Legislature(2017 - 2018)BARNES 124

01/31/2018 03:15 PM LABOR & COMMERCE

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        HB 299-EXTEND: ALCOHOLIC BEVERAGE CONTROL BOARD                                                                     
4:01:08 PM                                                                                                                    
CHAIR KITO  announced that  the next order  of business  would be                                                               
HOUSE BILL  NO. 299,  "An Act extending  the termination  date of                                                               
the  Alcoholic  Beverage  Control  Board; and  providing  for  an                                                               
effective date."                                                                                                                
4:01:23 PM                                                                                                                    
LAURA  STIDOLPH, Staff,  Representative Adam  Wool, Alaska  State                                                               
Legislature, introduced HB 299 on  behalf of Representative Wool,                                                               
prime  sponsor.   She  explained  that  the proposed  bill  would                                                               
extend the Alcoholic  Beverage Control (ABC) Board  by four years                                                               
to June  30, 2022.   She paraphrased  the Legislative  Budget and                                                               
Audit (LB&A) conclusions, which read as follows:                                                                                
     The  Alcoholic  Beverage  Control Board  (board)  is  a                                                                    
     regulatory and quasi-judicial  board consisting of five                                                                    
     members  appointed by  the  governor,  created for  the                                                                    
     purpose   of  controlling   the  manufacture,   barter,                                                                    
     possession,  and sale  of  alcoholic  beverages in  the                                                                    
     state.  The  board  consists  of  one  member  actively                                                                    
     engaged  in  the public  safety  sector,  one from  the                                                                    
     general public,  one who  has resided  in a  rural area                                                                    
     within the  last five years,  and two  actively engaged                                                                    
     in   the  alcoholic   beverage   industry.  The   audit                                                                    
     concluded the  board should improve its  procedures for                                                                    
     issuing  renewals,  recreational   site  licenses,  and                                                                    
     beverage  dispensary licenses  that encourage  tourism.                                                                    
     Testing  found  these  licenses were  not  consistently                                                                    
     issued  in  accordance  with statutes.    Additionally,                                                                    
     operational improvements are  needed in enforcing laws,                                                                    
     monitoring   board-related    local   law   enforcement                                                                    
     activity, and processing refunds to municipalities.                                                                        
4:02:52 PM                                                                                                                    
KRIS CURTIS,  Legislative Auditor, Legislative Audit  and Budget,                                                               
Legislative  Agencies and  Offices,  presented  the sunset  audit                                                               
findings  for the  ABC  Board.   The audit  found  the board  had                                                               
operated in  the public interest  in all areas  except licensing.                                                               
There was  a need to  improve the board's procedures  for issuing                                                               
renewals,  recreational site  licenses,  and beverage  dispensary                                                               
licenses   for   the   purposes    of      encouraging   tourism.                                                               
Additionally, operational improvements  are needed in enforcement                                                               
of  laws,   monitoring  local   law  enforcement   activity,  and                                                               
processing  refunds  to  municipalities.     She  read  from  the                                                               
November 2017 audit [included in committee packets] as follows:                                                                 
     AMCO    [Alcohol   and    Marijuana   Control    Board}                                                                    
     investigators   have   stopped  conducting   compliance                                                                    
     checks  as of  April  2015.   The  board, through  AMCO                                                                    
     investigators,  has  historically conducted  compliance                                                                    
     checks where investigators  employ underage individuals                                                                    
     who   attempt   to    purchase   alcoholic   beverages.                                                                    
     Licensees who fail a  compliance check receive criminal                                                                    
     summons  or citations.   According  to management,  the                                                                    
     federal grant  funding for this program  was terminated                                                                    
     at   the  end   of   2012,  and   the  board   received                                                                    
     supplemental funds  to keep  the program  going through                                                                    
     June  2014.   AMCO's enforcement  section continued  to                                                                    
     conduct  compliance checks  funded by  program receipts                                                                    
     until April  2015.  Although  there is no  statutory or                                                                    
     regulatory  requirement to  conduct compliance  checks,                                                                    
     AMCO management reported it is  an integral part of the                                                                    
     enforcement   of  alcoholic   beverage   laws  and   is                                                                    
     evaluating   alternative   means  for   providing   the                                                                    
     enforcement   through   shared  services   with   other                                                                    
     agencies.     The  audit  noted  the   board  and  AMCO                                                                    
     management have  not established a  written enforcement                                                                    
     plan to direct its  limited enforcement resources.  For                                                                    
     example,  the board  has not  formally established  how                                                                    
     often   licensed   premises    should   be   inspected.                                                                    
     Furthermore, the  control office  does not  monitor and                                                                    
     track all complaints to  ensure complaints are assessed                                                                    
     for  follow  up action  and  investigated  in a  timely                                                                    
4:05:26 PM                                                                                                                    
MS.  CURTIS  added  that  the   board  and  AMCO  staff  had  not                                                               
maintained a  list of restricted purchasers  within the statewide                                                               
database  in   accordance  with  statute,   potentially  allowing                                                               
individuals who have been convicted  of illegally selling alcohol                                                               
to continue to purchase alcohol via written order.                                                                              
MS. CURTIS  listed the eight  recommendations in the audit.   The                                                               
audit recommended the  authority to renew licenses  be limited to                                                               
the board to  comply with statutes.  The  audit again recommended                                                               
that  the board  issue recreational  site licenses  in accordance                                                               
with  statutory   requirements.     This  was  the   second  such                                                               
recommendation  and had  been given  in the  prior sunset  audit.                                                               
Ten of the 29 recreational site  licenses had been tested, and it                                                               
was  found  that  all  10  did  not  meet  the  definition  of  a                                                               
recreational  site.   She gave  the list  of recreational  sites,                                                               
including  baseball  games, car  races,  hockey  games, dog  sled                                                               
racing events  and curling matches  held during the season.   The                                                               
non-compliant  licensees  the  audit had  found  included  travel                                                               
companies, bowling alleys, an arts  council, a pool hall, a movie                                                               
theater, and  a spa.   Board  members were  aware that  they were                                                               
issuing  those  licenses  not in  accordance  with  statute,  but                                                               
believed it was  in the public's best interest to  continue to do                                                               
so.  The  board thought the issue would be  addressed in a future                                                               
re-write of the statute.                                                                                                        
MS.  CURTIS spoke  to  the recommendation  that  the board  issue                                                               
beverage  dispensary   licenses  in  accordance   with  statutory                                                               
requirements.    The  audit  sampled   16  of  the  126  beverage                                                               
dispensary licenses that encourage tourism  and found that 5 were                                                               
transferred and 6 were renewed  despite not meeting the statutory                                                               
requirements.   She explained statutes  give the  board authority                                                               
to  issue  a  beverage  dispensary   license  without  regard  to                                                               
population limits if it appears  that the issuance will encourage                                                               
tourism.   She  added that  statutes also  provide for  a minimum                                                               
rental room  rate, and, in  the areas examined, the  entities did                                                               
not  meet  the   minimum  rate.    The  board   believed  it  was                                                               
appropriate to continue  to issue those licenses  as the original                                                               
licenses had  been issued prior  to 1985.   However, there  is no                                                               
statutory provision to grandfather licenses.                                                                                    
4:08:54 PM                                                                                                                    
MS.  CURTIS continued  to  list the  LB&A  recommendations.   The                                                               
audit  recommended   the  board,  the  AMCO   director,  and  the                                                               
enforcement  supervisor work  together to  formally establish  an                                                               
enforcement plan to direct  AMCO's limited enforcement resources.                                                               
The  audit  further  recommended  the  board  and  AMCO  director                                                               
implement a  process to  monitor and  track complaints  to ensure                                                               
they  are assessed  for follow-up  action and  investigated in  a                                                               
timely manner.   The sixth recommendation was that  the board and                                                               
the  AMCO director  develop written  procedures for  updating the                                                               
statewide  database  with   restricted  purchasers.    Procedures                                                               
should include working  with the court system  to receive reports                                                               
of  violations in  a timely  manner.   The audit  recommended the                                                               
board   and   AMCO   director  improve   procedures   to   ensure                                                               
municipalities  report  violations  of alcoholic  beverage  laws.                                                               
Finally,  the audit  recommended  the AMCO  director develop  and                                                               
implement  procedures to  ensure  refunds  to municipalities  are                                                               
appropriately reviewed.                                                                                                         
4:11:33 PM                                                                                                                    
MS. CURTIS  stated LB&A was  recommending a 4-year  extension for                                                               
the  board.   The department  concurred with  all recommendations                                                               
except  recommendation   1  regarding  the  authority   to  renew                                                               
licenses.     The   board  believed   there  is   an  alternative                                                               
interpretation of  statute.  The  board chair concurred  with all                                                               
but  recommendation  3  concerning beverage  dispensary  licenses                                                               
which encourage tourism.  The  board maintained it is appropriate                                                               
to continue to grandfather those  licenses.  Ms. Curtis explained                                                               
that when an auditee does  not agree with any recommendation, she                                                               
responds  in the  audit findings.   In  this instance,  the board                                                               
chair  was  unable  to  provide   more  information  for  her  to                                                               
consider.  She therefore reaffirmed the findings.                                                                               
4:12:50 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON asked whether  the boards ever report to                                                               
the state about the lack of resources.                                                                                          
MS. CURTIS  replied that the  ABC Board was different  from other                                                               
boards  in  not  being  an occupational  licensing  board.    The                                                               
board's response  acknowledges the  need for an  enforcement plan                                                               
and some sort of prioritization due to limited resources.                                                                       
REPRESENTATIVE JOSEPHSON  asked what  the board  needed to  do to                                                               
fix the information gap with the court system.                                                                                  
MS. CURTIS answered  she thought that it was as  simple as asking                                                               
the court system to send in the information.                                                                                    
4:15:21 PM                                                                                                                    
REPRESENTATIVE  BIRCH asked  about  efforts  to receive  feedback                                                               
from licensees regarding the board's operations.                                                                                
MS. CURTIS  answered that at times  surveys were sent out  to ABC                                                               
stakeholders.  The  audit also examined board  meeting minutes to                                                               
determine  whether  the  public  was  commenting  and  how  those                                                               
comments  were considered  by the  board.   She  deferred to  the                                                               
board chair for more information.                                                                                               
4:17:37 PM                                                                                                                    
REPRESENTATIVE KNOPP  remarked the audit  had triggered a  lot of                                                               
discussion, including  the proposals of  HB 301  and HB 265.   He                                                               
asked  whether it  was not  more appropriate  to decide  that the                                                               
statute "doesn't fit," and he said  he thought that it made sense                                                               
to return to pre-1985.                                                                                                          
MS.  CURTIS replied  it was  outside of  her role  as auditor  to                                                               
comment on the appropriate nature of statute.                                                                                   
CHAIR  KITO  added  that  he   thought  it  made  sense  for  the                                                               
legislators to examine legislation that may no longer "fit."                                                                    
REPRESENTATIVE KNOPP  spoke to  the population  base and  said he                                                               
thought there were different  distinctions for incorporated areas                                                               
of the boroughs.  He asked  why the population base was not taken                                                               
out of the incorporated areas.                                                                                                  
MS. CURTIS said she did not  know which areas were examined.  She                                                               
specified that the analysis was applied  to a sample group of the                                                               
126 licenses.                                                                                                                   
REPRESENTATIVE KNOPP  asked whether,  with separate  sections for                                                               
incorporated  areas,  it made  sense  to  exclude the  population                                                               
MS.  CURTIS said  she  did not  know if  she  could address  that                                                               
issue.  She stated the  auditors had not had trouble interpreting                                                               
the  criteria  and  asked  whether he  was  questioning  why  the                                                               
statute was written the way it was.                                                                                             
REPRESENTATIVE KNOPP said,  "if it was meant to  be all inclusive                                                               
incorporated cities  inside an organized borough,  we would never                                                               
have put the exclusions for  the incorporated cities in there, so                                                               
we  should  only  be  counting   the  unorganized  areas  of  the                                                               
borough." He  said he thought that  was not what was  done in the                                                               
4:23:03 PM                                                                                                                    
MS. CURTIS deferred to the auditor who carried out the testing.                                                                 
4:23:19 PM                                                                                                                    
CHRISTINE  LUMBA,  Legislative  Auditor,  Legislative  Audit  and                                                               
Budget, stated she was not sure she has an answer for that.                                                                     
4:23:47 PM                                                                                                                    
CHAIR KITO asked  whether she was able to describe  how the audit                                                               
was tested.                                                                                                                     
4:23:57 PM                                                                                                                    
MS.  LUMBA  answered  that  the  division  had  generated  random                                                               
samples  and  found that  certain  licenses  were issued  without                                                               
regard  to population  limits  to encourage  tourism.   When  the                                                               
renewal came up, they were evaluated under AS 04.11.400(d).                                                                     
4:24:31 PM                                                                                                                    
REPRESENTATIVE  KNOPP   responded  that  he  would   contact  the                                                               
division in person later.                                                                                                       
4:24:48 PM                                                                                                                    
MS. CURTIS  remarked that LB&A  had vetted the findings  with the                                                               
ABC and  AMCO Boards and they  had no issue with  the criteria or                                                               
4:24:59 PM                                                                                                                    
REPRESENTATIVE WOOL  commented on an inconsistency  in the number                                                               
of rooms  required for licenses in  different areas.  He  went on                                                               
to ask about qualifications for enforcement officers.                                                                           
MS. CURTIS deferred to AMCO.                                                                                                    
4:26:44 PM                                                                                                                    
ERIKA MCCONNELL, Director, Alcohol  and Marijuana Control Office,                                                               
Department  of  Commerce,  Community,  and  Economic  Development                                                               
(DCCED),  answered that  the  board's  enforcement officers  were                                                               
classified  as special  investigator I,  requiring four  years of                                                               
advanced level investigative work or  four years of full-time law                                                               
enforcement  experience.   She  specified  that  all the  board's                                                               
current officers were previously law enforcement officers.                                                                      
REPRESENTATIVE  WOOL said  he felt  that the  ABC board  and AMCO                                                               
office staff were overworked.  He  disclosed that he is a license                                                               
holder and  has had  trouble reaching  the office  via telephone.                                                               
He asked whether the addition  of marijuana [control enforcement]                                                               
to the workload was something "they could do comfortably."                                                                      
MS. MCCONNELL answered  that there had been  an adjustment period                                                               
as the office  had taken on the marijuana program.   It had grown                                                               
incrementally  to accommodate  the marijuana  board and  had also                                                               
seen  a great  deal of  staff turnover.   She  remarked that  the                                                               
office had heard  other people complain that it  can be difficult                                                               
to reach staff,  and the office had developed  policies to ensure                                                               
it was more responsive.                                                                                                         
4:29:50 PM                                                                                                                    
REPRESENTATIVE  WOOL asked  how  many  enforcement officers  were                                                               
currently employed by the board.                                                                                                
MS. MCCONNELL  replied there  is one  special investigator  II in                                                               
Anchorage and seven enforcement officers.                                                                                       
REPRESENTATIVE  WOOL  remarked  that  there  were  1,885  alcohol                                                               
licenses requiring enforcement and  a growing number of marijuana                                                               
licenses.  He spoke to one  of the recommendations that the board                                                               
carry out license renewals whereas  currently the AMCO office was                                                               
doing that.  He asked for her thoughts.                                                                                         
MS. MCCONNELL replied  that as noted in the  audit response, AMCO                                                               
felt that  statutes can  be interpreted  differently, but  it had                                                               
agreed to  adjust its procedures based  on the audit.   She added                                                               
that AMCO  had taken 350  renewals to  the board.   However, they                                                               
were  not  providing the  board  with  all  the paperwork.    The                                                               
renewals  provided to  the board  were  those which  had met  the                                                               
requirements for renewal.                                                                                                       
4:31:46 PM                                                                                                                    
REPRESENTATIVE WOOL said he felt  renewing 900 licenses was a lot                                                               
of work  for the board.   He asked whether the  director having a                                                               
tie-breaking vote was something that existed in other boards.                                                                   
MS. CURTIS replied that she was not aware of the policy.                                                                        
REPRESENTATIVE WOOL directed his question to Ms. McConnell.                                                                     
MS.  MCCONNELL answered  that the  Marijuana Board  did not  have                                                               
that policy.                                                                                                                    
REPRESENTATIVE WOOL  mentioned that in discussions  with staff in                                                               
the  licensing areas,  it  was  disclosed that  the  vote was  in                                                               
statute which had  been repealed but had  remained in regulation.                                                               
He asked for confirmation from LB&A.                                                                                            
MS. CURTIS replied that it was not a topic in the audit.                                                                        
4:34:05 PM                                                                                                                    
CHAIR KITO  stated he thought  it may  have been a  decision that                                                               
had come up post-audit.                                                                                                         
4:34:49 PM                                                                                                                    
ROBERT KLEIN, Chair, Alcohol and  Beverage Control Board, Alcohol                                                               
& Marijuana  Control Office,  Department of  Commerce, Community,                                                               
and Economic Development (DCCED), testified  in the hearing on HB                                                               
299.   He  complimented  the LB&A  for the  thorough  job on  the                                                               
audit.  He said he agreed  with recommendations 4-8 and the board                                                               
had already implemented a number  of them. Regarding renewals, he                                                               
stated  the law  said the  board was  the only  group that  could                                                               
grant  renewals, so  at the  January  23 board  meeting they  had                                                               
staff  bring around  300  renewals to  them.   He  stated it  was                                                               
onerous, but that staff had done a lot of homework.                                                                             
MR.  KLEIN spoke  to recreational  site licenses,  specifying the                                                               
board does not  grant any recreational site licenses  that do not                                                               
follow  the statute  requirements  very closely  and only  renews                                                               
practicing businesses.   He mentioned that the  board was waiting                                                               
for SB 76 to move through  the legislature.  If the proposed bill                                                               
passed, the  board would comply,  otherwise it would  address how                                                               
to  avoid  renewing some  of  the  licenses.   He  addressed  the                                                               
recommendation   regarding  tourism,   indicating  that   in  the                                                               
application  of Title  4, the  board looked  at licenses  granted                                                               
before 1985 and applied common sense.   The board did not want to                                                               
ask those  holding tourism licenses  to build more  rooms because                                                               
the  population increases  and had  not  taken that  action.   In                                                               
closing, he stated  that he supports the 4-year  extension in the                                                               
proposed legislation.                                                                                                           
4:38:56 PM                                                                                                                    
REPRESENTATIVE BIRCH  extended his personal appreciation  for the                                                               
services and support the ABC Board  had provided to Alaskans.  He                                                               
asked  whether there  was anything  the legislature  could do  to                                                               
ensure that common sense prevails.                                                                                              
4:39:44 PM                                                                                                                    
MR. KLEIN remarked that the  application of common sense was what                                                               
had enabled Title 4 to exist for almost 40 years.                                                                               
4:40:00 PM                                                                                                                    
REPRESENTATIVE KNOPP spoke to the  rejection of the reinstatement                                                               
of  an  alcoholic beverage  license  to  a well-established  Elks                                                               
Lodge.   He said  he felt  the ABC Board  had been  following the                                                               
intent of  the law  but asked  whether the  board could  not have                                                               
used discretion.                                                                                                                
4:40:59 PM                                                                                                                    
MR. KLEIN answered  that the people responsible  for renewing the                                                               
license  chose  to  ignore  the requirements  to  apply  for  the                                                               
renewal  and had  missed all  the deadlines.   He  underlined the                                                               
action taken  by the board  did not  preclude the lodge  from re-                                                               
applying for the license.                                                                                                       
4:41:51 PM                                                                                                                    
REPRESENTATIVE  STUTES asked  how  many members  are  on the  ABC                                                               
MR. KLEIN replied there are five members on the board.                                                                          
4:42:07 PM                                                                                                                    
REPRESENTATIVE  WOOL remarked  that the  five board  members were                                                               
selected for different roles.   He asked whether the director had                                                               
a tie-breaking vote and whether it was ever used.                                                                               
MR. KLEIN answered that he  was against applying the tie-breaking                                                               
vote of  the director.  He  added that the board  had dropped the                                                               
legislative aspect of the director  having the tie-breaking vote.                                                               
He  clarified that  the board  was quasi-judicial  in nature  and                                                               
that at times  the director was the prosecutor in  the cases that                                                               
come before  the board.   He said  he thought the  regulation was                                                               
left in the statute inadvertently.                                                                                              
REPRESENTATIVE WOOL asked whether the  board can keep up with the                                                               
900 license renewals every year.                                                                                                
4:44:04 PM                                                                                                                    
MR. KLEIN  answered there was an  efficient way for the  staff to                                                               
review renewals.  There was a  public process as well as a series                                                               
of checks and balances in the system.   He added that by the time                                                               
the five members  of the board review a renewal,  the renewal has                                                               
gone through those hurdles.                                                                                                     
4:44:53 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON asked whether  the director of AMCO cast                                                               
a tie-breaking vote  relying on a regulation  that was previously                                                               
connected  to a  statute.   He added  that the  statute had  been                                                               
repealed, and he said he  thought it was a standalone regulation.                                                               
He asked  whether people were  questioning the legitimacy  of the                                                               
MR. KLEIN answered  that the tie-breaking vote has  not been used                                                               
in his experience  and has not been  used in many years.   It was                                                               
brought up  in a meeting  because the regulation had  been found.                                                               
He added  the assistant attorney  general who supports  the board                                                               
suggested it might be difficult  to defend should any lawsuits be                                                               
brought forward.                                                                                                                
4:46:11 PM                                                                                                                    
CHAIR KITO opened public testimony on HB 299.                                                                                   
4:46:29 PM                                                                                                                    
WILLIAM  HARRINGTON   testified  that  he  does   not  think  the                                                               
alcoholic beverage industry needs a control board.                                                                              
4:48:15 PM                                                                                                                    
CHAIR KITO  announced he would  leave public testimony on  HB 299                                                               
CHAIR KITO held over HB 299.                                                                                                    

Document Name Date/Time Subjects
HB299 Sponsor Statement 1.29.18.pdf HL&C 1/31/2018 3:15:00 PM
HB 299
HB299 ver A 1.31.18.PDF HL&C 1/31/2018 3:15:00 PM
HB 299
HB299 Supporting Document Audit 11.17.17.pdf HL&C 1/31/2018 3:15:00 PM
HB 299
HB299 Fiscal Note DCCED AMCO 1.27.18.pdf HL&C 1/31/2018 3:15:00 PM
HB 299
HB301 Sponsor Statement 1.24.18.pdf HL&C 1/31/2018 3:15:00 PM
HB 301
HB301 Supporting Documents ABC Memo Tourism BDL 9.13.17.pdf HL&C 1/31/2018 3:15:00 PM
HB 301
HB301 Ver D 1.31.18.PDF HL&C 1/31/2018 3:15:00 PM
HB 301
HB265 Fiscal Note DCCED AMCO 1.25.18.pdf HL&C 1/31/2018 3:15:00 PM
HB 265
HB265 Version D 1.31.18.PDF HL&C 1/31/2018 3:15:00 PM
HB 265
HB301 Fiscal Note DCCED AMCO 1.26.18.pdf HL&C 1/31/2018 3:15:00 PM
HB 301
HB265 Explanation of Changes.pdf HL&C 1/31/2018 3:15:00 PM
HB 265
HB265 Sponsor Statement.pdf HL&C 1/31/2018 3:15:00 PM
HB 265
HB301 Support Letters 1.31.18.pdf HL&C 1/31/2018 3:15:00 PM
HB 301