SB 92-REMOVAL OF MEMBERS OF THE PF BOARD  CHAIRMAN THERRIAULT asked Clark Gruening whether anyone from the Permanent Fund Trustee Board was planning to speak to the memo from Mr. Lorensen, attorney with Simpson Tillinghast Sorensen Lorensen & Longenbaugh. CLARK GRUENING, Chairman of the Alaska Permanent Fund Corporation's (APFC) Board of Trustees, said no, the memo speaks for itself and should answer questions raised at the last meeting. CHAIRMAN THERRIAULT said the memo did a concise job of covering the issues raised at the previous meeting. JIM BALDWIN, Assistant Attorney General, Governmental Affairs Section, said SB 92 is not a new issue and that, based on the text of the Alaska Constitution, it raises legal issues. According to the Alaska Constitution, the legislature may, by law, provide for removal by cause for boards or commissions that are at the head of executive agencies or are quasi-regulatory or are quasi-judicial. Since it is specifically stated there, it shouldn't be implicated anywhere else in the legislative or executive article. The APFC isn't quasi-regulatory or judicial, it isn't at the head of the executive branch agency. The argument focuses on separation of powers. SENATOR PEARCE joined the meeting. MR. BALDWIN said, as discussed at the previous meeting, Bradner v. Hammond is the only case that touches on appointment power but it isn't "directly on point". The argument was put forth before the last legislature and he thought the constitutional amendment was evidence that it was accepted. This is a legal position that the office has taken and there is evidence of this in other opinions from prior administrations. CHAIRMAN THERRIAULT said that he read past testimony in addition to Bradner v. Hammond and he agrees that case isn't directly on point because it dealt with legislative confirmation. The discussion last year was centered around there being a continuum of legislative interference in the confirmation process. He can understand the court's ruling because the legislature could insert itself in the process to a greater degree than having the removal for cause language, which would still be an administrative action taken without legislative interaction. He asked Mr. Baldwin to discuss the differences and degree from the viewpoint of the Department of Law. He also asked for a discussion on the Alaska State Pension Investment (ASPI) Board which has similarities and is not quasi- regulatory or quasi-judicial but has a removal for cause clause that hasn't been litigated. He asked whether the position taken by the department when that language was put into statute was that it was likely to be suspect if there was a challenge on constitutional grounds. Number 519 MR. BALDWIN said that Alaska has, by intent, a strong executive branch and the power of appointment is solely an executive power. The Alaska Constitution gives the legislative branch no role, through law making power, in deciding how appointments are made, their duration, and removal. In pre-statehood days, there was government by commission, which had the effect of blunting the power of the federal government, thereby giving more power to local government. Constitutional framers believed there needed to be a change from this arrangement and wanted a strong, centralized, government with boards and commissions under the appointed power of the governor. There would be a check on the appointment power for quasi-judicial, quasi-regulatory or heads of principle departments by providing confirmation hearings. The removal provision, which places the appointee beyond the reach of the removal at pleasure of the governor applies to everything else in the executive branch. Property and liberty rights are another issue because persons with a salary or a property right in an office can't, under the 5th amendment, have that taken away arbitrarily; there must be some due process. As a matter of degree, he thinks it's a skilled legal argument but questions of degree don't always hold sway in a constitutional argument. It is not cut and dried and is, in fact, a point of debate among lawyers that has not yet been tested in an Alaskan court. The argument was made on the ASPI Board, and it subsequently became law against the advice from the Department of Law. There is speculation as to why this happened, but it isn't the only example of a law being enacted even though the constitutionality is arguable. He thought he could probably find several examples in Alaska statute where removal for cause has been applied to a non- quasi-judicial or regulatory board or a board that is not that of an executive agency. The fact that they are there doesn't make them more constitutional. MR. BALDWIN said the constitutional amendment passed by the legislature last session is a significant piece of legislative history for anyone analyzing the issue. "It could be argued that the intent was that they supported that construction." However, trying to prove legislative intent is difficult, at best. CHAIRMAN THERRIAULT said he didn't mean to imply constitutionality just because something similar is in statute. This hasn't, as yet, been tested in court and since there is no similar case with this language it is not known how the court would rule. MR. BALDWIN agreed and said it's an open question in Alaska but DOL believes its argument is contextually supported by the Constitution. If the committee passes SB 92, he noted he had several suggestions to make it a better piece of legislation. CHAIRMAN THERRIAULT said he knew Mr. Baldwin was concerned about a definition for "just cause" but there was no definition in that section of statute addressing the ASPI Board and there is "no need for a definition unless you want to stray from the ordinary court interpretation of the phrase." MR. BALDWIN said you'd be relying on the common law interpretation for the phrase which means the definition is left to judges, attorneys and established precedent. Determining the meaning of "just cause" isn't easy because a citizen might be interpreting one event and the law might be interpreting another event and both are using the term "just cause". Another statute where cause is more specifically stated is AS 16.05 for the Board of Fish and Game. He pointed out a weakness in the legislation is the absence of provision for due process. The language appears to say that a letter is sent stating cause and that's the end of it. However, when someone is removed in that manner they might have the right to a due process hearing, which may be trial like with discovery and an independent third party to make the decision about removal. This can be a very long and complicated process. Removing a board member doesn't just happen, there is a process that must be followed. CHAIRMAN THERRIAULT said that administrative appeals follow the process whereby a division director makes a decision which is reviewed up the chain of authority. If someone is removed for cause it's the Governor, who is at the top of the authority chain, making the decision. Other than asking for a reconsideration, the only option is to take the matter to the court for a decision. Since the process is trial like anyway, why not just take it through the court system? MR. BALDWIN said that, under this legislation, the decision itself would be the Governor's and it's then established that there must be some sort of due process that leads to that decision. That process may be a simple hearing where the individual can come in and try to clear their reputation or something more involved where the individual can come in and there's a record created where the reasons are put on the record and the individual has a chance to rebut those reasons and try to prove their case. Going directly to court is essentially delegating the decision to the judicial branch and the court probably would not allow this, saying that administrative remedies haven't been exhausted. This most probably means that the due process hearings haven't been held. Reading the statute, it appears that the Governor simply writes a letter. If that is the intent of SB 92, then it should be clear on the record that there is no more due process being accorded than just the letter. This would be less than the removal right accorded to a member of the Fish and Game Board or a member of the Regulatory Commission for Alaska both of which are boards with salary, property rights and due process rights. CHAIRMAN THERRIAULT said that in going in that direction, the level of legislative interference with the Governor's process is heightened so the possibility that it would be ruled unconstitutional is also heightened. MR. BALDWIN said Chairman Therriault hit upon the tension between the legal issues at play. The for cause provision intrudes upon the appointment power but the for cause provision that's not spelled out in how it's exercised produces legal problems on the other side of the argument. He wanted it clearly understood that removal for cause isn't as simple as writing a letter. There must be due process in removal for cause. CHAIRMAN THERRIAULT asked for questions from committee members and members of the public. There were none. Committee members had no amendments. The bill has a zero fiscal note. He asked for the will of the committee. SENATOR PHILLIPS moved SB 92 and zero fiscal note from committee with individual recommendations. There were no objections.