Legislature(2007 - 2008)SENATE FINANCE 532

04/23/2007 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Above Item Removed from Agenda>
Moved CSSB 84(JUD) Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
     CS FOR SENATE BILL NO. 84(JUD)                                                                                             
     "An Act relating to the testing and packaging of cigarettes                                                                
     to be sold, offered for sale, or possessed in this state;                                                                  
     and providing for an effective date."                                                                                      
This was  the first hearing for  this bill in the  Senate Finance                                                               
9:25:59 AM                                                                                                                    
Senator Olson, the bill's sponsor,  cited cigarettes as being the                                                               
leading cause of  home fatalities in Alaska and  the nation. One-                                                               
quarter  of cigarette  home fire  fatalities do  not even  smoke.                                                               
This  legislation  is  an  attempt   to  address  this  issue  by                                                               
specifying  that "only  self-extinguishing  cigarettes" could  be                                                               
sold in the State.                                                                                                              
Senator Olson stated that when  he was a practicing physician, he                                                               
had treated a child for  injuries received in a cigarette-related                                                               
home fire. That incident has been  a major factor in his decision                                                               
to sponsor this bill.                                                                                                           
9:27:10 AM                                                                                                                    
DENISE  LICCIOLI,  Staff  to Senator  Olson,  expressed  that  in                                                               
addition  to allowing  only self-extinguishing  cigarettes to  be                                                               
sold  in  the  State,  this  bill  would  establish  testing  and                                                               
certification requirements to support that mandate.                                                                             
Ms. Liccioli communicated  that while it is  impossible to create                                                               
a  "safe" cigarette,  allowing only  self-extinguishing or  "fire                                                               
safe" cigarettes to be sold  would have an impact. These "reduced                                                               
ignition propensity cigarettes …. are  designed to be less likely                                                               
than a conventional cigarette to  ignite soft furnishings such as                                                               
a couch or mattress".                                                                                                           
Ms. Liccioli  stated that in  order to allow these  cigarettes to                                                               
be easily identified, the bill  also included specifics as to how                                                               
self-extinguishing cigarette packages should be marked.                                                                         
Ms. Liccioli  reiterated that cigarettes  are "the  leading cause                                                               
of  home fire  fatalities in  Alaska" and  the nation.  "The most                                                               
common material  first ignited  in home  fires is  mattresses and                                                               
bedding, upholstered  furniture, and floor coverings."  Fires are                                                               
often started by  a dropped or forgotten  cigarette, as evidenced                                                               
in  an April  21, 2007  article  in the  Juneau Empire  newspaper                                                               
[copy  on  file] that  credited  the  cause  of an  April  fourth                                                               
apartment building fire in Juneau  as being a discarded cigarette                                                               
that ignited in a couch.                                                                                                        
Ms.  Liccioli   stressed  that  one-quarter   of  smoking-related                                                               
fatalities are non-smokers  and more than one-third  of that one-                                                               
quarter  are children.  Studies also  indicate that  the risk  of                                                               
dying in  a smoking-related residential fire  increases with age.                                                               
"38 percent of fatal smoking material  fire victims are age 65 or                                                               
Ms. Liccioli stated that "the  most common technology utilized by                                                               
cigarette   manufacturers   for    reduced   cigarette   ignition                                                               
propensity [RCIP] … is to make  a paper thicker in places to slow                                                               
down a burning cigarette". She  directed attention to a Coalition                                                               
for Fire-Safe  Cigarettes handout  [copy on file]  which included                                                               
an image of the RCIP "speed bumps".                                                                                             
Ms.  Liccioli  explained  the  speed  bump  technology.  When  an                                                               
unattended cigarette burns  down to the thicker  paper speed bump                                                               
area, the burning will self-extinguish.  In order to qualify as a                                                               
self-extinguishing cigarette, a  cigarette must meet "established                                                               
fire safety performance standards".                                                                                             
Ms. Liccioli  advised that similar  legislation has  been enacted                                                               
in New  York, Massachusetts, Vermont, New  Hampshire, California,                                                               
and  Illinois. Utah,  Kentucky and  Oregon  have recently  passed                                                               
such  legislation.  Canada  has enacted  a  nationwide  fire-safe                                                               
cigarette mandate.                                                                                                              
Ms. Liccioli  pointed out  that the  legislation is  supported by                                                               
the  Alaska  Fire  Chiefs Association,  the  Alaska  Firefighters                                                               
Association,  the Department  of Public  Safety Division  of Fire                                                               
Prevention, AARP, and numerous other  organizations. "There is no                                                               
known opposition to this legislation."                                                                                          
Ms. Liccioli  concluded that this  legislation would  save lives,                                                               
reduce injuries,  and save property.  It would, in  essence, have                                                               
zero  fiscal  impact  as  the   revenue  generated  by  the  fees                                                               
established by the bill would  exceed the expense the legislation                                                               
would  incur on  the Department  of Revenue.  That Department  is                                                               
charged with  tracking the  cigarettes that  are permitted  to be                                                               
sold in the State. She urged the Committee to support the bill.                                                                 
9:32:05 AM                                                                                                                    
Co-Chair Hoffman  asked whether  this legislation  would increase                                                               
the cost of a pack of cigarettes.                                                                                               
Ms.  Liccioli  assured  that  adoption  of  the  bill  would  not                                                               
increase costs to consumers.                                                                                                    
Co-Chair  Hoffman  asked  whether  it  would  increase  costs  to                                                               
cigarette manufacturers.                                                                                                        
Ms.  Liccioli  understood  that manufacturers  would  absorb  any                                                               
increase in  cost if  there were any.  During discussion  on this                                                               
bill in a separate committee  hearing, the industry had testified                                                               
that the "difference in cost to them was negligible".                                                                           
9:32:52 AM                                                                                                                    
Senator   Thomas  asked   for  further   information  about   the                                                               
compliance  markings  that would  be  required  on each  pack  of                                                               
Ms. Liccioli  specified that, in  order to  maintain consistency,                                                               
the bill  would establish marking standards.  The bill's language                                                               
would  allow  the  State's fire  marshal  to  determine  specific                                                               
marking  requirements.   The  bill  does  direct   that  markings                                                               
established in other states should be considered.                                                                               
Senator  Thomas  asked  why  the   bill  included  language  that                                                               
specified that not more than  25 percent of the cigarettes tested                                                               
in a test may exhibit full-length burns.                                                                                        
9:34:12 AM                                                                                                                    
Ms. Liccioli  expressed that  this requirement  was based  on the                                                               
"Certificate of Analysis"  "Cigarette Ignition Strength Standard"                                                               
report  compiled  by  the  National   Institute  of  Standards  &                                                               
Technology  (copy  on  file).   That  analysis  "establishes  the                                                               
standards for what's acceptable".                                                                                               
9:34:47 AM                                                                                                                    
Senator Elton  questioned the $41,600 fiscal  impact reflected in                                                               
the  Department of  Revenue's  fiscal note  #3,  dated March  19,                                                               
2007, as that Department currently  has a division that maintains                                                               
a  listing of  cigarettes. He  thought the  bill would  have "the                                                               
greatest   impact"   on   the  Department   of   Public   Safety,                                                               
specifically the fire  marshal's office, and to  a lesser degree,                                                               
the Department of Law. He  noted, however, that the Department of                                                               
Public Safety had submitted a zero fiscal note.                                                                                 
Senator Elton asked for further  information about the Department                                                               
of Revenue's  determination that  this legislation  would require                                                               
an additional one-half time position.                                                                                           
Ms.  Liccioli  assured  Senator  Elton  that  the  Department  of                                                               
Revenue's  fiscal   note  had  been  discussed.   The  Department                                                               
currently maintains a directory  of cigarettes in compliance with                                                               
existing State tax  laws. That directory is "broad"  in the sense                                                               
that it  would include cigarettes  that would not meet  the fire-                                                               
safe standards identified in this bill.                                                                                         
Ms.  Liccioli  continued.  This  legislation  would  require  the                                                               
Department to maintain two different  lists: one specific to each                                                               
fire-safe brand name and brand style cigarette certified fire-                                                                  
safe  by the  State; the  other specific  to which  cigarettes in                                                               
compliance with State tax laws.  Distributors and retailers could                                                               
only sell cigarettes listed in both directories.                                                                                
Ms. Liccioli advised that expanding  the directory in this manner                                                               
would   initially  require   an  additional   fulltime  position.                                                               
Eventually that position would be reduced to halftime.                                                                          
9:37:23 AM                                                                                                                    
Senator Elton  thought that establishing  and maintaining  a list                                                               
would  "be  simpler  and  less  resource  intensive"  than  being                                                               
professed;  therefore,  he asked  that  the  Department speak  to                                                               
their fiscal note.                                                                                                              
9:37:53 AM                                                                                                                    
Senator Dyson also  asked whether New York and  other states that                                                               
have enacted  fire-safe cigarette legislation have  experienced a                                                               
reduction in cigarette related fires.                                                                                           
Ms.  Liccioli  responded  that  no  in-depth  studies  have  been                                                               
conducted  in this  regard; however,  preliminary reports  in New                                                               
York  indicate there  has been  a reduction  in cigarette-related                                                               
9:38:34 AM                                                                                                                    
JOHANNA  BALES,  Excise  Audit  Manager,  Tax  Division/Anchorage                                                               
Office, Department of Revenue,  testified via teleconference from                                                               
Anchorage to  respond to the  fiscal note question.  She affirmed                                                               
that a  comprehensive directory of cigarettes  "approved for sale                                                               
in  the State"  is currently  maintained by  the Department.  The                                                               
entirety of "those  cigarettes must be stamped  and in compliance                                                               
"with the nationwide Master Settlement Agreement (MSA)".                                                                        
Ms. Bales advised  that this legislation would  change the manner                                                               
in which  the Department conducts  its cigarette  enforcement and                                                               
investigation  practices. Furthermore,  the Department  "would be                                                               
the  primary agency"  tasked with  ensuring  that only  fire-save                                                               
cigarettes were sold in the State.                                                                                              
Ms.  Bales  communicated  that  the  current  directory  includes                                                               
approximately  200  brands  of   MSA  compliant  cigarettes.  The                                                               
Department  would  be  required  to compile  an  additional  list                                                               
specific  to  fire-safe cigarettes.  "Because  of  the way  this"                                                               
legislation's  language  is  written,  that  list  would  contain                                                               
approximately 1,000 different brands of cigarettes.                                                                             
Ms. Bales  specified that the  Department would then  be required                                                               
to compile  a third list  which would depict those  cigarettes in                                                               
compliance with  both the MSA  and the fire-save  regulations. In                                                               
addition,  the  Department  would   be  required  to  conduct  an                                                               
educational campaign for the  approximate 2,000 cigarette product                                                               
retailers and distributors in the State.                                                                                        
Ms.  Bales  surmised  that  "additional  duties"  would  also  be                                                               
assigned to the Department.                                                                                                     
9:41:10 AM                                                                                                                    
Co-Chair  Stedman asked  whether  the  enforcement process  would                                                               
become less burdensome as more  and more states adopted fire-save                                                               
cigarette legislation.                                                                                                          
JERRY  BURNETT,  Legislative   Liaison,  Department  of  Revenue,                                                               
acknowledged that over time that  could be the case. However, the                                                               
immediate affect  would be that  additional work would  be levied                                                               
on  the  Department. Thus,  it  is  "reasonable" to  request  the                                                               
additional staffing reflected in  the Department's $41,600 fiscal                                                               
9:42:19 AM                                                                                                                    
Senator Elton understood  that the testing would  be conducted by                                                               
other  entities and  the test  results would  be provided  to the                                                               
State  Fire   Marshall  in  the  Division   of  Fire  Prevention,                                                               
Department of  Public Safety.  A list would  then be  provided to                                                               
the Department of Revenue. It  appears that the responsibility of                                                               
the Department of Revenue would be  "a data entry issue". To that                                                               
point, he questioned why this  would warrant contractual expenses                                                               
and an additional staffing position  the initial year and a half-                                                               
time position thereafter.                                                                                                       
Mr.  Burnett   asked  Ms.  Bales  to   discuss  the  Department's                                                               
responsibilities in this regard.                                                                                                
9:43:21 AM                                                                                                                    
Ms. Bales clarified that the  Department would be the sole entity                                                               
responsible  for   compiling  the  list.  She   noted  that  each                                                               
cigarette  manufacturer is  required to  provide their  cigarette                                                               
marking  signatures  to  both  the State  Fire  Marshal  and  the                                                               
Department of Revenue.                                                                                                          
Ms.  Bales  asserted  that  the  Department  is  responsible  for                                                               
compiling  and   maintaining  the   directory,  and,   were  this                                                               
legislation enacted the Department  would be required to maintain                                                               
three lists.                                                                                                                    
Ms.  Bales  noted  that  the   Department  is  also  the  primary                                                               
enforcement agency.  They seize  and destroy cigarettes  that are                                                               
non-compliant and they must ensure  that the entity from whom the                                                               
cigarettes were seized has a  hearing. All these activities incur                                                               
expenses to the Department.                                                                                                     
Ms. Bales  pointed out  that the Department  did not  receive any                                                               
additional funding  when the  MSA was  implemented. Nor,  was its                                                               
funding increased  when it was  subsequently directed  to develop                                                               
the  directory of  approved MSA  cigarettes. These  efforts place                                                               
fiscal demands on  the Department year-round as  the directory is                                                               
updated constantly. Similar  efforts would be applied  to the two                                                               
additional lists this legislation would require.                                                                                
Ms.  Bales stressed  that  existing Department  responsibilities,                                                               
including  its auditing  activities,  are  impacted whenever  the                                                               
Department  is   asked  to   absorb  additional   functions.  She                                                               
reiterated  the  expectation  that  additional  duties  would  be                                                               
placed on the Department by this legislation.                                                                                   
Ms. Bales divulged  that the $83,000 the  State annually receives                                                               
from  cigarette certification  fees typically  matches Department                                                               
costs;   however,  this   legislation   would  incur   additional                                                               
9:45:33 AM                                                                                                                    
WARREN CUMMINGS,  President, Alaska Fire Chief's  Association and                                                               
Fire Chief, City of Fairbanks,  testified via teleconference from                                                               
Fairbanks in  support of  the bill.  "Cigarettes are  the leading                                                               
cause of home  fire fatalities in the United  States, killing 700                                                               
to 900 people" annually, including  both smokers and non-smokers.                                                               
Approximately  four people  die  this way  each  year in  Alaska.                                                               
Numerous  people   are  also   injured  from   cigarette  related                                                               
structure fires.                                                                                                                
Mr.  Cummings noted  that one-quarter  of the  people injured  or                                                               
killed  in  structure fires  are  not  the  person who  had  been                                                               
smoking the cigarette.  34 percent of that number  is children of                                                               
the smoker; 25  percent are their neighbor or  friend; 14 percent                                                               
are their spouse and partner; and 13 percent are their parent.                                                                  
Mr.  Cummings  shared  that  research   conducted  in  the  1980s                                                               
concluded that fire-safe cigarettes  would eliminate three out of                                                               
four cigarette  related fire deaths. Had  cigarette manufacturers                                                               
begun producing fire  safe cigarettes at that  time, an estimated                                                               
15,000 lives would  have been saved to date. 27  lives would have                                                               
been saved in Alaska over the past ten years.                                                                                   
Mr.  Cummings   shared  that  research  conducted   in  New  York                                                               
indicates there  has been "no  decline in cigarette  sales" since                                                               
fire  safe  cigarettes  were  introduced.  However,  a  one-third                                                               
reduction  in cigarette  fire fatalities  was experienced  during                                                               
the  first six  month  period  in 2004  when  the  law went  into                                                               
Mr. Cummings urged the Committee to advance this legislation.                                                                   
9:48:14 AM                                                                                                                    
JIM  CARROLL, Representative,  AARP and  Juneau Retired  Teachers                                                               
Association  spoke   in  support  of   the  bill.  As   a  former                                                               
firefighter,  he  has  experienced  firsthand  the  aftermath  of                                                               
cigarette related fires.                                                                                                        
9:49:50 AM                                                                                                                    
DAVID  HULL,  Vice Chair,  Alaska  Council  on Emergency  Medical                                                               
Services, spoke  in support of  the bill. This issue  impacts all                                                               
the services  associated with  the Council.  It is  a life-safety                                                               
Mr. Hull  avowed that rather  than being an attempt  "to regulate                                                               
the industry  or to  restrict smoking";  this legislation  "is an                                                               
effort to  curb needless  fires from  starting from  a carelessly                                                               
discarded  cigarette".  During  his   32  years  in  the  medical                                                               
services  industry, he  responded to  numerous cigarette  related                                                               
fires, including  a recent  apartment building  fire in  the City                                                               
and Borough of Juneau that  placed numerous people in harm's way.                                                               
The origin of  that fire was a discarded cigarette  that caught a                                                               
couch and ultimately the entire building on fire.                                                                               
Mr. Hull urged  the Committee to pass this  legislation. Its goal                                                               
is to save lives and property.                                                                                                  
9:52:17 AM                                                                                                                    
Senator Thomas,  observing that the safe  cigarette language that                                                               
would  be required  on  each pack  of  cigarettes was  extensive,                                                               
voiced concern that it might  overshadow other required warnings.                                                               
He also  understood that in recent  years cigarette manufacturers                                                               
have  reduced the  number of  additives  included in  cigarettes.                                                               
This  has reduced  the  tendency for  cigarettes  to continue  to                                                               
burn.  He  was surprised  this  had  not  been addressed  in  the                                                               
9:53:20 AM                                                                                                                    
Senator  Elton, who  had signed  on  as a  bill sponsor,  thanked                                                               
Senator  Olson for  initiating the  effort.  While he  considered                                                               
this "an  important bill" and  supported its being  reported from                                                               
Committee, there were  fiscal note issues that  should be further                                                               
addressed, specifically  that the Department of  Revenue's fiscal                                                               
note did  not address enforcement  efforts. He also  continued to                                                               
question  the Department's  request  for  additional staffing  to                                                               
maintain the directory.                                                                                                         
9:54:24 AM                                                                                                                    
Senator Dyson  shared his  continuing wariness  "about government                                                               
intrusions and  forcing industries to  do things that  they ought                                                               
to be doing on their  own". Nonetheless, he exampled a government                                                               
intrusion  he  had supported  which  dealt  with prostate  cancer                                                               
screening.  He had  asked the  insurance industry  why government                                                               
had to intervene and force them  to cover this since it was "such                                                               
a wise  thing for  them to  do for  their clients".  The response                                                               
"behind  closed doors"  was  that "we  would  if our  competition                                                               
would do it … we don't want to  have to run our rates up a little                                                               
and be at a competitive disadvantage".                                                                                          
Senator  Dyson concluded  that  government  interference in  that                                                               
matter was acceptable; it was  beneficial to both individuals and                                                               
the  industry  as it  placed  them  "on  the same  level  playing                                                               
field".  He  considered  this  legislation  in  the  same  light.                                                               
Cigarette manufacturers  would have  done this  on their  own had                                                               
everyone done  it. Now that  numerous states were  taking similar                                                               
action,   he   surmised   that  cigarette   manufacturers   would                                                               
eventually  switch  to   solely  producing  fire-safe  cigarettes                                                               
rather than maintaining two production lines.                                                                                   
9:56:18 AM                                                                                                                    
Co-Chair Hoffman  moved to  report the  bill from  Committee with                                                               
individual recommendations and accompanying fiscal notes.                                                                       
There  being  no  objection,  CSSB   84(JUD)  was  REPORTED  from                                                               
Committee with two previous fiscal  notes: $41,600 fiscal note #3                                                               
from the Department  of Revenue and zero fiscal note  #4 from the                                                               
Department of Public Safety.                                                                                                    
AT EASE 9:56:57 AM / 10:01:38 AM                                                                                            

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