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Press Release

Attorney General Responds to Legislative Auditor

April 30, 2020

(Anchorage, AK)  — In response to the attempt by the Alaska Legislative Auditor to force executive branch agencies to adhere to her interpretation of the Alaska Constitution, Attorney General Kevin G. Clarkson in a letter outlined the statutory and ethical roles of the Legislative Auditor and Attorney General. In the letter to Legislative Auditor Kris Curtis, General Clarkson explained that the role of the auditor is to audit financial transactions, and the role of the Attorney General is to provide legal advice to executive branch agencies. According to the Attorney General’s April 29, 2020 letter (128K PDF), the Legislative Auditor has overstepped her legal authority and exposed Alaska to unnecessary financial and legal risk by asserting that the Alaska Permanent Fund Corporation has potentially violated its fiduciary duty by following the legal advice of two successive Attorneys General, former Attorney General Jahna Lindemuth and current Attorney General Kevin Clarkson.

“The Legislative Auditor has an important role,” said Attorney General Clarkson in describing why he felt a response was necessary. “But her role has limits. It is beyond the auditor’s authority, as well as beyond comprehension, to assert that executive branch agencies are acting unlawfully because they follow the Attorney General’s advice. The meaning of the Alaska Constitution is not for the auditor to determine. The Auditor has no legal training. Our statutes and constitution are clear—it is the Attorney General’s role to advise agencies on what the law means, and it is for the courts to ultimately determine what the law is.”

The legal question is whether the Legislature must make an appropriation to place 50 percent of royalties in the Permanent Fund when the Alaska Constitution requires a deposit of only 25 percent. When the disagreement between the Legislative Auditor and the Department of Law first arose, former Attorney General Lindemuth (Walker administration) sent a letter to the auditor explaining the Department’s view that because the constitution requires a deposit of only 25 percent and a state statute requires 50 percent, depositing the constitutional 25 percent is automatic but the additional statutory 25 percent requires a legislative appropriation.

Despite Attorney General Lindemuth’s analysis, the auditor proceeded to issue a qualified financial opinion for the state claiming that the advice of the Attorney General should not be followed. Instead, she advised that agencies should follow her personal opinion on the matter.

In early 2019 Attorney General Clarkson had the Department of Law once again analyze the issue and he came to the same conclusion as the former attorney general. Despite the consistent advice of two successive Attorneys General, the auditor once again issued a qualified opinion. Then most recently, the auditor sent a letter to the APFC Board warning that the board could be violating its fiduciary duty by not depositing the additional 25 percent of royalties into the Permanent Fund despite the fact that the board has no authority over transferring the royalties, and any deposit requires a valid legislative appropriation. This assertion prompted Attorney General Clarkson to send the auditor yesterday’s letter.

Attorney General Clarkson states “the auditor’s claim that the APFC has somehow violated its fiduciary duty by following legal advice from successive attorneys general and the Department of Law is groundless.” Attorney General Clarkson emphasizes that the APFC Board does not have the responsibility to collect and deposit royalties, but only to manage revenues deposited into the Fund. “The APFC followed the legal advice of successive Attorneys General to the effect that its statutory responsibilities do not involve collection of revenues, but instead involve only the investment and management of revenues deposited into the Fund. The Department of Law has consistently advised through two administrations that the Constitution requires the deposit of only 25 percent of royalties into the Permanent Fund, and that the deposit of the additional 25 percent pursuant to statute requires an appropriation by the legislature. Any notion that the APFC Board of Trustees could breach its fiduciary obligations by following the Department of Law’s advice, consistent through two administrations, is ridiculous. In fact, the opposite is true – the APFC Board would breach its duty if it did not follow the Department of Law’s legal advice.”

Attorney General Clarkson would prefer it was unnecessary to send the auditor this letter: “We should be able to resolve these differences and stick to the statutory roles each of us has been assigned. It is unacceptable that the auditor has put the state at unnecessary financial risk and feels the need to question not only me but also my predecessor and the good and competent attorneys that work in the Department of Law.”

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Department Media Contact: Assistant Attorney General Maria Bahr at (907) 269-5285 or maria.bahr@alaska.gov.