SENATE BILL NO. 92 "An Act relating to removal of members of the board of trustees of the Alaska Permanent Fund Corporation; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. ROBERT STORER, Executive Director, Alaska Permanent Fund Corporation, Department of Revenue, outlined the two commissioner and four members of the public, make-up of the board. He noted the public members serve staggered four-year terms. He stated the legislation provides removal for just cause language consistent with 19 other State of Alaska boards and commissions, including the Pensions and Investment Board, which is charged with managing the assets of the state's retirement system. Mr. Storer told the Committee he has been involved in managing institution funds for over 20 years, and has seen how managing funds has become increasingly sophisticated, thus requiring time for board member's to "get up to speed." This legislation, he stated, would ensure continuity in fund management and allow institutional memory to be passed along from outgoing board members. Senator Wilken recalled that the legislature attempted to pass similar legislation approximately five years ago, but the governor vetoed it. He asked what was different about this bill that the governor would support. Mr. Storer affirmed Governor Knowles vetoed the same language in a different bill, early in his administration. Mr. Storer stated that the governor has indicated he now supports this provision after speaking to former trustees and giving the matter consideration. Senator Ward requested a copy of governor's veto message on the earlier bill. Co-Chair Donley asked if the governor has issued a position on the current legislation. Mr. Storer responded that before introducing this bill, representatives of the Corporation including himself, spoke with the governor and were told he would support this legislation. Co-Chair Donley suggested that since this language had been vetoed, a written statement from governor in support of this bill, with an explanation of why his position changed, is appropriate. Senator Green asked if "only for cause" is a legal term. RON LORENSON, outside counsel for the Alaska Permanent Fund Corporation, responded that there is "a large body of law" dealing with the subject of "for cause". He stated rather than providing a definition, these laws review a specific situation and the court determines whether there is just cause. He referenced a legal opinion he prepared on the subject of just cause for the Corporation, which he offered to share with the Committee. Senator Green requested a copy of the opinion. Mr. Lorenson said he would provide this. He summarized his findings, saying, "fair-minded people would know it when they see it" when taking into consideration performance and conduct. He said the opinion also states that traditionally the legislature has not given specific definitions of "for cause". JOHN KELSEY, former trustee, Alaska Permanent Fund Corporation, testified via teleconference from Anchorage that he served continuously on the Board under three different governors from 1987 to 1995. He noted that he served as chair three different times and was in that position during two occasions when all trustees, except him, were replaced. He stressed that during these times, he was the only trustee with the institutional knowledge about the fund's operation. Mr. Kelsey urged the Committee to pass SB 192. He cited his experiences as giving him "great cause" in supporting this bill. He emphasized he did not wish to denigrate new trustees, attesting they are excellent appointees. However, he stressed the need for experienced trustees on the Board to help guide newer trustees. He asserted the replacement of numerous trustees at one time is, "unfair to new trustees and it is certainly unfair to the stakeholders of the fund who own the assets." He asserted that a new board is understandably cautious and usually fails to make timely actions. He offered to detail specific occurrences if requested. Mr. Kelsey informed he was twice forced into the "uncomfortable" situation of training a new board, which he surmised was not the intent of the legislature that created the Corporation. Mr. Kelsey remarked that passage of this legislation would ensure "historical experience will be provided for all future boards, thus assuring that which was intended by the enabling legislation, which provided for staggered terms for trustees." Co-Chair Donley asked if Mr. Kelsey knew why the governor vetoed the earlier legislation. Mr. Kelsey replied that he had no way of telling. Co-Chair Donley reiterated it would be helpful to have the governor's veto message related to the earlier legislation and a written statement regarding the current legislation. Senator Ward noted Mr. Storer said he would provide this information. Co-Chair Donley suggested holding this bill until this information was received. Senator Wilken agreed this information was important but suggested moving the bill at this time and reviewing the information before the bill comes before the full Senate. Co-Chair Donley stated he wanted to hold the bill until the next day. Senator Wilken noted he just received the governor's veto message. Co-Chair Donley ordered the bill HELD in Committee.