Legislature(2021 - 2022)
12/15/2021 10:00 AM House LEGISLATIVE BUDGET & AUDIT
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| Executive Session | |
| Other Committee Business | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
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 |