01/31/2013 08:00 AM House STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| HB75 | |
| HB10 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 75 | TELECONFERENCED | |
| *+ | HB 10 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE STATE AFFAIRS STANDING COMMITTEE
January 31, 2013
8:05 a.m.
MEMBERS PRESENT
Representative Bob Lynn, Chair
Representative Wes Keller, Vice Chair
Representative Lynn Gattis
Representative Shelley Hughes
Representative Doug Isaacson
Representative Charisse Millett
Representative Jonathan Kreiss-Tomkins
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 75
"An Act repealing certain audit requirements for entities
receiving contributions from permanent fund dividends; requiring
each campus of the University of Alaska to apply to be included
on the contribution list for contributions from permanent fund
dividends; and requiring a university to pay an application fee
for each campus separately listed on the contribution list for
contributions from permanent fund dividends."
- MOVED HB 75 OUT OF COMMITTEE
HOUSE BILL NO. 10
"An Act authorizing state agencies to pay private legal fees and
costs incurred by persons exonerated of alleged violations of
the Alaska Executive Branch Ethics Act; allowing certain public
officers and former public officers to accept state payments to
offset private legal fees and costs related to defending against
complaints under the Alaska Executive Branch Ethics Act; and
creating certain exceptions to limitations under the Alaska
Executive Branch Ethics Act on the use of state resources to
provide or pay for transportation of spouses and children of the
governor and the lieutenant governor."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 75
SHORT TITLE: CONTRIBUTION FROM PFD: AUDITS; UNIVERSITY
SPONSOR(s): REPRESENTATIVE(s) SEATON
01/18/13 (H) READ THE FIRST TIME - REFERRALS
01/18/13 (H) STA, FIN
01/31/13 (H) STA AT 8:00 AM CAPITOL 106
BILL: HB 10
SHORT TITLE: EXEC ETHICS: LEGAL FEES/FAMILY TRAVEL
SPONSOR(s): REPRESENTATIVE(s) GRUENBERG
01/16/13 (H) PREFILE RELEASED 1/7/13
01/16/13 (H) READ THE FIRST TIME - REFERRALS
01/16/13 (H) STA, JUD
01/31/13 (H) STA AT 8:00 AM CAPITOL 106
WITNESS REGISTER
REPRESENTATIVE PAUL SEATON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 75 as sponsor.
HEATHER BEGGS, Staff
Representative Paul Seaton
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided information regarding HB 75 on
behalf of Representative Seaton, sponsor.
MIKE WALSH, MPA, Ph.D., Vice President
Operations
Foraker Group
Fairbanks, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
75.
KATHLEEN LIGHT, Executive Director
Ketchikan Arts and Humanities Council (KAHC)
POSITION STATEMENT: Testified in support of HB 75.
ANGELA RODELL, Deputy Commissioner
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
75.
DANA PAPERMAN, Executive Director
Seward Senior Center
Seward, Alaska
POSITION STATEMENT: Testified in support of HB 75.
TED MADSEN, Staff
Representative Max Gruenberg
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 10 on behalf of Representative
Gruenberg, sponsor.
REPRESENTATIVE MAX GRUENBERG
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As sponsor, responded to questions during
the hearing on HB 10.
JUDY BOCKMON, Assistant Attorney General;
State Ethics Attorney
Opinions, Appeals, & Ethics Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the hearing on HB
10.
ACTION NARRATIVE
8:05:00 AM
CHAIR BOB LYNN called the House State Affairs Standing Committee
meeting to order at 8:05 a.m. Representatives Hughes, Isaacson,
Keller, Gattis, Kreiss-Tomkins, and Lynn were present at the
call to order. Representatives Millett arrived as the meeting
was in progress.
HB 75-CONTRIBUTION FROM PFD: AUDITS; UNIVERSITY
8:05:32 AM
CHAIR LYNN announced that the first order of business was HOUSE
BILL NO. 75, "An Act repealing certain audit requirements for
entities receiving contributions from permanent fund dividends;
requiring each campus of the University of Alaska to apply to be
included on the contribution list for contributions from
permanent fund dividends; and requiring a university to pay an
application fee for each campus separately listed on the
contribution list for contributions from permanent fund
dividends."
8:05:50 AM
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, presented
HB 75 as sponsor. He reviewed that the "Pick.Click.Give"
program was established by the [25th Alaska State] Legislature
as a simple way for Alaskans to designate a portion of their
permanent fund dividend (PFD) as a donation to charities.
Currently, he stated, nonprofit organizations with a total
budget of less than $250,000 are exempt from the financial audit
required of nonprofit organizations with a total budget of
$250,000 or greater wishing to participate in Pick.Click.Give.
He clarified that the audit is a financial one done by a
certified public accountant (CPA); it is not an Internal Revenue
Service (IRS) audit. He reviewed that the IRS 990 form,
[included in the committee packet], is 12 pages in length, was
revised in 2008, and not only ensures nonprofit organizations'
income and expense numbers match, but also considers conflicts
of interest and governance.
8:07:55 AM
REPRESENTATIVE SEATON explained that the current audit
requirement is problematic for a nonprofit organization that,
for example, makes $260,000 a year, because the cost of the
audit is $7,000-$12,000. He opined that the purpose of a
nonprofit organization is to accomplish its mission, not to
employ CPAs. Representative Seaton said there is no question
that CPA audits are best practices; however, he said the
question is whether the state should require a CPA audit from a
small entity simply to allow people to donate money to that
entity. He questioned why it is necessary to disadvantage a
smaller nonprofit organization with an onerous requirement that
is not required of larger nonprofit organizations until they
reach $500,000 in federal funds.
REPRESENTATIVE SEATON relayed that many people who did not see
their charity on the Pick.Click.Give list mistakenly interpreted
that to mean that the charity had lost its nonprofit status,
which he said is "another reason to get rid of this." He said
The Rasmuson Foundation and other entities are trying to make it
very easy for people to donate to the organizations they support
and are happy to have more nonprofit organizations participate
in the Pick.Click.Give program.
8:11:20 AM
REPRESENTATIVE SEATON said the proposed legislation would also
correct an oversight in the original legislation. He explained
that all the nonprofits pay a $250 administrative fee, but the
University of Alaska campuses were left out of that requirement.
He offered his understanding that the University of Alaska does
not mind being asked to pay that fee.
8:12:21 AM
REPRESENTATIVE SEATON, in response to the chair, relayed that
the CPA audit looks at finances and account balancing, not
whether the expense should have been made. He said the idea for
the bill came from a complaint from the Seward Senior Center in
Seward, Alaska, which was generating $3,000-$4,000 in donations,
while facing an audit that was going to cost $12,000. He
remarked that the CPA audit is not even reviewed. In response
to a follow-up question, he clarified that a CPA audit would not
determine the legitimacy of a nonprofit organization; that is
something the IRS would do.
8:15:26 AM
REPRESENTATIVE GATTIS said she understands best practices, but
questioned what the other purpose of the [CPA] audit could be.
She asked if the audit is open to the public.
8:16:23 AM
HEATHER BEGGS, Staff, Representative Paul Seaton, Alaska State
Legislature, on behalf of Representative Seaton, sponsor of HB
75, stated, "Both the 990 and CPA audits do report some program
activities of nonprofits." She said the IRS 990 form is more
detailed. She said both documents are open to the public;
although the 990 form is more accessible. She relayed that with
the revisions made in 2008, "nonprofits are penalized $20 a day
every day after five days that they would refuse giving a 990 to
a donor." The CPA audit is an internally managed file that
should be given but is not required to be given [to the public],
she said.
REPRESENTATIVE GATTIS asked Ms. Beggs to confirm that [the CPA]
audit will not necessarily clarify for donors how their money is
spent.
MS. BEGGS answered that is correct.
8:17:47 AM
REPRESENTATIVE KELLER asked if any nonprofit 501(c)(3) willing
to fill out the 990 form is eligible to be listed in the
Pick.Click.Give program.
8:18:23 AM
MS. BEGGS answered that there are other requirements, upon which
she suggested the Foraker Group could expound, but said every
organization must be a 501(c)(3), which is why the bill sponsor
feels the 990 form is the best accountability (indisc. -
overlapping voices). In response to follow-up questions, she
indicated that the status of the University of Alaska is
specified in statute, and she offered her understanding that the
university is "the only other exception," but again deferred to
the Foraker Group for further details.
REPRESENTATIVE KELLER stated support of the sponsor's "getting
this through."
8:19:43 AM
REPRESENTATIVE KELLER stated his belief that the audit became an
eligibility requirement because the bar was so high. He said he
thinks it is great to take that bar away, as long as everybody
gets "a fair shake," and he questioned whether "we" are prepared
to make sure everyone can apply on equal terms. He mentioned
public schools. He said he was thinking about religious
nonprofit organizations and "how that eligibility is required."
He indicated that the IRS has made changes related to 501(c)(3)
organizations, but stated that "they weren't that difficult."
8:20:51 AM
REPRESENTATIVE SEATON said the general purpose of [the
Pick.Click.Give program] is to enable people to give donations
with ease. He said generally people give money to organizations
they know. He stated that really small organizations are
already exempt; [the proposed] legislation is designed for those
organizations with budgets over $250,000.
8:23:22 AM
REPRESENTATIVE KELLER said he understands the purpose of the
proposed legislation, but clarified that he wants to know if
[the division] is prepared for the increased number of nonprofit
organizations that might participate in Pick.Click.Give if HB 75
passes. Further, he expressed concern that there would be an
equal basis of qualification for all charities.
REPRESENTATIVE SEATON responded that HB 75 would get rid of
inequality. Regarding the concern about being prepared for the
change, he noted that representatives from the Rasmuson
Foundation and the division were available to testify. He
related that "they" have not expressed concern about the
additional work that may result from allowing more nonprofit
organizations into the Pick.Click.Give program.
8:26:29 AM
MS. BEGGS, in response to Representative Isaacson, stated that
the 990 forms were all changed in 2008 and are "tiered" to
accommodate organizations with smaller budgets, but still
include "all the same accountable categories."
REPRESENTATIVE ISAACSON asked if the intent of HB 75 is to allow
nonprofit organizations to use whichever form they file to the
IRS as the form they submit to the Pick.Click.Give program.
REPRESENTATIVE SEATON answered that is correct.
8:28:46 AM
REPRESENTATIVE HUGHES noted that the 990 form lists the purpose
of the nonprofit organization. She further noted that 990 forms
can be accessed easily on line. She offered her understanding
that [Alaska] has one of the highest nonprofit organizations to
population ratios, which she said could mean a long list
burdening the division; however, she recollected hearing about a
requirement wherein "they have to receive a certain amount of
their revenue income via donations" - an amount that she said
seemed high, such as $100,000 - and she suggested that that
detail could limit the rise in program participants.
8:30:26 AM
MS. BEGGS suggested that Representative Hughes might be
referring to the "one-third public support test," which is part
of the 990 form requirement for nonprofit organizations, but not
part of the Pick.Click.Give application.
8:30:50 AM
REPRESENTATIVE KREISS-TOMKINS pointed to a research brief from
Legislative Legal and Research Services, dated 1/24/13, in which
it is noted that Diane Kaplan, president of the Rasmuson
Foundation, testified in 2007 that there were budget and
staffing requirements related to qualifications of a nonprofit
organization to take part in the Pick.Click.Give program. He
asked for details regarding those requirements.
8:31:22 AM
MS. BEGGS deferred to other testifiers to answer further
questions.
8:32:02 AM
MIKE WALSH, MPA, Ph.D., Vice President, Operations, Foraker
Group, in response to the chair, explained that the Foraker
Group is a 501(c)(3) nonprofit management core organization
whose job is to strengthen nonprofit organizations through
education, training, organizational development, and shared
financial human services. In response to [Representative
Hughes'] previous mention of a $100,000 price point, confirmed
that that pertains to a requirement of the Pick.Click.Give
program wherein an organization must receive 5 percent or at
least $100,000 of its revenue from donated sources. In response
to Representative Isaacson, he clarified, "... whichever is the
lower."
8:34:38 AM
DR. WALSH, in response to a question from Representative Keller,
stated that there is little administrative burden anticipated as
a result of HB 75, because the process for taking in
applications is on line and simple.
8:36:19 AM
KATHLEEN LIGHT, Executive Director, Ketchikan Arts and
Humanities Council (KAHC), testified in support of HB 75. She
stated that KAHC cannot participate in the Pick.Click.Give
program because it is too great a financial burden to do so.
She said the program is an extraordinary means to increase
funding for many nonprofit organizations, as well as a
philanthropic opportunity for Alaskan citizens, and
participation in the program gives a "stamp of approval" to an
organization; however, ironically the program disenfranchises
those organizations that cannot participate because of its cost.
Ms. Light said KAHC receives numerous calls from people asking
why the council is not in the Pick.Click.Give program, and has
discovered later that those people are not donating money to the
council, because they have already given through the
Pick.Click.Give program. Under HB 75, she said, KAHC would be
financially able to participate in the Pick.Click.Give program.
MS. LIGHT relayed that KAHC was established in 1953, has been a
nonprofit organization since 1970, and has a budget of
approximately $320,000. She said the council receives grants
from the City of Ketchikan, the Ketchikan Borough, the State of
Alaska, the Alaska State Council on the Arts, the National
Endowment for the Arts, Westaff (ph), the Rasmuson Foundation,
and the Murdock Trust. She said it is not unusual for nonprofit
organizations in Alaska to receive grants from so many different
sources, all of which require the 990 form, which is "sufficient
for them in reviewing our finances and our standing as a good
nonprofit."
8:39:46 AM
ANGELA RODELL, Deputy Commissioner, Department of Revenue (DOR),
said she was present to answer questions on behalf of the
Permanent Fund Division. In response to a question from
Representative Keller, she stated that HB 75 would not place
additional burden on the Permanent Fund Division, and said the
department is comfortable with the affect the proposed
legislation may have. In response to a follow-up question, she
said the $250 application fee would sufficiently cover the
division's cost in running the Pick.Click.Give program. In
response to the chair, she confirmed that the fiscal note is
zero because there would be no additional cost to the division
as a result of HB 75.
8:41:28 AM
DANA PAPERMAN, Executive Director, Seward Senior Center,
testified in support of HB 75. She related that the Seward
Senior Center has served seniors and social services for 35
years. She thanked the bill sponsor for bringing forth the
legislation under House Bill 302 in 2012 and again as HB 75 this
year. She said the Seward Senior Center became a
Pick.Click.Give recipient in the first year of the program, and
it received $50 from those known personally to the center. Ms.
Paperman indicated that she worked in partnership with the
Seward Community Foundation, which helps finance direct
marketing in the community, to increase local awareness of the
Pick.Click.Give program and the recipients in Seward who benefit
from it, and in the second year of the Pick.Click.Give program
the Seward Senior Center received $1,100, again coming from
friends of the center. However, she stated that in 2011, the
center's budget climbed above the $250,000 mark that requires
the audit, which is a financial burden on the Seward Senior
Center. She said the Pick.Click.Give program created a valuable
avenue for the center to increase its unrestricted funds without
creating a burden on the center's funds or operating staff. She
encouraged the committee to support HB 75 and to help Alaska's
nonprofit organizations.
8:43:23 AM
CHAIR LYNN, after ascertaining that there was no one else who
wished to testify, closed public testimony.
8:43:33 AM
REPRESENTATIVE KELLER said he thinks HB 75 is a good bill, and
he expressed his hope that the testimony that had been heard
would be helpful in continued process of hearing the bill.
8:43:54 AM
REPRESENTATIVE GATTIS commented that the proposed legislation
would provide generous Alaskans the opportunity to give where
they choose, and she said she cannot find a problem with [the
proposed legislation].
8:44:15 AM
REPRESENTATIVE GATTIS moved to report HB 75 out of committee
[with individual recommendations] and the accompanying zero
fiscal notes. There being no objection, HB 75 was reported out
of the House State Affairs Standing Committee.
8:45:47 AM
The committee took an at-ease from 8:46 a.m. to 8:47 a.m.
HB 10-EXEC ETHICS: LEGAL FEES/FAMILY TRAVEL
8:47:46 AM
CHAIR LYNN announced that the final order of business was HOUSE
BILL NO. 10, "An Act authorizing state agencies to pay private
legal fees and costs incurred by persons exonerated of alleged
violations of the Alaska Executive Branch Ethics Act; allowing
certain public officers and former public officers to accept
state payments to offset private legal fees and costs related to
defending against complaints under the Alaska Executive Branch
Ethics Act; and creating certain exceptions to limitations under
the Alaska Executive Branch Ethics Act on the use of state
resources to provide or pay for transportation of spouses and
children of the governor and the lieutenant governor."
8:48:08 AM
TED MADSEN, Staff, Representative Max Gruenberg, Alaska State
Legislature, presented HB 10 on behalf of Representative
Gruenberg, sponsor. He said HB 10 would set into statute "much
of the substance of some attorney general regulations regarding
the [Alaska] Executive Branch Ethics Act that were promulgated
... back in December of 2009." He explained that Representative
Gruenberg disagreed with the procedures within two regulations.
The first issue had to do with 9AAC 52.045, which addresses
transportation expenses of family members of the governor and
lieutenant governor. Mr. Madsen explained that currently minor
children are the only ones whose travel costs can be reimbursed,
but the sponsor thinks it is appropriate to include any child of
the governor or lieutenant governor who is dependent upon the
care of his/her parents because of, for example, a physical,
mental, or developmental disability - even if the child is over
the age of 19.
CHAIR LYNN said theoretically that could include a child of the
governor or lieutenant governor who is 35 years of age.
MR. MADSEN answered that is correct.
8:50:51 AM
REPRESENTATIVE KELLER asked if current regulation prohibits
coverage of travel costs for "a minor child who is dependent and
becomes an adult."
MR. MADSEN cited 9 AAC 52.045 (d)(2), which defines family
member as "a spouse or minor child of the governor or lieutenant
governor".
CHAIR LYNN offered his understanding that HB 10 would increase
coverage from a minor child to a mentally or physically disabled
adult child of the governor or lieutenant governor.
MR. MADSEN confirmed that is correct.
REPRESENTATIVE KELLER ventured that just because it is not
covered under regulation does not mean coverage of the travel
cost of a dependent adult child of the governor or lieutenant
governor would be prohibited. He described a scenario in which
a former governor of the state becomes dependent on his children
for care, and under HB 10 "a senior citizen would still not
qualify." He questioned how big the value of HB 10 would be.
8:53:02 AM
MR. MADSEN relayed that the sponsor believes it would be unfair
to unnecessarily keep the governor's or lieutenant governor's
family from [traveling together] when there is a child in the
family who is dependent upon his/her mother or father for care.
He directed attention to the stipulations related to travel cost
reimbursement in Section 3, page 3, lines 19-31. For example,
[as shown on lines 28-29] he stated that the event must be "a
family-oriented or youth-oriented event at which the person's
attendance is particularly appropriate".
CHAIR LYNN suggested one example might be participation in the
Special Olympics.
MR. MADSEN concurred.
REPRESENTATIVE KELLER said he realizes that. He stated his
belief that because there is no prohibition, the executive
branch could pay for travel as it sees fit; therefore, he
questioned the necessity of the proposed legislation.
8:55:46 AM
REPRESENTATIVE MAX GRUENBERG, Alaska State Legislature, as
sponsor of HB 10, told Representative Keller that he is correct
that currently there is nothing that prevents the executive
branch from "doing what they're doing." However, he said he
thinks it is better policy to give the oversight to the
legislature, which appropriates the money and is a different
branch of government.
8:57:22 AM
REPRESENTATIVE KELLER opined that the spirit of the current
regulation is meant to be "a little general."
8:57:47 AM
REPRESENTATIVE GRUENBERG clarified his intent was to follow the
same parameters as the regulation. He reiterated that the
question is: Who decides? He said he thinks it is appropriate
for the executive branch not to make policy regarding its own
travel arrangements.
8:58:34 AM
REPRESENTATIVE GATTIS stated that if she was the governor, she
would want to know what the rules are before making travel
arrangements. She said she thinks she can see both sides, but
wants to know if currently there are rules to guide a governor
who may want to travel with a child.
REPRESENTATIVE GRUENBERG clarified that there are rules in
regulation currently; the only difference is that under HB 10,
adult disabled children would be included.
9:00:15 AM
REPRESENTATIVE ISAACSON posited that HB 10 would help to rectify
an issue that needs to be clarified. He said it is not good
policy for the executive branch to ignore the legislature's
statutory authority. He said he likes what the proposed
legislation would do to clarify this issue, especially in terms
of when a child's care is customary and needed, so that the
child is not split apart from the family when the family is
trying to follow the letter of the law.
9:02:16 AM
REPRESENTATIVE KELLER clarified that he never meant to suggest
that statute could be ignored by the executive branch. He
stated, "The line between what's statute and what's law is a
difficult one and a subjective one to draw." He said the
question is how far [the legislature] can go in specifying
policy in statute.
CHAIR LYNN pointed out that the question is not regarding whom
the governor can bring along when traveling, but who pays for
those people.
9:03:57 AM
MR. MADSEN, in response to comments made by Representative
Hughes and the sponsor, offered clarification by citing the
language in AAC 52.045(c), which read as follows:
(c) For purposes of AS 39.52.120(a) and (b)(3), the
use or authorization of use of state money or other
state resources for transportation of a family member
that does not benefit the state is presumed
insignificant if the governor or lieutenant governor
pays the state the cost of the family member's
transportation. Except for transportation by state
aircraft for partisan political purposes under AS
39.52.120(f), the agency that authorized or paid for
the travel shall determine the cost of the
transportation based on either
(1) the actual fare paid; or
(2) the fare for equivalent commercial
transportation, if the travel was by state aircraft,
vessel, or vehicle.
9:07:35 AM
JUDY BOCKMON, Assistant Attorney General; State Ethics Attorney,
Opinions, Appeals, & Ethics Section, Civil Division (Anchorage),
Department of Law (DOL), in response to Representative Keller,
offered a brief overview of the code of conduct set up through
the Alaska Executive Branch Ethics Act. She said regulations
have been adopted over time to provide additional parameters
with respect to certain portions of the statute. In response to
the chair, she said the Alaska Executive Branch Ethics Act
applies primarily to someone in the executive branch of
government while he/she is actively in service
9:10:59 AM
CHAIR LYNN directed attention to the following language in the
bill title, on line 3: "allowing certain public officers and
former public officers".
MS. BOCKMON responded that both the regulations and the proposed
legislation recognize the possibility that a former state
officer could be the subject of an ethics complaint for conduct
while in office, and the attorneys' fee provision covers that
individual. She said the regulation and the proposed statute do
not cover a former employee's violation of one of those
provisions that apply after he/she leaves state service.
9:12:09 AM
REPRESENTATIVE GRUENBERG directed attention to language in
Section 5, on page 5, lines 5-9, which read:
*Sec. 5. The uncodified law of the State of
Alaska is amended by adding a new section to read:
APPLICABILITY. AS 39.52.470, enacted by
sec.4 of this Act, applies only to complaints under AS
39.52l.310 - 39.52.390 that are initiated or filed on
or after the effective date of this Act.
REPRESENTATIVE GRUENBERG stated, "That's talking about the
attorneys' fees. The transportation would apply to applications
that are made after the effective date; there's no retroactivity
clause."
9:12:53 AM
REPRESENTATIVE KELLER offered his understanding that HB 10 is
looking at policy decisions regarding regulation that is already
in place. He suggested that the committee needs to hear the
rest of the presentation.
9:13:45 AM
REPRESENTATIVE GRUENBERG clarified that the first part of the
proposed legislation would adopt the regulations in statute,
"except for the developmentally disabled kid." He offered his
understanding that Representative Millett would be offering an
amendment. He said she has sponsored legislation, which he has
cosponsored, in support of the developmentally disabled
community, and he indicated a change in phrase is needed from
"mental disability" to "intellectual" or "developmental
disability".
9:15:07 AM
REPRESENTATIVE ISAACSON moved to adopt Amendment 1, labeled 28-
LS0040\A.2, Wayne, 1/30/13, which read as follows:
Page 3, line 12:
Delete "or mental"
Insert ", intellectual, or developmental"
There being no objection, Amendment 1 was adopted.
9:15:47 AM
REPRESENTATIVE GRUENBERG directed attention to Section 4 of HB
10, on page 4, line 7, through page 5, line 4, which addresses
the ability for any person in the executive branch who is
exonerated to recoup his/her cost in attorneys' fees in
defending against an ethics complaint. He stated that under
current regulation, the person can apply and receive payments
before they are exonerated; under HB 10, the person would have
to wait until he/she is exonerated. He said that is the normal
practice in the state. He opined that if money is awarded in
advance, the person may not prevail, and then he/she has to be
chased down to get the money back, which is "unseemly" and "a
waste of time."
9:18:51 AM
REPRESENTATIVE KELLER asked at what point a person could begin
to accumulate a legal debt because of a complaint.
9:19:39 AM
MS. BOCKMON answered that when a complaint is first received,
the department does a preliminary review and analysis to
determine whether it states appropriate Ethics Act claims and
warrants investigation. If the department decides to formally
accept the complaint, then statute requires that the subject of
the complaint is notified, and the investigation would proceed.
She said most investigations are resolved at some level of the
investigatory phase; however, statute provides for more formal
accusation that might lead to a hearing. She shared that her
experience has shown that most subjects do not immediately hire
an attorney when they are served with a complaint, unless the
circumstances are serious. She said, "If it got to the public
accusation phase without otherwise resolving, I would expect
most folks would hire an attorney - but maybe not."
9:21:40 AM
MS. BOCKMON, in response to a question from Representative
Hughes regarding possible costs to the state, explained that the
fiscal note is zero, because under [HB 10], neither the
transportation costs nor the attorneys' fees would impact the
Department of Law. She said the Office of the Governor has an
administrative account that is addressed in the budget and
appropriations process every year, and the transportation costs
are covered within that funding. She offered her understanding
that the attorneys' fees are covered through the Division of
Risk Management, in the Department of Administration (DOA), and
the DOA provides the fee payments through interagency
assessment; therefore, if there was a particular person subject
to an ethics complaint who chose to avail him/herself of the
attorneys' fees benefit, that would be addressed through the
Division of Risk Management and that particular person's agency.
MS. BOCKMON, in response to a request from Representative Hughes
regarding historical information, said there are instances where
state employees are the subject of various complaints - not just
ethics complaints. She said she is not fully educated on all
the parameters in which a defense might be provide in whatever
the law suit is. In addition to Ethics Act proceedings, she
said, there are also other proceedings, which can make a
conflict challenge or bring a complaint under the hearing
officers' procedures, for example. The regulations for the
Ethics Act have been in place only since December 2010. She
offered her understanding that to date there has been no one
seeking reimbursement of attorneys' fees costs. She recollected
two significant matters involving attorneys, and in both
instances the individual was not exonerated. She said there may
have been one smaller complaint that was dismissed where an
attorney was involved; however, she said she is not aware that
there have been any requests for reimbursement of attorneys'
fees since the regulation went in to effect.
9:26:02 AM
REPRESENTATIVE HUGHES asked if there is any statutory limit in
what would be paid to attorneys' fees.
MS. BOCKMON replied that in August 2009, the Division of Risk
Management set a cap of $25,000 per proceeding, regardless of
the number of claims made. She offered her understanding that
the division set that as policy, and said, "I don't see a
citation to ... another authority."
9:27:39 AM
REPRESENTATIVE KREISS-TOMKINS offered his understanding that HB
10 would change when attorneys' fees are paid out, not how; a
person would be paid back his/her attorneys' fee costs only
after being exonerated.
9:28:14 AM
CHAIR LYNN offered his understanding that under HB 10, the
person who had been exonerated or the Division of Risk
Management would be reimbursed.
9:28:34 AM
REPRESENTATIVE GRUENBERG answered that is correct. In response
to Representative Hughes' previous questions, he said the
general rule for fiscal notes is that they are viewed only in
terms of the effect of the bill. The only effect of HB 10, he
said, is "an unknown amount, which will ... potentially save the
state money," because it will protect against a circumstance
where a person is reimbursed for the attorneys' fees and
subsequently is not exonerated. He opined that a zero fiscal
note is very appropriate, because under HB 10, nothing would be
changed but to ensure that a person is not paid erroneously.
REPRESENTATIVE GRUENBERG directed attention to language
beginning on page 4, line 31, to page 5, line 4, which he said
does not set an amount for attorney's fees, but outlines that
those fees must be reasonable, related to the cost of legal
representation, and necessarily incurred.
CHAIR LYNN said "reasonable" is in the eyes of the judge.
REPRESENTATIVE GRUENBERG said that is correct. He said this
pertains to regulation 9 AAC 52.040(d)(2), which read:
(2) expenses are reasonable if, based on an evaluation
of the complexity of the alleged claim, the attorney's
fee or hourly rate, the hours expended, the
relationship between the amount of work performed and
the significance of the alleged claim, and other
relevant factors, the expenses were necessarily
incurred to defend against an allegation in a
complaint brought under AS 39.52.310 - 39.52.390;
those expenses may
(A) include attorney's fees, fees incurred for
professional legal services customarily performed by
an attorney but delegated to and performed by an
investigator, paralegal, or law clerk, and related
costs; and
(B) be apportioned by alleged violation if a complaint
alleges more than one violation, but only if the
public officer provides clear documentation that the
expenses paid were limited to the alleged violation
for which the public officer is exonerated; and
REPRESENTATIVE GRUENBERG stated, "We didn't go into that detail
in statute, because that's covered in the [regulations]."
9:33:00 AM
REPRESENTATIVE KELLER asked if it is the norm in other states to
have no money paid until after exoneration from an ethics
complaint. He posed the possibility that ethics complaints can
be used as a tool in the toolbox of various organizations. He
continued as follows:
For example, a political organization puts out the
word and says, "Okay, we've got to have lots of
complaints filed." That may or may not have an effect
on the AG, but we know that the ... media is involved
at a different level than what it normally is in the
courts, and this becomes a matter of public opinion,
you know, then that ... can affect the results of what
happens with the ... next ethics complaint.
REPRESENTATIVE KELLER expressed his concern that HB 10 can be
used as a political tool. Further, he questioned whether it is
appropriate to remove the option that the executive branch would
have of protecting an employee that may have become a political
target. He offered his understanding that the passage of HB 10
would "prevent that kind of coverage." He asked if the
executive branch would have the option of "putting the money out
there ... to help protect its employees" if the proposed
legislation does not pass.
9:36:12 AM
REPRESENTATIVE GRUENBERG responded that the practice before any
litigation came about was like that in criminal law where there
was no reimbursement for anything, but worse because there is no
public attorney appointed to represent the defendant in an
ethics case. He said neither the public defender nor the Office
of Public Advocacy have any statutory provision that allows them
to represent "these folks." He opined that when former Governor
Palin was hit with litigation, that brought people's attention
to "the fact that there should be some method of dealing with
this." He said the AG decided not to provide a public attorney
for the defendant, but to provide a method of reimbursing a
private attorney for the reasonable amount of the fee. Even
under the Alaska Legislative Branch Ethics Act, there would be
no one to defend legislators, he said, but "fortunately that
hasn't happened."
REPRESENTATIVE GRUENBERG, regarding the question about fairness,
said it is possible that the person upon whom the ethics
complaint was filed could incur considerable expense; however,
he said he thinks the chance of not being exonerated is much
greater. He echoed Ms. Bockmon's statement that most of the
cases are handled in house and do not require the attorneys'
fees. He said he thinks the issue of vexatious litigation goes
beyond the scope of HB 10.
9:42:45 AM
REPRESENTATIVE KELLER asked the bill sponsor if he thinks HB 10
would "expand the potency potential of vexatious complaint."
REPRESENTATIVE GRUENBERG responded that he does not think the
proposed legislation would have any effect on vexatious
litigation.
9:43:55 AM
CHAIR LYNN said it seems that there are two separate bills in HB
10. He reviewed that the first part of the proposed legislation
deals with the governor or lieutenant governor being able to do
what should be done for a disabled child of any age. He
questioned whether the two parts of the bill belong together.
9:44:29 AM
CHAIR LYNN, after ascertaining that there was no one else who
wished to testify, closed public testimony.
9:44:48 AM
CHAIR LYNN stated his support for the first part of HB 10, and
said the second part raises a lot of questions that merit more
discussion.
9:45:24 AM
REPRESENTATIVE GATTIS offered her understanding that testimony
has shown that frivolous ethics complaints are exposed, which
she said addresses her concern that a person would not have to
shell out the money to cover attorneys' fees for a frivolous
complaint and get reimbursed later. Regarding a nonfrivolous
ethics complaint, wherein the person has to hire his/her own
attorney, she stated, "Our constituents have to do the same
thing, and I think they're looking at us to have the same
rules."
9:46:43 AM
REPRESENTATIVE ISAACSON said the bill sponsor has pointed out
that the intent of HB 10 is not to address the issue of
vexatious litigation; however, he estimated that the bill would
notify the plaintiff that if he/she makes it through the
executive branch ethics process, he/she will not bleed the
governor's funds, because if the governor prevails, then the
governor will be reimbursed. He suggested perhaps the situation
with former Governor Palin was that people tried to "bleed her
dry." He stated, "That is not what we want our executives to
have to endure." He concurred with the chair that HB 10 may be
two bills in one, but stated his support of both aspects of the
proposed legislation, because it would provide "clear
instructions to all involved."
9:48:41 AM
REPRESENTATIVE KREISS-TOMKINS offered his understanding that
with vexatious complaints; it is the complainant that will "pay
through the nose" when his/her complaint is found to be
meritless. He added, "It's just a question of when." He opined
that the second part of HB 10 is logical and merely aligns "when
that money is paid out for executive branch people with members
of the general public."
9:49:40 AM
CHAIR LYNN reiterated his previous remarks about the complexity
of the second part of the proposed legislation.
CHAIR LYNN announced that HB 10 [as amended] was held over.
9:50:59 AM
ADJOURNMENT
There being no further business before the committee, the House
State Affairs Standing Committee meeting was adjourned at 9:51
a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 1 HB0075A.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 75 |
| 2 HB 75 sponsor statement.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 75 |
| 3 HB 75 About Pick.Click.Give.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 75 |
| 4 HB 75 Alaska Statute 43.23.062.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 75 |
| 5 HB 75 IRS Form 990 for tax-exempt organizations.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 75 |
| 6 HB 75 Letters of Support.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 75 |
| 7 HSTA Research HB 75 1-24-2013 13-157.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 75 |
| 8 HB075-DOR-PFD-01-30-13.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 75 |
| 1 HB 10 v. A.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 10 |
| 2 HB 10 Sponsor Statement for v. A.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 10 |
| 3 HB 10 Sectional Analysis for v. A.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 10 |
| 4 HB 10 Legal Opinion - Exec. Ethics.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 10 |
| 5 HB 10 Regulations 9 AAC 52-040.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 10 |
| 6 HB 10 Regulations 9 AAC 52-045.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 10 |
| 7 HB010-LAW-CIV-01-25-13.pdf |
HSTA 1/31/2013 8:00:00 AM |
HB 10 |