SB 227-DIVEST INVESTMENTS IN SUDAN  CHAIR MCGUIRE announced the consideration of SB 227. 10:32:27 AM SENATOR FRENCH, Sponsor, said SB 227 is as easy to understand as any Sunday school lesson. There is genocide happening in Sudan. Genocide is the deliberate extermination of ethnic or national groups. The U.S. State Department and President Bush have called it genocide, and it is being conducted by the Sudanese government. Tens of thousands of human beings have been murdered. Our duty is clear. We must not allow any Alaska dollars to further this terror. SB 227 takes the approach of targeted divestment. Divestment works. In 1997 the United States declared sanctions against the Sudanese government and got them to drop their support for terrorists and to cooperate on counter-terrorism. The focus in this bill is on companies with active business operations in Sudan. Not one U.S. company is doing business there and hasn't since 1997 when sanctions were put into place. Fourteen states including Texas, Arizona, Kansas, Florida, and North Carolina have targeted divestment laws aimed at Sudan. Detractors acknowledge the righteousness of the cause but point to two problems. One is a slippery slope: if Sudan, why not tobacco or South Africa? But this case is not that one. There is a large difference between genocide and smoking cigarettes. We should all agree not to invest in companies that are helping a government kill their own citizens. The second argument is that it will cost money. Costs are wildly overstated. No one at this table would knowingly invest in a company that is sponsoring genocide. Why do so as a state? 10:34:48 AM DIXIE HOOD, Family Therapist, Juneau, said she has been the beneficiary of the permanent fund dividend, and she supports humanitarian concerns over possible profits. The international boycott in South Africa helped end apartheid. She supports restricting state investments in Sudan until human rights abuses in Darfur have stopped and not resumed for 12 months. 10:36:15 AM HELENA FAGAN, Juneau, said the facts in Sudan are clear. She will give a brief history of her family to point out her personal devotion to this cause. Her mother lived in the Lodz ghetto of Poland and was then moved to Auschwitz and Bergen- Belsen. Her great grandparents were gassed in a truck and dumped in the mass graves of Chelmno. Her grandfather died in a work camp. Her grandmother died in the Auschwitz gas chambers. Her mother is part of a network of survivors who worked to create the holocaust memorial in Portland, Oregon. Ms. Fagan traveled with her mother to all the death camps in Poland and collected soil to deposit in the foundation of the memorial. The soil holds ashes and bones fragments. The mass grave sites she saw were as large as football fields. Her mother spoke publically many times about her experiences, including for Pillars of America. Every time she spoke she had nightmares, but she continued so that people -- especially young people -- could hear what happens when hatred grows and is fed by indifference. MS. FAGAN said her mother is 78 and has decided that she is done speaking. "So I figure that now it's my turn to speak." Indifference killed her family as much as hatred did. Her grandfather tried to get his family out of Poland for years, and nobody would help. The United States wouldn't let him in even though he had money and appropriate paperwork. Her mother was allowed to enter America many months after she was liberated from Bergen-Belsen on a stretcher and too emaciated to stand. During the past month, while people are killed in Darfur, she has heard state leaders speak of why they hesitate to support SB 227. The director of the permanent fund says that financial gain is his directive, and by divesting someone else will just buy in. "But I also believe that we can have financial gain without contributing to suffering, and I believe that we must not be indifferent to genocide and hatred." 10:39:50 AM MS. FAGAN said when she told her mother that she was testifying, her mother thought she was wasting her time. She wants the committee to prove her wrong and pass SB 227. 10:40:40 AM MICHAEL BURNS, CEO, Alaska Permanent Fund Corporation, Juneau, said he sincerely appreciates the motivation that led to this bill and is profoundly disturbed by the incomprehensible situation in Darfur. It is the legislature's prerogative to direct investments of the permanent fund, and if asked to divest it will do so. He said to think carefully. In 30 years the fund has been invested for the financial benefit of Alaskans. Placing a social investment directive on the fund would be a significant change to the core mission. The prudent course is to make investment decisions based only on economics. "After the question of prudence is the question of efficacy. We are concerned by the prospect of placing a socially motivated directive on the permanent fund that will have some costs when we have not seen definitive proof that these divestment efforts are or have been effective." He provided a review the effects that divestment from South Africa had on the decision to end apartheid. Those researchers said it was other forms of pressure that caused the South African government to change. The U.S. treasury and state department are trying to bring an end to genocide in Darfur. SB 227 is a significant decision that will impact Alaska's investments well into the future. 10:43:12 AM MR. BURNS said the two departments spoke to the Senate Banking Committee in Washington. The common theme was that individual divestment policies at the state level will hinder their efforts. Studies of the sovereign wealth funds of the world rank the permanent fund in the upper decile for best practices, including making investment decisions only on financial grounds. SENATOR BUNDE asked about the constitutional language from which Mr. Burns takes his direction. There is other legislation that considers assets of the state not available for initiatives. Assets are supposed to be used for the good of Alaskans. MR. BURNS said the constitution only requires the protection of the corpus and that 25 percent of the revenue goes to the permanent fund. Everything else is statutory, which now is to invest for maximum return while protecting the principal. 10:46:33 AM SENATOR FRENCH asked if he has read some of the divestment materials. Three companies have changed operations in Sudan as a result of divestment. One is CHC Helicopter Corporation -- the largest provider of helicopter services in the global offshore oil and gas industry. It recently ceased all business operations in Sudan because of concerned investors. The other is Rolls Royce, which sells oil equipment to Sudan. It announced its decision to leave citing increasing humanitarian concerns. Siemens pledged to pull out of the country because of divestment. The Brooking Institute said: In the view of some analysts divestment campaigns may prove more effective than sanctions. He asked if that changes Mr. Burns' view of efficacy. MR. BURNS said he was not aware and has not seen that report. Embarrassing a government that is taking part in this kind of activity is difficult. They are beyond it. "I don't think we're going to jawbone these people into doing the right thing." SENATOR FRENCH asked if he disputes it. MR. BURNS said he didn't he just wasn't aware of it. SENATOR FRENCH asked him to reconsider in the light of the fact that three major corporations have ceased operations there. If corporations don't help the Sudanese government kill their own citizens, the government wouldn't be able to do it. He said he means no harm to Mr. Burns, but it is a reality on the planet being done with the help of corporations that supply bolts, trucks, and machinery to keep it going. 10:49:36 AM SENATOR BUNDE said the efficacy thing bothers him. His limited understanding is that the weapon of choice for Africa is a machete and doesn't involve Rolls Royce. If Alaska limits its investment will it keep the leaders from having lunch, or will the poor people who are being abused have less food? MR. BURNS said he was not aware of the two companies that Senator French discussed. If Alaska divested its holdings in the four or five companies, he doesn't know what effect that would have on anything. If Alaska sells, someone else will buy. How does that harm the company and therefore harm the government? SENATOR BUNDE said he would very much like to see the genocide stop, but it would be boots on the ground by the United Nations and African nations to stop it. Over years, divestment might have an impact. But how many people will die in the interim? There are quicker ways to protect these people. 10:51:51 AM SENATOR FRENCH said the bill is not aimed at any company providing humanitarian aid or anyone importing food or lighting. It is targeted divestment. SENATOR STEVENS asked how Mr. Burns would figure out what companies the fund would divest if this bill passes. MR. BURNS said there are lists available, but he hasn't thought it through. He would have to deal with the fund's managers. Some holdings are in the index funds. "You're either in an index or you're not in the index." "If you invest in an index fund of the S&P 500, you are in the S&P 500 with billions of other dollars." The S&P 498 has a custom benchmark and that is managed differently at a different expense level. "That's what we tried to reflect in the fiscal note." SENATOR FRENCH said, "When you use the word S&P you know that this S&P doesn't include any targeted companies." Not a single U.S. company is doing business there. 10:54:02 AM MR. BURNS said he should have used AEFA [Europe, Australasia, and Far East index]. "I stand corrected." PAT GALVIN, Commissioner, Department of Revenue, said the administration supports SB 227. The bill properly reflects a proactive action against genocide in Darfur by divesting in companies that profit from those activities. The situation is an ongoing human tragedy and Alaska has an opportunity to take a stand against those atrocities. Congress and the Department of State have labeled it genocide, and that is an unprecedented situation. "With that legislation there [was] also language that would tend to shield, potentially, the decisions of social investing that may otherwise be subject to potential claims based upon other precedent, and we are working with the Department of Law to look at how that congressional action may affect decisions, absent the passage of this legislation, to allow the administration to actually take certain actions with regard to divestiture that would still be compliant with the state investment laws." There are areas of the legislation that should be amended and he wants to work with the sponsors in the finance committee "to try to eliminate some of the burdens with regard to the machinery of how this bill would affect the divestiture, in order to minimize some of the costs that don't change the core principal of affecting the divestiture of state funds in this manner." There may be some additional language to shield some of the investment decisions that Alaska can't really manage and affect, such as passive investments and some index funds. They should be shielded from this. The administration would like to work with the bill sponsors on it. 10:57:36 AM COMMISSIONER GALVIN said it is a difficult decision and the state has avoided it in the past. But the situation in Darfur is unique so the state can avoid a slippery slope and still ensure that state funds are not invested in a way to have any chance of contributing to the suffering in Darfur. DEBORAH BOCK, Volunteer, Save Darfur Anchorage, said last year Congress passed the Sudan Accountability and Divestment Act prohibiting any company from receiving any contracts with the federal government because of their complicity with the ongoing genocide. The act also encourages states to adopt policies of targeted divestment. It opens the door for every state to divest from the foreign oil, mining and power companies that are providing documented substantial support to the government of Sudan in its genocidal campaign. Currently 24 states have adopted or are considering divestment policies. When Arizona joined this group last month, all 90 lawmakers supported the legislation. It is now Alaska's turn. SB 227 would require the permanent fund and the Alaska Retirement Management Board to implement targeted divestment, which would mean selling off holdings in companies that have been indentified by multiple international organizations as having documented complicity in the Darfur genocide. "We sell those foreign holdings and purchase holdings in American companies that are genocide free - it's that simple." The permanent fund has about $22 million invested in six foreign companies that are linked to genocide. China is the majority shareholder of two of them, Sinopec and Hong Kong. China is also the leading small arms dealer to the Sudan government. China sold $55 million worth of small arms to Sudan from 2003 to 2006 that have been used by the government against its citizens. This is the first time in history that the U.S. Congress and president have labeled genocide while it is occurring. Targeted divestment isn't about sacrificing profits for the greater good. There are many, many genocide-free investments that are equally profitable. 11:01:07 AM MAX CROES, Sudan Divestment Task Force and Genocide Intervention Network, Washington D.C., said his organization's mission is to power individuals and communities with tools to stop genocide. He said the Sudanese government is a global anomaly; it lacks the ability to produce capital, and it relies solely on foreign corporations for technology and capital to develop its oil. Targeting these corporations effects change inside the country by pressuring the government. It works. Nine corporations have withdrawn or substantially altered their policies inside Sudan. In reference to sovereign wealth funds, some of the largest have elected to adopt investment policies that reflect financial and moral obligations. The Norwegian government pension fund, Australian future fund, and New Zealand superannuation fund are all in this category. Sovereign wealth funds are responsible for preserving their resources for future generations, but they also have responsibility to preserve a world that is good. The permanent fund's actions would not be out of line from similar funds. This is not a permanent policy; there are four sunset provisions including if the genocide ends and if the president or Congress assert that divestment policies interfere with their ability to make foreign policy. 11:04:01 AM SENATOR FRENCH moved to report SB 227 from committee with individual recommendations and attached fiscal note(s). SENATOR STEVENS objected to say he wishes he knew more about the Darfur issue. His knowledge of the holocaust is better, and he can't help but think that if we had done something about that in 1941, some of the suffering would have stopped. He questions the legislation, but it is an issue worth discussion, and he is willing to move it to the next committee for that purpose. CHAIR MCGUIRE said she echoes those thoughts and the slippery slope and how SB 227 would work in a practical sense. But she has woken up at night on this issue, and saying nothing and doing nothing during times of atrocity makes us responsible. SENATOR STEVENS removed his objection, and SB 227 passed out of committee.