Legislature(2021 - 2022)ANCH LIO DENALI Rm

12/15/2021 10:00 AM House LEGISLATIVE BUDGET & AUDIT

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10:08:53 AM Start
10:10:43 AM Executive Session
11:34:30 AM Other Committee Business
12:19:18 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
I. Executive Session
1. Final Audit Report:
i. Regulatory Commission of Alaska (Sunset)
ii. Alcoholic Beverage Control Board (Sunset and
Special Audit)
iii. Council on Domestic Violence and Sexual
Assault (Sunset)
2. Preliminary Audit Report:
i. Board of Pharmacy (Sunset)
3. Legislative Finance Division Personnel
+ II. Other Committee Business TELECONFERENCED
1. Revised Program Legislative (RPL)
2. Gaffney Cline Contract
3. Alaska Permanent Fund Corporation
                    ALASKA STATE LEGISLATURE                                                                                  
             LEGISLATIVE BUDGET AND AUDIT COMMITTEE                                                                           
                       Anchorage, Alaska                                                                                        
                       December 15, 2021                                                                                        
                           10:08 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Natasha von Imhof, Chair                                                                                                
Senator Peter Micciche                                                                                                          
Senator Bert Stedman                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Click Bishop (alternate, via teleconference)                                                                            
                                                                                                                                
Representative Chris Tuck, Vice Chair                                                                                           
Representative Andy Josephson (via teleconference)                                                                              
Representative James Kaufman                                                                                                    
Representative Dan Ortiz (alternate, via teleconference)                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Lora Reinbold                                                                                                           
Representative Ivy Spohnholz                                                                                                    
Representative Neal Foster                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
EXECUTIVE SESSION                                                                                                               
OTHER COMMITTEE BUSINESS                                                                                                        
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ALEXEI PAINTER, Director                                                                                                        
Legislative Finance Division                                                                                                    
Legislative Agencies and Offices                                                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Explained the RPLs before the committee.                                                                 
                                                                                                                                
REPRESENTATIVE BRYCE EDGMON                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Offered comment during discussion related                                                                
to personnel matters of the Alaska Permanent Fund Corporation.                                                                  
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:08:53 AM                                                                                                                   
                                                                                                                                
CHAIR NATASHA VON  IMHOF called the Legislative  Budget and Audit                                                             
Committee meeting to  order at 10:08 a.m.   Representatives Tuck,                                                               
Ortiz   (alternate,    via   teleconference),    Josephson   (via                                                               
teleconference),  and  Kaufman  and  Senators  Stedman,  Hoffman,                                                               
Micciche, Bishop  (alternate, via teleconference), and  von Imhof                                                               
were present at the call to order.                                                                                              
                                                                                                                                
^EXECUTIVE SESSION                                                                                                              
                       EXECUTIVE SESSION                                                                                    
                                                                                                                              
10:10:43 AM                                                                                                                   
                                                                                                                                
CHAIR VON IMHOF announced that  the first order of business would                                                               
be  an  executive  session  to   discuss  a  Legislative  Finance                                                               
Division  personnel  issue,  the   final  audit  report  for  the                                                               
Regulatory Commission  of Alaska, the Alcoholic  Beverage Control                                                               
Board, and the  Council on Domestic Violence  and Sexual Assault,                                                               
and the preliminary audit report for the Board of Pharmacy.                                                                     
                                                                                                                                
10:11:08 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee go into executive session  under Uniform Rule 22(b)(3),                                                               
for the  discussion of matters that  may, by law, be  required to                                                               
be confidential.  He asked  that the following individuals remain                                                               
in the  room or  online:  the  legislative auditor  and necessary                                                               
staff  for the  auditor; any  legislators not  on the  committee;                                                               
staff for legislators  who are members of the  committee; and the                                                               
House Finance Committee secretary.   There being no objection, it                                                               
was so ruled.                                                                                                                   
                                                                                                                                
10:11:48 AM                                                                                                                   
                                                                                                                                
The committee took  an at-ease from 10:11 a.m. to  11:34 a.m. for                                                               
the purpose of executive session.                                                                                               
                                                                                                                                
11:34:00 AM                                                                                                                   
                                                                                                                                
CHAIR NATASHA VON  IMHOF called the Legislative  Budget and Audit                                                             
Committee meeting back  to order at [11:34] a.m.   Present at the                                                               
call  back to  order  were Representatives  Tuck, Kaufman,  Ortiz                                                               
(alternate,    via    teleconference),   and    Josephson    (via                                                               
teleconference) and  Senators Stedman, Hoffman,  Micciche, Bishop                                                               
(alternate, via teleconference), and von Imhof.                                                                                 
                                                                                                                                
^OTHER COMMITTEE BUSINESS                                                                                                       
                    OTHER COMMITTEE BUSINESS                                                                                
                                                                                                                              
11:34:30 AM                                                                                                                   
                                                                                                                                
CHAIR VON IMHOF announced that  the final order of business would                                                               
be  other  committee business,  including  the  release of  final                                                               
audits,  the  release  of  a  preliminary  audit,  a  Legislative                                                               
Finance Division personnel issue, and discussion of RPLs.                                                                       
                                                                                                                                
11:35:20 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee  release the  following as  final audit  reports:   the                                                               
Regulatory Commission  of Alaska; the Alcoholic  Beverage Control                                                               
Board; and the  Council on Domestic Violence  and Sexual Assault.                                                               
There being no objection, it was so ordered.                                                                                    
                                                                                                                                
11:35:43 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee release  the following  preliminary audits:   the Board                                                               
of  Pharmacy and  the Board  of  Examiners in  Optometry.   There                                                               
being no objection, it was so ordered.                                                                                          
                                                                                                                                
11:35:42 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee set pay for the  legislative fiscal analyst at rage 29,                                                               
step  J, effective  December 27,  2021, with  no change  to merit                                                               
anniversary  dates  per  Alaska Statute  39.27.011(h),  with  the                                                               
understanding that  this wage adjustment  and other  planned wage                                                               
adjustments  for  Legislative  Finance  Division  staff  will  be                                                               
absorbed in the division's current  budget, and that no increases                                                               
to the  fiscal year 2022  (FY 22) or FY  23 budget are  needed to                                                               
provide for those adjustments.   There being no objection, it was                                                               
so ordered.                                                                                                                     
                                                                                                                                
11:36:34 AM                                                                                                                   
                                                                                                                                
CHAIR VON IMHOF announced an  additional order of business, under                                                               
other business,  would be  Request Proposals  Legislative (RPLs).                                                               
She asked Alexei Painter to go over the RPLs for the committee.                                                                 
                                                                                                                                
11:37:10 AM                                                                                                                   
                                                                                                                                
ALEXEI   PAINTER,   Director,   Legislative   Finance   Division,                                                               
Legislative Agencies  and Offices,  said there  are four  RPLs to                                                               
cover.  He  began with RPL 05-2022-0143,  Department of Education                                                               
and  Early Development,  Alaska State  Council on  the Arts,  for                                                               
$68,000,  fund source  federal receipt  002.   He explained  that                                                               
this RPL comprises two separate grants.   The first is related to                                                               
the CARES Act  where additional federal money  was received under                                                               
a previous RPL, and approximately  $35.7 thousand remain and need                                                               
to be spent  this year.  He  clarified that a portion  of the RPL                                                               
is for  that remaining  CARES Act  fund that  goes to  local arts                                                               
agencies.   The  remaining $32.3  thousand of  this RPL  is money                                                               
from a National Endowment of  the Arts partnership agreement that                                                               
will  be used  "to update  these strategic  plans."   Mr. Painter                                                               
noted that the portion of the  RPL related to the CARES Act, thus                                                               
COVID-19 relief  monies, will be  reflected by the  division with                                                               
tracking code 1265,  while the remaining part of the  RPL will be                                                               
coded  as 1022.   He  said the  committee does  not need  to note                                                               
those  codes in  its motion  to  approve the  RPL.   He said  the                                                               
division has no technical issues with the RPL.                                                                                  
                                                                                                                                
MR.  PAINTER  continued  to  the  next  item,  RPL  08-2022-0188,                                                               
Department  of   Commerce,  Community  &   Economic  Development,                                                               
Division of  Community and Regional  Affairs, for  $30,694,746 of                                                               
federal  receipts,  using  tracking  code  1265.    He  said  the                                                               
department  received  a grant  for  $30.7  million for  the  U.S.                                                               
Department of Agriculture's  Seafood Processors pandemic response                                                               
and safety block  grant program.  There is no  match required for                                                               
the   grant,  and   it  will   go  to   seafood  processors   for                                                               
reimbursement of eligible costs  relating to workplace safety and                                                               
other  issues  related  to  COVID-19.     Mr.  Painter  said  the                                                               
department has  the ability to  use a  portion of this  money for                                                               
administrative  costs;  the  majority  of   it  will  go  to  the                                                               
processors.                                                                                                                     
                                                                                                                                
11:40:33 AM                                                                                                                   
                                                                                                                                
MR. PAINTER,  in response to Representative  Josephson, confirmed                                                               
that  the Legislative  Finance Division  has no  technical issues                                                               
with this RPL, as it is in  line with the purpose of the Division                                                               
of  Community and  Regional Affairs  to disperse  grants of  this                                                               
type.                                                                                                                           
                                                                                                                                
MR.  PAINTER  continued  to  the  next  item,  RPL  12-2022-0104,                                                               
Department  of   Public  Safety,  Statewide   Support  Laboratory                                                               
Services, for $600,864 of federal  receipts, using code 1002.  He                                                               
explained the RPL is "due  to additional federal authority needed                                                               
for several  grants that  the agency received."   He  said, "They                                                               
will  enable ...  the forensic  science  improvement grants,  DNA                                                               
capacity enhancement,  and backlog  reduction.  And  then there's                                                               
another DNA backlog  reduction program grant.   There is existing                                                               
federal authority, but they need  another $600,000 to accommodate                                                               
the  amount of  grants  they  received."   Mr.  Painter said  the                                                               
division has no technical issues with this RPL.                                                                                 
                                                                                                                                
11:42:36 AM                                                                                                                   
                                                                                                                                
MR.  PAINTER, in  response to  Representative  Tuck, offered  his                                                               
understanding  that  the  funds  would  purchase  new  laboratory                                                               
equipment  and  a  sexual  assault  tracking  system  that  would                                                               
interface  the existing  crime lab  system.   He deferred  to the                                                               
agency as a source for answering further questions.                                                                             
                                                                                                                                
MR.  PAINTER   addressed  the   final  item,   RPL  12-2022-0105,                                                               
Department  of Public  Safety,  Statewide Support  Appropriation,                                                               
Criminal  Justice  Information  Systems program  allocation,  for                                                               
$4,843,825  in federal  receipts,  using code  1002, to  increase                                                               
federal authority  for existing  grants.   He explained  the need                                                               
for  this  is  primarily  for   due  to  the  approval  of  grant                                                               
extensions  for  multi-year  federal  grants.    Because  of  the                                                               
pandemic, the department was unable  to spend those monies in the                                                               
normal cycle,  so it received  these additional grants.   He said                                                               
some  of the  grants have  a match  associated with  them -  a 10                                                               
percent  match for  some; however,  that  match can  be met  with                                                               
existing unrestricted  general funds,  so no additional  match is                                                               
needed to  receive these funds.   He stated that  the Legislative                                                               
Finance Division has no technical issues with this RPL.                                                                         
                                                                                                                                
11:45:10 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE JOSEPHSON mentioned RPLs  from 2020 as being cause                                                               
for concern.   He  then asked whether  Mr. Painter  believes that                                                               
the current RPLs comply with the statute that addresses RPLs.                                                                   
                                                                                                                                
MR. PAINTER answered  yes, he believes all four  RPLs comply with                                                               
statute,  and all  are  within the  agencies'  existing scope  of                                                               
work.  He said some of the  RPLs from last year were creating new                                                               
programs, while  these are expanding on  existing federal receipt                                                               
authority mostly  due to  timing.   He characterized  the current                                                               
RPLs as "normal," unlike the ones from 2020.                                                                                    
                                                                                                                                
11:46:20 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  moved that the Legislative  Budget and Audit                                                               
Committee  approve  the  following   RPLs  as  presented  to  the                                                               
committee:  05-2022-0143   Department  of Education, $68,000; 08-                                                               
2022-0188      Department  of   Commerce  Community   &  Economic                                                               
Development,  $30,694,746;  2-2022-0105    Department  of  Public                                                               
Safety,  $4,843,825;  and  12-2022-0104    Department  of  Public                                                               
Safety,  $600,864.   There  being  no  objection, the  RPLs  were                                                               
approved.                                                                                                                       
                                                                                                                                
11:47:32 AM                                                                                                                   
                                                                                                                                
CHAIR VON IMHOF said the  other agenda item under other committee                                                               
business would  be a discussion  about the changes  in leadership                                                               
at the  Alaska Permanent Fund  Corporation (APFC).   She prefaced                                                               
this by reviewing statute relating  to the powers and purposes of                                                               
the Legislative Budget  and Audit Committee.  She  first cited AS                                                               
24.20.156(1)(A)-(B),  which addressed  the purpose  of monitoring                                                               
and reporting, as follows:                                                                                                      
                                                                                                                                
      Sec. 24.20.156.   Purposes.                                                                                               
     The  purposes  of  the  Legislative  Budget  and  Audit                                                                    
     Committee include                                                                                                          
          (1) monitoring and reporting                                                                                          
          (A) the  performance of the agencies  of the state                                                                    
     that perform lending or investment functions;                                                                              
          (B) the  extent to which the  performance of these                                                                    
     agencies  has  contributed  to the  fiscal,  financial,                                                                    
     economic, and  social improvement of the  state and its                                                                    
     citizens;                                                                                                                  
                                                                                                                                
CHAIR VON  IMHOF then cited  AS 24.20.201(a)(3), relating  to the                                                               
powers of  the Legislative Budget and  Audit Committee, including                                                               
the power to:                                                                                                                   
                                                                                                                                
          (3) require  all state  officials and  agencies of                                                                    
     state  government  to  give  full  cooperation  to  the                                                                    
     committee  or its  staff in  assembling and  furnishing                                                                    
     requested information;                                                                                                     
                                                                                                                                
CHAIR VON IMHOF summarized that  the Legislative Budget and Audit                                                               
Committee has  the responsibility  for providing  the legislature                                                               
with  fiscal analyses,  budget reviews,  audits, and  performance                                                               
reviews of state government agencies.                                                                                           
                                                                                                                                
CHAIR VON IMHOF continued as follows:                                                                                           
                                                                                                                                
     At the  recent December 9, 2021,  Alaska Permanent Fund                                                                    
     Corporation  Board meeting,  Executive Director  Angela                                                                    
     Rodell  was terminated  by  a  vote of  5  to  1.   The                                                                    
     dismissal was abrupt,  without explanation, and without                                                                    
     a   clear,   planned,   and   professional   leadership                                                                    
     transition.   Further, this action was  taken following                                                                    
     six years  of record performance by  the permanent fund                                                                    
     under her leadership.                                                                                                      
                                                                                                                                
     The great irony of the  timing of her dismissal is that                                                                    
     just  this week  the Permanent  Fund [Division],  under                                                                    
     Ms.  Rodell's  leadership, has  been  found  to be  the                                                                    
     "Best Places to Work" by  ... Pensions & Investments, a                                                                  
     global news source of money  management.  Moreover, she                                                                    
     had been  tapped to be  the chair of  the International                                                                    
     Forum  of Sovereign  Wealth Funds,  so clearly  she has                                                                    
     won the respect of professional peer groups.                                                                               
                                                                                                                                
CHAIR VON  IMHOF stated for  the record  that she and  Ms. Rodell                                                               
are friends.  She said she  has tremendous respect for Ms. Rodell                                                               
and  for Ms.  Rodell's  strong financial  performance during  her                                                               
tenure at the fund.                                                                                                             
                                                                                                                                
CHAIR VON IMHOF asked the Legislative Budget and Audit Committee                                                                
to make considerations, as follows:                                                                                             
                                                                                                                                
     Next to our  land and our people,  the Alaska permanent                                                                    
     fund is  Alaska's greatest asset.   It is our  legacy -                                                                    
     our  nest egg;  no other  state in  the union  has one.                                                                    
     And  since 2019,  the majority  of  our state's  annual                                                                    
     revenue  at this  time -  65 percent  - comes  from the                                                                    
     fund.                                                                                                                      
                                                                                                                                
     Since its  inception, one  of the  fundamental elements                                                                    
     the  fund's  creators   explicitly  stressed  from  the                                                                    
     beginning was the importance that  the fund remain free                                                                    
     from political  interference.  Because of  the critical                                                                    
     role  the  permanent  fund plays  in  Alaska,  ...  our                                                                    
     finances,  and ...  our  future, and  in  light of  the                                                                    
     recent sudden  and unexpected  change in  leadership, I                                                                    
     would like  to propose that this  committee undertake a                                                                    
     hearing  about the  leadership  and  governance of  the                                                                    
     Alaska Permanent Fund Corporation.                                                                                         
                                                                                                                                
     At  this time,  few facts  are known  about the  recent                                                                    
     executive  director's dismissal.   However,  as we  all                                                                    
     know  too  well,   rumors  swirl  in  a   vacuum.    In                                                                    
     conversations with  many on this committee,  we believe                                                                    
     Alaskans  should be  given better  answers  for such  a                                                                    
     high-profile decision.   The  public and  policy makers                                                                    
     need  to  know  more  about what  led  to  the  board's                                                                    
     action.                                                                                                                    
                                                                                                                                
11:51:20 AM                                                                                                                   
                                                                                                                                
CHAIR VON  IMHOF proposed that  the Legislative Budget  and Audit                                                               
Committee send a  written invitation to the  Permanent Fund Board                                                               
of  Trustees to  join the  committee  at its  January meeting  in                                                               
Juneau for the purpose of discussing  the factors that led to the                                                               
dismissal of the executive director  following years of benchmark                                                               
record returns.   She said she would like to  propose a letter to                                                               
include  a set  of questions  and any  other questions  committee                                                               
members may  feel relevant. Ideally,  this committee  should have                                                               
answers to  process and  form procedural  questions prior  to its                                                               
hearing  in January  to facilitate  a better  conversation.   She                                                               
presented the list as follows:                                                                                                  
                                                                                                                                
     What is the Permanent Fund Board's established process                                                                     
     for evaluating, disciplining, and terminating                                                                              
     Permanent Fund [Division] staff and, in particular,                                                                        
     the executive director or CEO?                                                                                             
                                                                                                                                
     Was Ms. Rodell's treatment consistent with that                                                                            
     process?                                                                                                                   
                                                                                                                                
     The seeming urgency and timing around her dismissal                                                                        
     raises numerous questions:                                                                                                 
                                                                                                                                
          Had  the  board  identified deficiencies  in  past                                                                    
     performance reviews of  Ms. Rodell?  If  so, were those                                                                    
     part of the rationale behind her dismissal?                                                                                
          Had Ms.  Rodell failed  to remedy or  make changes                                                                    
     in  areas where  the  board had  found her  performance                                                                    
     deficient?                                                                                                                 
          Did  the  board  receive   legal  counsel  on  Ms.                                                                    
     Rodell's termination  and, if  yes, from whom?  Did the                                                                    
     board follow the process  and the legal recommendations                                                                    
     laid out by counsel?                                                                                                       
                                                                                                                                
CHAIR VON IMHOF  advised that the goals for the  meeting would be                                                               
to  ensure Ms.  Rodell's  treatment met  the  standards that  the                                                               
Permanent Fund  [Board] has set  for itself and that  the board's                                                               
dealings  with Ms.  Rodell were  honest, fair,  and above  board.                                                               
Further, she  stated that she  would like the  Legislative Budget                                                               
and  Audit  Committee to  receive  assurance  that the  financial                                                               
integrity of  the permanent fund  and how  it is managed  has not                                                               
been, and  will not be  in the  future, compromised.   She sought                                                               
feedback  from committee  members as  to whether  they wished  to                                                               
invite the board of trustees  to answer these and other questions                                                               
at  the  January meeting.    She  pointed  out  that due  to  the                                                               
sensitivity of the issue, it  would likely be appropriate to hold                                                               
some of the discussion in executive session.                                                                                    
                                                                                                                                
11:53:40 AM                                                                                                                   
                                                                                                                                
SENATOR  STEDMAN  emphasized  the   importance  of  ensuring  the                                                               
permanent fund  stays politically removed from  the executive and                                                               
legislative  branches.   He  indicated the  matter  is worthy  of                                                               
review  by the  Legislative  Budget and  Audit  Committee and  is                                                               
within the scope  of the committee; however, he  pointed out that                                                               
when addressing  matters of personnel,  there is "a line  that we                                                               
have to parse at some point."   He observed there appears to have                                                               
been a  drift over the  years to more speculative  investments in                                                               
an effort to broaden investment  opportunities yet increasing the                                                               
risk level.   He  said he  had had discussion  with the  board on                                                               
that subject.                                                                                                                   
                                                                                                                                
SENATOR STEDMAN said he  wants to take a look at:   how the board                                                               
is structured;  how the chair  and vice chair are  selected; what                                                               
"their" duties are;  and changing "their" duties.   He speculated                                                               
that some subtle changes are "in  the works" that "may bring some                                                               
concern of independence."  He  offered his understanding that the                                                               
permanent fund has  hit its three-, five-,  ten-, and twenty-year                                                               
targets; therefore,  the performance has  been stellar.   He said                                                               
normally when  the Legislative Budget  and Audit  Committee hears                                                               
"grumblings" within  departments, it  may address them,  but most                                                               
of  the time  it does  not, because  they are  the issues  of the                                                               
executive  branch.     He  indicated   that  he  had   not  heard                                                               
[complaints] regarding  "the permanent fund  area" in years.   He                                                               
added, "So, that is an area of concern."                                                                                        
                                                                                                                                
SENATOR  STEDMAN said  over the  years  representatives from  the                                                               
Permanent  Fund [Division]  have addressed  the legislature,  and                                                               
that  has been  the  extent of  [the legislature's]  involvement.                                                               
However, he  mentioned "the  attractiveness of  excess liquidity"                                                               
and "their interest in helping  the permanent fund spend it," and                                                               
he  opined that  is  something  the committee  should  note.   He                                                               
clarified, "We're  all aware  that we've had  a lot  of inquiries                                                               
and  interest  over the  last  several  years  on ways  to  spend                                                               
billions and billions of the permanent fund."                                                                                   
                                                                                                                                
SENATOR STEDMAN  said another issue  to consider is  the interest                                                               
from the permanent fund.  He  said whenever public money is spent                                                               
it is  different from spending  private money.  He  noted concern                                                               
from the  public about expenditures  and disclosure.  He  said he                                                               
thinks the  subject is  timely and  talked about  the Legislative                                                               
Budget  and  Audit  Committee exercising  its  [purview]  of  the                                                               
permanent  fund to  maintain the  independence of  the fund.   He                                                               
noted that there have been  a couple presentations that have been                                                               
given  to  the Permanent  Fund  Corporation  Board on  which  the                                                               
[Senate] Finance Committee has requested  a hearing, during which                                                               
it will  focus on issues  such as  comparison of other  funds and                                                               
actions that  have been  taken that  hurt them,  as well  as what                                                               
Alaska's fund  has done right and  wrong.  He mentioned  the size                                                               
and  scope of  the  permanent fund  relative  to the  constituent                                                               
base.                                                                                                                           
                                                                                                                                
12:01:20 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE KAUFMAN  said he  supports this  issue.   He noted                                                               
that  there  are elements  of  this  that converge  on  personnel                                                               
issues  that  "may  not  be  part of  the  public  domain."    He                                                               
encouraged the  focus be directed  on the management of  the fund                                                               
for  effective returns  relative to  risk, in  order to  stay "on                                                               
solid ground."                                                                                                                  
                                                                                                                                
12:02:13 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK said he fully  supports the scope laid out by                                                               
Chair  von Imhof  and further  expanded by  Senator Stedman.   He                                                               
said  the Legislative  Budget and  Audit Committee  has oversight                                                               
over  the Permanent  Fund  Corporation and  others,  and this  is                                                               
something that  is appropriate  for the  committee's review.   He                                                               
commented  on  Ms. Rodell's  having  received  accolades and  the                                                               
happy  environment  of the  division,  which  begs the  question,                                                               
"What is up?"  He agreed  that much of this discussion related to                                                               
personnel  may  occur  in   executive  session  while  discussion                                                               
related to  policy and procedures  should be open to  the public.                                                               
He  commented on  the professional  capacity of  Ms. Rodell.   He                                                               
said he  appreciated the  reminder that  the corporation  is non-                                                               
political, which has  been a reason for its  success; however, it                                                               
would  be  irresponsible for  the  Legislative  Budget and  Audit                                                               
Committee "not to look into it any further."                                                                                    
                                                                                                                                
12:04:20 PM                                                                                                                   
                                                                                                                                
SENATOR MICCICHE spoke of the  founding fathers of Alaska and the                                                               
initiation of  the permanent  fund with  the purpose  of allowing                                                               
royalty  wealth to  be invested  and  increase in  value for  all                                                               
Alaskans in perpetuity.   He expressed concern  about a permanent                                                               
fund that once  was isolated from politics  now seemingly subject                                                               
to it.   He talked  about keeping consideration  of personalities                                                               
out of  the mix.   He  said he would  like the  process to  be as                                                               
transparent as  possible.  He  expressed concern about  "the lack                                                               
of warning"  of this "developing issue."   He said he  thinks the                                                               
points  brought up  by Chair  von Imhof  and Senator  Stedman are                                                               
important, and he  said he would like to understand  "what can be                                                               
shared  about this  situation" and  "determine  how someone  with                                                               
that level  of performance can suddenly  be sort of out  the door                                                               
one day."  He said he supports Chair von Imhof's proposal.                                                                      
                                                                                                                                
12:06:29 PM                                                                                                                   
                                                                                                                                
SENATOR HOFFMAN  noted the  importance of  the fund  to Alaskans.                                                               
He emphasized  that much of  the success  of the fund  comes from                                                               
the decisions  made by the board.   He said that  is as important                                                               
as the  actions of  the chief executive  officer (CEO),  who must                                                               
follow  the  directives  of  the  board.    He  agreed  that  the                                                               
committee has the  oversight but encouraged using  caution in the                                                               
process  chosen   going  forward   because  the   corporation  is                                                               
dependent on  its ability to  make decisions.  He  warned against                                                               
micromanaging the  board.  He  said he  sees "the writing  on the                                                               
wall" in terms of the direction  of the committee, and he said he                                                               
would not  step in the way.   He said the  Legislative Budget and                                                               
Audit Committee may  not have access to  certain personnel issues                                                               
which  are part  of the  relationship between  the board  and the                                                               
CEO.   He reiterated that  he would not stand  in the way  of the                                                               
committee's decision, but said as a  chair of a board of a multi-                                                               
million  dollar  corporation,  he  knows the  crucial  nature  of                                                               
decision-making of a  board, and that the information  a board is                                                               
privy to is confidential and "will never see the light of day."                                                                 
                                                                                                                                
12:10:30 PM                                                                                                                   
                                                                                                                                
CHAIR VON  IMHOF noted that  Ms. Rodell  had had a  tenure longer                                                               
than  all the  current trustees,  with the  exception of  William                                                               
"Bill" Moran;  therefore the track  record of the  permanent fund                                                               
is arguably the result of Ms. Rodell.                                                                                           
                                                                                                                                
12:11:02 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOSEPHSON suggested  an addition  to the  list of                                                               
inquiries,  to ask  whether there  would  be a  change in  policy                                                               
regarding what constitutes  a sustainable draw.   He relayed that                                                               
he recently found an old prospectus related to the fund.                                                                        
                                                                                                                                
12:12:27 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  ORTIZ agreed  with  Chair  von Imhof's  proposal,                                                               
Senator Stedman's remarks,  and Representative Josephson's point,                                                               
and he encouraged  the Legislative Budget and  Audit Committee to                                                               
look into  the issue, as  it is within its  scope and duty  to do                                                               
so.                                                                                                                             
                                                                                                                                
12:13:21 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  BRYCE EDGMON,  Alaska  State Legislature,  stated                                                               
that  he  is  concerned  about the  suddenness  of  Ms.  Rodell's                                                               
termination.  He  mentioned separation of powers  and the purview                                                               
of  the Legislative  Budget  and Audit  Committee  and posed  the                                                               
question as to whether the committee  would be remiss if it chose                                                               
not to look into  the issue.  He said the  board has, in general,                                                               
been held  beyond reproach "by  most of  us."  He  indicated that                                                               
legislative tracking of the board  meetings indicates very little                                                               
participation or  attention being  paid, but  said now  there are                                                               
questions.  He shared his question  is:  "Why wouldn't we want to                                                               
examine this to the  extent that we could?"  He  said he does not                                                               
have the  prudent investor statutes  in front of him  but wonders                                                               
if  there  is  a  role  to   be  played  in  making  certain  the                                                               
corporation adheres  to the prudent investor  rule going forward.                                                               
He suggested  there are many more  questions to ask, and  he said                                                               
he thinks it is completely  within the purview of the Legislative                                                               
Budget and  Audit Committee  to ask them,  and he  encouraged its                                                               
members to do so.                                                                                                               
                                                                                                                                
12:15:22 PM                                                                                                                   
                                                                                                                                
CHAIR VON  IMHOF said what  makes the permanent  fund exceptional                                                               
is  that it  has exceeded  "the  return to  its peers."   It  has                                                               
outperformed  "a  portfolio of  benchmarks"  over  the last  five                                                               
years.  She explained that is  when a fund is compared with other                                                               
similar funds, as well as  other widely accepted benchmarks.  She                                                               
continued:                                                                                                                      
                                                                                                                                
     Smart,   prudent,   and  professional   investors   and                                                                    
     investment boards  use a  whole variety  of benchmarks,                                                                    
     within various market types,  to compare themselves ...                                                                    
     [to]  understand how  a portfolio  is  performing as  a                                                                    
     whole.  What  fund managers do not [emphasis  on "not"]                                                                    
     do  is cherry  pick one  or two  benchmarks where  they                                                                    
     either have  exceeded or  failed and  point to  a small                                                                    
     handful to use to make policy or employment decisions.                                                                     
                                                                                                                                
     So, in  light of  that, if  the Board  of Trustees  was                                                                    
     using  benchmarking  in their  decision-making  process                                                                    
     regarding the CEO performance  evaluation, I think this                                                                    
     committee  might   be  interested  in   learning  which                                                                    
     benchmarking,   out   of  the   entire   portfolio   of                                                                    
     benchmarks,  did  the  board  select  to  evaluate  Ms.                                                                    
     Rodell.                                                                                                                    
                                                                                                                                
CHAIR  VON  IMHOF  reiterated  that   the  corporation  had  been                                                               
recognized by  Pensions &  Investments as being  one of  the best                                                             
places to  work in  the area  of money management  in 2021.   She                                                               
added that 75 percent of the  weight of evaluation for that award                                                               
was based  on employee survey, sent  to staff in July  2021.  She                                                               
said  the  question  is  whether  the  survey  was  used  in  the                                                               
performance  review of  Ms. Rodell.   If  a secondary  survey was                                                               
used, she said she thinks the [committee] would like to know.                                                                   
                                                                                                                                
CHAIR VON  IMHOF said she has  a sense of the  committee that its                                                               
members would  like to  move forward  as a  committee to  write a                                                               
letter to the  Board of Trustees inviting them  to participate in                                                               
the  committee's  meeting  in  January.     She  invited  closing                                                               
comments.                                                                                                                       
                                                                                                                                
12:18:36 PM                                                                                                                   
                                                                                                                                
SENATOR  STEDMAN,   responding  to  the  idea   of  an  "invite,"                                                               
suggested  Chair von  Imhof  make  the letter  more  direct.   He                                                               
advised, "We are  the oversight board; they will sit  in front of                                                               
us."                                                                                                                            
                                                                                                                                
CHAIR VON  IMHOF said  she would  not use  those exact  words but                                                               
would  paraphrase  to  come  up  with  something  she  thinks  is                                                               
appropriate.                                                                                                                    
                                                                                                                                
12:19:02 PM                                                                                                                   
                                                                                                                                
SENATOR  MICCICHE recommended  Chair von  Imhof's words  over the                                                               
words chosen by Senator Stedman.                                                                                                
                                                                                                                                
CHAIR VON IMHOF acknowledged the remark.                                                                                        
                                                                                                                                
12:19:18 PM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the                                                                       
Legislative Budget and Audit Committee meeting was adjourned at                                                                 
[12:19] p.m.                                                                                                                    

Document Name Date/Time Subjects
12 15 21 LBA Agenda FINAL.pdf JBUD 12/15/2021 10:00:00 AM
Agenda LBA 12.15.21
LB&A RPL Packet 12 15 21.pdf JBUD 12/15/2021 10:00:00 AM
12.15.21 LBA RPL
LBA 12.15.21 Gaffney Cline Contract.pdf JBUD 12/15/2021 10:00:00 AM
12.15.21 LBA Gaffney Cline