Legislature(2007 - 2008)SENATE FINANCE 532
02/07/2007 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB19 | |
| SB20 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 19 | TELECONFERENCED | |
| + | SB 20 | TELECONFERENCED | |
MINUTES
SENATE FINANCE COMMITTEE
February 7, 2007
9:00 a.m.
CALL TO ORDER
Co-Chair Bert Stedman convened the meeting at approximately.
PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Joe Thomas
Senator Fred Dyson
Senator Kim Elton
Also Attending: SENATOR HOLLIS FRENCH; DAVE JONES, Senior
Assistant Attorney General, Opinions, Appeals and Ethics
Section, Civil Division, Department of Law;
Attending via Teleconference: From an offnet location: DAN
WAYNE, Legal Counsel, Division of Legal and Research Services,
Legislative Affairs Agency.
SUMMARY INFORMATION
SB 19-EXEC. BRANCH ETHICS:INTERESTS & ACTIONS
The Committee heard from the sponsor, the Division of Legal and
Research Services and the Department of Law. The bill was held
in Committee.
SB 20-LEGISLATIVE DISCLOSURES
The Committee heard from the sponsor. The bill was held in
Committee.
9:01:32 AM
CS FOR SENATE BILL NO. 19(STA)
"An Act relating to a public officer's taking official
action regarding, or influencing, a matter in which the
public officer has a personal or financial interest;
prohibiting certain persons from engaging in activity as
lobbyists; and defining 'official action' under the Alaska
Executive Branch Ethics Act and related law."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Stedman indicated that a committee substitute would be
prepared on this legislation for consideration at a later
hearing.
9:02:17 AM
SENATOR HOLLIS FRENCH, Sponsor, testified that this legislation
pertains to ethics of the Executive Branch. The intent is to
provide perimeters for financial interests held by certain State
employees in which action by that employee could impact those
interests.
9:03:50 AM
Senator French outlined the bill, noting that the provisions of
Section 1 outline the actions of a public officer that would not
constitute a violation of public trust with regard to a personal
or financial interest in the matter in which the action was
taken. Section 1 would repeal and reenact AS 39.52.011(b).
9:04:56 AM
Senator French gave an example of a public officer who owns
stock in the IBM Corporation valued at $1 million. This officer
would be expected to recuse him or herself from making decisions
regarding the purchase of personal computers (PC) by the State.
Conversely, decisions on the purchase of Apple Macintosh (Mac)
computers would be permitted.
9:05:49 AM
Senator French spoke to the language of subparagraph (2) of AS
39.52.110(b), reading into the record the conditions in which a
personal or financial interest would not constitute a violation.
9:05:58 AM
Senator French pointed out that Alaska Permanent Fund public
officers are charged with making investment decisions intending
to increase the earnings of the Fund. These officers likely
receive dividends from the Fund and therefore benefit from
investment decisions, but because their investment decisions are
made for the "public good", their activities are permitted.
Senator French also exampled a public officer who also resides
in Delta Junction and is responsible for decisions regarding the
location of a pipeline. This officer would be allowed to
participate in consideration of Delta Junction as a location
because all residents of the community would benefit. However,
if the officer attempted to route the pipeline directly through
his property, such actions would be a violation.
9:07:18 AM
Senator French shared that the language of subparagraph (B) of
AS 39.52.110(b)(2), "personal interest is insignificant" would
remain unchanged from existing statute because the provision
could not easily be detailed.
9:07:53 AM
Senator French characterized the provisions of subparagraph (C)
as "the real meat of the" committee substitute. This language
listed the disqualifying business interests. These items were
"self explanatory."
9:09:04 AM
Senator French then spoke to the provisions of Section 2, which
pertained to the transfer from the public sector to the private
sector, specifically lobbying by former public officers. This
language would increase the State positions subject to the
restrictions. Current statute limited the activities of former
governors, lieutenant governors and "head of a principal
department in the executive branch." The proposed language would
extend the restrictions to apply to deputy commissioners,
division directors, employees of the Office of the Governor who
are in a decision making position and chairs of a State board or
commission that has authority to adopt regulations.
Senator French noted that those meeting this criterion would be
prohibited from engaging in activity as a lobbyist for period of
one year after leaving service in the qualifying position.
Senator French emphasized this ban would apply to all lobbying
activities, regardless of whether the topic coincided with
matters the former public officer engaged in while in State
service. Another provision would prohibit lobbying for a period
of two years on matters in which a former public officer was
involved.
9:10:52 AM
Senator French stated that the Section 3 would insert language
to AS 39.52.960(14) to broaden the definition of "official
action" to include "performance of any duties in the course and
scope of a public official's employment, including review,
advice, participation, assistance, or another kind of
involvement regarding a matter". The situation involving former
attorney general Greg Renkes, brought attention to the
difficulty in determining official action under existing
statute.
9:11:33 AM
Co-Chair Stedman noted the use of "public officers" and "public
officials" in the language of the bill. He asked the difference
between the two and whether the use of both was inconsistent.
9:12:40 AM
Senator French deferred to the Department of Law. He surmised
the two terms were synonymous but was unsure.
9:13:25 AM
DAN WAYNE, Legislative Legal Counsel, Division of Legal and
Research Services, Legislative Affairs Agency, testified via
teleconference from an offnet location in Juneau that the term
"public officer" is defined in AS 39.52.200 of the Executive
Branch Ethics Act as "public employee, member of a board or
commission and a State officer designated by the governor to act
as trustee." "Public employee" is also defined as "permanent,
probationary, seasonal, temporary, provisional or nonpermanent
employees of an agency in the classified, partially exempt, or
exempt service." This does not include governor, lieutenant
governor and some other positions. Conversely, "public officers"
are comprehensively listed in AS 39.50.200 as high ranking
elected or appointed officials and includes, judicial officers,
appointed or elected municipal officers, governor, lieutenant
governor, department heads, members of the board of trustees and
the executive director of the Alaska Permanent Fund Corporation,
and chairs and members of a State commissioned board. Further
listing of 58 State commissioned boards is provided and
generally relates to those boards and commissions that have
authority to adopt regulations. The Alaska State Council on the
Arts, the Board of Parole, the Board of Fisheries, the Board of
Game and the Commission on Postsecondary Education are some
examples.
9:17:43 AM
Co-Chair Stedman asked if this legislation was consistent in its
use of the term "public officer".
9:17:45 AM
Mr. Wayne responded that efforts are made for consistency within
a bill, but that language of a bill may not necessarily be
consistent with the chapter in which it affects. The use of the
two terms would be a "policy call" of the Legislature, as the
meanings differ from each other.
9:18:40 AM
Co-Chair Stedman cited subsections (a) and (d) of Sec.
39.52.180. Restrictions on employment after leaving state
service., which reads as follows.
(a) A public officer who leaves state service may not,
for two years after leaving state service, represent,
advise, or assist a person for compensation regarding a
matter that was under consideration by the administrative
unit served by that public officer, and in which the
officer participated personally and substantially through
the exercise of official action. For the purposes of this
subsection, "matter" includes a case, proceeding,
application, contract, or determination, but does not
include the proposal or consideration of legislative bills,
resolutions and constitutional amendments, or other
legislative measures; or the proposal, consideration, or
adoption of administrative regulations.
…
(d) A former governor, lieutenant governor, or head of
a principal department in the executive branch may not
engage in activity as a lobbyist under AS 24.45 for a
period of one year after leaving service as the governor,
lieutenant governor, or department head, as appropriate.
This subsection does not prohibit service as a volunteer
lobbyist described in AS 24.45.161(a)(1) or a
representational lobbyist as defined under regulations of
the Alaska Public Offices Commission.
Co-Chair Stedman was unsure that the provision of subsection (d)
would not "trump" the provision of (a) thereby allowing former
public officers to "get around" the restrictions imposed by the
first subsection.
9:19:35 AM
Senator French agreed to this assumption. The provision of
subsection (d) was a "more powerful … blanket prohibition" than
that of subsection (a). Subsection (a) applied to broader
activities than just lobbying, as it would prohibit former
public officers from capitalizing on decisions or actions made
while in State service. For example, a former public official
who, in that capacity, made a decision in awarding a contract to
one company over another should not be allowed to accept
employment from the successful company. Such occurrence could
give the appearance of a "payback".
9:22:02 AM
Co-Chair Stedman indicated he would further review the matter,
as he was unsure "that this isn't one of those issues where
there's some maneuverability."
9:22:15 AM
Co-Chair Stedman next inquired about limitations on lobbying
activities by former legislative staff.
9:22:28 AM
Senator French noted the legislation before the Committee
pertained to the Executive Branch and suggested for clarity sake
that the discussion be limited to Executive Branch officials at
this time.
9:23:05 AM
Co-Chair Stedman acquiesced, emphasizing that the matter of
legislative employees must be addressed.
9:23:17 AM
Senator Dyson asked if consideration was given to situations in
which holdings of a public officer were assigned to a "blind
trust" for the period of time that the officer was in public
service. He wanted to know if influence over the previously
acquired "wealth and position" of a public official could be
removed to allow that official to undertake public service "with
integrity."
9:24:21 AM
Senator French responded that permitting such activities would
be a "pure policy call" that he would "leave to the wisdom of
the Committee". He advised against allowing for blind trusts in
these situations. Blind trusts transfer administration and
management of assets to an entity other than the holder of those
assets to prevent the holder from making policy decisions that
could affect the valuation of the assets. Continuing with the
earlier mentioned example of a public official who holds IBM
stocks worth $1 million, he stated that control over management
of those stocks could be relinquished, but the official would
still reasonably assume that a competent stock broker would not
trade away those stocks. Therefore, the official would maintain
an allegiance to IBM. The official must decide whether to be an
IBM stockholder or take official action on matters pertaining to
computer companies.
Senator Dyson posed a scenario of a public official considering
oil recovery actions, a technician suggesting a pulp extraction
method patented by a certain company, and the official realizing
he or she owns stock in that company.
9:26:33 AM
Senator French stressed that the public official must avoid
taking official action with respect to the company. The State
employs thousands of people and at least one of those people
would be capable of making a decision on the oil recovery issue.
9:27:35 AM
Senator Elton asked about the use of the term "principal
department" in Section 2.
9:28:02 AM
Senator French deferred to the Division of Legal and Research
Services.
9:28:26 AM
Mr. Wayne was unsure if the term was defined in statute.
9:29:05 AM
Senator Elton, using himself as an example, shared that he
participates in the State's Supplement Benefits System (SBS) and
also owns mutual funds. He asked that if he were a public
officer whether he would be required to total his holdings in a
company from both accounts and recuse himself from actions
pertaining to that company if the assets exceeded $1,000.
9:29:55 AM
Senator French answered that he would. However, mutual fund
assets are typically commingled and a "positive charge" of
impropriety would be difficult to levy.
9:30:43 AM
Senator Dyson divulged that he has specifically instructed his
stockbroker to not apprise him of the identity of his assets to
avoid being influenced by these holdings.
9:31:19 AM
Senator French advised that a determination of a violation would
be based on "strict liability" with no "knowledge element"
considered. A public officer either owns or does not own a
financial interest. This legislation is not directed to "state
of mind."
9:31:50 AM
Mr. Wayne agreed.
9:32:17 AM
Mr. Wayne returned to Senator Elton's inquiry regarding
"principal department". The term is contained in Article 3 of
the Alaska Constitution.
9:33:15 AM
Senator Dyson understood the implication would be that the
manager of his investment accounts would be required to notify
him "instantly" to inform him of any changes of stock ownership.
9:33:45 AM
Senator French affirmed. He qualified that the Office of the
Governor could be asked the number of employees who would make
decisions on a daily basis affecting stocks.
9:34:14 AM
Senator Dyson noted a violation of public trust would not occur
unless the provisions of subparagraph (1) and all of the
provisions of subparagraph (2) of AS 39.52.110(b) apply. He
questioned the possibility that a public officer could fail to
comply with any number of the conditions but if as few as one
condition was met, that officer would be considered "innocent".
Instead the two provisions should be cumulative.
9:34:53 AM
Senator French admitted this issue had been discussed
extensively and that the language of Section 1 was deemed
appropriate. A decision made by a public official holding a
significant stock investment in a company would not violate
public trust if that action did not affect the stock price.
9:36:01 AM
Senator Dyson told of a report issued by the Better Government
Association, which ranks state's performance relating to
integrity and corruption [copy not provided]. The State of
Alaska is ranked 23rd of the 50 states. Specifically compliance
with the federal Freedom of Information Act was judged to be
poor. Additionally, the US Department of Justice ranked Alaska
sixth in terms of corruption.
Senator Dyson suggested that the efforts to improve ethics
legislation might not be "attacking the real heart of issues" or
that more should be considered.
9:37:51 AM
DAVE JONES, Senior Assistant Attorney General, Opinions, Appeals
and Ethics Section, Civil Division, Department of Law, testified
that Governor Palin had introduced legislation to also address
ethics. Some of the issues included in her bill were also
included in SB 19.
Mr. Jones outlined the provisions of SB 19, as previously done
by Senator French.
Mr. Jones stated that the language of AS 39.52.110(b)(2)(C)(i),
amended in Section 1, would disqualify a member of the Executive
Branch from actions relating to a business if that member held a
controlling interest in the business valued at over $5,000.
Subparagraph (iii) provided that stock options valued over
$5,000 or equal to one percent or more of the total value of the
business would also be a disqualifier.
Mr. Jones commented that the provisions of Section 1 would
address issues pertaining to business interests. The legislation
proposed by the Governor, SB 64, contains different language but
is intended to achieve the same result.
9:40:19 AM
Mr. Jones continued that Section 2 relates to restrictions on
lobbying activities. Current statute applied to the positions of
governor, lieutenant governor and heads of departments. Governor
Palin, in the legislation she had offered, proposed to extend
the restrictions to apply to deputy commissioner positions and
other policy-making positions.
9:40:59 AM
Mr. Jones remarked that he was in agreement with Mr. Wayne
regarding the difference between public officials and public
officers. The Department of Law had been consistent in the use
of the two terms, which do not have the same meaning.
9:42:07 AM
Mr. Jones addressed the question regarding the difference
between the restrictions provided for in Sec. 24.45.121(a) and
(d). The provision of subsection (a) was a "general restriction"
that would apply to all public employees and would prohibit
former employees for lobbying activities pertaining to matters
in which employees participated in for two years after leaving
public service. The provision of subsection (d) would prohibit
all lobbying activities for a period of one year, but currently
only applied to former governors, lieutenant governors and
commissioners.
9:43:32 AM
Mr. Jones shared that he had participated in similar discussions
as Senator French indicated regarding the use of "or" rather
than "and" in the list of restrictions imposed in Sec. 39.52.110
(b). Mr. Jones reached the same conclusion that the language is
appropriate.
9:43:50 AM
Senator Elton asked if under the Governor's proposal whether the
executive director of the Alaska Housing Finance Corporation
(AHFC) making multi-million dollar financial decisions on behalf
of the corporation would be prohibited from lobbying for a
financial management company if that company was involved in the
aforementioned decisions.
9:44:30 AM
Mr. Jones answered that the lobbying restrictions would not
apply to the former director of the AHFC unless the lobbying was
for matters in which the former officer was "personally and
substantially involved" during tenure at the AHFC.
9:44:56 AM
Senator Elton surmised therefore that lobbying restrictions
would only apply to financial transactions that may have already
occurred. Potential future transactions would not be subject to
the prohibition.
9:45:17 AM
Mr. Jones replied, "I don't think that would be the only
situation. It would have to be a matter with which they dealt
during their State services personally and substantially." He
pointed out, "That may only well occur only when the
transaction's already completed; but I suspect there may be
situations in which the transaction is ongoing when the State
service ends."
9:45:47 AM
Senator Elton stated that this issue should be addressed.
9:45:56 AM
Co-Chair Hoffman noted the witness pointed out the increase in
the number of positions in which the restrictions would apply.
Co-Chair Hoffman asked if Governor Palin supported or opposed
this expansion.
9:46:23 AM
Mr. Jones could not speak to the Office of the Governor position
on the matter.
9:46:36 AM
Co-Chair Hoffman requested an answer to his question before the
Committee took action on the bill.
9:46:45 AM
Mr. Jones assured he would see to it.
9:47:18 AM
Co-Chair Stedman ordered the bill HELD in Committee.
9:47:24 AM
CS FOR SENATE BILL NO. 20(STA)
"An Act relating to disclosures by legislators, legislative
employees, public members of the Select Committee on
Legislative Ethics, and legislative directors subject to
the Legislative Ethics Act; relating to the applicability
of the Legislative Ethics Act; and providing for an
effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
9:47:51 AM
Senator French, sponsor of the bill, testified that it relates
to disclosure that legislators and legislative employees provide
to the public of "what we're doing to earn a living outside the
capitol, who we're working for, how much they're paying us and
what amounts of effort we're having to put out to gain that
employment."
9:48:38 AM
Senator French characterized the inserted language "of this
chapter" to AS 24.60.020(a), in Section 1 as "clean up"
suggested by the Department of Law.
9:48:48 AM
Senator French stated that Section 2 proposes a new statute
section to Article 2: AS 24.60.115. Disclosure required of a
legislator, legislative employee or public member of the
committee after the final day of service. This provision was
intended to address past confusion of when a departed legislator
must file the final disclosure. Currently, a question existed as
to whether a final report must be filed after a legislator left
service.
9:50:26 AM
Senator French informed that Section 3 would amend AS 24.60.200.
Financial disclosure by legislators, public members of the
committee, and legislative directors., in part to extend the
reportable income to include dividend income in excess of $1,000
received from a limited liability company as compensation for
personal services. Additionally disclosure must include the
nature of services performed "with sufficient description to
make clear to a person of ordinary understanding the specific
services performed"; "the approximate total number of hours that
have been spent or will be spent performing the services" and
"the amount of income received from the source."
9:51:32 AM
Senator French explained that this would provide information
about the "amount of effort" the legislator or legislative
employee invested to earn the contract. A contract in the amount
of $20,000 in which only ten hours were worked would "raise
questions"; however, 40 hour weeks at a compensation rate
consistent with the profession of the service provided in the
contract would be "understandable."
9:52:31 AM
Senator French continued that this section would provide for the
amount of income permitted from one source. Previous rules
pertaining to income from sources "known to have legislative
business" would be "put by the wayside". A legislator or
legislative employee would not be required to report whether the
person or company which gave them money was a lobbyist or had
business before the legislature. Instead, the amount of money
received would be reported.
9:53:11 AM
Senator French concluded with Section 4, which defines to whom
this legislation would apply. The provisions of Section 2 would
apply to a person serving as a legislator who left service on or
after the effective date of the act and to a person who served
as a legislator between April 2006 and the effective date of the
act.
9:53:51 AM
Co-Chair Stedman directed attention to the reporting requirement
by a legislator who had dividend income in excess of $1,000 from
a limited liability corporation. He remarked that the public
should be aware of any "wealth creation" in excess of $1,000,
whether from a dividend, or stock options, deferred compensation
or other "mechanism that they may imbed in that limited
liability company".
9:54:59 AM
Senator French agreed that the intent was disclosure so long as
Alaska has a "citizen legislature". He deferred to Co-Chair
Stedman's greater financial experience to specify the methods of
achieving the wealth. This legislation was intended to address
matters that had occurred in the past.
9:55:52 AM
Co-Chair Stedman would review the matter to avoid providing an
"opportunity" for financial gain without disclosure.
9:56:22 AM
Senator Elton understood that most businesses operating in
Alaska are limited liabilities. He asked if other types of
business formations exist in the state.
9:56:56 AM
Senator French deferred to legal experts. He defined income in
excess of $1,000 to include "almost everything". However, it was
learned that income from a limited liability company was not
specified.
9:57:32 AM
Senator Huggins recalled that the original version of this bill
included a provision addressing professional licenses.
9:57:51 AM
Senator French affirmed, noting that the exemption provision was
removed in the Senate Judiciary Committee substitute.
9:58:02 AM
Senator Huggins supported the deletion. He predicted however,
that the deletion could be onerous.
9:58:15 AM
Senator French stated that the issue could be "delicate" with
respect to some professions. The amended language would require
legislators to "expose" all of their clients, including those
legislators who earn income as a doctor, a lawyer or an
investment advisor. Concern had been expressed about whether an
attorney, for example, should be exposing some clients and the
amount of money received from each client. Some clients seek
professional services that they may not want known publicly.
Senator French had decided that if a person chose to become a
legislator, that person may be restricted in the types of cases
or clients accepted. He shared that he would likely not
undertake extensive patent cases, as the client and amount of
money collected would be made public.
Senator French qualified that an exemption could be considered
for physicians under the provisions of Hippocratic Oath
statutes.
10:00:58 AM
Senator Huggins reiterated that he supported the removal of the
professional license exemption. Licenses are issued for 38
professions, one of which relates to "performing arts" and
"promoters of events". Holders of such licenses should not
assume that income garnered from that profession should be
exempt from disclosure.
10:01:41 AM
Senator Dyson asked if consideration had been given to expanding
the list of service providers for which confidentiality of
client information would be allowed.
Senator French requested an example of a type of service.
10:02:09 AM
Senator Dyson shared that his wife was a mental health counselor
who refused to divulge information about her clients. Also a
previous legislator was an insurance provider who chose to stop
issuing large policies to avoid disclosure requirements.
10:03:00 AM
Senator French stressed that physicians are governed by
"explicit protections" in federal law regarding disclosure of
clients and client information. Information about a lawyer's
clients is made public in the form of court filings. He
understood that some seeking legal consultation could want that
to remain private. A legislator practicing law could inform
potential clients of the disclosure requirements, and could
subsequently "loose some business". However, more disclosure is
better.
10:04:36 AM
Senator Dyson posed a scenario of a legislator involved in a
mountain guiding business with his son. He asked if disclosure
would be required if the business were paid $1,000 by a client.
Senator French answered in the affirmative.
Senator Dyson then asked if the business guided clients into the
Chugiak State Park and if an issue relating to the park were
before the legislature whether the legislator would be required
to declare an interest in the matter.
10:05:39 AM
Senator French responded that such requirement is provided for
in existing law.
10:06:15 AM
Senator French stressed the importance that legislators disclose
their income sources. He informed that he owns rental property
and would be required to disclose all tenants, the rental income
received from each tenant and the amount of time spent in
administering and maintaining each unit.
10:07:05 AM
Co-Chair Stedman ordered the bill HELD in Committee.
AT EASE 10:07:38 AM
ADJOURNMENT
Co-Chair Bert Stedman adjourned the meeting at 10:09:41 AM
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