HHES - 03/16/95 HB 171 - COMMISSIONER OF EDUCATION SERVES AT BOARD'S PLEASURE Number 1580 TOM ANDERSON, Legislative Assistant for Representative Terry Martin, provided the sponsor statement for HB 171. He said Representative Martin was unable to attend due to a Legislative Budget and Audit meeting. MR. ANDERSON said basically, the bill addresses a recent occurrence regarding the commissioner of education. There was an article included in the bill packets from the newspaper which stated that Commissioner Covey was given an "early-out payoff" of about $120,000 because of a contractual agreement he had made due to AS 14.07.145 in the statutes. This basically allows a commissioner to serve a term of office of five years. This means a commissioner of Education and also the commissioner of Fish and Game can remain through one governor's term to another if there is a switch in Administrations. MR. ANDERSON continued that in essence, the current Governor of Alaska, in the hopes of getting rid of Commissioner Covey, had to essentially pay him off. Representative Martin feels this is wrong and should not occur. Therefore he drafted HB 171, which says the commissioner of Education serves at the pleasure of the Board of Education, and may not be appointed by the board for a term of office. MR. ANDERSON said therefore, that would exclude the five-year rule. The five-year rule was put in place to bridge continuity in Fish and Game for fish management issues and for education goals. But this is not necessary because currently the present commissioner is extremely qualified to serve and can continue those goals. Number 1678 CO-CHAIR BUNDE said that he was addressing "golden parachutes," and certainly the commissioner of Education is not the only person that has ever encountered a golden parachute. Co-Chair Bunde asked if Mr. Anderson had an amendment. Mr. Anderson did have an amendment, and Co-Chair Bunde moved it. An objection was raised for discussion purposes. MR. ANDERSON said the amendment continues the concept of the bill by prohibiting the use of state money for severance pay or other separation bonus for certain public officials. An example of the need for this amendment is the former executive director of the Alaska Housing Finance Corporation (AHFC) was in the job for about six months. He had a golden parachute of $60,000 as a severance payoff, as did the previous executive director. Mr. Anderson said this has happened at other levels, but he did not have any statistics handy at the moment. MR. ANDERSON said the amendment prevents that type of severance pay. Number 1731 CO-CHAIR BUNDE said the amendment was obviously expanding the bill, and it did not seem like it fit under the current bill title. MR. ANDERSON said there is going to be a title change should the amendment pass. CO-CHAIR BUNDE said therefore, there are two different issues. The first is the five-year term, and the second is the golden parachute. He asked the HESS Committee members if they understood the amendment and the thrust of the bill. A vote was called on amendment number one. REPRESENTATIVE ROKEBERG interjected that he had concerns. In the course of dealing with employee and executive compensation and employment, in certain instances there might even be provisions for severance in a hiring contract as part of a bargaining basis. Representative Rokeberg asked if this bill would affect such aspects. CO-CHAIR BUNDE asked Mr. Anderson if he was right to assume that this would be not retroactive. It would only apply to future contracts. He was right. REPRESENTATIVE ROKEBERG said that was not his question. He asked if a term or element of a bargain for an employment contract was agreed upon with one of these stipulated officers, would HB 171 make that bargained-for provision illegal. CO-CHAIR TOOHEY answered yes. CO-CHAIR BUNDE thought Representative Rokeberg previously meant the bargain was part of a current contract. Number 1804 MR. ANDERSON said on page 2, lines 6 and 7 say that the bill does not affect an agreement entered into before a certain date. REPRESENTATIVE ROKEBERG said it is not uncommon, when an executive is approached to take a state job, that he or she will take a pay cut. There might be some consideration in the contract to do it up front. CO-CHAIR BUNDE said this bill would preclude the state negotiating a severance package. It is not right for a person to work for six months and then get $60,000 as a parachute when an education bill was just passed that was quite heavy-handed. REPRESENTATIVE ROKEBERG pointed out that in the private sector, there are many activities like this that are preconditioned, pre- existing bargains and agreements. They have nothing to do with golden parachutes. CO-CHAIR BUNDE responded that the private sector is the private sector, and they can spend their money however they want. This is the state, and the people do not want their money spent on high- dollar individuals passing through. Number 1851 REPRESENTATIVE ROKEBERG said he does not want to restrict the recruitment of good people from some top level corporations. He suggested an amendment would help the bill further. He agrees with the concept, but HESS Committee members should be careful and not rush the bill through the committee. CO-CHAIR BUNDE felt that you either allow severance pay or you don't. If the bill was amended to allow severance pay, then there is no need for the bill. REPRESENTATIVE ROKEBERG said the bill says, "or other separation bonus." He has not had proper time to study the bill. CO-CHAIR BUNDE said the bill did not have to be moved that day. Number 1881 REPRESENTATIVE DAVIS sees some corporations, even though they are under the Executive Budget Act, which are quasi-governmental organizations and as such, they need to operate as independently as they can at times without the government looking over their back before they make decisions. The ability to provide severance pay has a purpose, mostly in the private sector, but also in the public sector. Representative Davis said therefore, he would object to the amendment and would rather discuss the issue more in detail before it is voted on to possibly kill the amendment. CO-CHAIR BUNDE did not see an obligation of the state to make wealthy people wealthier. MR. ANDERSON added that generally, one can look at past occurrences such as the building that the AHFC was intending to construct but the legislature said "stop." That would perhaps be a retort to the statement that Representative Davis does not want to micro-manage the quasi-entities. Yet, situations like this can occur, in which there was no vote by the legislature and now they are constructing a building. That is going to be prevented. Number 1951 CO-CHAIR BUNDE said obviously, people need to study the issue more closely. A vote will not be called for on the amendment at this time. The bill and amendment will be heard at a later time. REPRESENTATIVE ROKEBERG felt that the bill should be studied more closely. The money enables one to be able to remove his or her family and leave the state after his/her contract expired normally or he/she was terminated under a termination clause. This situation is very common, especially in jobs such as school superintendents and university presidents. The amendment clearly reads of a separation, but the amendment should be cleaned up. Representative Rokeberg does not want to restrict hiring practices. However, he agrees with Co-Chair Bunde conceptually about golden parachutes. REPRESENTATIVE ROKEBERG felt, however, that if it was a pre-agreed bonus or provision going into employment, that is not the same thing. CO-CHAIR TOOHEY referred to Section 2 of the bill, which regarded severance pay. The bill states unless they qualify under a general law applicable to all qualified persons, "the following persons may not be paid severance pay or other separation bonuses...." CO-CHAIR TOOHEY noted that if that is the practice of the state to do that for all separations, then that is fine. CO-CHAIR BUNDE said that time will be more productively served after all HESS Committee members have studied the bill and the issue more thoroughly. He withdrew the motion to move amendment number one pending further discussion.