analyst from the real estate department of the Permanent Fund                 
 Corporation.  He states the purpose of SB 245 is to authorize the             
 permanent fund corporation to invest up to 100% in real estate                
 investments.  The corporation has found that the current 40%                  
 ownership limitation does not give the corporation as much control            
 as it needs over assets.                                                      
 Number 447                                                                    
 MR. SCOTT claims the corporation has come a long way and learned a            
 lot in the ten years since the corporation has been authorized to             
 invest in real estate.  The Alaska Permanent Fund Corporation is              
 recognized nation-wide as being a very good real estate operation.            
 Number 423                                                                    
 MR. SCOTT says that the corporation needs to have the ability to              
 invest 100% in some types of real estate, particularly those in the           
 smaller range, under 25 million dollars.  He states the corporation           
 will still be involved in co-investing, but that it needs the                 
 latitude to invest 100% in some smaller projects.  The board of               
 trustees of the corporation voted unanimously in support of being             
 able to invest 100% in some real estate investments.  The                     
 corporations' rate of return on real estate investments is about              
 double the national rate of return.                                           
 Number 354                                                                    
 CHAIRMAN LEMAN tells Mr. Scott he wants to review the backup                  
 materials on SB 245.  He asks Mr. Scott how he would feel about               
 only having authorization to invest 100% in small investments, but            
 continue to be required to have co-investors on larger real estate            
 Number 332                                                                    
 MR. SCOTT replies that the chairman's suggestion would certainly be           
 one solution, and the solution in SB 245 was suggested because it             
 was simple and straightforward, but it is certainly not the only              
 Number 315                                                                    
 MR. KELLY adds that the Permanent Fund Corporation has always been            
 very selective in its' real estate investments.  The corporation is           
 allowed to have 15% invested in real estate.  The Current amount              
 invested is under 7%.  The Board of Trustees of the Permanent Fund            
 Corporation has set a target rate of 10% investment in real estate.           
 We believe it will be easier to get closer to the target investment           
 rate of 10% if we have the additional flexibility of being able to            
 invest 100% in real estate investments.                                       
 Number 297                                                                    
 MR. SCOTT says another problem caused by only being able to invest            
 40% in a project is that deals are often not closed with a co-                
 investor because the corporation is not willing to give up certain            
 Number 278                                                                    
 CHAIRMAN LEMAN announces SB 245 will be taken up again on                     
 Wednesday, February 2, 1994.                                                  
 Number 274                                                                    
 CHAIRMAN LEMAN announces the schedule for Wednesday, February 2,              
 1994 will be SB 245, SB 170, SJR 38, and bills previously heard.              
 Number 267                                                                    
 CHAIRMAN LEMAN adjourns the meeting at 10:22 a.m.                             

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