ALASKA STATE LEGISLATURE                                                                                  
               HOUSE JUDICIARY STANDING COMMITTEE                                                                             
                        February 3, 2010                                                                                        
                           1:04 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Jay Ramras, Chair                                                                                                
Representative Nancy Dahlstrom, Vice Chair                                                                                      
Representative Carl Gatto                                                                                                       
Representative Bob Herron                                                                                                       
Representative Bob Lynn                                                                                                         
Representative Max Gruenberg                                                                                                    
Representative Lindsey Holmes                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 8                                                                                                    
Proposing amendments to  the Constitution of the  State of Alaska                                                               
limiting  appropriations from  certain mineral  revenue, relating                                                               
to the balanced budget account,  and relating to an appropriation                                                               
limit.                                                                                                                          
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 146                                                                                                              
"An Act relating to transfer restrictions on trust interests."                                                                  
                                                                                                                                
     - MOVED CSHB 146(JUD) OUT OF COMMITTEE                                                                                     
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HJR 8                                                                                                                   
SHORT TITLE: CONST. AM: APPROP. LIMIT/MINERAL REVENUE                                                                           
SPONSOR(S): REPRESENTATIVE(S) KELLY                                                                                             
                                                                                                                                
01/26/09       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/26/09       (H)       STA, JUD, FIN                                                                                          
04/02/09       (H)       STA AT 8:00 AM CAPITOL 106                                                                             
04/02/09       (H)       Heard & Held                                                                                           
04/02/09       (H)       MINUTE(STA)                                                                                            
04/07/09       (H)       STA AT 8:00 AM CAPITOL 106                                                                             
04/07/09       (H)       Moved Out of Committee                                                                                 
04/07/09       (H)       MINUTE(STA)                                                                                            
04/07/09       (H)       STA RPT 2DP 3DNP 1NR 1AM                                                                               
04/07/09       (H)       DP: JOHNSON, LYNN                                                                                      
04/07/09       (H)       DNP: SEATON, GRUENBERG, PETERSEN                                                                       
04/07/09       (H)       NR: GATTO                                                                                              
04/07/09       (H)       AM: WILSON                                                                                             
02/03/10       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
                                                                                                                                
BILL: HB 146                                                                                                                  
SHORT TITLE: TRANSFER RESTRICTIONS ON TRUSTS                                                                                    
SPONSOR(S): REPRESENTATIVE(S) RAMRAS                                                                                            
                                                                                                                                
02/23/09       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/09       (H)       L&C, JUD                                                                                               
01/25/10       (H)       L&C AT 3:15 PM BARNES 124                                                                              
01/25/10       (H)       Moved Out of Committee                                                                                 
01/25/10       (H)       MINUTE(L&C)                                                                                            
01/27/10       (H)       L&C RPT 1DP 6NR                                                                                        
01/27/10       (H)       DP: CHENAULT                                                                                           
01/27/10       (H)       NR:   LYNN,    BUCH,   HOLMES,   NEUMAN,                                                               
                        T.WILSON, OLSON                                                                                         
02/03/10       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE MIKE KELLY                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Sponsor of HJR 8.                                                                                        
                                                                                                                                
DEREK MILLER, Staff                                                                                                             
Representative Mike Kelly                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Assisted with the presentation of HJR 8 on                                                               
behalf of the sponsor, Representative Kelly.                                                                                    
                                                                                                                                
TAMARA COOK, Director                                                                                                           
Legislative Legal and Research Services                                                                                         
Legislative Affairs Agency (LAA)                                                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Responded to questions during discussion of                                                              
HJR 8.                                                                                                                          
                                                                                                                                
DANA L. OLSON                                                                                                                   
Knik, Alaska                                                                                                                    
POSITION STATEMENT:  Indicated a concern with HJR 8.                                                                          
                                                                                                                                
DAVID TEAL, Legislative Fiscal Analyst                                                                                          
Legislative Finance Division                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Responded to  questions during discussion of                                                             
HJR 8.                                                                                                                          
                                                                                                                                
JANE W. PIERSON, Staff                                                                                                          
Representative Jay Ramras                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Presented HB 146 on behalf  of the sponsor,                                                             
Representative Ramras.                                                                                                          
                                                                                                                                
DANA L. OLSON                                                                                                                   
Knik, Alaska                                                                                                                    
POSITION STATEMENT:  Indicated a concern with HB 146.                                                                         
                                                                                                                                
DOUGLAS J. BLATTMACHR, President and CEO                                                                                        
Alaska Trust Company                                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 146.                                                                          
                                                                                                                                
DAVID G. SHAFTEL, Attorney at Law                                                                                               
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Provided comments  during  discussion  of                                                             
HB 146.                                                                                                                         
                                                                                                                                
MICHAEL A. GERSHEL, Attorney at Law                                                                                             
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Expressed concern with Section 3 of HB 146.                                                              
                                                                                                                                
JACOB A. SONNEBORN, Attorney at Law                                                                                             
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Provided comments  during  discussion  of                                                             
HB 146.                                                                                                                         
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:04:48 PM                                                                                                                    
                                                                                                                                
CHAIR JAY  RAMRAS called the  House Judiciary  Standing Committee                                                             
meeting  to   order  at  1:04   p.m.     Representatives  Ramras,                                                               
Gruenberg, Holmes,  Dahlstrom, Herron, and Gatto  were present at                                                               
the call  to order.   Representative Lynn arrived as  the meeting                                                               
was in progress.                                                                                                                
                                                                                                                                
        HJR 8 - CONST. AM: APPROP. LIMIT/MINERAL REVENUE                                                                    
                                                                                                                                
1:08:01 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS announced that the  first order of business would be                                                               
HOUSE  JOINT  RESOLUTION  NO.  8,  Proposing  amendments  to  the                                                               
Constitution of the State of  Alaska limiting appropriations from                                                               
certain  mineral   revenue,  relating  to  the   balanced  budget                                                               
account, and relating to an appropriation limit.                                                                                
                                                                                                                                
1:10:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MIKE KELLY,  Alaska  State Legislature,  sponsor,                                                               
explained that  [if voters  approve HJR  8's proposed  changes to                                                               
Article  IX, Section  16,  of the  Alaska  State Constitution,  a                                                               
maximum of]  a five-year average -  of the amounts from  the four                                                               
preceding years and  the estimated amount for the  current year -                                                               
of the  revenue from [mineral  lease rentals,  royalties, royalty                                                               
sale  proceeds,  federal  mineral revenue  sharing  payments  and                                                               
bonuses, and every State tax  on minerals, mineral production, or                                                               
mineral transportation] would be available  in any given year for                                                               
appropriation  via a  simple majority  vote; at  the end  of each                                                               
fiscal year,  any of  that revenue not  so appropriated  would go                                                               
into  a  proposed balanced  budget  account,  and could  then  be                                                               
transferred to the  general fund (GF) via a  simple majority vote                                                               
in years when  that revenue did not amount  to the aforementioned                                                               
five-year  average;  and  any amount  in  the  proposed  balanced                                                               
budget account in excess of  the combined amounts so appropriated                                                               
for the current  fiscal year and the preceding  fiscal year would                                                               
be transferred to the constitutional  budget reserve fund (CBRF).                                                               
The  proposed balanced  budget account  would receive  funds when                                                               
the  State  has  what  he called  "excess  revenues,"  and  would                                                               
provide funds "when  we are short, for balancing  the budget," he                                                               
added.                                                                                                                          
                                                                                                                                
1:13:47 PM                                                                                                                    
                                                                                                                                
DEREK  MILLER, Staff,  Representative  Mike  Kelly, Alaska  State                                                               
Legislature,  on behalf  of  the  sponsor, Representative  Kelly,                                                               
added  that [if  HJR  8 is  passed by  the  legislature and]  its                                                               
proposed changes  to the Alaska  State Constitution  are approved                                                               
by the voters  in 2010, it would apply to  appropriations made in                                                               
fiscal year 2012  (FY 12), and every year  thereafter.  Referring                                                               
to  a  PowerPoint  presentation,  he noted  that  under  existing                                                               
Article IX,  Section 16,  of the  Alaska State  Constitution, the                                                               
appropriation limit is $2.5 billion  plus adjustments for changes                                                               
in   population  and   inflation;  this   was  estimated   to  be                                                               
approximately  $7.9  billion in  FY  08,  and approximately  $8.3                                                               
billion  in FY  09.   These  estimates are  far  higher than  the                                                               
budgets that actually passed the  legislature in those years.  He                                                               
then  offered his  understanding that  establishment of  the CBRF                                                               
[Article IX,  Section 17, of  the Alaska State  Constitution] was                                                               
another  attempt to  control State  spending, and  mentioned that                                                               
accessing the CBRF requires an affirmative three-fourths vote.                                                                  
                                                                                                                                
MR.  MILLER  referred  to  charts   included  in  his  PowerPoint                                                               
presentation  that  illustrated  inflation-adjusted  GF  spending                                                               
from FY 90 through FY  09; inflation-adjusted GF spending from FY                                                               
90 through  FY 09  compared with  actual GF  spending; inflation-                                                               
adjusted  GF spending  from FY  90  through FY  09 compared  with                                                               
actual GF spending and total GF revenue including non-mineral-                                                                  
related revenue;  and inflation-adjusted  GF spending from  FY 00                                                               
through FY 10 compared with  actual GF spending, total GF revenue                                                               
including  non-mineral-related  revenue,  and  the  amounts  that                                                               
would have been available for  appropriation had HJR 8's proposed                                                               
changes to  the Alaska  State Constitution  been in  effect since                                                               
FY 00.   He then,  in part in  response to  questions, reiterated                                                               
points made by  the sponsor during his explanation of  the HJR 8,                                                               
and assured  the committee that  HJR 8's proposed changes  to the                                                               
Alaska State  Constitution would not affect  the Alaska permanent                                                               
fund  - either  dividends, principal,  or earnings  - or  [monies                                                               
related to  the Amerada Hess  litigation], and that  the proposed                                                             
balanced budget account would not  be subject to what he referred                                                               
to as  the CBRF "sweep"  [outlined in Article IX,  Section 17(d),                                                               
of the Alaska State Constitution].                                                                                              
                                                                                                                                
MR. MILLER  then offered  his understanding that  a chart  in his                                                               
PowerPoint  presentation   provides  an  estimate  of   what  the                                                               
proposed five-year-averaged  appropriation limit would  have been                                                               
for  FY 10  had  HJR 8's  proposed changes  to  the Alaska  State                                                               
Constitution already been in effect.   In response to a question,                                                               
he indicated that  funds in the proposed  balanced budget account                                                               
would  not  be  limited  with   regard  to  what  they  could  be                                                               
appropriated for.                                                                                                               
                                                                                                                                
REPRESENTATIVE  KELLY   concurred.     In  response   to  another                                                               
question,  he indicated  that  HJR 8's  proposed  changes to  the                                                               
Alaska State Constitution would not  address any of the perceived                                                               
problems  currently  associated  with  the  CBRF's  appropriation                                                               
requirement of an affirmative three-fourths  vote, though in some                                                               
years,  the   proposed  changes   might  mitigate  the   need  to                                                               
appropriate from the CBRF.                                                                                                      
                                                                                                                                
MR. MILLER,  referring to  his PowerPoint  presentation, remarked                                                               
that HJR  8's proposed changes  to the Alaska  State Constitution                                                               
would  encourage  a  better and  simpler  budgeting  system  than                                                               
exists  now, would  avoid problems  with statutory  appropriation                                                               
constraints, would  allow the  voters to weigh  in on  the issue,                                                               
and would accommodate any future  approach that might be taken of                                                               
funding government with Alaska permanent fund earnings.                                                                         
                                                                                                                                
The committee took an at-ease from 1:27 p.m. to 1:28 p.m.                                                                       
                                                                                                                                
REPRESENTATIVE KELLY, in response  to comments, reiterated points                                                               
he'd made earlier in explanation of HJR 8.                                                                                      
                                                                                                                                
1:32:06 PM                                                                                                                    
                                                                                                                                
TAMARA COOK,  Director, Legislative Legal and  Research Services,                                                               
Legislative  Affairs  Agency  (LAA), in  response  to  questions,                                                               
explained that the  language on page 1, lines 8-9,  of HJR 8 that                                                               
reads, "mineral lease rentals,  royalties, royalty sale proceeds,                                                               
federal mineral  revenue sharing  payments and bonuses"  can also                                                               
be  found  in  Article  IX,  Section  15,  of  the  Alaska  State                                                               
Constitution  pertaining  to  the   Alaska  permanent  fund,  and                                                               
surmised,  therefore,  that  the  Alaska  Court  System  and  the                                                               
executive branch already have some  experience in construing that                                                               
language  in terms  of  which sources  are  dedicated under  that                                                               
constitutional provision.   Language  on page  1, lines  9-10, of                                                               
HJR  8  that  reads,  "every   State  tax  on  minerals,  mineral                                                               
production, or mineral transportation" would  be new and thus not                                                               
currently  addressed by  Article IX,  Section 15,  of the  Alaska                                                               
State Constitution.                                                                                                             
                                                                                                                                
MS. COOK, in terms of  potential constitutional problems, relayed                                                               
that  although HJR  8 does  satisfy  the single  subject rule  as                                                               
upheld in Bess v. Ulmer - in  terms of being just an amendment as                                                             
opposed  to  a revision  -  and  probably satisfies  the  court's                                                               
stipulation   that  a   proposed   constitutional  amendment   be                                                               
relatively simple and easy to  comprehend - regardless that HJR 8                                                               
is  somewhat complex  -  there  is a  possibility  that it  would                                                               
violate the  court's stipulation  that a  proposed constitutional                                                               
amendment not  seriously alter a  basic governmental  function of                                                               
one of the  major branches of government, since it  would be hard                                                               
to argue that  the power of appropriation is  anything other than                                                               
a  very basic  power  of the  legislative  branch of  government.                                                               
Therefore, to the  extent that HJR 8  would successfully restrict                                                               
the power of appropriation - and  that being its actual goal, she                                                               
pointed out  - the  question then becomes  whether the  court, in                                                               
any  ensuing  challenge, would  find  that  HJR 8  too  painfully                                                               
erodes  a   fundamental  power  of  the   legislative  branch  of                                                               
government.                                                                                                                     
                                                                                                                                
MS.  COOK, in  response  to a  question,  said she  is  not in  a                                                               
position to say  whether HJR 8 would be overturned  by the court;                                                               
instead,  she is  merely relaying  that HJR  8 is  susceptible to                                                               
challenge based on  the notion that the power  of the legislature                                                               
to appropriate  money is such  a significant power that  it ought                                                               
not  to be  eroded via  a constitutional  amendment.   She noted,                                                               
though,  that   there  were  several   constitutional  amendments                                                               
adopted  before Bess  which did  radically erode  the legislative                                                             
power  of  appropriation.   These  include  the creation  of  the                                                               
Alaska  permanent fund  -  which  placed a  great  deal of  money                                                               
outside of  the appropriation process, indefinitely,  forever, as                                                               
to the balance; the creation of  the CBRF, which imposes a higher                                                               
vote level  in order to reach  the money in most  situations; and                                                               
the  existing  constitutional  appropriation  limit,  which  some                                                               
purport to be ineffective because it's set too high.                                                                            
                                                                                                                                
MS. COOK  said that  although it could,  perhaps, be  argued that                                                               
those three examples  are more dramatic, in  monetary terms, than                                                               
HJR 8,  she is unable  to say that that  fact, in and  of itself,                                                               
could give a person a great  deal of reassurance that HJR 8 would                                                               
not be looked at very carefully  by the court, but, again, she is                                                               
not  predicting that  the court  would  necessarily overturn  it.                                                               
Rather, there  is a possibility  that the court, as  it partially                                                               
did  in Bess,  might simply  slightly rewrite  HJR 8  before it's                                                             
voted  on by  the  people,  though that  might  not  be the  case                                                               
either, and  the court might  instead just decide not  to address                                                               
the question until after it's approved by the voters.                                                                           
                                                                                                                                
1:43:27 PM                                                                                                                    
                                                                                                                                
DANA  L.  OLSON  indicated  a   concern  that  HJR  8's  language                                                               
regarding  [mineral   lease  rentals,  royalties,   royalty  sale                                                               
proceeds, federal  mineral revenue sharing payments  and bonuses,                                                               
and every State  tax on minerals, mineral  production, or mineral                                                               
transportation] might be interpreted in  such a way that it would                                                               
affect whether she could sell the oil and gas that she owns.                                                                    
                                                                                                                                
CHAIR RAMRAS closed public testimony on HJR 8.                                                                                  
                                                                                                                                
MS. COOK,  in response to questions,  provided comments regarding                                                               
the  Alaska   Permanent  Fund  Corporation  (APFC),   the  Alaska                                                               
permanent fund, and the permanent fund dividend (PFD).                                                                          
                                                                                                                                
REPRESENTATIVE HERRON asked whether any  attempt has been made to                                                               
set the  provisions of HJR  8 out in  statute rather than  in the                                                               
Alaska State Constitution.                                                                                                      
                                                                                                                                
MR. MILLER said  not that he's aware of, and  indicated that he'd                                                               
have to research the issue further.                                                                                             
                                                                                                                                
REPRESENTATIVE HOLMES  asked whether the calculation  outlined in                                                               
HJR 8 would be using fiscal years or calendar years.                                                                            
                                                                                                                                
MS. COOK  said it would  be using calendar years:   specifically,                                                               
the calculation  would be using  the amounts received  during the                                                               
four  full  calendar  years  immediately  preceding  the  current                                                               
fiscal year - so amounts received  during the portion of the past                                                               
calendar year that  is part of the current fiscal  year would not                                                               
be included  - and the  estimated amount expected to  be received                                                               
during the calendar year that's part of the current fiscal year.                                                                
                                                                                                                                
2:01:23 PM                                                                                                                    
                                                                                                                                
DAVID  TEAL,  Legislative  Fiscal  Analyst,  Legislative  Finance                                                               
Division, Alaska  State Legislature, in response  to comments and                                                               
questions,  explained  that  using  calendar  years  in  HJR  8's                                                               
proposed calculation is intended  to provide the legislature with                                                               
as much accurate information as  possible so that the legislature                                                               
can  determine  precisely  what amount  would  be  available  for                                                               
appropriation.    The   purpose  of  HJR  8  is   to  smooth  out                                                               
volatility, in that any peak-income  years would be averaged out,                                                               
as  would any  low-income  years; the  legislature  would not  be                                                               
constrained in any  given year by the amount  of revenue received                                                               
in that particular year.                                                                                                        
                                                                                                                                
CHAIR  RAMRAS  offered  his  understanding that  HJR  8  is  also                                                               
intended to cap spending.                                                                                                       
                                                                                                                                
MR. MILLER concurred.                                                                                                           
                                                                                                                                
MR. TEAL  pointed out, however,  that HJR  8 would not  have that                                                               
effect, because the legislature could  still access the CBRF with                                                               
an  affirmative three-fourths  vote.   House  Joint Resolution  8                                                               
would limit spending but would not  cap it; under HJR 8, spending                                                               
would be  constrained by revenue  - albeit revenue  averaged over                                                               
several  years -  whereas currently,  spending is  constrained by                                                               
both revenue and the available  balance.  In theory, the proposed                                                               
balanced  budget  account  would  never have  very  much  in  it,                                                               
because  funds would  be placed  in it  in peak  years, but  then                                                               
taken out  of it in lean  years, and, over time,  the legislature                                                               
would simply  spend everything that's  available to it  from that                                                               
account.   He  characterized  the current  spending  limit as  an                                                               
arbitrary number  unrelated to revenue  or what's  available, and                                                               
opined that  if the goal is  to have a balanced  budget, then any                                                               
such limit must be related to  the amount of revenue available to                                                               
the legislature.                                                                                                                
                                                                                                                                
REPRESENTATIVE  GRUENBERG, in  response to  an earlier  question,                                                               
referred to  the language on  page 2, lines  9-10, of HJR  8 that                                                               
reads,  "Money may  not be  appropriated from  the account",  and                                                               
offered  his   understanding  that  such  a   limitation  on  the                                                               
legislature's  appropriation  power  must come  from  the  Alaska                                                               
State Constitution, not from statute.                                                                                           
                                                                                                                                
MS. COOK concurred.                                                                                                             
                                                                                                                                
REPRESENTATIVE GRUENBERG  observed that  the language on  page 2,                                                               
lines 12-13, of HJR 8 that  reads, "Section 7 of the this article                                                               
does  not  apply  to  money   deposited  into,  retained  in,  or                                                               
transferred from the  balanced budget account" is  similar to the                                                               
language contained  in Article IX,  Section 17(a), of  the Alaska                                                               
State Constitution  that reads,  "Section 7  of the  this article                                                               
does  not  apply  to  deposits   made  to  the  fund  under  this                                                               
subsection".   However,  there  is no  such  similar language  in                                                               
Article  IX,  Section  15,  of   the  Alaska  State  Constitution                                                               
pertaining to the Alaska permanent  fund.  Article IX, Section 7,                                                               
of  the   Alaska  State  Constitution,  he   ventured,  basically                                                               
prohibits dedicated funds.  He  questioned, therefore, whether an                                                               
amendment  to  Article  IX,  Section  15,  of  the  Alaska  State                                                               
Constitution  - stipulating  that  Section 7  does  not apply  to                                                               
Section 15 - would be in order.                                                                                                 
                                                                                                                                
2:10:23 PM                                                                                                                    
                                                                                                                                
MS. COOK explained that such  an amendment would not be necessary                                                               
because Article IX,  Section 7, of the  Alaska State Constitution                                                               
contains language stating  that it does not apply  to Article IX,                                                               
Section 15.   In response  to comments,  she relayed that  as the                                                               
drafter of  HJR 8, she chose  not to add an  amendment to Article                                                               
IX, Section 7, of the  Alaska State Constitution stipulating that                                                               
it  wouldn't  apply  to  proposed Article  IX,  Section  16;  she                                                               
instead  chose to  imbed the  exemption from  Section 7  directly                                                               
into  proposed  Section  16,  whereas  the  person  drafting  the                                                               
language  currently  in  Section  15  pertaining  to  the  Alaska                                                               
permanent  fund  chose  the  other  approach,  that  of  amending                                                               
Section 7.                                                                                                                      
                                                                                                                                
MR.  TEAL  and  MS.  COOK then  briefly  responded  to  questions                                                               
unrelated to HJR 8.                                                                                                             
                                                                                                                                
CHAIR  RAMRAS offered  his belief  that HJR  8 complies  with the                                                               
Alaska State Constitution.                                                                                                      
                                                                                                                                
2:18:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HOLMES  relayed that she  would like to  know more                                                               
about  HJR 8  before  she  would be  comfortable  moving it  from                                                               
committee.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  HERRON agreed  with  Chair Ramras,  characterized                                                               
the proposed balanced budget account  as merely a miniature CBRF,                                                               
and indicated  that he  would be  amenable to  moving HJR  8 from                                                               
committee.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  GRUENBERG characterized  HJR 8's  proposed change                                                               
to the Alaska State Constitution as fairly serious.                                                                             
                                                                                                                                
REPRESENTATIVE  HOLMES, in  response  to  a question,  reiterated                                                               
that she  would like to  know more about  HJR 8 before  moving it                                                               
from committee, and so would prefer that the bill be held over.                                                                 
                                                                                                                                
CHAIR RAMRAS relayed that HJR 8 would be held over.                                                                             
                                                                                                                                
            HB 146 - TRANSFER RESTRICTIONS ON TRUSTS                                                                        
                                                                                                                                
2:22:36 PM                                                                                                                    
                                                                                                                                
CHAIR RAMRAS announced that the  final order of business would be                                                               
HOUSE BILL NO. 146, "An  Act relating to transfer restrictions on                                                               
trust interests."                                                                                                               
                                                                                                                                
REPRESENTATIVE  GRUENBERG  indicated  that  he's  heard  concerns                                                               
regarding Section 3 of HB 146.                                                                                                  
                                                                                                                                
2:24:30 PM                                                                                                                    
                                                                                                                                
JANE W.  PIERSON, Staff, Representative Jay  Ramras, Alaska State                                                               
Legislature,  on behalf  of the  sponsor, Representative  Ramras,                                                               
explained that  HB 146 would  - by amending AS  34.40.110(b)(1) -                                                               
clarify that  a creditor must  establish by clear  and convincing                                                               
evidence that a  transfer of property in trust was  made with the                                                               
intent to defraud  him/her; would - by adding  a new subparagraph                                                               
(E) to AS 34.40.110(b)(3) -  clarify that a spendthrift provision                                                               
would  apply to  a  trust  if distributions  are  made under  the                                                               
exercise  of discretion  by a  trustee  who is  not the  settlor,                                                               
regardless of whether  the exercise of discretion  is governed by                                                               
a  standard; would  -  by adding  a new  subparagraph  (F) to  AS                                                               
34.40.110(b)(3)  -  provide that  a  spendthrift  provision in  a                                                               
trust applies  even though the  trustee may distribute  income or                                                               
principal to the  settlor or to pay income taxes;  and would - by                                                               
amending AS 34.40.110(l) - clarify  that a beneficiary's interest                                                               
in a trust, regardless of  whether it's vested, is not considered                                                               
a factor  or economic  circumstance in  the division  of property                                                               
subject  to divorce.   Additionally,  HB 146  makes a  conforming                                                               
change  to AS  34.40.110(b)(2)  to reflect  the  addition of  new                                                               
subparagraphs (E)  and (F) to  AS 34.40.110(b)(3); and  amends AS                                                               
34.40.110(h)  such that  a  transfer  restriction is  enforceable                                                               
even if  the settlor has the  authority to appoint or  remove and                                                               
replace a trustee, a trust protector, or an advisor.                                                                            
                                                                                                                                
REPRESENTATIVE GRUENBERG characterized the  proposed change to AS                                                               
34.40.110(l) -  via Section 3  of HB 146  - as a  complete change                                                               
rather  than  just a  clarification,  remarked  that he  and  the                                                               
attorneys who  practice divorce law  in Alaska have  concern with                                                               
Section 3,  and indicated  a belief that  it would  overrule some                                                               
supreme court cases.                                                                                                            
                                                                                                                                
MS. PIERSON surmised  that others could better  address that last                                                               
point.                                                                                                                          
                                                                                                                                
2:29:11 PM                                                                                                                    
                                                                                                                                
DANA  L.  OLSON indicated  a  belief  that  HB 146  as  currently                                                               
written  would  conflict with  federal  rules,  and would  create                                                               
problems for her.                                                                                                               
                                                                                                                                
[Chair Ramras turned the gavel over to Vice Chair Dahlstrom.]                                                                   
                                                                                                                                
MS. OLSON,  in response to  questions, recounted  further details                                                               
about her specific situation.                                                                                                   
                                                                                                                                
[Vice Chair Dahlstrom returned the gavel to Chair Ramras.]                                                                      
                                                                                                                                
MS. OLSON  then indicated a belief  that Representative Gruenberg                                                               
has  a conflict  of  interest, and  that  unless the  legislature                                                               
takes a deposition, HB 146 wouldn't apply to her.                                                                               
                                                                                                                                
REPRESENTATIVE GRUENBERG  offered his  understanding that  HB 146                                                               
would not affect Ms. Olson's  situation because the bill pertains                                                               
to private trusts.                                                                                                              
                                                                                                                                
2:37:10 PM                                                                                                                    
                                                                                                                                
DOUGLAS J.  BLATTMACHR, President and CEO,  Alaska Trust Company,                                                               
said the Alaska Trust Company  supports HB 146, believing it will                                                               
keep Alaska in the forefront of  states providing for trusts.  He                                                               
indicated  that both  his company  and the  State have  benefited                                                               
from nonresidents setting up trusts in Alaska.                                                                                  
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked whether Section 3  would have the                                                               
effect of overruling some Alaska Supreme Court decisions.                                                                       
                                                                                                                                
MR.  BLATTMACHR surmised  that others  could better  address that                                                               
point.                                                                                                                          
                                                                                                                                
2:39:31 PM                                                                                                                    
                                                                                                                                
DAVID  G. SHAFTEL,  Attorney at  Law,  after noting  that he's  a                                                               
member  of  an  informal  group  that's  recommended  changes  to                                                               
Alaska's trust laws to the  legislature, and that he was involved                                                               
in drafting HB 146, indicated that  Section 3 is meant to address                                                               
a  potential problem  with existing  AS  34.40.110(l), which,  he                                                               
posited, was intended to ensure  that trust assets of a divorcing                                                               
beneficiary wouldn't  be given  to his/her  soon-to-be-ex spouse,                                                               
and that  such trust  assets can't even  be considered  as assets                                                               
for purposes of property division in a divorce.                                                                                 
                                                                                                                                
[Chair Ramras turned the gavel over to Vice Chair Dahlstrom.]                                                                   
                                                                                                                                
MR.  SHAFTEL  explained that  "a  practitioner"  in Colorado  has                                                               
recommended that AS 34.40.110(l) be  bolstered, and so that's the                                                               
intent   of  adding   the  language,   "a   factor  or   economic                                                               
circumstance in  the division  of" to AS  34.40.110(l).   He then                                                               
referred to the Alaska Supreme  Court's 2006 decision in Krize v.                                                             
Krize, 145 P.3d  481, and offered a  hypothetical example wherein                                                             
a beneficiary's trust assets do get considered during a divorce.                                                                
                                                                                                                                
REPRESENTATIVE  GRUENBERG indicated  a  belief  that adoption  of                                                               
Section  3 would  have the  effect of  overturning more  than one                                                               
court  case,  that existing  law  is  sufficient to  address  Mr.                                                               
Shaftel's concerns,  and that the circumstances  in Mr. Shaftel's                                                               
hypothetical example are unlikely to occur.                                                                                     
                                                                                                                                
2:52:37 PM                                                                                                                    
                                                                                                                                
MICHAEL  A.  GERSHEL, Attorney  at  Law,  expressed concern  that                                                               
Section 3's proposed change would  have a detrimental effect, and                                                               
concurred that existing law is sufficient.                                                                                      
                                                                                                                                
2:56:55 PM                                                                                                                    
                                                                                                                                
JACOB A.  SONNEBORN, Attorney at Law,  indicated concurrence with                                                               
Mr.  Gershel and  Representative Gruenberg  that existing  law is                                                               
sufficient.                                                                                                                     
                                                                                                                                
[Vice Chair Dahlstrom returned the gavel to Chair Ramras.]                                                                      
                                                                                                                                
CHAIR  RAMRAS  questioned what  would  occur  if Section  3  were                                                               
deleted.                                                                                                                        
                                                                                                                                
MR. SHAFTEL indicated that existing  AS 34.40.110(l) would simply                                                               
remain un-clarified.                                                                                                            
                                                                                                                                
CHAIR RAMRAS surmised  that without Section 3, HB  146 would have                                                               
the support of the committee.                                                                                                   
                                                                                                                                
CHAIR RAMRAS closed public testimony on HB 146.                                                                                 
                                                                                                                                
3:00:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAHLSTROM made  a motion to adopt  Amendment 1, to                                                               
delete  Section  3  of  HB   146.    There  being  no  objection,                                                               
Amendment 1 was adopted.                                                                                                        
                                                                                                                                
3:01:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAHLSTROM moved to report  HB 146, as amended, out                                                               
of   committee   with    individual   recommendations   and   the                                                               
accompanying  fiscal  notes.   There  being  no  objection,  CSHB                                                               
146(JUD)  was   reported  from   the  House   Judiciary  Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
3:04:14 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Judiciary Standing Committee meeting was adjourned at 3:04 p.m.