Legislature(1997 - 1998)
04/06/1998 03:18 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 479 - RECOGNITION FOR EMPLOYERS OF ALASKANS Number 0302 CHAIRMAN ROKEBERG announced the next item on the agenda was HB 479, "An Act relating to recognition of employers who hire Alaskans." He asked Ryan Kegley, his Legislative Secretary, to read the sponsor statement for the record. Number 0397 RYAN KEGLEY, Legislative Secretary to Representative Norman Rokeberg, Alaska State Legislature, read the following statement: Alaska Department of Labor statistics show that about one-third of job openings went to out-of-state workers in 1996 and companies in Alaska paid total wages topping $900 million to nonresidents. Between 20,000 and 30,000 Alaskans were unemployed in any given month in 1996 while 52,000 nonresidents gained employment in the state. House Bill 479 is intended to induce companies to hire within the state by awarding those who meet Alaska Department of Labor criteria with an "Alaska Hire" seal, modeled after the highly noticeable "Made in Alaska" logo. House Bill 479 will help state initiatives to curb out- of-state hires, such as the State Training and Employment Program which trains workers with an emphasis on occupations with high nonresident hire, by giving companies an incentive to hire Alaskan workers. Nonresidents often spend portions of their wages in their home state, decreasing the multiplier effect and depriving Alaska of the full economic benefits of the employment created in Alaska's economy. An Alaska Department of Labor analysis shows that nonresidents who spend even one-quarter of their earnings outside Alaska take away $100 million to $200 million from the state economy over and above the direct income loss to Alaska. Display of the "Alaska Hire" seal by Alaskan businesses will confirm their commitment to the employment of the citizens of this state and the economic health of Alaska. Number 0522 CHAIRMAN ROKEBERG asked Mr. Kegley to explain HB 479 in his own words, as well as the changes in the proposed committee substitute. MR. KEGLEY said basically HB 479 attempts to allow for the public display in businesses as well as on publications and letterheads, a seal that shows that businesses hire a certain percentage of Alaska employees. The criteria for determining an Alaska employee is set on a two-year residency based on the permanent fund dividend (PFD) formula used by the Department of Labor in the analysis of resident versus nonresident hire in companies. House Bill 479 not only allows for an incentive to hire an Alaskan employee to obtain the "Alaska Hire" decal, but it also allows Alaskans, as residents, to choose the business at which to shop. Number 0605 MR. KEGLEY explained the proposed committee substitute 0-LS 17919\B, Cramer, 4/3/98, sets out the criteria for determining an Alaska employee in subsection (g). Also, on page 1, lines 11-12, it deletes language in the previous draft relating to the use of the seal on items made by Alaska employees. He said that is the "Made in Alaska" logo, so the language was deleted in an effort to avoid confusion between the "Alaska Hire" program and the "Made in Alaska" program. CHAIRMAN ROKEBERG reiterated the idea is to have a seal or decal to display on various items, and in no way is it meant to be in competition or to denigrate the "Made in Alaska" logo. CHAIRMAN ROKEBERG called on Ed Flanagan from the Department of Labor to testify at this time. Number 0718 ED FLANAGAN, Deputy Commissioner, Department of Labor, said the department supports the concept of HB 479 and in fact, is something the department has considered; however, the department has some concerns. He said, "As you all well know, any time we talk about resident hire, we get into a pretty prolonged debate on what's a resident, how are you going to enforce -- to the extent that any program like this would just piggyback on efforts that we're already doing, like our annual report to the legislature and you provided those outside to the public - and an offshoot of that, by statute, we report to the legislature every year on nonresidents working in Alaska - we do what we call the employer report card. And all employers with 20 or more employees - and the reason we seized on 20 - I believe, that was by regulation - was to give some anonymity to it. It was felt that if you have an employer with 18 and reported that 16 of them were nonresidents, it might violate confidentiality. Anyway, this is just under 4,000 employers and it's a cross match of the UI [unemployment insurance] - the wage files the employers report quarterly for the employees that worked for them and we match that - in this case for 1996, which is the report we just put out in January - we matched that with their files with anyone who had applied -- received in '96 or applied for a PFD in '97. By using the applicant file from the previous year, we bring it forward -- it's not really a two-year requirement. In an extreme case, if someone arrived in the state after January 1, 1996, and was not eligible to apply in '97, they would show up as a nonresident. But at any rate, we do this reporting and we could probably extrapolate some percentage. We would rather frankly in this case - and I see one amendment that the Chairman I believe has proposed specifies a minimum of 80 percent - one of our concerns -- we'd just as soon have the parameters laid out in the legislation rather than go through a regulation process. And some number - probably we could do something like 90 percent or better and then maybe allow for improvement." MR. FLANAGAN continued, "Just a run through real quickly - I understand time is late - but some of the concerns -- and a couple of them have been addressed in your CS -- just want to bring to your attention, we could have a problem in -- I'm the one who gets these phone calls just as Mr. Kegley probably would for the Committee Chair after this law is in effect -- and the kind of things we'll be hearing about. For example, a company that has five divisions and the holding company over all of them is their corporate headquarters in Anchorage. They might have 38 employees and 35 of them are Alaskan, so they're over 90 percent - maybe we'd give them an award. But then they have subsidiaries - they're operations or they're construction companies -- I'm thinking of specific companies -- and they could be as low as 60 percent. But are they going to be able to put on the corporate letterhead the seal of approval and then solicit work for the divisions that only run 60 - 70 percent Alaskan. That's the kind of problems we will have. We don't want to get into a situation where we have a lot of employers saying 'I should get this - I should be able to get this - you're using the PFD -- we hear this a lot from the oil industry that the PFD is too stringent because of the time lag involved and that it takes a year. But actually if you'll look at our report of nonresidents working in Alaska, we track from year to year how many nonresidents one year become residents the next year and over all industries, it's about one in seven that actually become residents." Number 0979 MR. FLANAGAN further stated, "Another concern we have is we'll get people calling up, "So and so has the logo - the decal in their window, and I know for a fact they don't have people and you should go take out their logo -- you know, in those cases, we'll just send Dwight over with a baseball bat to remove the offending window [laughter]. But you know, we've got to have due process and all that stuff -- I don't mean to be throwing cold water on it, it's just these are the things that will come up. The establishment of different levels for different industries - that is doable - you could do somebody who exceeds the industry average or something like that, but the more we add to it, the more labor-intensive it gets. And as far as tracking if someone's making a good faith effort to hire Alaskans - we'd really like to stay out of that. That's kind of subjective and we don't care to get into measuring -- how do we measure for that. So I guess what we'd like to see -- the cost -- I believe our research and analysis branch has been very conservative on the fiscal note and that assumes that we would be able to do things pretty much the way we do them with regard to determining the availability of workers who are able and willing to engage. We do that for our resident hire in construction law - we don't survey a bunch of workers and say if you could work on this, would you? We look at how many people are registered with Job Service in different classifications and what the availability is of people that may be qualified. So, I guess if we could work with the committee, I think on a quick turnaround, if we could get this to be more of a - I guess passive program that takes things we already do, takes the data and then, I guess the committee - whatever your pleasure - if you gave a gold award for 95 percent or better, assuming you could agree that PFD -- and not just qualifying for it - that was one of the changes you made in the CS - and we appreciate that, you know - that they qualify, they satisfy their resident eligibility standards for eligibility in the PFD. We don't want to do a case by case, you know if you have a conscientious objector, like certain legislators who pride themselves on not collecting a permanent fund, and we don't want to have to certify that that person would have gotten a PFD if they applied. We just want to go off the tape that we get from PFD every year that shows who applied." Number 1086 MR. FLANAGAN stated, "Mr. Kegley mentioned in a private conversation that might look at some kind of program receipts authority for this. We would certainly prefer that because any general funds added to our budget, it's going to be up for grabs the next time around. I mean if we have to make a choice between enforcing the law protecting working conditions and workers and doing this worthwhile program, we're probably going to go with that. And we just have to be up front and tell you that. If it was program receipts, we would hope that it would be the new fangled designated program receipts, you know, that only -- you don't do them -- you don't collect them unless you do the activity, so that they're kind of off budget. And I guess I just make myself available for questions. A couple of the suggestions we spelled out was maybe you could have something for over 95 percent, something for 85 - 95 percent; and then maybe -- and this would not be too labor intensive -- if you had an employer -- and in some cases, I mean there are some industries -- in seafood if somebody's doing 50 percent - because there's such a huge influx of seasonal workers, short demand -- if somebody's doing 50 percent in that industry, they're way over the industry average. Maybe you could have like an award for percent improvement year to year. If someone's under 50 percent, they'd have to improve 20 percent to get an award. Between 50 [percent] and 70 [percent], they'd have to improve 15 percent. Between 70 [percent] and 85 percent, they'd have to improve 10 percent. Just throwing those out for suggestions - we only saw this -- I guess we saw it Thursday and we have given it some thought and would be glad to work with committee staff or a subcommittee on a quick turnaround and come up with something that we would feel comfortable telling you it would not just be another thing on the books like the Alaska products preference - the dairy products, the timber products - that are on the books and well-intentioned and maybe when they first started, had a little enforcement money, but are virtually vestigial (indisc.) as far as laws go that just sit there with no enforcement." Number 1198 REPRESENTATIVE SANDERS asked Mr. Flanagan to explain why industries with outside markets like canneries, timber, mining and oil would have an interest in this legislation. MR. FLANAGAN believed there would be a lot of interest as is seen with any discussion on resident hire - the corporate citizen aspect. For example, there's been a lot of discussion with the oil industry on resident hire. There's been a lot of emphasis on the resident hire performance of the offshore and onshore sectors with regard to the pollock allocation. Many industries coming before the legislature for various reasons would conceivably have an interest in having a seal of approval from the Department of Labor. Number 1388 REPRESENTATIVE COWDERY inquired about the constitutionality of Alaskan hire. MR. FLANAGAN replied, "That's a very deep subject. I'll give you the two-minute answer. The Alaska Supreme Court, let alone the federal, have always looked real hard and not too favorably on Alaska hire resident legislation. We've had two mandates in terms of percentages - two laws go down and our last vestige is being challenged as we speak in superior court. That regards public construction projects in the state. However, the Department of Law did look at this one - not saying that somebody couldn't figure out they were aggrieved, but they basically think it's defensible you know, because the withholding of it or the granting is a pretty intangible potential bonus or detriment to somebody. It doesn't mean somebody won't jump up and challenge it. But yeah, the equal protection clause of our own state constitution has for the most part preempted local hire laws before they even get to the U.S. Supremes. It doesn't mean we all can't keep trying though. Number 1455 CHAIRMAN ROKEBERG noted that Representative Sanders needed to leave for another committee meeting, so he would like to adopt the proposed committee substitute, Version 0-LS1719\B, Cramer, 4/3/98, as the work draft while there was a quorum. Hearing no objection, that version was before the committee. Number 1489 REPRESENTATIVE COWDERY asked how the Department of Law defines an Alaskan employer. MR. FLANAGAN said he didn't believe the department had a definition of an Alaskan employer in statute; however, it's defined in other statutes pertaining to the Alaska bidder's preference and the legislature came up with a fairly extensive definition in the North Star legislation. REPRESENTATIVE COWDERY inquired about joint ventures. He's aware of a situation where an out-of-state or out-of-country company attempted to find a small contractor in order to qualify for a particular preference. MR. FLANAGAN said he thought that had been dealt with in amendments made to the North Star legislation. He added, "I don't if it was a -- I know it said at least one of the partners had to meet the full definition and then I've seen other places like when it's an issue of minority contractoring or (indisc.), 51 percent has to be, so I guess you could say 51 percent of the joint venture had to be the Alaskan -- the one that met the Alaskan definition to get away from the kind of front situation you're talking about, Representative Cowdery." Number 1584 REPRESENTATIVE ERIC CROFT stated, "Just on Representative Cowdery's point about the constitutionality - this bill came up as part of a discussion between me and your staff, Mr. Kegley, and later with you, Representative Rokeberg, and Amanda Bohman on my staff, about how we could get around a lot of the things that Ed [Flanagan] was talking about. How we keep putting out or did for awhile, put out local hire laws that kept getting struck down and exactly what could we do that would be on the good side of the law. And this, using by analogy the 'Made in Alaska' buttons and stickers seemed to be one that would pass constitutional muster and that's the preliminary opinion we got from the Department of Law. You can't tell people who they have to hire or for that matter, what products they have to buy. You can reward - you can recognize really - people who do a good job in areas you like and by that way, encourage. You can't mandate. You can't require. It seems to me and it seems I think preliminary to the Department of Law you can encourage through this process so this may be the one avenue we do have to do this kind of resident hire stuff. And the more I look through the data here and before, it does seem like as I've said, that certain industries just have a difficult time or difficult reputation in hiring locally - fisheries, food service, visitors. It seems like the ones that operate in a short time span in the summer have a lot of nonresident hires and whether having them always excluded from the criteria, it seemed to me -- the Department of Labor always does a sort of 'worst' list. It says in each of the industries, here are the ones that don't do as well. You could just as easily, it'd seem to me, do a 'here's the one in each industries that do the best' so you could even have ones in the fisheries that were only hitting 60, but that was so much better than the average of 30 that we did want to recognize them. So, I guess on those two issues -- what's an Alaskan employer, I'd much rather recognize the hires here than some criteria about doing business or licensed in the state - those you can have the kind of sham offices or sham operations. When it really gets down to who are your employees, it seems to me more verifiable and harder to fake." Number 1700 CHAIRMAN ROKEBERG acknowledged Steven Rouse standing by on teleconference to testify. Number 1714 STEVEN ROUSE, Executive Director, Trade Association, Make it Alaskan, Inc.; and Permit Agent and Program Manager for the Made in Alaska Program, testified from Anchorage via teleconference. He said "Make it Alaskan" is a statewide, nonprofit organization whose mission statement is to promote the purchase and use of Alaskan made products and utilization of Alaskan services. The organization has been an active leader in raising the awareness and the importance of the issue of Alaska hire and believes that in a resource rich state, the resident work force is a very valuable resource and one that should be developed to its full potential. He said his second role is speaking as the permit agent and program manager for the state of Alaska's Made in Alaska program, which has been so liberally referred to in the discussions of this bill. He has some serious concerns and questions about HB 479. He had expressed his concerns to Chairman Rokeberg's staff and while he doesn't have a copy of the proposed committee substitute, he understands that a couple of items of concern have been addressed in the committee substitute. MR. ROUSE said it was his understanding there was no fiscal note for this bill. CHAIRMAN ROKEBERG interjected that was incorrect; there was a fiscal note attached. MR. ROUSE said this type of program needs to be funded. There is current and historical evidence that demonstrates that the aftermath of well-intentioned programs enacted without enough funds, let alone just funds, are widespread. He cited several examples of programs that are no longer in existence or close to nonexistent due to lack of funds: the product preference program; the forest products preference program; the recycled products preference; the Alaska grown program, et cetera. He concluded, "We believe that while the bill is certainly well-intentioned, that we believe in it in concept as does the Alaska Department of Labor, for all of the reasons that Mr. Flanagan referred to and then some, we strongly urge this committee to reconsider this bill before passing it out (indisc.-coughing) willing to work with the committee to determine a way in which you could identify and support those people who meet any specific set of criteria. But one who administers and has administered this program that you guys are saying you want emulate, I'm telling you there's a lot to it that you're not recognizing - there's a lot of cost to it that you're not admitting and you're opening up what my experience has been to be a pandora's box of public outcry and consternation over who gets it, why they get, when they get it, who polices this logo by the wayside, is it a copyrighted logo? Given the recent court decision on the use of the state seal under the guise of artistic expression, does this mean that this seal can be used and reused or bastardized, for lack of a better term, by anybody and everybody for commercial means." He stated that if this legislature is looking to advance the concept of results based government and allocate funds and create laws under that principle, he respectfully suggested this legislation is not consistent with that principle. Number 1980 CHAIRMAN ROKEBERG inquired if the committee had any questions of Mr. Rouse. REPRESENTATIVE COWDERY inquired as to the size of the program administered by Mr. Rouse. MR. ROUSE replied the nonprofit organization, Make it Alaska which administers the Made in Alaska program, has an employee and a half and a volunteer staff that extends across the state - volunteer site inspectors, volunteer information and various other activities. More specifically, there are two paid staff and dozens of volunteer staff statewide. REPRESENTATIVE COWDERY inquired as to the number of members. MR. ROUSE replied the Made in Alaska program currently has 1,162 active product lines certified in the program held by 1,018 different permit holders. Number 2051 CHAIRMAN ROKEBERG said that concluded public testimony on HB 479. He requested the Department of Labor work with the bill sponsors on this particular piece of legislation. He remarked that he's not real excited about rewarding businesses that reach 50 percent achievement, even though it is a vast improvement, because the idea is to take pride in the display of a decal or logo. Chairman Rokeberg noted that HB 479 would be held in committee for further consideration.
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