Legislature(2015 - 2016)BARNES 124
04/14/2016 09:00 AM LABOR & COMMERCE
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SB 158-REAL ESTATE COMMISSION;BROKER LICENSING 9:13:56 AM CHAIR OLSON announced that the first order of business would be SENATE BILL NO. 158, "An Act relating to real estate broker licensure; relating to the real estate commission; and providing for an effective date." 9:14:40 AM WESTON EILER, Staff, Senator Mia Costello, stated that SB 158 was brought forward and introduced by the Senate Labor and Commerce Standing Committee at the request of the Alaska Real Estate Commission and the real estate industry. 9:14:57 AM KONRAD JACKSON, Staff, Representative Kurt Olson, stated that on 4/13/16, the committee moved, but did not adopt, the proposed House committee substitute for SB 158, Version 29-LS1303\H, Bruce, 4/5/16, which repeals AS 08.88.172(e), and thereby would require real estate brokers and salespersons to carry errors and omissions insurance. In addition, Version H changes the effective date of Section 4 of the bill to 1/1/18, which allows a broker applicant currently processing an application to complete that process. 9:16:20 AM CHAIR OLSON removed his objection stated on 4/13/16, and Version H was before the committee. 9:16:34 AM CHAIR OLSON opened public testimony. 9:16:47 AM ERROL CHAMPION, Chair, Legislative Issues Committee, Alaska Association of Realtors, expressed his organization's support for the proposed House committee substitute for SB 158. REPRESENTATIVE HUGHES asked how long the Alaska Association of Realtors has been working to support the proposed legislation, and whether support was found throughout its membership. MR. CHAMPION responded that the legislation has been a topic of discussion for the last 3-4 years. In further response to Representative Hughes, he said the association does not represent every real estate licensee, however, it does represent about 1,600 of 2,400 real estate licensees, and all of the members of the association have been well informed in this regard. 9:19:40 AM TRACI BARICKMAN, Commissioner, Alaska Real Estate Commission, informed the committee she has been a real estate broker for over 23 years, and has reviewed and supervised thousands of transactions and hundreds of licensees. She clarified that not all real estate licensees are Realtors, and the upgrade to education as referred to in the bill should not be confused with continuing education; the bill addresses 15 hours of additional broker education. Ms. Barickman described the differences in the industry between transactions of 25 years ago and those in recent years, and also the differences between what is taught a new licensee and what understanding is required of a broker, such as business recovery funds, opening a new office, trust accounts, operating accounts, supervision, and local, state, and federal law. She advised that the duties of a broker cannot be taught in 15 hours, or in 24 months of real estate sales. 9:22:14 AM MATTHEW STEELE, real estate licensee, expressed his support of the effective date change [within Version H]. He clarified that there are two licenses issued by the state, that of a salesperson and that of a broker; however, to become an associate broker, one must obtain a broker's license. His goal is not to start his own firm, but to become an associate broker working under the supervision of a broker. 9:23:58 AM ELIJAH WAUGH stated that as a lifelong Alaskan he finds legislation related to occupational licensing, such as SB 158, a direct infringement on individual liberty. The bill doubles the amount of time required to become a broker, and he questioned why that would provide safety to the general public. In reality, this policy helps very few and is an example of "crony capitalism" because it creates barriers to entry, and limits competition to existing brokers. Mr. Waugh referred to a recent White House report that showed unnecessary occupational licensing negatively affects low-income families, immigrants, and military spouses, and leads to higher unemployment [report not provided]. At this time, Alaska needs leadership and he expressed his strong opposition to the bill. REPRESENTATIVE JOSEPHSON inquired as to whether Mr. Waugh would attribute to the real estate industry any honest motivation or merit in its support for further education for brokers. MR. WAUGH opined the industry seeks to gain from requiring more education, and there is no problem with the current system. 9:27:14 AM MARGARET NELSON, real estate licensee, Alaska Real Estate Alliance, said she works for a very small brokerage and has worked in the industry for 12 years. She acknowledged that SB 158 has support of the "Alaska boards of Realtors"; however, she is not a Realtor, and was unaware of the bill. She said she is opposed to SB 158 because the real estate industry is a professional service industry, and individuals distinguish themselves by providing customer service to their clients. Large brokerage houses support this bill as it eliminates competition from new brokerages. Ms. Nelson pointed out that all licensees are independent contractors who are small business owners and thus are subject to taxes as a small business. More time spent on unnecessary training restricts time to earn money, and every two years repetitive continuing education courses are required. She noted that some real estate licensees who provide property management services, and manage homeowner's associations, will pass the cost of additional training along to homeowners, and brokers who work for engineering companies will also pass costs along to consumers. Another point is that some brokers already have undergraduate degrees. Most important is the impact of the bill on rural Alaska, where applicants will have to travel for training and not all are suited for correspondence classes. Ms. Nelson opined that present-day real estate is not more complex if one seriously wishes to assist one's client. She urged for more review of the proposed legislation. 9:32:38 AM KELSI PULCZINSKI said she is strongly opposed to SB 158 because the bill doubles the amount of experience required to become a licensed real estate broker, and doubles the amount of training required. She stated that the increased requirements are unnecessary and create barriers to enter into the field; in fact, unnecessary occupational licensure requirements infringe on individual liberties, cripple the free market, and perpetuate crony capitalism. Ms. Pulczinski opined the legislation addresses a problem that does not exist, and supporters of the bill will directly benefit by eliminating competition. Additionally, supporters are the only sources offering the training. The proposed legislation hurts small business owners, low-income individuals, and others. She urged for the committee to better the lives of Alaskans by protecting their opportunities. 9:34:57 AM JEREMY PRICE, State Director, Alaska Chapter, Americans for Prosperity, said he was speaking on behalf of "thousands of grass-roots activists across the state" to oppose SB 158. The legislation reduces competition for big brokerage firms and creates barriers and unnecessary hurdles for those wishing to become a broker, by those who will benefit. He noted the demographics of those most negatively affected are low-income, immigrants, military spouses, and rural individuals. He read from a report [report not provided]. Mr. Price read from the public record of the 9/2[/16] minutes of the Alaska Real Estate Commission [document not provided]. He concluded that members of the industry, who are trainers, have put the legislation forward, which is a conflict of interest that has not been given full attention. Large brokerage firms support the bill because it suppresses competition; however, the public benefits from greater competition, and there is legal recourse to deal with bad actors. 9:37:56 AM REPRESENTATIVE JOSEPHSON opined that fifteen hours of additional education is not very much to ask of brokers. He asked whether one more year of experience would be satisfactory, rather than two more years. MR. PRICE stated that legislation is not the best way to prevent bad actors from becoming licensed brokers. He supported Representative Josephson's foregoing proposal. REPRESENTATIVE JOSEPHSON surmised the intent of the legislation is to strive for improvement in the industry. MR. PRICE inquired as to whether the industry provided the committee with evidence of problems which are addressed by the legislation. 9:40:09 AM CHAIR OLSON, after ascertaining no one else wished to testify, closed public testimony. 9:40:52 AM REPRESENTATIVE KITO moved to report CS for SB 158 out of committee with individual recommendations and the accompanying fiscal notes. [There followed discussion as to the correct version of the bill.] 9:41:21 AM REPRESENTATIVE KITO restated the motion to report [House] committee substitute for SB 158, Version 29-LS1303\H, Bruce, 4/5/16, out of committee with individual recommendations and the accompanying fiscal notes. 9:41:38 AM REPRESENTATIVE JOSEPHSON advised that he would not object to fifteen hours of additional education, however, he suggested that members may further consider the extension from two years to four years. 9:42:08 AM There being no objection, HCS SB 158(L&C) was reported out of the House Labor and Commerce Standing Committee.