Legislature(2009 - 2010)CAPITOL 120

04/09/2010 01:00 PM JUDICIARY

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* first hearing in first committee of referral
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= bill was previously heard/scheduled
<Bill Hearing Canceled>
Moved HCS SB 43(JUD) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
                 SB 284 - CAMPAIGN EXPENDITURES                                                                             
3:15:01 PM                                                                                                                    
CHAIR RAMRAS announced that the  final order of business would be                                                               
CS  FOR SENATE  BILL  NO.  284(FIN), "An  Act  relating to  state                                                               
election  campaigns,  the duties  of  the  Alaska Public  Offices                                                               
Commission,  the reporting  and  disclosure  of expenditures  and                                                               
independent  expenditures,   the  filing  of  reports,   and  the                                                               
identification  of  certain   communications  in  state  election                                                               
campaigns; prohibiting expenditures  and contributions by foreign                                                               
nationals  in state  elections;  and providing  for an  effective                                                               
3:19:34 PM                                                                                                                    
JOHN PTACIN, Assistant Attorney  General, Labor and State Affairs                                                               
Section,  Civil Division  (Anchorage), Department  of Law  (DOL),                                                               
explained that  DOL feels that Alaska's  expenditure restrictions                                                               
on  corporations,  labor unions,  and  other  entities is  likely                                                               
unconstitutional.   He noted  that SB  284 considers  the current                                                               
disclaimer  and   disclosure  laws   and  changes  the   law  for                                                               
restricting  expenditures by  corporations  and  labor unions  in                                                               
candidate elections.   He allowed that  disclosure and disclaimer                                                               
laws are  still given a lot  of scrutiny, as they  uncover hidden                                                               
interests  and deter  reporting violations.   He  emphasized that                                                               
disclaimer and disclosure  laws still need to show  that they are                                                               
only a modest burden on free speech rights.                                                                                     
3:22:17 PM                                                                                                                    
CHARLES DUNNAGAN,  Resource Development Council  (RDC), referring                                                               
to  Section 10  on  page  5, opined  that  the  general rule  for                                                               
expenditures  and  contributions  by  foreign  nationals  tracked                                                               
federal law, but he directed  attention to line 29, (b)(5), which                                                               
disallowed  election  contributions from  domestic  subsidiaries.                                                               
He  offered  his  belief  that  this  created  a  class  of  U.S.                                                               
corporations that  no longer  have First  Amendment rights  in an                                                               
Alaskan election.   He pointed out that  contributions by foreign                                                               
nationals are  already illegal  in a state  election.   He opined                                                               
that this  would add a  new class  of person to  be discriminated                                                               
MR.  DUNNAGAN explained  that domestic  subsidiaries of  American                                                               
corporations  have   been  given   a  right  to   participate  in                                                               
elections, but that subsection (b)(5)  eliminates that right.  He                                                               
said  that it  was  not necessary  to create  a  rule to  prevent                                                               
direct and indirect contributions  from foreign nationals because                                                               
it was  already illegal.   He opined  that this  created concerns                                                               
for First  Amendment, due process,  and equal  protection rights.                                                               
He expressed concern  for the drafting of parts of  the bill.  He                                                               
pointed  to   proposed  AS  15.13.068(b)(2)-(4),   which  defines                                                               
domestic subsidiary  and noted  that there was  not a  mention of                                                               
individual foreign  nationals.   He said  that for  an individual                                                               
foreign national  with a wholly  owned corporation,  the domestic                                                               
subsidiary rule  did not  apply, while an  Alaskan working  for a                                                               
company  of more  than  50 percent  foreign  ownership could  not                                                               
participate in an  election campaign.  He  commented that issuing                                                               
public  traded stock  was how  American businesses  raised money.                                                               
He opined that this change  could affect the investment decisions                                                               
of foreign investors.                                                                                                           
MR.  DUNNAGAN  referred to  a  March  17, 2010,  memorandum  from                                                               
Legislative  Legal and  Research Services  [Included in  members'                                                               
packets.] which raised questions for  the right of Alaska to pass                                                               
a law different than federal law  and regulation.  He stated that                                                               
this part  of SB 284 is  badly drafted legislation.   He directed                                                               
attention to page 6, lines  3-7, subsection (c), which "prohibits                                                               
conduct only  to the extent  that federal law prohibits  the same                                                               
conduct."   He  referred back  to page  5, line  29, (b)(5),  and                                                               
noted  that  this  was  not  in  federal  law,  and  opined  that                                                               
subsection (c) would  nullify subsection (b)(5).   He stated that                                                               
courts  do  not  like  to  interpret  legislation  as  nullifying                                                               
itself.   He called this  section "a complete  litigation magnet"                                                               
and that there was  no idea how the court will  interpret it.  He                                                               
emphatically stated  that he "cannot  see how this  provision has                                                               
anything to do with disclaimer or disclosure rules."                                                                            
CHAIR RAMRAS  agreed that  he wants  to encourage  disclosure but                                                               
did not want to limit discourse.                                                                                                
REPRESENTATIVE  GRUENBERG asked  if the  concern was  for all  of                                                               
Section 10, or solely for subsection (b)(5).                                                                                    
MR.  DUNNAGAN, responding  to  Representative Gruenberg,  offered                                                               
his belief that  all of Section 10 is problematic,  as it parrots                                                               
existing law.  He reflected that  Section 10(b)(5) "is a mess and                                                               
it's clearly unconstitutional."                                                                                                 
3:31:41 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG directed  attention  to paragraph  (5),                                                               
and asked  if Mr.  Dunnagan was aware  of any  other jurisdiction                                                               
that  has enacted  anything similar,  and  if there  was a  court                                                               
MR. DUNNAGAN replied no.                                                                                                        
REPRESENTATIVE   GRUENBERG  asked   whether  there   was  federal                                                               
precedent for Section 10, if paragraph (5) were eliminated.                                                                     
MR. DUNNAGAN agreed.                                                                                                            
REPRESENTATIVE GRUENBERG  asked if any states  have enacted state                                                               
laws similar to  that remainder of Section  10 [without paragraph                                                               
MR. DUNNAGAN replied that he did not know.                                                                                      
REPRESENTATIVE  GRUENBERG   asked  about  any  court   cases  for                                                               
challenges to similar federal legislation.                                                                                      
MR. DUNNAGAN replied  that there were none, and he  was not aware                                                               
of any pending litigation.                                                                                                      
REPRESENTATIVE  GRUENBERG asked  if  there was  concern with  any                                                               
other provisions of SB 284.                                                                                                     
MR.  DUNNAGAN replied  that his  comments and  concerns were  for                                                               
Section 10 specifically.                                                                                                        
REPRESENTATIVE GRUENBERG  offered his  belief that  one potential                                                               
reason for including subsection (b)(5) would be to:                                                                             
     Prevent  a foreign  national  that  would be  precluded                                                                    
     from  contributing,  from  simply  forming  a  domestic                                                                    
     subsidiary to get around the law.   It seems to me that                                                                    
     there is  an old equity  maxim that says 'the  law will                                                                    
     not permit  something to be done  indirectly that could                                                                    
     not  be  done directly.'    Isn't  this a  valid  state                                                                    
     purpose  to prevent  somebody from  setting up  a shell                                                                    
     domestic corporation to evade the general prohibition?                                                                     
3:35:02 PM                                                                                                                    
MR. DUNNAGAN agreed,  but then he questioned the  agenda for what                                                               
is  currently  written.    He  relayed that  it  is  a  difficult                                                               
question,  especially  as  to  how   many  levels  [of  corporate                                                               
ownership] this would  apply.  He pointed out that  there are not                                                               
many definitions and  almost no court guidance.   He again voiced                                                               
his belief  that direct and  indirect contributions  from foreign                                                               
nationals are  illegal.  Referring  to domestic  subsidiaries, he                                                               
said that  indirect contributions are  already illegal.   He said                                                               
that  SB 284  creates a  problem, as  it will  not allow  foreign                                                               
nationals a  51 percent  ownership in a  business, and  this will                                                               
make it  difficult for a  business to  raise capital.   He opined                                                               
that SB 284 goes beyond what  is necessary to protect Alaska from                                                               
inappropriate influence from foreign nationals.                                                                                 
REPRESENTATIVE  GRUENBERG replied  that SB  284 did  not prohibit                                                               
foreign ownership;  it only  prohibited a  political contribution                                                               
from the business.  He posited that  if the only reason to set up                                                               
a domestic  subsidiary was for its  political contributions, then                                                               
it would be a sham.                                                                                                             
MR. DUNNAGAN  responded that he  did not agree, as  the reference                                                               
in SB 284  was to "domestic corporations controlled  by a foreign                                                               
entity."  He  opined that with the passage of  SB 284, a business                                                               
could follow  lawful procedures  and yet  violate the  law, which                                                               
itself would be  a violation of both the First  Amendment and the                                                               
United  States  Supreme  Court's  ruling in  Citizens  United  v.                                                             
Federal Election Commission.                                                                                                  
3:38:53 PM                                                                                                                    
JASON  BRUNE, Executive  Director,  Resource Development  Council                                                               
(RDC), shared that  the RDC had been actively  involved in ballot                                                               
measures,  including "the  cruise ship  head tax  initiative, the                                                               
gas reserves  initiative, and  the clean  water initiative."   He                                                               
went on to say:                                                                                                                 
     The industries that were  targeted by these initiatives                                                                    
     have  spent  billions  of  dollars  investing  in  this                                                                    
     state.   Each industry  employs hard  working Alaskans,                                                                    
     and each pays significant  taxes to the state treasury.                                                                    
     Be it  fishing, tourism,  oil and  gas, or  mining, RDC                                                                    
     members  have  a  vested interest  in  defending  their                                                                    
     investments.    By  doing   business  in  Alaska  these                                                                    
     businesses have  demonstrated that  they have a  dog in                                                                    
     any  initiative fight  and they  should  be allowed  to                                                                    
     participate in the process.   However, ... [proposed AS                                                                    
     15.13.068] appears to  potentially impact an investor's                                                                    
     ability  to  fight  an  initiative  that  targets  them                                                                    
     because  they are  a domestic  subsidiary of  a foreign                                                                    
MR.   BRUNE  offered   his   understanding   that  according   to                                                               
Legislative Legal  and Research  Services, proposed  AS 15.13.068                                                               
only applies  to a domestic  subsidiary of a foreign  national to                                                               
the extent  that the foreign  national is making the  decision or                                                               
is financing  that domestic subsidiary's  involvement in  a state                                                               
election,  and  does not  prohibit  a  domestic subsidiary  of  a                                                               
foreign  national from  involving  itself in  state elections  if                                                               
it's using  money that was made  in Alaska or the  United States,                                                               
and the  decision to  spend the  money was  made by  the domestic                                                               
subsidiary   Offering  some examples,  he pointed  out that  that                                                               
interpretation  only raises  more  questions such  as  who is  it                                                               
that's ultimately making the decision  to spend money to defend a                                                               
company against initiatives, and whether  the bill would apply in                                                               
situations where  the domestic entity  isn't yet making  money in                                                               
Alaska.   He urged  the committee to  either clarify  proposed AS                                                               
15.13.068 or delete  it entirely.  In conclusion,  he stated that                                                               
the   RDC  supports   open   discourse,   open  disclosure,   and                                                               
transparency in election  campaigns, but is very  much opposed to                                                               
any law  that would prohibit  contributions that would  allow RDC                                                               
members to fight initiatives that target their industries.                                                                      
3:43:05 PM                                                                                                                    
REPRESENTATIVE  GRUENBERG agreed  that Section  10 was  "not just                                                               
the disclosure, it's prohibition,"  and stated that he understood                                                               
the concern.                                                                                                                    
CHAIR RAMRAS concurred, stating that  it limits discourse, and he                                                               
stated concern that it would limit commerce.                                                                                    
REPRESENTATIVE  GRUENBERG asked  whether there  is any  precedent                                                               
supporting the argument that it  is unconstitutional to deny this                                                               
type of free expression, a  prohibition against expenditures by a                                                               
foreign national.                                                                                                               
MR. BRUNE offered to research the issue and respond immediately.                                                                
REPRESENTATIVE GRUENBERG  asked that  Mr. Ptacin also  respond to                                                               
the same question on precedents.                                                                                                
[CSSB 284(FIN) was held over.]                                                                                                  

Document Name Date/Time Subjects
01 Proposed HJUD CS version P.pdf HJUD 4/9/2010 1:00:00 PM
02 SB43 Sponsor Statement.pdf HJUD 4/9/2010 1:00:00 PM
SB 43
03 SB43 HSTA version E.pdf HJUD 4/9/2010 1:00:00 PM
SB 43
04 SB43 GOV Fiscal Note.pdf HJUD 4/9/2010 1:00:00 PM
SB 43
05 SB43 Support.pdf HJUD 4/9/2010 1:00:00 PM
SB 43