CS FOR SENATE JOINT RESOLUTION NO. 34(FIN) Proposing an amendment to the Constitution of the State of Alaska relating to public corporations. Co-Chair Therriault noted that the proposed resolution was the companion piece to HJR 52, which the Committee previously took action on. There was additonal language in Secton 1, which allowed the Legislature to exclude corporations. That language was not necessary and is not included in the Senate version. Discussion followed among Committee members regarding the legislation proposed by Representative James. SENATOR RICK HALFORD stated that the Alaska Constitution provides for legislative confirmation of any board or commission at the head of a principal department or regulatory or quasi-judicial agency. That would include the Board of Education, the Board of Game and all the professional and regulatory boards, such as the Board of Dispensing Opticians. Senator Halford noted that in sharp contrast, public corporations which manage much money in State assets, are not subject to the provision. The corporations including the Permanent Fund Corporation, Alaska Railroad and Alaska Housing Finance Corporation, have a tremendous impact on all Alaskans and our State's economy. Members are appointed at the Governor's pleasure and removed in the same manner, without legislative oversight. Senator Halford stated that the amendment proposed in SJR 34 is a necessary addition to Alaska's Constitution. It would ensure that the people who control Alaska's largest assets are subject to a formal appointment, confirmation and removal process, and not the whim of a newly elected Governor. He stated that the framers of the Constitution would have passed this legislation if they had had the above named entitities before them. The size and scope of these corporations has gone far beyond the imagination anyone 20- 30 years ago could have envisioned. He believed that the legislation would establish a better working relationship between the Executive and Legislative Branches of government. Representative J. Davies disagreed that the founding fathers would have written the Constitution differently. He stated that the entities included, the Alaska Railroad and the Alaska Permanent Fund, were set up to be private corporations. The purpose in establishing them was not to make them departments in the State of Alaska. One of the rationales for setting them up the way in which they were, was to have them separate from the government process so that they could operate more like a business. Representative J. Davies stressed that there was a reason for making the separation, in that they are meant to be an executive function. They are meant to execute the operations of a business of the State. Otherwise, they would have been set up as a department. Senator Halford commented that when the constitutional fathers did look at "high breds", they wanted them to have some independence. They worked hard on the University of Alaska while continuing to provide for confirmations. Representative J. Davies argued that creating an educational enterprise is different than creating a business enterprise. Senator Halford replied that to protect the Railroad from internal conflict, that protection was necessary. He argued that how the Railroad deals with the Legislative branch is currently a problem. He did not agree that government can operate effectively and function in the way that private business does. Senator Halford claimed that the Judiciary review process belongs to the people. Representative J. Davies inquired why not run them as a department of the State. Senator Halford replied that in the case of the Alaska Railroad, the State was attempting to get involved into all the arguments. He believed that would be determinental to the operation of the Railroad. Representative J. Davies stated that making these boards responsive to legislative confirmation would put politics back into the corporate business structure. Senator Halford noted that of the major appointments, only 2% have been turned down. Most legislators generally agree to give the Governor his choice. Representative J. Davies disagreed with that statement, given votes the last six years. He pointed out that on all the significant issues, there had been controversy. Representative J. Davies voiced concern that the State would get into situations in which there would be discussions regarding each of those appointments. He agreed that a staggered appointment system would work, however, the cure being proposed could be worse than the problem fixed. (TAPE CHANGE, HFC 00 - 126, Side 2). Representative J. Davies reiterated that the political process functions well. Representative Grussendorf asked what the resolution would correct. Senator Halford stated that the ability to support staggered terms to maintain an on going policy. He noted that the last two governors had replaced the entire Permanent Fund Board. He stated that was a mistake as continuity is important and added that protection is tenuous and noted that the Railroad is difficult to deal with through the legislative branch only. Senator Halford spoke to the confirmation process and the possibility of creating a better working relationship. Representative J. Davies agreed with the notion of staggering the terms. He asked if there had been consideration given how to accomplish the staggering of terms without legislative appointment. Senator Halford noted that a bill passed the legislature to do that and it was vetoed by Governor Knowles. The ability to control terms and placements is derived from the sharing of appointment which comes through confirmation. There are questions as to whether one can reach the enforceability in staggered terms. Representative J. Davies agreed that the law passed did not work. He reiterated his question if there was a constitutional method that would simply provide for staggered terms. Senator Halford did not know. JAMES BALDWIN, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, voiced caution regarding the legislation. He advised that there are technical problems with the resolution. Initially, there are questions whether corporations other than the Permanent Fund are separate corporations to insulate the State from liability. He agreed that the Permanent Fund should be included, however, Alaska Industrial Development and Export Authority (AIDEA), Alaska Housing Finance Corporation (AHFC) and the Alaska Railroad Corporation (ARRC) all have their own separate assets. The language of the resolution creates a "disconnect" between what the drafter intended and what the language reports to do. It does not reach the public corporation that manages their own assets. To bring language into the Constitution to manage State assets would be dangerous. Mr. Baldwin added that when interpreting the Constitution, the wording in Section 26, speaks to the governing entity of a public corporation. Elsewhere, in Article 9, it speaks about public corporation, debt exemption, in which you could issue debt through a public corporation enterprise; that language refers to a public corporation enterprise of a State. He did not know if any entity could be "managing" State assets and if the legislation would be applicable to those members. Representative J. Davies asked if there was concern with the phrase, "as defined by law". Mr. Baldwin responded that there would not be any uniformity in accomplishing that. Certain corporations would escape the provision for reasons that are not rationale and would not be included in the requirement that their board members be confirmed. Mr. Baldwin pointed out that there is not guidance as to what is "significant". That word does not appear much in the Constitution as it is a difficult word to define. Representative J. Davies asked if "as defined by law" was used to define the word "significant". Mr. Baldwin did not know and recommended that the language be tightened up to establish the intent. Vice Chair Bunde asked if the Permanent Fund Board would be covered by the proposed legislation. He believed that other entities were not as clear. Mr. Baldwin acknowledged that. He asked that his testimony not be misconstrued to look like this was a good idea. He added, it would become more of a problem when moving beyond the Permanent Fund. Representative Phillips inquired if the legislation would cover the Commercial Fishing and Agriculture Bank (CFAB). Mr. Baldwin stated that it was initially formed as a production credit association. Representative Phillips pointed out that they manage State assets. Mr. Baldwin did not know. Representative Phillips noted that could bring the Legislature into the banking business. Senator Halford stated that in reference to the things that Mr. Baldwin had pointed out, the drafters solution was for each of those questions to be decided by the Legislature. He reiterated that each case would be a negotiation between the Legislative and the Executive Branch. Representative J. Davies asked about concerns raised regarding AIDEA and AHFC and how their assets are not considered to be the State's but rather assets of the corporation. Senator Halford replied that would depend upon what State law defines. He stated that "as defined by law" could be read to apply to that. The Court would interpret in a constitutional amendment, the simplest version of what the words meant. Representative J. Davies advised that the concern is, if the State passes a law that would clarify that those assets were assets of the State, and hence, they would fall under this, would there then be a risk of not having those liability assets for liability protection purposes and separate from the State. Senator Halford explained that is the discussion that would occur at the time of the decision and added that the confirmation question would decide the assets of the State. Representative Grussendorf asked which public corporations would be included. Senator Halford responded that AIDEA, AHFC, Alaska Railroad Corporation and the Permanent Fund. He emphasized that all those boards deal with large amounts of State assets. Representative Grussendorf asked if there had been complaints about how these corporations had managed their portfolios. Senator Halford explained that from a business point of view, he had received complaints regarding the Alaska Railroad Corporation. Representative Williams MOVED to report CS SJR 34 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Grussendorf OBJECTED. A roll call vote was taken on the motion. IN FAVOR: Bunde, G. Davis, Phillips, Williams, Austerman OPPOSED: J. Davies, Grussendorf, Moses Representative Foster, Co-Chair Mulder and Co-Chair Therriault were not present for the vote. The MOTION FAILED (5-3). Representative Bunde noted that the Committee would need six votes for passage out of Committee. Representative Foster MOVED to RECONSIDER the passage of moving the bill out of Committee. There being NO OBJECTION, the bill was again before the Committee. Representative Foster MOVED to report CS SJR 34 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Grussendorf OBJECTED. A roll call vote was taken on the motion. IN FAVOR: G. Davis, Foster, Moses, Williams, Austerman, Bunde OPPOSED: Grussendorf, Moses Representative J. Davies, Co-Chair Therriault and Co-Chair Mulder were not present for the vote. The MOTION PASSED (6-2). CS SJR 34 (FIN) was reported out of Committee with a "no recommendation" and with a fiscal note by the Office of the Lt. Governor dated 2/23/00. HOUSE CS FOR CS FOR SENATE BILL NO. 34(L&C) An Act relating to tattooing, body piercing, and ear piercing; relating to other occupations regulated by the Board of Barbers and Hairdressers; relating to fees charged by the Board of Barbers and Hairdressers; and providing for an effective date. Representative Bunde pointed out that in previous testimony, concern had been voiced if ear piercing should remain a part of the legislation. DIANA RHOADES, STAFF, SENATOR JOHNNY ELLIS, noted that Senator Ellis was supportive of the draft committee substitute before Committee members. She added that there were two changes made in that draft which had been previously discussed. The first was to guarantee that the exam for sterilization and health and safety was written and the second was a technical change made in the definition of tattooing and permanent cosmetics. Representative Foster MOVED that work draft #1-LS0279\X, Lauterbach, 4/18/00, be the version of the legislation before the Committee. There being NO OBJECTION, it was adopted. Representative J. Davies asked if the draft had removed ear piercing. Ms. Rhoades noted that it had not been removed, but that there would be amendment offered. Representative Bunde advised that Co-Chair Therriault had voiced a concern regarding removal of that language. Discussion followed regarding removing ear piercing. Representative J. Davies voiced concern that the bill recognized that this would be a secondary level and that it did not require beaucratic effort. Vice Chair Bunde suggested that the problem would rest with the enforcement. Representative J. Davies replied that the language would add clarity regarding standards. Representative Phillips interjected that there should not be regulations which cover each jewelry store in the State. (TAPE CHANGE, HFC 00 - 126, Side 1). Representative Foster MOVED to report HCS CS SB 34 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. HCS CS SB 34 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by Department of Environmental Conservation dated 4/14/00 and Department of Community & Economic Development dated 4/14/00. RECESSED The Committee recessed at 4:20 p.m. RECONVENED The Committee reconvened at 6:15 p.m.