Legislature(2009 - 2010)CAPITOL 106

03/31/2009 03:00 PM House HEALTH & SOCIAL SERVICES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 192(HSS) Out of Committee
Heard & Held
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
HB 190-CHILDREN'S TRUST GRANT FOR ENDOWMENT                                                                                   
4:13:01 PM                                                                                                                    
CO-CHAIR HERRON announced that the  final order of business would                                                               
be HOUSE BILL NO. 190,  "An Act privatizing the Alaska children's                                                               
trust   as  a   separate   endowment  fund;   providing  for   an                                                               
administrator for  the assets of  the former  trust; establishing                                                               
conditions  for a  grant  of  the balance  of  the former  Alaska                                                               
children's trust;  designating certain receipts as  available for                                                               
grants to the  trust's successor; and providing  for an effective                                                               
4:13:25 PM                                                                                                                    
REPRESENTATIVE  ANNA FAIRCLOUGH,  Alaska State  Legislature, read                                                               
that "the  mission of the  Trust [Alaska Children's  Trust (ACT)]                                                               
was to  improve the  status of children  in Alaska  by generating                                                               
funds  and  committing resources  to  eliminate  child abuse  and                                                               
neglect."   She  reported that  the Alaska  Children's Trust  was                                                               
established in 1988,  and in 1996, it was  given an appropriation                                                               
of $6 million by the state  of Alaska.  She discussed the current                                                               
value  of  the  trust,  and  stated  that  the  Alaska  Community                                                               
Foundation  had lost  less investment  value  than the  Permanent                                                               
Fund.    She  identified  FACT  as  the  Friends  of  the  Alaska                                                               
Children's Trust,  a private group which  raised additional funds                                                               
to  address child  abuse and  neglect in  Alaska.   She explained                                                               
that donors to FACT could  not specifically dedicate funds as all                                                               
the donations  went into the state  of Alaska general fund.   She                                                               
described  that  ACT  grants  could   only  fund  to  a  specific                                                               
percentage  each  year,  which  she   opined  was  not  good  for                                                               
addressing the long term issues of  child abuse and neglect.  She                                                               
presented that  the Alaska Community  Foundation would  be better                                                               
suited  to  manage   the  ACT  funds,  and   would  give  greater                                                               
flexibility for  generating and distributing dollars.   She noted                                                               
that  it was  currently  implied in  state  statute that  funding                                                               
could only  be used  for programs of  prevention for  child abuse                                                               
and neglect,  and not for research.   She summarized that  HB 190                                                               
would allow:  a public-private partnership, a  consistent funding                                                               
stream,  a   change  in  fund   management,  and   for  continued                                                               
administrative cost  to be provided  by marriage  licenses, birth                                                               
certificates,  and   special  request  children's   fund  license                                                               
4:19:51 PM                                                                                                                    
CRYSTAL  KOENEMAN,  Staff   to  Representative  Anna  Fairclough,                                                               
Alaska State Legislature, presented  the sectional analysis on HB
190.   [Included in  the members' packets.]   She  explained that                                                               
Sections  1-5  allowed  the   legislature  to  appropriate  funds                                                               
generated    from   birth    certificates,   heirloom    marriage                                                               
certificates,  and   children's  fund  special   license  plates,                                                               
account  for them  separately, and  to  give these  funds to  the                                                               
endowment fund  held by the  charitable named  recipient grantee.                                                               
She noted  that Section 6  discussed management of  the endowment                                                               
fund, which  allowed the legislature  to transfer the  balance of                                                               
the ACT to  a charitable named recipient grantee, and  to be held                                                               
as  a  permanent  endowment  fund for  child  abuse  and  neglect                                                               
prevention activities.  She discussed  Section 7, which created a                                                               
grant  administrator and  determined  the duties.   She  affirmed                                                               
that  Section 8  was  clean  up language  to  repeal current  ACT                                                               
statutes.   She said that  Section 9 amended the  Uncodified law,                                                               
and explained that it was  contingent on the appropriation of the                                                               
ACT  funds to  a named  recipient grantee.   She  summarized that                                                               
Section 10 explained the effective date of the act.                                                                             
4:25:26 PM                                                                                                                    
CO-CHAIR HERRON  asked for  clarification of  the March  30, 2009                                                               
memorandum   from  Legislative   Legal  and   Research  Services,                                                               
discussing  the   ACT  reference  after  repeal   of  the  trust.                                                               
[Included in the members' packets.]                                                                                             
4:25:50 PM                                                                                                                    
MS.  KOENEMAN  asked  if  he  was  referring  to  the  memo  that                                                               
accompanied the amendment.                                                                                                      
4:26:41 PM                                                                                                                    
CO-CHAIR HERRON agreed.                                                                                                         
REPRESENTATIVE FAIRCLOUGH said that  there were conflicting legal                                                               
opinions  to the  ability of  the legislature  to appropriate  an                                                               
asset and allow another party to manage those funds.                                                                            
4:28:07 PM                                                                                                                    
MS. KOENEMAN  confirmed that the  Legislative Legal  and Research                                                               
Services memorandum  [Included in  the members'  packets.] stated                                                               
that making  this an endowment  fund which referenced  a repealed                                                               
trust that no  longer existed in statute, for the  purpose of fee                                                               
collection, created  an unenforceable provision in  codified law.                                                               
She reasoned  that the  public recognized  the license  plates as                                                               
Alaska  Children's Trust  plates,  so that  maintaining the  same                                                               
name would avoid unnecessary confusion for donations.                                                                           
4:29:45 PM                                                                                                                    
CARLEY LAWRENCE,  Chair, Friends  of the Alaska  Children's Trust                                                               
(FACT)  Board, pointed  out  that  the code  of  ethics for  fund                                                               
raising stated  that contributions  should be used  in accordance                                                               
with donors'  intentions.   She ascertained  that FACT  could not                                                               
guarantee  that  the   donors'  intent  would  be   met,  as  the                                                               
legislature had  control of the  funds.  She explained  that this                                                               
limited the  FACT trust  from generating  additional funds.   She                                                               
offered her support for HB 190.                                                                                                 
4:31:44 PM                                                                                                                    
SAMMYE  POKRYFKI, Vice  Chair, Friends  of the  Alaska Children's                                                               
Trust  (FACT), said  that she  supported HB  190.   She confirmed                                                               
that the primary purpose of FACT  was to raise funds for the ACT.                                                               
She  reiterated  the  ethical dilemma  of  honoring  the  donor's                                                               
intent when they  solicited contributions.  She  stated that only                                                               
the dividends and interest generated  by the trust were available                                                               
for grants, and that this  was an unpredictable amount each year.                                                               
She explained that establishing this  trust as an endowment would                                                               
allow donations  to be spent as  intended, and it would  ensure a                                                               
predictable distribution  each year.   She  said that  FACT board                                                               
members voted unanimously for privatization of the ACT.                                                                         
4:33:53 PM                                                                                                                    
ARLISS STURGULEWSKI  said that she was  a supporter of ACT.   She                                                               
mentioned that she  was a legislator when ACT  was introduced and                                                               
funded.   She offered  her support for  the privatization  of the                                                               
trust, as she  believed that meeting the donors'  intent was very                                                               
4:36:46 PM                                                                                                                    
DIANE KAPLAN,  Board Member, Alaska Children's  Trust (ACT), said                                                               
that  she had  been  involved with  the trust  for  more than  12                                                               
years.    She  said  that the  restrictions  of  current  funding                                                               
structure made it difficult to have  an impact on the goal of ACT                                                               
to eliminate child abuse and neglect.                                                                                           
4:40:09 PM                                                                                                                    
CO-CHAIR KELLER asked what the criteria were for funding.                                                                       
4:41:18 PM                                                                                                                    
MS.  KAPLAN said  that the  focus was  on new,  young first  time                                                               
parents  in rural  communities.   She  shared  that research  had                                                               
indicated that young people were not prepared to become parents.                                                                
4:43:02 PM                                                                                                                    
GINGER BAIM,  Executive Director, Safe and  Fear Free Environment                                                               
(SAFE),  stated that  SAFE had  been a  recipient of  ACT grants.                                                               
She  explained  some  of  its  prevention  work,  which  included                                                               
substance abuse and  fetal alcohol syndrome.  She  said that SAFE                                                               
supported privatization  of ACT,  as it  would assure  steady and                                                               
dependable  grant  management.   She  agreed  that  privatization                                                               
would  increase  and  enhance  donors,  as  the  donor  would  be                                                               
guaranteed the  funds were used  as intended.  She  expressed her                                                               
support of HB 190.                                                                                                              
4:46:49 PM                                                                                                                    
CAROL SIMONETTI,  President &  CEO, Alaska  Community Foundation,                                                               
explained  the background  of  the  Alaska Community  Foundation,                                                               
which was  proposed as the  fiscal sponsor of the  endowment fund                                                               
for the  ACT.   She shared  that it had  been in  existence since                                                               
1996, and that it was one  of more than 700 community foundations                                                               
across the  country.   She reported  that it  had $35  million in                                                               
assets in more than 210 funds, and  that in 2008, it had paid out                                                               
more than  $10 million in grants.   She explained that  it was an                                                               
endowment with  a mission to  build charitable resources  to meet                                                               
current  needs.   She  explained  the  reasons  it would  be  the                                                               
appropriate choice to  manage an endowment fund  to prevent child                                                               
abuse and neglect,  which included an assurance  that funds would                                                               
be used  for the  intended purpose, and  that the  foundation had                                                               
expertise in the management of endowed funds.                                                                                   
4:52:03 PM                                                                                                                    
PANU LUCIER,  Executive Director,  Alaska Children's  Trust (ACT)                                                               
and  Friends of  the  Alaska Children's  Trust (FACT),  explained                                                               
that the groups believed that there  was a better way to increase                                                               
grant funds and  reach underserved communities.   She opined that                                                               
privatizing ACT would enhance the  ability to focus grants in the                                                               
highest need  areas.   She said  it would allow  ACT and  FACT to                                                               
merge and  take on  ethical fundraising to  ensure the  long term                                                               
stability  of the  funds, with  a  more efficient  process.   She                                                               
opined  that this  would still  protect the  original legislative                                                               
intent to create a children's trust in perpetuity.                                                                              
4:59:57 PM                                                                                                                    
MARGARET VOLZ,  Vice Chair, Alaska Children's  Trust (ACT) Board,                                                               
agreed that  privatization would allow flexibility  in the choice                                                               
of programs for  prevention of child abuse and in  the pursuit of                                                               
5:03:28 PM                                                                                                                    
JERRY BURNETT, Deputy Commissioner,  Department of Revenue (DOR),                                                               
said  that both  the commissioners  of Department  of Health  and                                                               
Social   Services  and   Department   of   Education  and   Early                                                               
Development voted to  privatize ACT.  He  acknowledged that there                                                               
were  problems  with the  current  management  of  the ACT.    He                                                               
reported that  the trust had  about $7.2 million, which  was part                                                               
of the  $15 billion that DOR  managed, and he detailed  the asset                                                               
allocations  for the  trust.   He  explained that  the trust  was                                                               
divided  into  two accounts,  the  income  account and  the  main                                                               
account.   He stated that  currently only the income  account was                                                               
spendable.   He  said that  legislation could  make the  trust an                                                               
endowment, which could  allow access to more of the  account.  He                                                               
expressed  concern with  the concept  of taking  state money  and                                                               
granting it  to a  private organization  for management  toward a                                                               
specific outcome.                                                                                                               
5:07:48 PM                                                                                                                    
CO-CHAIR  HERRON suggested  that DOR  had not  done "a  very good                                                               
job" with management of the trust.                                                                                              
5:08:37 PM                                                                                                                    
MR. BURNETT, in response to  Co-Chair Herron, said that the asset                                                               
allocation for  the trust  was based on  investments with  a long                                                               
time horizon.   He patiently explained that the  stock market had                                                               
its third  worst performance in the  last 218 years.   He pointed                                                               
out that the trust performance  was similar to the Constitutional                                                               
Budget Reserve  account and  the Permanent  Fund account,  all of                                                               
which had  been professionally managed with  the appropriate time                                                               
5:09:59 PM                                                                                                                    
CO-CHAIR  HERRON  expressed  concern with  the  longer  financial                                                               
history, and  he opined that,  as the trust  was a small  part of                                                               
the much  larger investment portfolio,  it was not a  big concern                                                               
for DOR.                                                                                                                        
5:11:08 PM                                                                                                                    
REPRESENTATIVE SEATON  asked if  this issue  was parallel  to the                                                               
Supreme  Court decision  which rendered  as unconstitutional  the                                                               
University of Alaska land endowment.                                                                                            
5:12:02 PM                                                                                                                    
MR.   BURNETT  agreed   that   this  was   an   issue  that   the                                                               
administration  was  still  reviewing.    He  detailed  that  the                                                               
account income was appropriated each  year by the legislature and                                                               
transferred to a private account  which dedicated the money for a                                                               
specific  purpose.   He  asked  if  this  was  a way  around  the                                                               
constitutional provision against dedicated funds.                                                                               
5:12:55 PM                                                                                                                    
REPRESENTATIVE SEATON,  in response to Co-Chair  Herron, asked if                                                               
the  objection   was  for   the  legislature   not  appropriating                                                               
sufficient  money  out of  the  income  fund,  or that  the  fund                                                               
management had not generated sufficient money.                                                                                  
5:13:26 PM                                                                                                                    
MR. BURNETT, in response to  Representative Seaton, said that the                                                               
fund could  only spend  dividends and gains,  which were  part of                                                               
the  income  account.   He  explained  that  the income  was  not                                                               
consistent from year  to year; therefore the grants  would not be                                                               
consistent.   He expressed that  this would be different  with an                                                               
endowment account, whereby a percentage  could be appropriated to                                                               
provide more consistent available income.                                                                                       
5:14:41 PM                                                                                                                    
REPRESENTATIVE SEATON  asked if it  was possible for  a statutory                                                               
change to a percent of market value (POMV) for the ACT.                                                                         
5:14:51 PM                                                                                                                    
MR. BURNETT replied that he was  not aware of anything to prevent                                                               
5:14:59 PM                                                                                                                    
MS.  KAPLAN  said   that  an  endowment  fund   was  managed  for                                                               
consistency.     She  said  that   ACT  had  been   requesting  a                                                               
legislative change for many years,  but that it had not happened.                                                               
She noted the  hesitancy of donors to write a  check to the state                                                               
of Alaska, when their intent was to donate to ACT.                                                                              
5:17:10 PM                                                                                                                    
REPRESENTATIVE  FAIRCLOUGH  said  that   she  had  met  with  the                                                               
attorney general, and  was wanting for a ruling.   She emphasized                                                               
that this was a life  changing issue that affected children every                                                               
day.  She explained that putting  the ACT into an endowment would                                                               
still  allow  the   governor  to  appoint  the   board,  and  the                                                               
legislature to maintain the fund in perpetuity.                                                                                 
[HB 190 was held over.]                                                                                                         

Document Name Date/Time Subjects
HSS192pkt.PDF HHSS 3/31/2009 3:00:00 PM
HSS190pkt.PDF HHSS 3/31/2009 3:00:00 PM
HSS71pkt.PDF HHSS 3/31/2009 3:00:00 PM