04/11/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB346 | |
| SB129 | |
| SB159 | |
| SB145 | |
| SB58 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 346 | TELECONFERENCED | |
| + | SB 138 | TELECONFERENCED | |
| + | SB 129 | TELECONFERENCED | |
| += | SB 159 | TELECONFERENCED | |
| + | SB 145 | TELECONFERENCED | |
| + | SB 58 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 11, 2014
3:21 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Lora Reinbold, Vice Chair
Representative Mike Chenault
Representative Bob Herron
Representative Dan Saddler
Representative Andy Josephson
MEMBERS ABSENT
Representative Charisse Millett
Representative Craig Johnson
COMMITTEE CALENDAR
HOUSE BILL NO. 346
"An Act relating to corporations, including public benefit
corporations; and providing for an effective date."
- MOVED CSHB 346(L&C) OUT OF COMMITTEE
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 129(FIN)
"An Act extending the termination date of the Board of Certified
Real Estate Appraisers; relating to real estate appraisers; and
providing for an effective date."
- MOVED CSSB 129(FIN) OUT OF COMMITTEE
SENATE BILL NO. 159
"An Act relating to air ambulance service providers, air
ambulance membership agreements, and regulation of air ambulance
service providers and air ambulance membership agreements by the
division of insurance; and providing for an effective date."
- MOVED HCS SB 159(L&C) OUT OF COMMITTEE
SENATE BILL NO. 145
"An Act relating to the Teachers' Retirement System, the
Judicial Retirement System, and the Public Employees' Retirement
System for qualified military service; relating to the
definition of 'veteran' for purposes of housing, eligibility for
veterans' loans, and preferences in state employment hiring; and
providing for an effective date."
- MOVED SB 145 OUT OF COMMITTEE
SENATE BILL NO. 58
"An Act allowing an insurer to cancel an insurance policy if
property becomes entirely abandoned and the abandonment
increases the hazard insured against."
- MOVED SB 58 OUT OF COMMITTEE
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 138(FIN) AM
"An Act relating to the purposes, powers, and duties of the
Alaska Gasline Development Corporation; relating to an in-state
natural gas pipeline, an Alaska liquefied natural gas project,
and associated funds; requiring state agencies and other
entities to expedite reviews and actions related to natural gas
pipelines and projects; relating to the authorities and duties
of the commissioner of natural resources relating to a North
Slope natural gas project, oil and gas and gas only leases, and
royalty gas and other gas received by the state including gas
received as payment for the production tax on gas; relating to
the tax on oil and gas production, on oil production, and on gas
production; relating to the duties of the commissioner of
revenue relating to a North Slope natural gas project and gas
received as payment for tax; relating to confidential
information and public record status of information provided to
or in the custody of the Department of Natural Resources and the
Department of Revenue; relating to apportionment factors of the
Alaska Net Income Tax Act; amending the definition of gross
value at the 'point of production' for gas for purposes of the
oil and gas production tax; clarifying that the exploration
incentive credit, the oil or gas producer education credit, and
the film production tax credit may not be taken against the gas
production tax paid in gas; relating to the oil or gas producer
education credit; requesting the governor to establish an
interim advisory board to advise the governor on municipal
involvement in a North Slope natural gas project; relating to
the development of a plan by the Alaska Energy Authority for
developing infrastructure to deliver affordable energy to areas
of the state that will not have direct access to a North Slope
natural gas pipeline and a recommendation of a funding source
for energy infrastructure development; establishing the Alaska
affordable energy fund; requiring the commissioner of revenue to
develop a plan and suggest legislation for municipalities,
regional corporations, and residents of the state to acquire
ownership interests in a North Slope natural gas pipeline
project; making conforming amendments; and providing for an
effective date."
- BILL HEARING CANCELED
PREVIOUS COMMITTEE ACTION
BILL: HB 346
SHORT TITLE: PUBLIC BENEFIT CORPORATION
SPONSOR(s): REPRESENTATIVE(s) SEATON
02/26/14 (H) READ THE FIRST TIME - REFERRALS
02/26/14 (H) L&C
04/11/14 (H) L&C AT 3:15 PM BARNES 124
BILL: SB 129
SHORT TITLE: REAL ESTATE APPRAISERS
SPONSOR(s): RULES BY REQUEST OF LEG BUDGET & AUDIT
01/22/14 (S) READ THE FIRST TIME - REFERRALS
01/22/14 (S) L&C
02/13/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/13/14 (S) Heard & Held
02/13/14 (S) MINUTE(L&C)
02/20/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/20/14 (S) Moved SB 129 Out of Committee
02/20/14 (S) MINUTE(L&C)
02/21/14 (S) L&C RPT 3DP
02/21/14 (S) DP: DUNLEAVY, STEDMAN, MICCICHE
02/21/14 (S) FIN REFERRAL ADDED AFTER L&C
03/05/14 (S) FIN AT 5:00 PM SENATE FINANCE 532
03/05/14 (S) Moved CSSB 129(FIN) Out of Committee
03/05/14 (S) MINUTE(FIN)
03/07/14 (S) FIN RPT CS 4DP 1NR NEW TITLE
03/07/14 (S) DP: MEYER, KELLY, DUNLEAVY, BISHOP
03/07/14 (S) NR: OLSON
03/14/14 (S) TRANSMITTED TO (H)
03/14/14 (S) VERSION: CSSB 129(FIN)
03/17/14 (H) READ THE FIRST TIME - REFERRALS
03/17/14 (H) L&C, FIN
04/11/14 (H) L&C AT 3:15 PM BARNES 124
BILL: SB 159
SHORT TITLE: AIR AMBULANCE SERVICES
SPONSOR(s): STEDMAN
02/05/14 (S) READ THE FIRST TIME - REFERRALS
02/05/14 (S) L&C
02/18/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/18/14 (S) Heard & Held
02/18/14 (S) MINUTE(L&C)
02/20/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/20/14 (S) Moved SB 159 Out of Committee
02/20/14 (S) MINUTE(L&C)
02/21/14 (S) L&C RPT 3DP
02/21/14 (S) DP: DUNLEAVY, MICCICHE, STEDMAN
02/28/14 (S) TRANSMITTED TO (H)
02/28/14 (S) VERSION: SB 159
03/03/14 (H) READ THE FIRST TIME - REFERRALS
03/03/14 (H) L&C
03/17/14 (H) L&C AT 3:15 PM BARNES 124
03/17/14 (H) Heard & Held
03/17/14 (H) MINUTE(L&C)
04/11/14 (H) L&C AT 3:15 PM BARNES 124
BILL: SB 145
SHORT TITLE: VETS' RETIREMENT/LOANS/HOUSING/EMPLOYMENT
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/29/14 (S) READ THE FIRST TIME - REFERRALS
01/29/14 (S) STA
02/13/14 (S) STA AT 9:00 AM BUTROVICH 205
02/13/14 (S) Heard & Held
02/13/14 (S) MINUTE(STA)
02/20/14 (S) STA AT 9:00 AM BUTROVICH 205
02/20/14 (S) Moved SB 145 Out of Committee
02/20/14 (S) MINUTE(STA)
02/21/14 (S) STA RPT 3DP 1AM
02/21/14 (S) DP: DYSON, COGHILL, GIESSEL
02/21/14 (S) AM: WIELECHOWSKI
03/10/14 (S) TRANSMITTED TO (H)
03/10/14 (S) VERSION: SB 145
03/12/14 (H) READ THE FIRST TIME - REFERRALS
03/12/14 (H) L&C
04/11/14 (H) L&C AT 3:15 PM BARNES 124
BILL: SB 58
SHORT TITLE: CANCEL INS. ON CERTAIN ABANDONED PROPERTY
SPONSOR(s): EGAN
02/15/13 (S) READ THE FIRST TIME - REFERRALS
02/15/13 (S) L&C
04/04/13 (S) L&C AT 5:00 PM BELTZ 105 (TSBldg)
04/04/13 (S) Heard & Held
04/04/13 (S) MINUTE(L&C)
02/04/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/04/14 (S) Heard & Held
02/04/14 (S) MINUTE(L&C)
02/06/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
02/06/14 (S) Moved SB 58 Out of Committee
02/06/14 (S) MINUTE(L&C)
02/07/14 (S) L&C RPT 3DP 1NR
02/07/14 (S) DP: DUNLEAVY, STEDMAN, MICCICHE
02/07/14 (S) NR: OLSON
02/19/14 (S) TRANSMITTED TO (H)
02/19/14 (S) VERSION: SB 58
02/21/14 (H) READ THE FIRST TIME - REFERRALS
02/21/14 (H) L&C
04/11/14 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
REPRESENTATIVE PAUL SEATON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as prime sponsor of HB 346.
TANEEKA HANSEN, Staff
Representative Paul Seaton
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of HB 346.
GORDON BLUE, Executive Director
Alaska Sustainable Fisheries Trust (ASFT)
Sitka, Alaska
POSITION STATEMENT: Testified in support of HB 346.
ERIK TROJIAN, Director of Policy
B-Lab Benefit Corporation
New York, New York
POSITION STATEMENT: Testified during the discussion of HB 346.
NATALIE TEAL, Staff
Senator Anna Fairclough
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the sponsor of SB
129, the LB&A Committee, Chair, Senator Fairclough.
KRIS CURTIS, Legislative Auditor
Legislative Audit Division
Legislative Agencies and Offices
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions on SB 129.
CHRISTIE JAMIESON, Staff
Senator Bert Stedman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the prime sponsor of
SB 159, Senator Bert Stedman.
KONRAD JACKSON, Staff
Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Explained Amendment 1 for SB 159, on behalf
of the House Labor and Commerce Standing Committee, Kurt Olson,
Chair.
MARTY HESTER, Director
Division of Insurance (DOI); Anchorage Office
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Answered questions on SB 159.
CURTIS THAYER, Commissioner
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of SB 145.
ALIDA BUS, Staff
Senator Dennis Egan
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the prime sponsor of
SB 58, Senator Dennis Egan.
SHELDON WINTERS, Lobbyist; Legal Counsel
State Farm Insurance
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of SB 58.
ACTION NARRATIVE
3:21:20 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:21 p.m. Representatives Herron,
Josephson, Reinbold and Olson were present at the call to order.
Representatives Saddler and Chenault arrived as the meeting was
in progress.
HB 346-PUBLIC BENEFIT CORPORATION
3:21:33 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 346, "An Act relating to corporations, including
public benefit corporations; and providing for an effective
date."
3:22:21 PM
REPRESENTATIVE REINBOLD moved to adopt the proposed committee
substitute (CS) for HB 346, labeled 28-LS1433\O, Bannister,
3/19/14, as the working document.
CHAIR OLSON objected for the purpose of discussion.
3:22:32 PM
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, stated
that HB 346 expands the options for Alaskan entrepreneurs and
investors by placing a new type of corporate entity, the benefit
corporations also known as B-Corps, in Alaska statute. The
existing corporate structures in Alaska, the C-corporations,
provide numerous benefits and jobs; however, the benefit
corporation is a for-profit corporation which incorporates
public benefits and community improvement into its business
practices, no matter the principal service or product provided.
REPRESENTATIVE SEATON stated that current corporate law
generally requires a corporation to consider the financial
impact to their shareholders as the top priority when making
decisions. He summarized the ruling in a Michigan court
decision, Dodge v. Ford Motor Co., 170 N.W. 668 (Mich. 1919), as
indicating that a business corporation is organized and carried
on primarily for the profit of the stockholders. The powers of
the directors are to be employed to that end. The discretion of
directors is exercised in the choice of the means to attain that
end and does not extend to change in the end itself, to the
reduction of profits, or to the non-distribution of profits
among stockholders in order to devote them to other purposes.
REPRESENTATIVE SEATON explained that the goal of C-corporations
is exclusively to make money for shareholders. While there is
nothing wrong with that goal an instance may arise in which a
corporation chooses to have other goals. Thus these
corporations may be legally liable to shareholder lawsuits since
the community involvement must have some nexus to corporate
profit. Under the benefit corporate structure, owners and
boards have the freedom to take actions which positively impact
their communities without fear of violating a fiduciary duty.
3:26:59 PM
REPRESENTATIVE SEATON explained HB 346 will give these
corporations more flexibility in deciding how to run the
businesses and will bring Alaska a slice of the $3.7 trillion
invested nationwide in socially-responsible funds. Benefit
corporations are formed voluntarily and have the same tax status
of any other for-profit corporation. Thus the corporation
wouldn't gain any tax advantage in electing a "B-Corp" status.
The benefit corporations can participate in tax credits but only
to the extent that other corporations can elect to do so.
REPRESENTATIVE SEATON reported that 23 other states have passed
benefit corporation legislation with West Virginia, Utah, and
Nebraska just this year. He acknowledged this bill is not based
on model legislation, but he did pull information from several
other states since similarity in statutes make it easier for
investors to attract investment in Alaska. Over 550 benefit
corporations have incorporated in the U.S., including Ben &
Jerry's, Patagonia, Rasmussen College, Epic Coffee, and King
Arthur Flour Company - America's oldest flour company. Each of
these companies works to benefit the public and their
communities in the way that matters most to them.
REPRESENTATIVE SEATON related that HB 346 also includes measures
to ensure accountability and transparency so a benefit
corporation will additionally create and publish an annual
benefit report describing how the company has pursued the
general public benefit. This report allows shareholders,
investors, and the public to confidently invest in benefit
corporations that share their values. He summarized that the
goal of HB 346 is to give businesses more flexibility and
control over their decisions and to provide private investors
with a clear social investment option.
3:27:50 PM
REPRESENTATIVE JOSEPHSON related he has invested in a company
and the investors knew that the returns may be less than other
investments. He asked whether that is how shareholders
approached this and if they anticipated earning less while doing
something good.
REPRESENTATIVE SEATON answered yes; the shareholders know what
the specific benefit the board of directors has voted on so
people investing in the B-Corps generally share the same kind of
philosophy, that it isn't just about maximizing dollars, but
sharing the public benefit goal, whether it is education or
research or some other specified goal.
3:29:00 PM
REPRESENTATIVE JOSEPHSON asked whether any discussion of the
treatment of workers in third world countries has been
considered. He recalled a big debate about Old Navy, Gap, and
other stores. He further recalled an explanation after a fire
about why the U.S. pays so little for its clothing.
REPRESENTATIVE SEATON answered that there can be, depending on
what public benefit is selected by the corporation, such as
whether it is more local farm jobs instead of cheaper grocery
costs. That would be a benefit adopted in a particular
corporation and people could invest in that corporation since
they want to promote local foods and jobs although it would be
cheaper to buy and have them shipped in. It's more difficult in
a typical "C corporation" structure since it is not a fiduciary
choice and the board of director's goal is to maximize profits.
The "B Corp" structure allows those types of benefits to be
selected as one of the criteria being use.
3:31:07 PM
TANEEKA HANSEN, Staff, Representative Paul Seaton, Alaska State
Legislature, added that there are two parts to the benefit
corporations, the general public benefit purpose and the
specific purpose. She referred to page 4 of HB 346, which lists
the things the board of directors must consider, one of which is
the community and societal factors including the interests of
each community in which the offices or facilities of the benefit
corporations, subsidiaries, or suppliers are located. She said
that the specifics mentioned are considered by the benefit
corporations and the third party standards used for the annual
report will have questions relating to the purposes.
3:32:12 PM
REPRESENTATIVE SADDLER asked whether the benefit corporation
structure is aimed at existing corporations or if new
corporations would take this form.
REPRESENTATIVE SEATON said that it could be either. He noted a
number of businesses exist that may want to do something locally
but don't want to violate their primary duty of maximizing
shareholder profits. This would allow the corporation, by a
two-thirds vote, to become a benefit corporation and establish
specific benefits, which is publicized. People can invest based
on that but it also allows the flexibility for new corporations
as well, including small tour companies that hire locals that
give flavor to the ethnic tours.
3:33:32 PM
REPRESENTATIVE SADDLER asked whether this is primarily focused
at publically traded companies. He asked how many businesses in
Alaska are publically traded. He further asked if this is
related to smaller corporations, as well.
REPRESENTATIVE SEATON answered that it could be smaller
corporations and the Division of Corporations, Business &
Professional Licensing could address the number of corporations.
CHAIR OLSON removed his objection. [Version O was before the
committee as the working document].
3:34:33 PM
GORDON BLUE, Executive Director, Alaska Sustainable Fisheries
Trust (ASFT), testified in support of HB 346. He explained that
the ASFT's mission is to increase the retention of benefits of
the fisheries in the Gulf of Alaska community. He reported
three projects. First, this project is modeled on community-
supported agriculture called Alaskan Zone. It is a community-
supported fishery project in which local fishermen and
processors produce product subsequently sold to local consumers.
He explained that it is primarily an educational venture, but it
also produces small net proceeds shared back to a second
project, which is a community fisheries conservation network.
The network is a collaboration of scientists and fishermen who
work to solve some of the fishery problems, including reduction
of unwanted bycatch. Third, the ASFT is working to launch
another project: the Local Fish Fund. The Local Fish Fund was
designed to try to increase the retention of the fishery quota
in the halibut/sablefish fisheries in the Gulf of Alaska
communities. There have been several attempts in financing
mechanisms and this is a further articulation on that to try to
bring some success to it since quota is being lost to the
outside. He related the essence is that the aforementioned fund
will provide a vehicle for fishermen who are about to retire
from the fishery to make an inter-generational transfer of quota
to a new fisherman who has made a commitment to stay in the
community. This process is complicated by the halibut/sablefish
regulations so the ASFT has worked with attorneys to construct
an arrangement to accomplish this. The ASFT has created a
subsidiary of a nonprofit, Local Fish LLC. The LLC's agreement
allows the ASFT to balance the interest of participants, which
include fisherman about to retire who would like to sign their
quota over on a time contract and those fishermen who would like
to purchase the quota. It would provide financing to pay the
taxes generated by that transaction.
3:37:54 PM
MR. BLUE related that the agreement works legally, but it is
very complicated; however, over time if it increases the size of
business it will provide improvements to the social benefits.
He explained that it has become difficult to administer the LLC
membership interests and to describe accurately and identify the
specific interests. Thus the benefits corporation would suit
the ASFT admirably and would allow the organization to use the
corporate stock structure to keep a clear statement of the
interests of the participants that is easy to transfer and
understand, yet would allow them to continue the public
benefits. He referred to the addendum in the final part of the
bill. The savings would benefit the corporation and the entire
community. He expressed strong support for HB 346.
3:39:31 PM
ERIK TROJIAN, Director of Policy, B-Lab Benefit Corporation,
lauded the sponsor's description of the benefit corporations.
He stated that 23 states have passed bills in the past few
years, and currently 550 benefit corporations have been formed.
The key thing to consider is that the purpose of a benefit
corporation is to deregulate the purpose of a corporation. He
reiterated Representative Seaton's comparison between a "C
corporation" and a benefit corporation or "B Corporation." He
explained that if a corporation can only do one thing it
inhibits the free market from truly acting as a free market.
Opening this up will allow entrepreneurs to discover new and
innovative ways of running a company. This can lead to new ways
of thinking about how a company is run. He referred to Mr.
Blue's testimony, with respect to the LLCs, who raised a good
point. An LLC is based on contract law, which is not a good
vessel for multiple shareholders. If a corporation chooses to
go public - although none of the B corps are - and has a social
mission the corporation must deviate from that mission to bring
in investors or growth will become stagnant. There are $3.7
trillion of social impact investment funds in the marketplace
that is being targeted towards companies like this. He offered
his belief that by opening this up it sets the stage for
investors and entrepreneurs to operate. Not only is it a great
way to protect directors, but it is a great vehicle to protect
shareholders. He related a scenario in which an individual
would invest in a company that has a social mission, but the
corporation can deviate from the mission since there isn't a
legally binding document. In fact, the purpose of the
corporation is to maximize profit, as previously stated, except
that his understanding was that the company would do something
else. This bill would fill that gap. He pointed out one other
key element is that this bill stays fairly consistent with the
model legislation, with each state having its particular
nuances; however, the general concept is very consistent so it
will attract investors.
3:43:42 PM
MR. TROJIAN related that lastly the younger generation, and 80
percent of college graduates want to work for companies with a
mission that provides a means to be connected to society and not
just having a job. He offered his belief this is another way to
keep the younger population in the state by expanding
opportunities for them to come up with new innovative ideas. He
acknowledged that there is no tax benefit. In fact, some states
such as South Carolina have seen this as a great opportunity for
businesses tying to alleviate problems in our society since tax
monies cannot solve all the problems so why not harness the
power of the free market to try to solve problems.
MR. TROJIAN further stated that this bill does not dictate what
is good for society, but it is left up to the free market. For
example, it allows companies to bestow conservative or liberal
values in the companies, as determined by the marketplace and
the entrepreneur. He offered his belief that if they have a
good idea it will attract investors and consumers, but it is not
government dictating what is good for society and this bill
would provide the stage for them to operate.
3:45:52 PM
REPRESENTATIVE HERRON asked for an example of how the state
would enforce these rights under the bill.
MR. TROJIAN answered that the benefits corporations would be
enforced in the same manner as traditional corporations enforce
its duties to maximize profits. He said it is enforced through
the shareholders and not government. The same principles are
taken here, which really allow a contractual agreement theatre
statute that the shareholders and board can entertain, enforced
through benefit enforcement proceeding in which the shareholders
are the only ones with a private right of action. For example,
if a corporation wanted to consider a particular aspect of the
community that the people in community cannot sue them for not
meeting the goal, but the shareholder can do so or could elect
to add outside interests with a two-thirds vote to the private
right of action; however, it would be up to the company.
3:47:44 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 346.
REPRESENTATIVE JOSEPHSON remarked that this is good bill. He
offered his belief that the bill is well considered, plus he
liked the concept of deregulating corporations. He said he
hopes the committee will move today.
3:48:27 PM
REPRESENTATIVE HERRON moved to report the proposed committee
substitute (CS) for HB 346, labeled 28-LS1433\O, Bannister,
3/19/14, out of committee with individual recommendations and
the accompanying fiscal notes. There being no objection, CSHB
346(L&C) was reported from the House Labor and Commerce Standing
Committee.
The committee took an at-ease from 3:48 p.m. to 3:49 p.m.
SB 129-REAL ESTATE APPRAISERS
3:49:59 PM
CHAIR OLSON announced that the next order of business would be
CS FOR SENATE BILL NO. 129(FIN), "An Act extending the
termination date of the Board of Certified Real Estate
Appraisers; relating to real estate appraisers; and providing
for an effective date."
3:50:08 PM
NATALIE TEAL, Staff, Senator Anna Fairclough, Alaska State
Legislature, explained the additional changes made to SB 129 in
the Senate version before the committee, the committee
substitute (CS) for SB 129 (FIN). The original version SB 129
was a sunset bill to extend the Board of Certified Real Estate
Appraisers for another four years; however, the Department of
Commerce, Community & Economic Development (DCCED) approached
the committee with additional changes in order for the board to
remain in compliance with the federal requirements laid out in
the Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank) that amends Title 11 of the Financial Institutions
Reform, Recovery, and Enforcement Act of 1989.
3:51:03 PM
MS. TEAL explained that Section 1 of the bill extends the board.
An audit completed last June by the Division of Legislative
Budget and Audit recommended that the board be extended until
June 30, 2018. This four-year extension is half of the eight
year maximum allowed in statute. The shortened extension period
is due to the projected increase in federally mandated
responsibilities over the next few years. The remaining
sections are designed to bring the board into compliance with
those changes.
3:52:24 PM
KRIS CURTIS, Legislative Auditor, Legislative Audit Division,
Legislative Agencies and Offices, stated that the division
conducted a sunset audit on the Board of Certified Real Estate
Appraisers and the report is dated June 2013. The purpose of
the audit was to examine whether the board was serving the
public's interest and if the termination date should be
extended. Overall the division concluded that the board is
protecting the public's interest by effectively licensing and
regulating real estate appraisers. The audit [Audit Control
Number 08-20084-13] recommends the board's termination date be
extended four years of the eight year maximum, and as Ms. Teal
explained, is in recognition of the increase in the board's
responsibilities mandated by the federal government. She said
the division felt it was prudent to come in earlier than the
eight years to examine the board and its responsibilities. The
audit report recommendations for operational improvements are
directed not to the board but to the Division of Corporations,
Business and Professional Licensing (DCBPL). One recommendation
was to improve administrative support to the board including
addressing investigative delays. The second recommendation was
directed to the DCBPL's director to continue improvements to the
investigative case management system. She related that the
board and the department agreed with the recommendations.
3:54:05 PM
REPRESENTATIVE JOSEPHSON referred to the second recommendation
and said his understanding is that this issue is a problem that
has been seen in a number of boards and commissions.
MS. CURTIS stated that the second recommendation is to improve
administrative support. She clarified that her earlier
testimony pertained to improving the investigative case
management, which has been a division-wide issue.
3:55:03 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 129.
REPRESENTATIVE JOSEPHSON assumed the [appraisers] found this
acceptable. He asked whether the committee has heard anything
otherwise.
CHAIR OLSON answered no.
3:55:54 PM
REPRESENTATIVE HERRON moved to report CSSB 129(FIN) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSSB 129(FIN) was
reported from the House Labor and Commerce Standing Committee.
SB 159-AIR AMBULANCE SERVICES
3:57:49 PM
CHAIR OLSON announced that the next order of business would be
SENATE BILL NO. 159, "An Act relating to air ambulance service
providers, air ambulance membership agreements, and regulation
of air ambulance service providers and air ambulance membership
agreements by the division of insurance; and providing for an
effective date."
3:58:11 PM
CHRISTIE JAMIESON, Staff, Senator Bert Stedman, Alaska State
Legislature, explained that passage of SB 129 would allow all
life-saving air medical transport services to continue to offer
membership programs to Alaskan residents. The purpose of a
membership program is to cover all out-of-pocket expenses that
may not be covered by a primary payer. Following an
organizational restructure last year, in 2013, the Airlift
Northwest membership program was discontinued by the Alaska
Division of Insurance (DOI). The division deemed the membership
program was no longer exempt from insurance regulations.
Presently, the Airlift Northwest is allowed to honor existing
memberships but cannot allow renewals to the program. This bill
would exempt all air ambulance services from the state's
insurance code thereby allowing continued membership programs to
Alaskans. Over 3,000 Alaskan residents subscribe and benefit
from the membership program. The Division of Elections said
that it does not anticipate that SB 159 will result in any
financial impact to the division and it has a zero fiscal note.
3:59:35 PM
REPRESENTATIVE HERRON moved to adopt Amendment 1, labeled 28-
LS1359\N.1, Wallace, 3/20/14, which read as follows:
Page 2, following line 28:
Insert a new subsection to read:
"(c) Except as provided in this section, an air
ambulance service provider or an air ambulance
membership agreement that complies with this chapter
is not otherwise subject to this title."
There being no objection, Amendment 1 was adopted.
3:59:56 PM
KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State
Legislature, stated that Amendment 1 was brought forward by some
who wanted it to be clear that an air ambulance provider is not
subject to Title 21.
4:01:10 PM
REPRESENTATIVE JOSEPHSON understood that one main function of
the DOI is to ensure that insurance is appropriately
underwritten and that the resource will be there for the insured
when the time comes. He asked if any concern exists or if
people can be confident "the jet will come when it is called."
MS. JAMIESON expressed her confidence that the [air ambulance
service] will respond when called.
CHAIR OLSON recalled the Airlift Northwest has been in business
since the late 1970s or early 1980s, so it has established a
track record.
4:02:36 PM
REPRESENTATIVE JOSEPHSON asked whether there are any other
"carve outs" like this that aren't subject to the insurance
code. He didn't think this was a bad idea but was curious.
MARTY HESTER, Director, Division of Insurance (DOI); Anchorage
Office, Department of Commerce, Community & Economic
Development, said different statutes deal with different lines
of insurance and have different regulations and stipulations on
those different lines of insurance. This would be a particular
"carve out" for the air ambulance industry. He did not think it
would be an "apples to apples" comparison for a different line
or type of insurance would have the same type of application.
4:03:44 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 159.
REPRESENTATIVE SADDLER commented that the absence of questions
demonstrates that this bill was vetted in previous meetings. He
felt confident [about the bill.]
4:04:02 PM
REPRESENTATIVE HERRON moved to report the CSSB 159, as amended,
out of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, the HCS
CSSB 159(L&C) was reported from the House Labor and Commerce
Standing Committee.
4:04:23 PM
The committee took an at-ease from 4:04 p.m. to 4:06 p.m.
SB 145-VETS' RETIREMENT/LOANS/HOUSING/EMPLOYMENT
4:06:20 PM
CHAIR OLSON announced that the next order of business would be
SENATE BILL NO. 145, "An Act relating to the Teachers'
Retirement System, the Judicial Retirement System, and the
Public Employees' Retirement System for qualified military
service; relating to the definition of 'veteran' for purposes of
housing, eligibility for veterans' loans, and preferences in
state employment hiring; and providing for an effective date."
4:06:31 PM
CURTIS THAYER, Commissioner, Department of Administration,
stated that this bill provides clean-up to statutes. First, he
commented that the state has hiring preferences for veterans.
However, these statutes have not been updated since the Vietnam
War, so this bill would update the statutory definitions to the
federal definition to recognize veterans that have served in
military conflicts such as the 1991 Gulf War, Operation Iraqi
Freedom, and any conflicts arising after September 11, 2001, as
qualifying for the state's hiring preference. He noted that
veterans who apply for state service obtain a hiring preference
for having served. Additionally, the Alaska Housing Finance
Corporation (AHFC) Veterans' Housing Preference definition is
outdated and needs updating. These changes would bring the
AHFC's statutes in alignment with the federal definition used
for public housing and mortgage loans. Finally, this bill
updates the provisions related to the Heroes Earnings Assistance
and Relief Tax Act of 2008 (HEART Act), which is a federal law
passed in 2008. Basically, this would require additional tax
and health benefits for employees who are absent from state work
due to duty in the uniformed military service. For example,
someone who serves in the military reserve is called up to duty
and subsequently killed in the line of duty would have an
effective date of service coinciding with the day the person
left state service. This means the family would be eligible for
any vesting the military individual would have had for the
period of time since they left state service through the time of
military service until his/her death. It would also allow them
to collect life insurance benefits. He pointed out that this is
a federal requirement and the state is currently out of
compliance. He referred to an upcoming audit due in 2015, and
this bill would clean up some veterans' statutes and allow the
department to be compliant by 2015.
4:09:27 PM
CHAIR OLSON related two committee members are veterans and have
taken advantage of programs.
REPRESENTATIVE JOSEPHSON asked for any costs to "back date" the
life insurance for veterans.
COMMISSIONER THAYER answered that the department has a zero
fiscal note for all three provisions. He said that the state
was lucky that it did not have any state employee who was called
up for duty and killed. He explained that actuaries review the
past to predict the future so currently the actuary's prediction
is zero. In further response to a question, he agreed the
department briefed the legislature earlier in the year on this.
4:10:59 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 145.
REPRESENTATIVE HERRON moved to report SB 145 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, SB 145 was reported from the
House Labor and Commerce Standing Committee.
The committee took an at-ease from 4:11 p.m. to 4:13 p.m.
SB 58-CANCEL INS. ON CERTAIN ABANDONED PROPERTY
4:13:10 PM
CHAIR OLSON announced that the final order of business would be
SENATE BILL NO. 58, "An Act allowing an insurer to cancel an
insurance policy if property becomes entirely abandoned and the
abandonment increases the hazard insured against."
4:13:20 PM
ALIDA BUS, Staff, Senator Dennis Egan, Alaska State Legislature,
stated that SB 58 clarifies that insurance can be cancelled when
a property owner abandons the property, and thereby increases a
hazard covered by the insurance. He referred to AS 21.36.210,
which lists allowable reasons for cancelling personal insurance,
including a grossly negligent act by the insured that increases
a covered hazard and physical changes in the insured property
that result in the property becoming uninsurable. As this
statute is currently written, it is not clear whether these
reasons would include abandonment of the property by the
insured. This is the reason the sponsor wants to clarify the
entire abandonment cancellation of insurance.
MS. BUS said that homeowners insurance is underwritten based on
the property generally being occupied. An abandoned home
greatly increases the risk of damage beyond what was
contemplated in the insurance contract, including damage caused
by vandalism, broken water pipes, and fire. Cancellation of
insurance when the property is abandoned is necessary to manage
insurance costs for all consumers.
MS. BUS related that SB 58 clarifies that insurance on property
that has been entirely abandoned can be cancelled in Alaska, as
it can in all other states.
4:14:59 PM
REPRESENTATIVE JOSEPHSON asked how this statute defines
abandonment.
MS. BUS answered that "entire abandonment" means the property is
no longer occupied by the insured as defined by the policy and
does not have contents of substantial utility. Thus, if it is a
property that is owned by a "snowbird," the fact that they spend
their winters south is probably reflected in the policy.
CHAIR OLSON suggested it might be listed as seasonal use.
MS. BUS agreed.
4:15:50 PM
REPRESENTATIVE HERRON wondered if it creates a conundrum if the
person is paying the insurance how it could be considered
abandoned.
MS. BUS clarified that the question is to identify what it means
to be abandoned. She suggested that perhaps the pipes are
overflowing or the property doesn't contain any moveable
contents.
CHAIR OLSON further suggested that perhaps no one is watching
the property.
REPRESENTATIVE HERRON pointed out that the customer is paying
premiums for the insurance. He wondered if this bill would
allow the insurance company to cancel the policy even if the
premiums are being paid.
MS. BUS offered her belief that the situation for the property
would have to be so bad that the insurance would still want to
cancel it. She acknowledged that if the insurance company
receives premiums it would not be in their interest to collect
the premiums. Otherwise, the insurance company could just
choose not to renew the policy, she said.
4:17:38 PM
SHELDON WINTERS, Lobbyist and Counsel, State Farm Insurance,
explained how the bill came about. He related that insurance
policies are written and the premiums are underwritten based on
certain assumptions and requirements. A homeowner's policy
assumes that the home will primarily be "more or less"
maintained and occupied. He recognized this will differ from
person to person, noting some people don't perform much
maintenance and others are very attentive. However, within that
wide range, homeowners are placed in the same risk pool, which
provides the key to answering Representative Herron's question.
As long as the risk is acceptable and the homeowner has "more or
less" been occupying the property, the homeowners are in the
same risk pool. Throughout the country there has not been any
dispute that when property becomes abandoned, those risks become
so great that they weren't contemplated in the insurance policy
and the property should not be in the same risk pool that
everyone participates in. For example, Ms. Bus alluded to
evidence of vandalism or abandonment of a home in Fairbanks in
winter, which likely means the pipes will freeze and a flood or
fire results.
MR. WINTER pointed out that the problem is that the Alaska
statutes are not completely clear that insurance can be canceled
in those instances. He referred to page 1, which lists five
reasons for canceling insurance prior to the renewal period. He
read as follows:
(4) discovery of a grossly negligent act or omission
by the insured that substantially increase the hazards
insured against;
(5) physical changes in the insured property that
result in the property becoming uninsurable;
MR. WINTER offered his belief that this language is pretty broad
and vague. He said this statute is not much different than many
other states. Some other states simply allow insurance
companies to cancel insurance if the hazard increases. Others
are more specific and indicate that companies can cancel
insurance if the property becomes abandoned or vacant; however,
a definition for abandoned or vacant is not given. He
emphasized that in all states when the property has become
abandoned, State Farm Insurance, who provide insurance in all
states, has never had a problem with the divisions of insurance
by canceling. He said that the question was raised in Alaska
when the state reviewed its policy for consistency in language
and reviewed Alaska's statutes with the Division of Insurance
(DOI) and whether existing statutes would allow for cancellation
of insurance on abandoned property. The division responded that
Alaska's statutes were not completely clear and taking a strict
view that the answer would be no. The company felt that a
situation could arise in which someone walks out and abandons
the property and State Farm couldn't cancel the insurance.
4:22:04 PM
MR. WINTERS said the reason this is so important during the
midterm of the policy is that the premium has been paid and
[once canceled] will be returned to the consumer; however, the
insurance company wants to remove the at-risk property from the
risk pool since something drastic could happen.
MR. WINTERS offered to point out practical protections in the
statute, but emphasized two things. First, the insurance agent
is in business to sell insurance, which is their product. It
doesn't make sense that they would cancel insurance since the
insurance premium has been paid and return the premium unless
something drastic has happened. Second, the local agent
probably provides the customers their auto insurance and life
insurance. Therefore, the agent will not want to lose these
policyholders as customers. From a practical standpoint, the
agent will try to reach out and figure out what is happening and
if the home is truly abandoned. Secondly, the policy term is
for one year and at the end of the period can choose to not
renew the policy and not rely on the aforementioned statutory
cancellation policy. For example, if a situation arises in the
10th or 11th month of the policy and it becomes clear the
property has been abandoned, the insurance company could choose
to not renew the policy. He clarified that what is under
discussion is an eight or nine-month period of time in which
something really drastic has happened and the insurance company
wants to cancel the policy and remove the house out of the risk
pool. Turning to the proposed bill, SB 58, State Farm Insurance
worked with the DOI, the industry, and stakeholders, including
the realtors who wanted some "sideboards" on this.
MR. WINTERS suggested this bill was likely the most restrictive
in the country. Basically, this bill would require entire
abandonment. First, to be considered abandoned the property
cannot be occupied by the insured as defined in the policy.
This language was inserted to address the seasonal home or
recreational home. He clarified that a person with a cabin
policy is assumed to not be occupying it most of the time.
Thus, the insurance company will not cancel the policy because
the cabin is not being occupied. Additionally, it cannot have
contents of substantial utility. He emphasized that he was not
aware of any other state statute that includes both of these
requirements to meet the test of determining whether the
property is abandoned. This language was put in to basically
identify that not only is it not occupied, but the furniture has
been removed, and nothing exists that could be utilized by the
typical homeowner. At that point the insurance company must
provide a 30-day written cancellation notice, as required by
existing statute. Additionally, the statutes require that the
insurer must provide written notice to any lender of record.
Even if the aforementioned notices occur, the owner, agent, or
real estate agent, or personal representative can inform the
insurance company that a mistake has been made and the property
is not abandoned property, that reasonable maintenance and
monitoring is underway to assure that the property is not
abandoned. Finally, he could not think of any situation in
which a property could be improperly canceled. He has not heard
anyone voice concern; however, he assured members that the DOI
has oversight over all of this and if "some rogue" reason
existed the division could step in. He thanked the sponsor for
this effort, which has taken several years and the concept has
gone through four or five legislative committees. In closing,
he said the company would like to see the bill move along.
4:27:14 PM
REPRESENTATIVE JOSEPHSON remarked that the bill seemed to be
written tightly. He asked how State Farm Insurance treats
policies in the event someone has died and their heirs are in
the process of selling the property.
MR. WINTERS answered that the agent almost assuredly would know
what has been happening and would talk to the personal
representative.
4:28:09 PM
REPRESENTATIVE SADDLER referred to page 2, line 6, which read,
"entire abandonment of the property that increases a hazard
insured against; ...." He asked whether he could think of any
type of entire abandonment that would not increase a hazard
insured against. He suggested that homeowner's coverage covers
almost everything. He wondered what it might not cover.
MR. WINTERS answered that he was right; however, the intent was
to make this as restrictive as possible to satisfy everyone.
This bill includes the provisions listed.
4:29:15 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 58.
REPRESENTATIVE HERRON moved to report SB 58 out of committee
with individual recommendations and the accompanying fiscal
note. There being no objection, SB 58 was reported from the
House Labor and Commerce Standing Committee.
4:29:42 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:29 p.m.