Legislature(2005 - 2006)HOUSE FINANCE 519

03/14/2006 01:30 PM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 365 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
*+ HB 366 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ HB 190 REQUIRED ID FOR PURCHASING ALCOHOL TELECONFERENCED
Heard & Held
+ HB 409 NO WORKERS' COMP. FOR REAL EST. LICENSEE TELECONFERENCED
Moved CSHB 409(L&C) Out of Committee
+ HB 471 KNIK ARM BRIDGE AND TOLL AUTHORITY TELECONFERENCED
Moved CSHB 471(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 409                                                                                                            
                                                                                                                                
     "An Act relating to excluding qualified real estate                                                                        
     licensees from workers' compensation coverage."                                                                            
                                                                                                                                
REPRESENTATIVE  BOB LYNN, sponsor,  addressed the  purpose of                                                                   
HB  409, which  is  to  exclude  real estate  licensees  from                                                                   
workers'  compensation  coverage.     He  noted  that  he  is                                                                   
currently  a  licensed  real   estate  broker  acting  as  an                                                                   
associate  broker.   He  related that  every  state has  laws                                                                   
governing real  estate licenses.  Most real  estate licensees                                                                   
in Alaska  are independent  contractors.   They are  licensed                                                                   
under   a   broker,   but  they   operate   as   "independent                                                                   
contractors", paying for all of  their own expenses.  They do                                                                   
not receive  a wage, salary, or  benefits.  They  control and                                                                   
decide  what  days and  hours  they  will  work and  pay  for                                                                   
business   expenses  such  as   licensing  fees,   continuing                                                                   
education,  advertising,   long-distance  phone   calls,  and                                                                   
business insurance  on their  vehicles.   They often  pay for                                                                   
their own computer and other office  equipment, and quarterly                                                                   
estimated income  tax and social  security tax.   Real estate                                                                   
licensees operate an independent  business within a business,                                                                   
controlling  their own  hours of  work.   The IRS  recognizes                                                                   
them  as  independent   contractors  and  the   state  should                                                                   
likewise.                                                                                                                       
                                                                                                                                
1:54:38 PM                                                                                                                    
                                                                                                                                
Representative Holm asked for  more information about how the                                                                   
real   estate  business   works   with   brokers  and   their                                                                   
associates.   Representative Lynn responded that  brokers can                                                                   
list  themselves  independently.    A  sales  associate  must                                                                   
operate  under a  broker.   A broker  receives a  commission,                                                                   
such as 40 percent  of the sales.  Representative  Holm asked                                                                   
what  the broker  offers to  the associate  broker for  their                                                                   
cut.   Representative Lynn replied  that the broker  oversees                                                                   
transactions as they apply to state law.                                                                                        
                                                                                                                                
Representative Holm  asked how workers' compensation  applies                                                                   
to the hierarchical nature of  the industry.  He wondered, if                                                                   
real  estate licensees  cannot work  on their  own, why  they                                                                   
wouldn't qualify  for workers' compensation.   Representative                                                                   
Lynn explained the difference  between a broker's license and                                                                   
a  sales  associate  license.     He  emphasized  that  sales                                                                   
associates are  not employees.  Representative  Holm restated                                                                   
the question  to compare  a sales  associate's  job to  a car                                                                   
salesman who gets a percentage  of the sales.  Representative                                                                   
Lynn clarified  that a real  estate sales associate  does not                                                                   
get a salary, only a commission.                                                                                                
                                                                                                                                
2:00:48 PM                                                                                                                    
                                                                                                                                
Representative  Kerttula wondered  if there  has ever  been a                                                                   
workers'   compensation   claim    filed   by   a   licensee.                                                                   
Representative Lynn said he does not know.                                                                                      
                                                                                                                                
Representative  Hawker noted  that  this situation  regarding                                                                   
independent  contractors  and   workers'  compensation  is  a                                                                   
pervasive problem.   He wondered why the bill  was limited to                                                                   
the real  estate industry.   Representative Lynn  agreed that                                                                   
other areas  could be looked  at later.    He chose  to limit                                                                   
the bill to real estate licensees.                                                                                              
                                                                                                                                
2:02:50 PM                                                                                                                    
                                                                                                                                
DAVE FEEKEN,  ALASKA ASSOCIATION  OF REALTORS, KENAI,  stated                                                                   
that  the  bill would  clarify  a  confusing issue  that  his                                                                   
organization  has  been  working  on.    He  noted  that  the                                                                   
Department  of Labor  recognizes  the status  of  independent                                                                   
contractors  and  exempts  them  from  workers'  compensation                                                                   
coverage.  The  relationship in a brokerage  firm between the                                                                   
broker  and  licensee  meets  the  standards  of  independent                                                                   
contractor.   The IRS  recognized this  relationship  for tax                                                                   
purposes in the  70's as self-employed.  The  broker does not                                                                   
withhold taxes on  commissions earned by the  licensees.  The                                                                   
licensee is responsible  for filing quarterly  returns.  This                                                                   
does not mean that a brokerage  firm would not carry workers'                                                                   
compensation  insurance for staff,  personal assistants,  and                                                                   
hourly employees.   It only exempts licensees  with a written                                                                   
independent   contract  agreement  with   the  broker.     He                                                                   
concluded  that  the Department  of  Labor, the  director  of                                                                   
workers'  compensation,   and  the  real   estate  commission                                                                   
support the bill.                                                                                                               
                                                                                                                                
Representative  Kerttula asked  if  there had  ever been  any                                                                   
workers' compensation  claims by licensees  against realtors.                                                                   
Mr. Feeken said there have only  been a few.  He recalled one                                                                   
instance  of a  person slipping  on  the ice  when showing  a                                                                   
house   and   collecting   compensation    for   two   weeks.                                                                   
Representative  Kerttula  summarized  that  it  seems  to  be                                                                   
related to the type of work done,  rather than the job title.                                                                   
                                                                                                                                
2:06:37 PM                                                                                                                    
                                                                                                                                
PAUL LISANKIE,  DIRECTOR, DIVISION  OF WORKERS  COMPENSATION,                                                                   
DEPARTMENT OF LABOR, agreed to answer questions.                                                                                
                                                                                                                                
Representative Kerttula  asked if Mr. Lisankie  thought there                                                                   
was  a  risk, with  the  passage  of  this bill,  of  leaving                                                                   
employees out  who qualified for workers' compensation.   Mr.                                                                   
Lisankie replied that part of  the problem is there has to be                                                                   
a written agreement that identifies  the relationship between                                                                   
the worker and the employee.   What happens sometimes is that                                                                   
people believe,  due to the  paperwork that they  have filled                                                                   
out, that they  have an independent contractor  relationship.                                                                   
But at  some later  point, someone  is unsatisfied  with that                                                                   
view  and  may want  an  injury  considered by  the  workers'                                                                   
compensation  board.     Another  example  would   be  if  an                                                                   
insurance  company  audits  premiums   on  the  office  staff                                                                   
insurance  and  determines  that the  associate  brokers  are                                                                   
employees and  should be  subject to a  back premium.   It is                                                                   
the uncertainty that causes problems.                                                                                           
                                                                                                                                
Representative  Kerttula  asked  if  that is  true  for  many                                                                   
professions.   Mr. Lisanke  agreed that  it applies  to other                                                                   
occupations as well.                                                                                                            
                                                                                                                                
2:10:16 PM                                                                                                                    
                                                                                                                                
Representative  Foster MOVED  to REPORT  CSHB 409 (L&C)  with                                                                   
individual  recommendations and  with  the accompanying  zero                                                                   
fiscal notes.  There being NO OBJECTION, it was so ordered.                                                                     
                                                                                                                                
CSHB  409 (L&C)  was REPORTED  out  of Committee  with a  "no                                                                   
recommendation" and  with zero note  #1 by the  Department of                                                                   
Commerce, Community  and Economic  Development and  with zero                                                                   
note   #2  by   the  Department   of   Labor  and   Workforce                                                                   
Development.                                                                                                                    
                                                                                                                                
2:11:06 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 471                                                                                                            
                                                                                                                                
     "An Act amending the Knik  Arm Bridge and Toll Authority                                                                   
     Act and the  powers and authority of the  authority, and                                                                   
     making  conforming  changes   to  statutes  relating  to                                                                   
     issuance,   renewal,   or  reinstatement   of   driver's                                                                   
     licenses and  to levy on  permanent fund  dividends; and                                                                   
     providing for an effective date."                                                                                          
                                                                                                                                
Representative Stoltze  MOVED to ADOPT  the work draft  to HB
471,  labeled  24-LS1670\Y, Kane,  3/3/06.    There being  NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
REPRESENTATIVE  BILL  STOLTZE,  sponsor, reported  that  this                                                                   
bill sets  up the mechanisms for  when money is  provided for                                                                   
the Knik Arm Bridge  project.  It does not request  funds for                                                                   
the project,  but sets  up the  bonding and toll  mechanisms.                                                                   
He termed  it an  innovative means  of achieving this  public                                                                   
project  by leveraging  private sector  funds to construct  a                                                                   
toll bridge across the Knik Arm  and connect the municipality                                                                   
of Anchorage and the Matanuska-Susitna.                                                                                         
                                                                                                                                
2:14:30 PM                                                                                                                    
                                                                                                                                
GEORGE  WUERCH, EXECUTIVE  DIRECTOR, KNIK  ARM BRIDGE  & TOLL                                                                   
AUTHORITY (KABATA), introduced  the others who were available                                                                   
to answer  questions.  He  congratulated the legislature  for                                                                   
adopting the state's first toll  authority in 2003.  He spoke                                                                   
of  a specific  responsibility  related  to that  legislation                                                                   
which  requires  KABATA  to  set  a  debt  ceiling.    KABATA                                                                   
requested  a $500  million  cap  on its  debt,  an amount  in                                                                   
response  to the governor's  budget.   He suggested  it  is a                                                                   
workable number to finance that  which is needed to begin the                                                                   
project.                                                                                                                        
                                                                                                                                
WILLIAM  GREEN,  PROJECT  COUNSEL,  KNIK ARM  BRIDGE  &  TOLL                                                                   
AUTHORITY,  referred  to  a  packet  made  available  to  the                                                                   
members of the  committee entitled "Knik Arm  Bridge and Toll                                                                   
Authority Presentation" (copy  on file).  HB 471 is a product                                                                   
of  several efforts.   The  CS  contains recommendations  and                                                                   
additions  made by  the  State  Bond Council.    In 2003  the                                                                   
legislature charge KABATA to build  a bridge across Knik Arm.                                                                   
Federal  funds  have been  made  available to  this  project,                                                                   
which includes the bridge and  all access approaches.  It has                                                                   
always been understood by KABATA  that other funding would be                                                                   
necessary, such  as revenue bonds.   Visits with  other state                                                                   
Departments  of  Transportation   and  toll  facilities,  and                                                                   
discussions  with  senior representatives  with  the  Federal                                                                   
Highway  Administration   and   their  loan  programs,   have                                                                   
provided information about other  funding sources.  He termed                                                                   
the  bill a  good  and unique  toll  authority  statute.   He                                                                   
offered  clear   and  specific   suggestions  for   financing                                                                   
options.                                                                                                                        
                                                                                                                                
2:22:18 PM                                                                                                                    
                                                                                                                                
Mr. Green  clarified the  purposes of the  bill: to  clean up                                                                   
language in state statutes and  to assure and give competence                                                                   
to public and  private financing sectors that  KABATA has the                                                                   
authority  it needs  to  enter into  financing  arrangements.                                                                   
The  bill serves  to  "fill in  the  blank"  of the  original                                                                   
statute to request  the level of revenue bonds  to be issued.                                                                   
He  offered  to  review  the  proposed  bill:    It  provides                                                                   
authority to  KABATA to set the  amount of the  bridge tolls.                                                                   
It   provides   authority  to   enter   into   public-private                                                                   
partnerships for the construction,  maintenance and operation                                                                   
of the  toll bridge.   It  authorizes obtaining  non-recourse                                                                   
loans from  the U.S. DOT's TIFIA  loan program.  It  sets the                                                                   
dollar of non-recourse  revenue bonds that may  be issued and                                                                   
refunded.  It provides means for  the collection of tolls and                                                                   
other obligations  owing KABATA in the operation  of the toll                                                                   
bridge.  He concluded that it is a housekeeping bill.                                                                           
                                                                                                                                
2:24:52 PM                                                                                                                    
                                                                                                                                
TOM  BOUTIN,  DEPUTY  COMMISSIONER,  DEPARTMENT  OF  REVENUE,                                                                   
offered to answer questions.                                                                                                    
                                                                                                                                
Representative Kerttula noted  that the statute says that the                                                                   
bonds  issued  by  the  Authority  are  not  going  to  be  a                                                                   
liability of the  state.  She wondered what  happens if there                                                                   
was  not enough  funding within  the Authority.   Mr.  Boutin                                                                   
described  the  language as  standard,  stand-alone,  revenue                                                                   
bond language.   The bond holders  and KABATA would  not have                                                                   
the ability  to give  the bond holders  a pledge  of anything                                                                   
other than  the rates and  fees and reserve funds  associated                                                                   
with the  facility.  There  would not  be a way  to penetrate                                                                   
the revenues  and funds on hand  for a bondholder to  get the                                                                   
general fund  or any other funds  of the state.   These bonds                                                                   
would not carry the moral obligation  of the state.  They are                                                                   
stand-alone  revenue  bonds  of   a  state  agency  that  are                                                                   
independent.                                                                                                                    
                                                                                                                                
Representative Kerttula  asked for an example of  a bond that                                                                   
does not carry  a moral obligation by the state.   Mr. Boutin                                                                   
related  that  International  Airport Revenue  Bonds  are  an                                                                   
example of stand-alone revenue bonds.                                                                                           
                                                                                                                                
Representative  Stoltze summarized  that the  risk is  to the                                                                   
investor who is buying the bonds.  Mr. Boutin agreed.                                                                           
                                                                                                                                
2:28:37 PM                                                                                                                    
                                                                                                                                
HOPE LOUISE  CERMELJ,  ALASKA ELDER VOTERS,  spoke about  her                                                                   
participation on the Petition  Trail Campaign.  She testified                                                                   
in  opposition to  HB  471.   She termed  it  a $600  million                                                                   
project  of which  $94 million  will be  appropriated by  the                                                                   
federal government, a large decrease  from $240 million.  She                                                                   
referred  to the last  page of  the bill,  which states  that                                                                   
persons  can  lose their  permanent  fund  if their  toll  is                                                                   
unpaid.  She suggested that the  toll could be as high as $12                                                                   
round trip.   She proposed that seniors and  veterans receive                                                                   
a toll exemption  or compensation to use this  facility.  She                                                                   
spoke about the loss of the longevity bonus.                                                                                    
                                                                                                                                
Co-Chair Meyer  noted that gas  prices are high,  which makes                                                                   
the toll seem reasonable.                                                                                                       
                                                                                                                                
2:32:48 PM                                                                                                                    
                                                                                                                                
EMILY  FERRY,   ALASKA  TRANSPORTATION  PRIORITIES   PROJECT,                                                                   
stated relief that the contract  is being tightened down, but                                                                   
voiced  concern  about strengthening  KABATA's  authority  to                                                                   
bond.   She referred  to a  handout of  KABATA's 2005  Annual                                                                   
Report  (copy on  file)  that shows  a  graph of  anticipated                                                                   
project  spending.   $200  million  would  be from  the  bond                                                                   
revenue, which is  one-third of the cost of the  bridge if it                                                                   
is  $600  million.    She  mentioned  that  there  have  been                                                                   
estimates of  up to $1.5 billion  for the same project.   She                                                                   
noted  $94  million  from  the  federal  government  and  $50                                                                   
million from the  general fund for Mat-Su  road improvements.                                                                   
That  still leaves  $256 million  unfunded.   She  questioned                                                                   
where that money  would come from.  She suggested  that other                                                                   
projects  that  depend on  general  fund  money may  be  left                                                                   
short.                                                                                                                          
                                                                                                                                
Co-Chair Meyer closed public testimony.                                                                                         
                                                                                                                                
Mr. Wuerch concluded  that the issue before  the committee is                                                                   
to grant  KABATA the  authority to  proceed with private  and                                                                   
public financing.   The rest of the funding  issue would come                                                                   
later.  There  will be roughly $100 million  in public money.                                                                   
He pointed out  that toll facilities are subject  to rigorous                                                                   
public scrutiny.                                                                                                                
                                                                                                                                
2:37:40 PM                                                                                                                    
                                                                                                                                
Representative  Kerttula asked why  the right to  garnish the                                                                   
permanent  fund dividend  was included.   Mr. Wuerch  replied                                                                   
that is  just a mechanism  of collecting  debt to  the state.                                                                   
KABATA  is not  asking for  police  power, but  to set  fees.                                                                   
Agencies    can   enforce    collection    of   the    tolls.                                                                   
Representative  Kerttula  cautioned to  use  good sense  when                                                                   
dealing with permanent funds.                                                                                                   
                                                                                                                                
2:38:53 PM                                                                                                                    
                                                                                                                                
Mr.   Green  addressed   the  permanent   fund  concern   and                                                                   
speculated how  high the  toll bill would  have to  be before                                                                   
collection was  enacted.  He suggested that  discretion would                                                                   
be used  for leans against  the PFD.   The PFD provisions  do                                                                   
provide  for use as  a lean  for all  debts.   Representative                                                                   
Kerttula said  she would check  into how many  state agencies                                                                   
have that authority.                                                                                                            
                                                                                                                                
2:40:09 PM                                                                                                                    
                                                                                                                                
Representative Foster  MOVED to REPORT CSHB 471  (FIN) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying  two new  zero  fiscal notes.    There being  NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
2:41:30 PM                                                                                                                    
                                                                                                                                

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