Legislature(2005 - 2006)CAPITOL 120
04/27/2005 01:00 PM JUDICIARY
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|Board of Governors of the Alaska Bar|
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 276 - BUSINESS LICENSE TOBACCO ENDORSEMENT 2:16:32 PM REPRESENTATIVE ANDERSON announced that the next order of business would be HOUSE BILL NO. 276, "An Act relating to business license endorsements for tobacco products, to holders of business license endorsements for tobacco products, and to the employees and agents of holders of business license endorsements for tobacco products." [Representative Anderson returned the gavel to Chair McGuire.] MICHAEL O'HARE, Staff to Representative Pete Kott, Alaska State Legislature, sponsor, presented HB 276 on behalf of Representative Kott. He said HB 276 addresses the amendment of AS 43.70.075 regarding the sale of tobacco products to minors. Basically, HB 276 increases financial penalties for non- compliance by employees and employers who sell tobacco products; removes the automatic suspension of tobacco endorsement provision of current law; and increases the minimum fines, per violation, for employers with education, monitoring and enforcement programs in place - from the current levels of $300, $500, $1000 and $2,500 - to $750, $1,000, $2,500 and $3,500 respectively. The bill also increases the minimum fines, per violation, for employers without education, monitoring, and enforcement programs - from the current levels of $300, $500, $1,000 and $2,500 - to $500, $750, $1,500, and $2,500 respectively, as well as suspends the violator's tobacco endorsement for a predetermined period of time. MR. O'HARE said that HB 276 also makes an employee responsible for the sale of tobacco products to minors by imposing separate fines for those in violation. The bill allows qualifying employers - employers with documented education, monitoring and enforcement programs - to assert defenses and provide evidence at administrative hearings of endorsement suspension regardless of the disposition of a case against the violating employee. Under current law, employers have little or no chance to present their own cases if an employee pleads no contest or guilty. This should encourage more employers to create education, monitoring, and enforcement programs to prevent the sale of tobacco products to minors. House Bill 276 would require employees to sign a statement that they understand it is against the law to sell tobacco to minors and that they will bear some of the responsibility, personally, if they violate the law. MR. O'HARE relayed that HB 276 creates a separate cause of action against the employee for selling tobacco to minors and imposes a fine of $300 to the employee. The state needs to continue to hold employers responsible in order that they may improve their own internal operations, and needs to put more responsibility on those employees who either refuse to participate in education programs or intentionally violate the law. The state must also recognize responsible employers who make strong internal efforts at curbing underage smoking in a fair, balanced, and reasonable manner. These changes could also make Alaska one of the strongest states in the country in terms of employer-sponsored education, monitoring, and enforcement programs, and could lead to even better federal compliance. REPRESENTATIVE GARA asked whether, under the bill, a tobacco seller could still lose his/her tobacco endorsement under certain circumstances. 2:21:17 PM MR. O'HARE reiterated that HB 276 removes the automatic suspension provision while increasing the fines for employers who have been documented to have education, monitoring, and enforcement programs in place. REPRESENTATIVE GARA asked for a comparison between current law and the changes being proposed by HB 276 as they pertain to losing a tobacco endorsement. 2:22:14 PM CYNTHIA DRINKWATER, Assistant Attorney General, Commercial/Fair Business Section, Civil Division (Anchorage), Department of Law (DOL), relayed that she represents the Division of Occupational Licensing in tobacco-endorsement matters. She explained that currently there is a very strong incentive for vendors of tobacco products to be very vigilant in the hiring, training, and monitoring of their employees who sell tobacco, because, under the current framework, if the holder of the tobacco endorsement is convicted of selling to a minor, or if the employees or agents - while acting within the scope of employment or agency - are convicted of selling to minors, then the holder of the endorsement is liable and there are mandatory stepped penalties starting with a 20-day suspension and a $300 fine. Then, if there is a second conviction within a two-year period, the fine is $500 and the suspension is 45 days. Further convictions warrant higher fines and longer suspensions. MS. DRINKWATER went on to explain that after conviction, once the holder of an endorsement receives a notice of suspension, there is an appeal process, but its currently a fairly limited process. The legislative intent was to create a framework of penalties wherein the outcome was known, determinant, and would not require lengthy hearings. There was also the consideration that the sanctions that were imposed - both civil penalties and suspension periods - would essentially level the playing field for different types of vendors. For example, for small vendors, it is the fine that will get their attention, whereas for [large vendors, it is the suspension of the endorsement that will get their attention]. 2:25:48 PM DIANE CASTO, Section Manager, Prevention and Early Intervention Section, Division of Behavioral Health, Department of Health and Social Services (DHSS), relayed that the DHSS is in opposition to HB 276 for a number of reasons, two of them being primary reasons. She explained that the Tobacco Youth Education & Enforcement Program falls under the purview of the Division of Behavioral Health because the "sell rate" of tobacco products to youth is directly linked to the federal Substance Abuse Prevention And Treatment (SAPT) Block Grant made available through the federal "Synar legislation." She went on to say: The two primary reasons that our department ... opposes this bill is that first and foremost, one of our main goals is to promote healthy youth in the state of Alaska, and obviously smoking is a huge problem - all tobacco products are a problem - for youth in the state of Alaska, and we believe that the current system that we have ... has been very effective in reducing access to tobacco products by our youth. So we hope to continue the great progress that we have made. ... The mandatory suspension of tobacco endorsements began in July of , which was the beginning of fiscal year [FY] 02, and ... prior to fiscal year 03 we [were] ... always in violation of the federal 20 percent sell rate for youth. And in 2003, after a full year of the new regulation, we went down to a 10 percent sell rate for youth, which put us below, at that time, the national sell rate average. Last year ... we increased just a little bit ..., up to almost 12 percent. ... 2:28:54 PM REPRESENTATIVE GARA asked what "sell rate" refers to. MS. CASTO said that the "Synar survey" is conducted between May and September each year, and it involves a process of doing a random sample poll of all of the businesses that have a business license with a tobacco endorsement that are accessible to youth. Last year the sample included just under 400 businesses. During the aforementioned months, departmental tobacco investigators go out with confidential youth informants to those businesses selected via the random sample and attempt to buy cigarettes. If the confidential youth informants are successful and "complete a sell," those [sales] go into the "sell rate." MS. CASTO, in response to a question, said only one attempted buy occurs at each business. She reiterated that once the mandatory suspension of the tobacco endorsement went into place, the sell rates dropped significantly, and the DHSS believes that that drop was a result of the possible consequence of losing one's tobacco endorsement. Such a loss can cost businesses money, much more money than the fines, which were not successful in reducing sell rates. Additionally, there has been a significant reduction, overall, in smoking among youth - the rate dropped from 37 percent to 19 percent, which is lower than the national rate. In conclusion, she said that the DHSS feels very encouraged by this reduction and feels that the endorsement suspension provision of current law has been a great part of that reduction. She provided the committee with the DHSS's tobacco vendor education packets. REPRESENTATIVE COGHILL raised the issue of individual responsibility. MS. CASTO said: We believe it's a mutual responsibility. Obviously it is [the] responsibility of the employee to not sell, and I think that through ... vendor education - if our retailers are providing the vendor education as was pointed out in the introduction of this bill - that they do have responsibility and they should not be selling. And there is a fine both for the employee and that employer, as well as the tobacco [endorsement] suspension. 2:33:56 PM CHRISTIE GARBE, Chief Executive Officer (CEO), American Lung Association of Alaska, relayed that she would be testifying in opposition to HB 276 on behalf of the group, Alaskans for Tobacco-Free Kids, an alliance of a number of health-focused nonprofit organizations. She indicated that Alaskans for Tobacco-Free Kids believes that HB 276 will effectively weaken the enforcement component - the cornerstone - of the statewide comprehensive tobacco control program, and that it strikes at the heart of efforts to deter kids from smoking. MS. GARBE said that Alaskans for Tobacco-Free Kids would remind members of the amazing progress made in the reduction of youth tobacco consumption as measured by the Youth Risk Behavior Survey (YRBS), which shows a 50 percent reduction in cigarette smoking among Alaska high school students from 1995 to 2003. Another YRBS statistic indicates that Alaska students who reported purchasing cigarettes at a store also dropped 50 percent in that same time period. She said that the bill will, for all practical purposes, eliminate the ability to take away vendors' rights to sell tobacco. Without this ability there will be no financial incentive on the part of the vendor - the party profiting from the sale of tobacco - to comply with current law. In fact, history has shown that suspension has been a necessary component of enforcement. MS. GARBE opined that companies which have the privilege of holding a license to sell tobacco - a legal yet deadly and addictive product - must also bear the serious responsibility for selling this product to Alaska's children. The company is the entity making the profit from the sales of tobacco and therefore it is the company that must bear the responsibility to hire capable, responsible, trainable, competent employees who follow the policy of not selling tobacco to those under the age of 19. It just doesn't seem that difficult a rule for management to train employees to follow, she opined. In conclusion, she asked the committee not to fix something that is not broken, and characterized "this proposal" as a giant step backward for efforts to prevent youth tobacco addiction; the current law has effectively done the job of reducing tobacco sales to youth and therefore does not need any further changes. 2:37:12 PM MS. GARBE, in response to a question, offered her understanding that under the bill, vendors would have the ability to put in place an educational program of some sort that they consider to be adequate and then, once they have done that, they will be immune from suspension of their tobacco endorsement. 2:38:10 PM MIKE ELERDING, Northern Sales Company of Alaska, Inc., relayed that Alaska's tobacco industry supports HB 276 because it believes that the bill corrects a deficiency in current law while continuing to provide enforcement officials with the powerful tools necessary to assist them in keeping tobacco out of the hands of children. He offered the industry's belief that Alaska retailers, in partnership with the State, are doing a good job of keeping tobacco out of the hands of children. The results of the Synar surveys indicate that the state has made huge progress in becoming and remaining compliant with federal guidelines. Nationally, for 2003 and 2004, Alaska ranks in the top one-third of all states for "Synar scores." MR. ELERDING offered his belief that HB 276 will continue to provide the state with the tools to penalize non-conforming retailers while not unjustly punishing the retailers that are doing everything within their power to comply with state law. The problem with the current law, he opined, is that the penalty range does not distinguish between different retail classifications or size of retail operations. As a consequence, the penalty for a violation impacts different businesses differently. For example, if a business sells a large volume of tobacco products - or sells only tobacco products - the suspension of its tobacco endorsement is going to have a much more severe impact on it than would an endorsement suspension on a business that sold very little in the way of tobacco products. Furthermore, license suspensions are currently mandatory and do not take into account any mitigating circumstances such as whether the retailer had a training program in place. MR. ELERDING concluded by offering his understanding that HB 276 changes the license suspension phase and continues to provide the DHSS with the right to impose license suspensions but only after initiating a proceeding that examines a retailer's efforts to comply with state law regarding the prohibition of tobacco sales to minors. This change is significant because it provides retailers that have an effective training program in place with an affirmative defense and also provides retailers the opportunity to have a hearing before the imposition of a license suspension. He said, "We support HB 276 and would like to see the committee pass this bill out." [Following was a brief discussion regarding a possible amendment Mr. Elerding suggested for a different bill.] 2:46:29 PM STEVE RUSH, Holiday Stationstores, Inc., after mentioning that Holiday Stationstores owns and operates approximately 30 convenience stores in Alaska, said that Holiday Stationstores is in favor of HB 276 and believes that it should be enacted for a number of reasons. He offered his belief that the bill substantially stiffens the penalties for selling tobacco to minors - those fines being the highest he's ever encountered - and also encourages employers to implement the aforementioned education, monitoring, and enforcement programs. Current law, he opined, provides little incentive for employers to train employees, since [all vendors] are treated the same. He said that Holiday Stationstores has a very comprehensive, proprietary computer-based training program, and is quite proud of that program; however, current law does nothing to reward Holiday Stationstores for its efforts to curb tobacco purchases by minors. MR. RUSH offered his belief that HB 276 will also establish a more predictable and fair due process for employers. Current law does provide a very streamlined process for going after a license holder, but it leaves a license holder with no defense when an employee sells tobacco to a minor and pleads guilty or no contest; in such cases the employer is held strictly liable, pays the fine, and faces the 20-day suspension of his/her tobacco endorsement. He opined that this is unfair; instead, an employer ought to be able to offer up all of his/her efforts towards compliance as part of a defense. Additionally, the bill would encourage employees to be more diligent in checking IDs when selling tobacco, because it creates a civil penalty for the employee who sells tobacco to a minor, and the employee would be required to sign a statement acknowledging that it is against the law to sell tobacco to a minor and thus he/she would bear some of the responsibility for violating the law. MR. RUSH acknowledged that there is some concern that removal of the current suspension provision might jeopardize "Synar funding," but offered his belief that such has not been borne out by empirical evidence from California, Oregon, and Washington. Thus, he surmised, removal of the current suspension provision will have no effect on federal funding. He concluded by asking the committee to pass the bill. 2:51:44 PM DAN RILEY, Vice President, Government Relations, Tesoro Refining and Marketing Company ("Tesoro"), relayed that he would be speaking in support of HB 276. Tesoro, he explained, operates 32 convenience stores in Alaska and is a strong advocate of preventing the selling of tobacco products to minors. He elaborated: We have training programs in place to ensure our employees are aware of their responsibilities not to sell tobacco products to minors. All of our convenience store employees are required to complete a "new employee" orientation when they are hired. That employee orientation program contains a section on techniques for alcohol management and specific lessons on restricted products. The training covers, in detail, procedures regarding the sale of restricted products, and employees are required to pass a validation test with a score of 100 percent at the conclusion of their training. As many of you know, Tesoro started out in Alaska; we now operate convenience stores in 16 states across the western United States. I can tell you that Alaska is the most stringent, regarding tobacco sales laws, of any of the states that we operate in. The proposed bill before you will allow Alaska to continue to have the toughest penalties of any state, and will [ensure] that Alaska is the country's leader in terms of [employer-sponsored] education, monitoring, and enforcement programs. Tesoro supports the provisions that stiffen penalties for non- compliance; we also support the provision that will allow ... employers with aggressive internal education and monitoring and enforcement programs - like we believe we have - to take credit for those programs as mitigating factors in administrative hearings. We believe the bill establishes a more predictable and fair due process, and encourages employees to be more diligent in checking IDs at the point of sale. I respectfully request that you support HB 276, and I would be happy to answer any questions. 2:54:07 PM CHAIR McGUIRE, after ascertaining that no one else wished to testify, relayed that HB 276 would be held over.