ALASKA STATE LEGISLATURE  HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE  April 4, 2023 8:01 a.m. DRAFT MEMBERS PRESENT Representative CJ McCormick, Chair Representative Kevin McCabe, Vice Chair Representative Tom McKay Representative Justin Ruffridge Representative Rebecca Himschoot MEMBERS ABSENT  Representative Josiah Patkotak Representative Donna Mears COMMITTEE CALENDAR  HOUSE BILL NO. 123 "An Act relating to an amendment to the articles of incorporation of a corporation organized under the Alaska Native Claims Settlement Act; and providing for an effective date." - HEARD & HELD HOUSE BILL NO. 69 "An Act relating to the reclassification of first class cities as second class cities; and providing for an effective date." - HEARD & HELD PREVIOUS COMMITTEE ACTION  BILL: HB 123 SHORT TITLE: ARTICLES OF INCORPORATION FOR ANCSA CORPS SPONSOR(s): REPRESENTATIVE(s) C.JOHNSON 03/17/23 (H) READ THE FIRST TIME - REFERRALS 03/17/23 (H) CRA 04/04/23 (H) CRA AT 8:00 AM BARNES 124 BILL: HB 69 SHORT TITLE: RECLASSIFICATION OF FIRST CLASS CITIES SPONSOR(s): REPRESENTATIVE(s) CRONK 02/10/23 (H) READ THE FIRST TIME - REFERRALS 02/10/23 (H) EDC, CRA 03/01/23 (H) EDC AT 8:00 AM DAVIS 106 03/01/23 (H) Heard & Held 03/01/23 (H) MINUTE(EDC) 03/13/23 (H) EDC AT 8:00 AM DAVIS 106 03/13/23 (H) Heard & Held 03/13/23 (H) MINUTE(EDC) 03/20/23 (H) EDC AT 8:00 AM DAVIS 106 03/20/23 (H) Moved HB 69 Out of Committee 03/20/23 (H) MINUTE(EDC) 03/22/23 (H) EDC RPT 5DP 2NR 03/22/23 (H) DP: STORY, MCKAY, MCCORMICK, ALLARD, RUFFRIDGE 03/22/23 (H) NR: HIMSCHOOT, PRAX 04/04/23 (H) CRA AT 8:00 AM BARNES 124 WITNESS REGISTER TOM WRIGHT, Staff Representative Craig Johnson Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Presented HB 123 on behalf of Representative Craig Johnson, prime sponsor. REPRESENTATIVE MIKE CRONK Alaska State Legislature Juneau, Alaska POSITION STATEMENT: As prime sponsor, presented HB 69. DAVE STANCLIFF, Staff Representative Mike Cronk Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Co-presented HB 69 on behalf of Representative Mike Cronk, prime sponsor. ACTION NARRATIVE 8:01:30 AM CHAIR CJ MCCORMICK called the House Community and Regional Affairs Standing Committee meeting to order at 8:01 a.m. Representatives McKay, Himschoot, McCabe, and McCormick were present at the call to order. Representative Ruffridge arrived as the meeting was in progress. HB 123-ARTICLES OF INCORPORATION FOR ANCSA CORPS  8:03:15 AM CHAIR MCCORMICK announced that the first order of business would be HOUSE BILL NO. 123, "An Act relating to an amendment to the articles of incorporation of a corporation organized under the Alaska Native Claims Settlement Act; and providing for an effective date." 8:03:25 AM TOM WRIGHT, Staff, Representative Craig Johnson, Alaska State Legislature, presented HB 123 on behalf of Representative Craig Johnson, prime sponsor. He paraphrased the sponsor statement [included in the committee packet], which read as follows [original punctuation provided]: The Alaska Corporations Code, adopted in 1989, requires corporations existing before July 1, 1989, (which includes all ANCSA corporations) to obtain an affirmative vote of at least two-thirds of the shares entitled to vote for the adoption of an amendment to the articles of incorporation. Per current AS 10.06.504(d): The requirement of an affirmative vote of at least two-thirds of the shares entitled to vote for the adoption of an amendment to the articles of incorporation as provided in former AS 10.05.276 shall remain in force for corporations existing before July 1, 1989. By contrast, corporations formed after July 1, 1989, including any newly formed corporation in the State of Alaska, generally require only a simple majority vote of all outstanding shares for articles amendments. The existing language of AS 10.06.504{d) effectively handicaps ANCSA corporations from making amendments to their Articles of Incorporation, unless an exception applies. Most ANCSA corporations typically received shareholder meeting quorums in the upper 50% or lower 60% of the total outstanding shares eligible to vote. But as the years go on and shares become distributed across larger numbers of individual descendants of original shareholders, quorum counts are expected to continue to decrease. ANCSA and Alaska law already recognize this phenomenon by providing reduced voting thresholds for ANCSA corporations for certain specified matters. Reduced voting thresholds apply to creation of a Settlement Trust or amending the Articles of Incorporation to issue new shares of Settlement Common Stock to descendants of original shareholders, along with amendments to the Articles of Incorporation to provide for classification of seats on the Board of Directors. There is no general catch-all allowing Alaska Native Corporations to amend the Articles of Incorporation for matters outside these narrow exceptions. Thus, AS 10.06.504 sets up a discriminatory, two-tier regime, in which Alaska Native Corporations are subjected to an effectively impossible heightened two- thirds voting standard and are effectively prevented from general amendments to their Articles of Incorporation. Other, newly formed corporations are provided a more realistic 50% voting standard. Research reflects that the 50% standard is the modern norm across most states. Based on research of various states' corporation codes, and the history and significance of ANCSA, ANCSA corporations believe the current law is antiquated, and leaves Native corporations established under ANCSA at a competitive disadvantage compared with newer corporations. 8:05:15 AM REPRESENTATIVE HIMSCHOOT asked for confirmation that the intent of HB 123 is to proactively solve a problem that "isn't exactly happening yet" but is anticipated. MR. WRIGHT answered that is correct. He added that it is becoming a problem, because not all shareholder meetings have a two-thirds threshold, and the bill seeks to "put them in step with all other corporations" that have "a 50 percent, plus one, threshold." 8:06:11 AM CHAIR MCCORMICK announced that HB 123 was held over. 8:06:28 AM The committee took a brief at-ease at 8:06 a.m. HB 69-RECLASSIFICATION OF FIRST CLASS CITIES  8:06:59 AM CHAIR MCCORMICK announced the final order of business would be HOUSE BILL NO. 69, "An Act relating to the reclassification of first class cities as second class cities; and providing for an effective date." 8:07:18 AM REPRESENTATIVE MIKE CRONK, Alaska State Legislature, as prime sponsor, presented HB 69. He explained it had been brought to his attention that the first class city of Tanana, Alaska, was unable to transfer its school into the Yukon-Koyukuk School District (YKSD), and in researching, it became clear that Tanana would have to be reclassified to legally transfer the school. 8:08:17 AM DAVE STANCLIFF, Staff, Representative Mike Cronk, Alaska State Legislature, on behalf of Representative Cronk, prime sponsor, added that HB 69 is a "fairly simple piece of legislation" and is intended to assist in the transfer of the Tanana City School District, which would mean savings to the state, but the real motivation is what is best for the students in Tanana. He explained that the Local Boundary Commission set a population threshold of 400 [for a city to be able to incorporate]. The city of Tanana's population has dropped to 243 people - well below the threshold. The bill would provide such a mechanism giving a first class city the option of automatically being reclassified if their population falls below the 400 resident threshold. 8:11:17 AM VICE CHAIR MCCABE asked if there are any other cities that are in this situation. 8:11:41 AM MR. STANCLIFF responded that there are four other communities in the state that are first class cities at this time that could make the request if they felt under duress, but none have stepped forward to do so. He also noted there is support from the Tanana City School District, the mayor of Tanana, and from YKSD to make the transition happen. 8:13:46 AM REPRESENTATIVE HIMSCHOOT observed the 10-day turnaround time possibly being problematic, and she asked if there would be an amendment to the 10 days, or a solution to the tight timeline. MR. STANCLIFF replied that if a committee substitute for HB 69 were drawn up, it would include that. He also noted that after hearing about the bill, the Local Boundary Commission was able to convene a meeting well within the 10-day limit. REPRESENTATIVE HIMSCHOOT commented on Pelican, Alaska, that the mayor relayed the community is not looking at this [transition] right now, but would welcome having an easier pathway than what is currently available. 8:15:19 AM CHAIR MCCORMICK announced that HB 69 was held over. 8:16:29 AM ADJOURNMENT  There being no further business before the committee, the House Education Standing Committee meeting was adjourned at 8:16 a.m.