Legislature(2017 - 2018)SENATE FINANCE 532

04/14/2018 10:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Reconvene at 3:00 p.m. --
+ Bills Previously Heard/Scheduled: TELECONFERENCED
Moved SCS CSHB 31(STA) Out of Committee
Heard & Held
Moved HB 121 Out of Committee
Moved CSHB 215(FIN) Out of Committee
Moved SCS CSHB 275(FIN) Out of Committee
CS FOR HOUSE BILL NO. 299(FIN)                                                                                                
     "An Act  relating to the  authority of the  director of                                                                    
     the  Alcoholic Beverage  Control  Board; extending  the                                                                    
     termination  date  of  the Alcoholic  Beverage  Control                                                                    
     Board;  relating to  the  application  of precedent  to                                                                    
     decisions of the Alcoholic  Beverage Control Board; and                                                                    
     providing for an effective date."                                                                                          
10:45:37 AM                                                                                                                   
Vice-Chair  Bishop  asked the  sponsor  to  provide a  brief                                                                    
overview of the bill.                                                                                                           
REPRESENTATIVE ADAM  WOOL, SPONSOR, explained that  the bill                                                                    
would  extend the  Alcoholic Beverage  Control (ABC)  Board.                                                                    
The bill had  been amended twice in its  process through the                                                                    
House. The ABC  Board was a quasi-judicial board  made up of                                                                    
five members  including two from  industry, one  from public                                                                    
safety, one  rural member, and  one public member.  The bill                                                                    
included   a  four-year   extension  based   on  the   audit                                                                    
recommendation  by the  Division of  Legislative Audit.  The                                                                    
board  regulated  almost  2,000   licenses  in  the  alcohol                                                                    
industry. The division had previously  been housed under the                                                                    
Department of  Revenue and  had moved  to the  Department of                                                                    
Public  Safety (DPS)  - where  individuals had  more closely                                                                    
resembled public safety officers  with badges and weapons) -                                                                    
and  then  it  had  moved to  the  Department  of  Commerce,                                                                    
Community and Economic Development (DCCED).                                                                                     
Representative Wool disclosed that  he owned a business with                                                                    
a  beverage dispensary  license, which  was governed  by the                                                                    
board. He added  that he had been a license  holder when the                                                                    
division  had been  under the  Department of  Public Safety.                                                                    
Eventually,  the   legislature  had  decided  to   move  the                                                                    
division  to DCCED  to make  it more  business friendly  and                                                                    
receptive   to  the   idea  of   commerce  instead   of  law                                                                    
enforcement.  He  noted the  division  was  under DCCED  for                                                                    
administrative  purposes   only  and  he   acknowledged  his                                                                    
uncertainty  about  what  that meant.  He  communicated  the                                                                    
audit made five recommendations.                                                                                                
10:48:08 AM                                                                                                                   
KRIS  CURTIS,   LEGISLATIVE  AUDITOR,  ALASKA   DIVISION  OF                                                                    
LEGISLATIVE AUDIT, reviewed the  findings in the legislative                                                                    
audit dated  November 2017 (copy  on file). The  audit found                                                                    
that the  board was  operating in  the public's  interest in                                                                    
all  areas except  licensing. The  audit  found the  board's                                                                    
meetings  had been  conducted in  accordance  with law,  its                                                                    
investigations   were  processed   timely,  and   the  board                                                                    
actively  developed  and  adopted regulations  necessary  to                                                                    
implement  statutes. The  audit concluded  the board  should                                                                    
improve  its procedures  for issuing  renewals, recreational                                                                    
site   licenses  and   beverage  dispensary   licenses  that                                                                    
encouraged  tourism. Testing  found that  the licenses  were                                                                    
not  consistently   issued  in  accordance   with  statutes.                                                                    
Additionally,  operational   improvements  were   needed  in                                                                    
enforcing   laws,  monitoring   board   related  local   law                                                                    
enforcement    activity,   and    processing   refunds    to                                                                    
municipalities.  The division  recommended  an extension  of                                                                    
four years.                                                                                                                     
Ms.  Curtis highlighted  report conclusions.  She turned  to                                                                    
page 8  of the audit  where the division concluded  that the                                                                    
board's  enforcement efforts  had declined,  and operational                                                                    
improvements  were  needed.  Alcohol and  Marijuana  Control                                                                    
Office   (AMCO)   investigators   had   stopped   conducting                                                                    
compliance   checks  as   of   April   2015.  Through   AMCO                                                                    
investigators,   the   board  had   historically   conducted                                                                    
compliance  checks  where  investigators  employed  underage                                                                    
individuals who attempt to purchase  alcohol. When a license                                                                    
failed  a  compliance  check they  were  issued  a  criminal                                                                    
summons or  citation. Federal grant funding  for the program                                                                    
had  run  out  in  2012. Supplemental  funding  to  continue                                                                    
conducting compliance checks had  been received through June                                                                    
2014. At  that point investigators had  continued conducting                                                                    
the checks using program receipts through April 2015.                                                                           
Ms. Curtis  stated that although  there was no  statutory or                                                                    
regulatory  requirement to  conduct compliance  checks, AMCO                                                                    
management  had  stated  it  was an  integral  part  of  its                                                                    
enforcement   of  alcoholic   beverage  laws   and  it   was                                                                    
evaluating  alternative   means  of   providing  enforcement                                                                    
through  shared  services  with other  state  agencies.  The                                                                    
audit  noted that  the  board and  AMCO  management had  not                                                                    
established  a  written  enforcement   plan  to  direct  the                                                                    
limited  enforcement  resources. Additionally,  the  control                                                                    
office did  not monitor  or track  all complaints  to ensure                                                                    
complaints were followed up and investigated timely.                                                                            
Ms. Curtis turned to page  2, paragraph 2 where the division                                                                    
concluded  the  board  and  control  office  staff  had  not                                                                    
maintained  a  list  of  restricted  purchasers  within  the                                                                    
statewide  database of  written  orders  in accordance  with                                                                    
regulation,  potentially   allowing  persons   convicted  of                                                                    
illegally  selling  or  manufacturing  alcohol  to  continue                                                                    
purchasing  alcohol via  written  order.  The division  made                                                                    
eight  recommendations for  improvements. Two  of the  eight                                                                    
were  repeat recommendations  from the  prior sunset  audit,                                                                    
beginning  on  page  12.  First,   the  authority  to  renew                                                                    
licenses should be limited to  the board. Statutes were very                                                                    
specific that only  the board may issue or  renew a license.                                                                    
There was a statutory  provision to temporarily delegate the                                                                    
authority to  the executive director,  but the  division had                                                                    
found  that   the  board   had  permanently   delegated  the                                                                    
authority  to  the  executive  director,  who  had  in  turn                                                                    
delegated the authority to licensing staff.                                                                                     
Ms. Curtis  addressed the  second audit  recommendation that                                                                    
the  board issue  recreational site  licenses in  accordance                                                                    
with statutory requirements. The  division had tested 10 out                                                                    
of  29 active  recreational site  licenses during  the audit                                                                    
period. She elaborated that all  10 licenses had not met the                                                                    
definition of a recreational  site. The statutory definition                                                                    
was included  at the bottom of  page 12 of the  audit, which                                                                    
specifically identified what  activities qualified including                                                                    
baseball  games, car  races,  hockey  games, dogsled  racing                                                                    
events,  or curling  matches held  during a  season. The  10                                                                    
non-compliant  licenses  included   travel  tour  companies,                                                                    
bowling alley, art council, pool  hall, movie theater, and a                                                                    
spa. The  same issue  had been found  in the  previous audit                                                                    
and  the same  recommendation had  been made.  Board members                                                                    
had been aware  they were issuing the  licenses in violation                                                                    
with  statute  but believed  it  was  in the  public's  best                                                                    
interest  to do  so. The  board also  believed the  licenses                                                                    
would be addressed in a future rewrite of the law.                                                                              
Ms. Curtis  detailed the issuance  of the  licenses expanded                                                                    
the number  of establishments licensed to  sell alcohol over                                                                    
the  number  allowed  for  in  statute.  The  audit's  third                                                                    
recommendation  was   for  the   board  to   issue  beverage                                                                    
dispensary   licenses    in   accordance    with   statutory                                                                    
requirements.  The  division  had  sampled  16  out  of  126                                                                    
beverage  dispensary licenses  issued  to encourage  tourism                                                                    
and it found  5 were transferred and 6  were renewed despite                                                                    
not meeting  statutory requirements. Page 13  explained that                                                                    
the statutes  gave the board  authority to issue  a beverage                                                                    
dispensary license  without regard for  statutory population                                                                    
limits  if  it could  be  shown  a license  would  encourage                                                                    
tourism and  the statutes provided  for a minimum  number of                                                                    
rental  rooms that  must be  met in  order to  qualify as  a                                                                    
business that  encourages tourism.  The errors found  by the                                                                    
division  were  in  entities  that did  not  meet  the  room                                                                    
requirements.  The  board  believed it  was  appropriate  to                                                                    
continue  to   issue  the  licenses  because   the  original                                                                    
licenses  had  been  issued  prior to  1985  (the  year  the                                                                    
statute had been implemented). However,  the statute did not                                                                    
provide for  grandfathering of  a license  as it  existed at                                                                    
the time.                                                                                                                       
Ms.  Curtis moved  to the  fourth audit  recommendation. She                                                                    
detailed   the  board,   AMCO   director,  and   enforcement                                                                    
supervisor should work together  to establish an enforcement                                                                    
plan to  direct their limited  resources. She noted  she had                                                                    
reviewed the  same recommendation  as part of  the Marijuana                                                                    
Control Board  audit. The fifth recommendation  was directed                                                                    
to the  Marijuana Control  Board to  implement a  process to                                                                    
monitor and  track all complaints to  ensure complaints were                                                                    
followed up timely.                                                                                                             
Ms. Curtis  reviewed the sixth audit  recommendation on page                                                                    
15.  The division  recommended the  board and  AMCO director                                                                    
develop  written  procedures   for  updating  the  statewide                                                                    
database   with   restricted  purchasers.   The   background                                                                    
information section  of the audit described  the database of                                                                    
written  orders.  The  database  was  used  to  control  and                                                                    
monitor  the sale  of  alcohol to  restricted  areas of  the                                                                    
state. It was also used  to provided package store licensees                                                                    
with  a  list  of  individuals who  had  been  convicted  of                                                                    
selling  or  manufacturing  alcohol; the  stores  were  then                                                                    
prohibited   from   selling   alcohol  to   the   restricted                                                                    
purchasers. The  audit had determined  restricted purchasers                                                                    
had not  been entered  into the  database due  to a  lack of                                                                    
procedures.  Further, the  reports  of  convictions had  not                                                                    
been  consistently provided  to  the control  office by  the                                                                    
Court System.                                                                                                                   
Ms. Curtis  addressed the seventh recommendation  on page 16                                                                    
specifying  that the  board and  AMCO  staff should  improve                                                                    
procedures to  ensure municipalities reported  violations of                                                                    
alcohol laws. Statute required  municipalities to report the                                                                    
information  as  a  condition   of  receiving  half  of  the                                                                    
biennial licensing fees.  The audit had found only  4 of the                                                                    
40 locations  had been  reporting the  information; however,                                                                    
the fees had been routinely refunded.                                                                                           
Ms. Curtis  moved to  the eighth  recommendation on  page 17                                                                    
specifying the  AMCO director  should develop  and implement                                                                    
procedures   to  ensure   refunds  to   municipalities  were                                                                    
appropriately  reviewed. Auditors  reviewed the  process for                                                                    
calculating the refunds  and found there was  only one staff                                                                    
person  responsible   for  calculating  and   approving  the                                                                    
payments,  with no  independent review.  The lack  of review                                                                    
increased  the risk  for incorrect  payments. The  Office of                                                                    
the Governor  agreed the  board should  be extended  and its                                                                    
response to  the audit  began on  page 27.  The department's                                                                    
response  on  page  29 concurred  with  all  recommendations                                                                    
except  the first,  which was  the  recommendation to  limit                                                                    
renewal to  the board. The department  believed the statutes                                                                    
could  be interpreted  in a  different  manner; however,  it                                                                    
agreed that going forward, all  renewals would be brought to                                                                    
the board.                                                                                                                      
Ms. Curtis  detailed that the  board's response was  on page                                                                    
33. The  board chair agreed with  all recommendations except                                                                    
the  third   regarding  dispensary  licenses   to  encourage                                                                    
tourism.  The   board  chair  felt  the   grandfathering  of                                                                    
licenses  was  appropriate.   She  explained  that  auditing                                                                    
standards  required the  division  to address  circumstances                                                                    
when  an  auditee  disagreed   with  a  recommendation.  Her                                                                    
comments were  on page  35 where  she discussed  the board's                                                                    
disagreements  with  the  third recommendation.  She  stated                                                                    
that  no additional  information had  been provided  for her                                                                    
review.   She   reaffirmed   the  report   conclusions   and                                                                    
Senator  Micciche remarked  there were  issues with  the ABC                                                                    
Board but allowing  the board to sunset would  not solve the                                                                    
issues.   He  supported   the  bill.   He  mentioned   other                                                                    
legislation that  he believed  would simplify  management of                                                                    
the board  dramatically and could help  with struggles shown                                                                    
in various audit findings.                                                                                                      
10:57:11 AM                                                                                                                   
Senator Stevens  appreciated the  comments in  the committee                                                                    
substitute specifying the  director was not a  member of the                                                                    
board, could  not vote,  and could not  cast a  tie breaking                                                                    
vote.  He thought  the board  structure  was different  than                                                                    
other boards  given the  term limit  members could  serve on                                                                    
the  board  or as  chair.  He  asked  for detail  about  the                                                                    
structure in other boards and how the ABC Board differed.                                                                       
Ms.  Curtis answered  that page  1 of  the audit  noted that                                                                    
statutes did  not limit  the number  of consecutive  terms a                                                                    
member may  serve. She continued  it was the  one difference                                                                    
the division  had noted that  there were individuals  on the                                                                    
board  that  had  been  there   for  quite  some  time.  The                                                                    
Marijuana  Control Board  was different  in its  requirement                                                                    
that a  member was required to  leave the board for  a given                                                                    
number  of years  before returning.  The ABC  Board did  not                                                                    
have the requirement.                                                                                                           
Senator Olson asked Representative  Wool for his response to                                                                    
the audit  recommendations. He remarked  on his  respect for                                                                    
Ms. Curtis and her work.                                                                                                        
Representative Wool  agreed with the  audit recommendations.                                                                    
He provided  a brief overview of  some of the issues  he saw                                                                    
with the board decisions. He  noted he was not familiar with                                                                    
all   of   the   board's  decisions.   He   referenced   the                                                                    
recommendation  to  issue  licenses  according  to  statute,                                                                    
which he believed the board  was trying to do. He elaborated                                                                    
that Alaska  Airlines was experiencing a  situation with the                                                                    
board  where it  was  not currently  renewing the  airline's                                                                    
licenses. The issue  had to do with the  fingerprints of all                                                                    
the  airline's vice  presidents.  Historically, the  airline                                                                    
had provided  the information  in one way  in the  past, but                                                                    
had been  told by  the board was  following statute  and the                                                                    
airline  could not  longer provide  the  information in  the                                                                    
same  way.  He  explained   that  the  board  was  following                                                                    
statute,  but  he questioned  whether  it  was in  the  best                                                                    
interest of  the business,  the state,  or commerce.  He was                                                                    
not  concerned about  Alaska Airlines  and  knew they  would                                                                    
come  up  with  a  solution   because  they  had  money  and                                                                    
attorneys.  He reasoned  that did  not  mean it  was a  good                                                                    
solution because many people did not have that option.                                                                          
Representative  Wool  continued  that   the  audit  did  not                                                                    
address  how  the  board  was   making  business  easier  or                                                                    
unencumbered. He referenced  grandfathering in of businesses                                                                    
that  could  not  renew their  licenses  suddenly  after  25                                                                    
years. He  referenced another  bill currently  going through                                                                    
the  legislature that  would fix  the issue.  He stated  the                                                                    
board was  following statute, but  he wondered if  there was                                                                    
another  interpretation  or  another  set of  eyes.  He  was                                                                    
amenable to the audit recommendations.                                                                                          
11:01:00 AM                                                                                                                   
AT EASE                                                                                                                         
11:01:39 AM                                                                                                                   
Senator Stevens continued his  earlier questioning about the                                                                    
ABC  Board compared  to  other boards.  He  stated that  the                                                                    
Marijuana  Control Board  had  a limit  of  three terms  for                                                                    
members. He  asked Ms.  Curtis if  she believed  term limits                                                                    
should be explored.                                                                                                             
Ms.  Curtis  replied that  the  division  used the  criteria                                                                    
found in  the back  of the  audit to  conduct an  audit. She                                                                    
explained  if   there  were  no   criteria  to  use   for  a                                                                    
recommendation, the division did  not make a recommendation.                                                                    
She stated it  was a policy call. She did  not know what the                                                                    
legislative  intent had  been when  creating  the ABC  Board                                                                    
structure. The  division would have  to dive into  the issue                                                                    
prior to providing any type of response.                                                                                        
CSHB 299(FIN)  was HEARD and  HELD in committee  for further                                                                    
[Note:  CSHB  299(FIN) was  heard  again  at 3:20  p.m.  See                                                                    
11:02:54 AM                                                                                                                   
3:14:28 PM                                                                                                                    
CS FOR HOUSE BILL NO. 299(FIN)                                                                                                
     "An Act  relating to the  authority of the  director of                                                                    
     the  Alcoholic Beverage  Control  Board; extending  the                                                                    
     termination  date  of  the Alcoholic  Beverage  Control                                                                    
     Board;  relating to  the  application  of precedent  to                                                                    
     decisions of the Alcoholic  Beverage Control Board; and                                                                    
     providing for an effective date."                                                                                          
3:20:05 PM                                                                                                                    
Co-Chair  MacKinnon provided  a brief  history on  the bill,                                                                    
which  had been  heard earlier  in the  meeting. She  listed                                                                    
individuals available to testify.                                                                                               
REPRESENTATIVE  ADAM WOOL,  SPONSOR,  reported  that HB  299                                                                    
would  extend the  Alcohol Beverage  Control Board  for four                                                                    
years  as  recommended by  the  audit  [by the  Division  of                                                                    
Legislative  Audit]. The  committee had  reviewed the  audit                                                                    
recommendations  previously.  He  noted there  had  been  an                                                                    
amendment  in the  House Labor  and  Commerce Committee  and                                                                    
another in the House Finance Committee.                                                                                         
Co-Chair  MacKinnon  asked for  a  review  of the  Sectional                                                                    
LAURA STIDOLPH, STAFF, REPRESENTATIVE  ADMAN WOOL, read from                                                                    
the Sectional  Analysis for CSHB  299(FIN), version  U (copy                                                                    
on file):                                                                                                                       
     Section  1. AS  04.06.075 is  amended by  adding a  new                                                                    
     subsection, "(b)  The director is  not a member  of the                                                                    
     board and may not vote on a matter before the board."                                                                      
     Section 2. AS 44.66.010(a)(1)  is amended to extend the                                                                    
    Alcoholic Beverage Control Board to June 30, 2022.                                                                          
     Section 3.  AS 04.11.437  Application of  Precedent "In                                                                    
     determining   whether   issuance,  renewal,   transfer,                                                                    
     relocation, suspension,  or revocation of a  license is                                                                    
     in the  best interests  of the  public, the  board need                                                                    
     not  conform to  or distinguish  its decision  from any                                                                    
     action  it  has  taken  in  the  past  on  applications                                                                    
     presenting  similar facts,  but  may  instead base  its                                                                    
     decision only  on the particular  facts before  it." is                                                                    
     Section 4. 3 AAC 304.025(c) is annulled.                                                                                   
     Section  5.   Section  2  of  this   Act  takes  effect                                                                    
     immediately under AS 01.10.070(c).                                                                                         
Ms.  Stidolph   elaborated  that  Section  4   annulled  AAC                                                                    
304.025(c),  which   was  a  regulation  that   allowed  the                                                                    
director to be a voting member of the board.                                                                                    
3:23:47 PM                                                                                                                    
Senator Stevens assumed the executive  director was hired by                                                                    
the board.  He asked if  the five-member board  selected its                                                                    
own chair.                                                                                                                      
Representative  Wool  replied  that   the  board  chair  was                                                                    
selected by the governor.                                                                                                       
Senator  Stevens  asked  whether   the  board  director  was                                                                    
appointed by the board.                                                                                                         
Representative Wool stated that  the director of the Alcohol                                                                    
and  Marijuana Control  Board (AMCO)  was  appointed by  the                                                                    
governor and technically worked for the board.                                                                                  
Co-Chair MacKinnon  looked at  [page 1] line  7 of  the bill                                                                    
and  wondered  if there  had  been  an issue  regarding  the                                                                    
director voting. She asked for history on the matter.                                                                           
Ms. Stidolph reported that in  2012 the statute that allowed                                                                    
the director to be a voting  member was repealed, but it had                                                                    
been left in regulation. The  regulation had been noted in a                                                                    
January  board  meeting  that  in  the case  of  a  tie  the                                                                    
director would  cast the tie  breaking vote. She  noted that                                                                    
the director's vote had not  ultimately been needed. She had                                                                    
been told the situation was the  first time in a decade that                                                                    
the director  may have been  asked to cast the  tie breaking                                                                    
vote. The bill only  repealed the regulations (the provision                                                                    
had already been repealed in statute).                                                                                          
3:25:59 PM                                                                                                                    
Co-Chair  MacKinnon  asked  about  the  composition  of  the                                                                    
current board.                                                                                                                  
Ms.  Stidolph replied  that the  ABC Board  made up  of five                                                                    
members  including  two  from   industry,  one  from  public                                                                    
safety, one rural member, and one public member.                                                                                
Senator von  Imhof considered the numerous  letters (copy on                                                                    
file) pertaining to the bill,  which alleged the regulations                                                                    
were not  clear. She  highlighted that  local establishments                                                                    
were in danger  of being shut down. She  noted a grandfather                                                                    
clause  dovetailed on  the issue.  She stated  the bill  was                                                                    
merely a  board extension,  but there  seemed to  be concern                                                                    
about  existing regulations.  She asked  how the  pieces all                                                                    
fit together.                                                                                                                   
Ms.  Stidolph responded  that the  auditors  had found  that                                                                    
there were  34 businesses in noncompliance  that had tourism                                                                    
beverage dispensary  licenses. The  businesses had  all been                                                                    
operating  since   1985  with  the  belief   they  had  been                                                                    
grandfathered in  since the last  rewrite. There had  been a                                                                    
couple of  board meetings that had  determined a legislative                                                                    
fix   was  needed.   She  noted   Representative  Wool   was                                                                    
sponsoring  separate  legislation  that  would  provide  the                                                                    
legislative fix. She  summarized the issue had  arisen in an                                                                    
audit  finding  that was  currently  being  resolved by  the                                                                    
3:28:19 PM                                                                                                                    
Senator von Imhof asked about the bill being referenced.                                                                        
Ms.  Stidolph specified  that HB  301 was  currently in  the                                                                    
Senate Labor and Commerce Committee.                                                                                            
Senator Stevens  asked for  detail on  the current  board in                                                                    
terms of  the number  of appointments  members had  and when                                                                    
the  appointments had  occurred.  He was  interested in  the                                                                    
information  broken   out  by   the  four   board  appointee                                                                    
Co-Chair  MacKinnon replied  that the  requested information                                                                    
could  be  provided.  She understood  there  were  not  term                                                                    
limits on  the board. She  had seen  the chair of  the board                                                                    
multiple times  during her service  in the  legislature. She                                                                    
considered whether the audit included the information.                                                                          
3:30:01 PM                                                                                                                    
AT EASE                                                                                                                         
3:30:31 PM                                                                                                                    
Co-Chair MacKinnon  referenced page 1 [of  the audit], which                                                                    
included  a   list  of   the  board   member  representation                                                                    
including one  rural member, one  public member,  one public                                                                    
safety member,  and two industry members.  She asked Senator                                                                    
Stevens for verification he was  interested in the longevity                                                                    
of each board member.                                                                                                           
Senator  Stevens replied  in the  affirmative. He  requested                                                                    
the  dates   of  each   appointment  and   whether  multiple                                                                    
appointments had occurred.                                                                                                      
Co-Chair  MacKinnon agreed  and noted  there may  be someone                                                                    
available online to provide the information.                                                                                    
Senator  von  Imhof  thought the  bill  was  important.  She                                                                    
wanted to  read through the  audit and provide  questions to                                                                    
Co-Chair MacKinnon.                                                                                                             
Co-Chair  MacKinnon  agreed. She  planned  to  set the  bill                                                                    
aside  to address  some questions  and intended  to hear  it                                                                    
again as quickly as possible.                                                                                                   
3:32:04 PM                                                                                                                    
Co-Chair MacKinnon OPENED and CLOSED public testimony.                                                                          
Vice-Chair  Bishop discussed  FN  2 from  the Department  of                                                                    
Commerce, Community and  Economic Development, OMB Component                                                                    
Number 3119.  The annual cost  was $1,660,000  in designated                                                                    
general funds. He  read from the page 2, paragraph  3 of the                                                                    
fiscal note:                                                                                                                    
     If  the  bill passes  the  following  expenses will  be                                                                    
     incurred:  Personal Services:  $765.5 (eight  full time                                                                    
     agency  staff: 3  Special Investigator  I, Records  and                                                                    
     Licensing   Supervisor,    2   Occupational   Licensing                                                                    
     Examiner, Administrative Assistant  I, Criminal Justice                                                                    
     Technician I)                                                                                                              
3:33:45 PM                                                                                                                    
AT EASE                                                                                                                         
3:33:54 PM                                                                                                                    
Vice-Chair Bishop continued to read from the fiscal note                                                                        
     Travel:  $73.5  (board  members attend  at  least  five                                                                    
     board meetings per  year; board is required  to meet in                                                                    
     each judicial  district at least once  per year; agency                                                                    
     director and  occasionally board chair or  other agency                                                                    
     management   staff   travel  for   conferences   and/or                                                                    
     training;  enforcement  staff travel  throughout  state                                                                    
     for inspections and investigations)                                                                                        
     Services: $750.0  (includes information  technology and                                                                    
     department support for  deleted positions; support from                                                                    
     the  Department  of  Law;  hearing  services;  building                                                                    
     leases; meeting advertising;  meeting space rental; and                                                                    
     other  reimbursable  services   agreements  with  other                                                                    
     Commodities:   $71.6   (supplies   including   printing                                                                    
     statute/regulation    books;    required   signs    for                                                                    
     licensees;  ammunition and  other enforcement  training                                                                    
     supplies; office supplies)                                                                                                 
     The  ABC Board's  work is  funded by  program receipts.                                                                    
     Fees  for applicants  and licensees  for new  licenses,                                                                    
     renewal of  licenses, or  transfer of  licenses include                                                                    
     an  application fee  set in  regulation, a  license fee                                                                    
     mostly  set  in  statute  (a   few  license  types  are                                                                    
     established  in  regulation  along with  their  license                                                                    
     fee), and a background check  fee set by the Department                                                                    
     of Public Safety.   Permit fees are set  in statute for                                                                    
     permits established  in statute, and set  in regulation                                                                    
     for  permits  established   in  regulation.  The  total                                                                    
     amount  of revenue  collected approximately  equals the                                                                    
     actual regulatory costs.                                                                                                   
Co-Chair  MacKinnon  asked  to  hear  from  the  ABC  Office                                                                    
director. She  referenced an earlier question  [from Senator                                                                    
Stevens] regarding  the longevity  of the  members currently                                                                    
serving on the board.                                                                                                           
ERIKA  MCCONNELL, DIRECTOR,  ALCOHOL  AND MARIJUANA  CONTROL                                                                    
OFFICE, ANCHORAGE (via teleconference),  stated that not all                                                                    
the  five members  listed in  the audit  were current  board                                                                    
members; two of  the members had been replaced.  She did not                                                                    
have precise  numbers but reported  that the chair  (Mr. Bob                                                                    
Klein) had  been serving  for a  long period  of time  - she                                                                    
estimated his  service at 20  years. She believed  Mr. Evans                                                                    
had been  serving for around  5 years;  Mr. Rex Leath  was a                                                                    
new public  safety member and  had been serving for  about 1                                                                    
year (the  public safety  seat had  been established  by the                                                                    
legislature  in the  past year),  the  remaining public  and                                                                    
industry members had recently been replaced.                                                                                    
Co-Chair  MacKinnon asked  Senator Stevens  if limiting  the                                                                    
information request  regarding the length of  service to Mr.                                                                    
Klein and Mr. Evans was acceptable.                                                                                             
Senator Stevens replied in the affirmative.                                                                                     
Co-Chair  MacKinnon  would  contact  the  administration  to                                                                    
receive the  information. She appreciated the  longevity and                                                                    
the perspective of industry and  rural representation on the                                                                    
3:38:08 PM                                                                                                                    
Vice-Chair  Bishop how  many of  the eight  full-time agency                                                                    
staff  carried firearms.  Ms. McConnell  answered all  eight                                                                    
investigators throughout the state carried firearms.                                                                            
Vice-Chair Bishop  asked whether all the  staff were trained                                                                    
in Sitka.  Ms. McConnell  responded that  all the  staff had                                                                    
previously been  police officers.  She assumed they  had all                                                                    
been through the appropriate police academies.                                                                                  
Co-Chair  MacKinnon asked  Representative Wool  to repeat  a                                                                    
disclosure he had provided earlier in the meeting.                                                                              
Representative Wool declared a  conflict of interest because                                                                    
he was the  owner of a beverage  dispensary license governed                                                                    
by the board.                                                                                                                   
Ms. McConnell asked to provide testimony on the bill.                                                                           
Co-Chair MacKinnon asked Ms. McConnell to proceed.                                                                              
Ms. McConnell provided testimony with prepared remarks:                                                                         
     This testimony  relates to Section  3 of HB  229, which                                                                    
     repeals AS 04.11.537 application  of precedent. This is                                                                    
     a  very  short section  and  it  says, "in  determining                                                                    
     whether   issuance,   renewal,  transfer,   relocation,                                                                    
     suspension, or revocation  of a license is  in the best                                                                    
     interest of the  public, the board need  not conform to                                                                    
     or  distinguish its  decision from  any  action it  has                                                                    
     taken in  the past  on applications  presenting similar                                                                    
     fact, but  may instead  base its  decision only  on the                                                                    
     particular facts before it."                                                                                               
     On April 10th  the ABC Board voted to  recommend to the                                                                    
     legislature that this section  be retained within Title                                                                    
     IV. This  section of statute  allows the board  to make                                                                    
     decisions  based  on  the   facts  and  the  particular                                                                    
     circumstances  of  each  case   that  comes  before  it                                                                    
     without being bound by how  the board treated a similar                                                                    
     case  in the  past.  This section  does  not allow  the                                                                    
     board  to make  random  decisions based  on whims.  The                                                                    
     board  works  hard to  be  consistent  so that  it  can                                                                    
     properly  discharge  its  authority under  statute  and                                                                    
     maintain credibility and  predictability for the public                                                                    
     including licensees.  However, the  flexibility allowed                                                                    
     by  this section  of statute  is vital  to the  board's                                                                    
     requirement to act in the public's interest.                                                                               
     The board is required by  AS 04.06.050 to travel to the                                                                    
     four judicial districts in the  state at least once per                                                                    
     year to modify the  existing board regulations in light                                                                    
     of statewide  and local problems.  This acknowledgement                                                                    
     of  the  particular  challenges that  face  the  varied                                                                    
     communities in  the state, along with  the local option                                                                    
     provisions   and  the   broad  opportunity   for  local                                                                    
     government   protests  on   licenses  recognizes   that                                                                    
     different  situations  exist in  different  communities                                                                    
     within  the  state  with respect  to  the  manufacture,                                                                    
     barter,  possession, and  sale of  alcoholic beverages.                                                                    
     Consequently, the board may  be faced with applications                                                                    
     presenting similar  facts in different  communities and                                                                    
     need  to take  different  actions based  on the  public                                                                    
     input from  those communities. The  board must  be free                                                                    
     to conclude  that what  is in  the public  interest may                                                                    
     differ  in   different  parts  of  the   state  and  be                                                                    
     different over time.                                                                                                       
     My  speculation on  why this  amendment was  offered is                                                                    
     that Representative Wool is  attempting to address very                                                                    
     real  frustrations with  situations where  licensees or                                                                    
     board  staff has  followed certain  practices or  taken                                                                    
     certain actions,  sometimes over a period  of months or                                                                    
     years, some  of which were  unknown to the board  or to                                                                    
     the  director  and  which   did  not  necessarily  have                                                                    
     statutory support.                                                                                                         
3:42:37 PM                                                                                                                    
Ms. McConnell continued with her prepared testimony:                                                                            
     Representative   Wool   this  morning   mentioned   the                                                                    
     situation with  Alaska Airlines.  While there  are very                                                                    
     valid  frustrations   with  this  type   of  situation,                                                                    
     removing the board's  flexibility to address individual                                                                    
     circumstances  as described  above  will not  guarantee                                                                    
     against human error  either on part of  the board staff                                                                    
     or licensees and errors where  they are consistent with                                                                    
     statute should be corrected.  In summary, the Alcoholic                                                                    
     Beverage   Control   Board  recommends   retaining   AS                                                                    
     04.11.537 in Title IV. Thank you.                                                                                          
3:43:14 PM                                                                                                                    
Senator  Stevens  understood  Ms.  McConnell's  comments  on                                                                    
flexibility and  versus consistency and following  rules. He                                                                    
asked for provide  an example of why the board  would not be                                                                    
consistent with following the rules.                                                                                            
Ms.  McConnell stated  that the  section did  not allow  the                                                                    
board to  be inconsistent in  following the rules  set forth                                                                    
in statute and regulations.  The section specified that when                                                                    
the  board had  acted  in  a certain  manner  for a  license                                                                    
application in  Juneau for example,  the board could  face a                                                                    
similar license  application in Bethel  where there  was not                                                                    
public or local  government support. In that  case the board                                                                    
may  act differently  on a  similar  license application  in                                                                    
Bethel and in Juneau because  of the different situations in                                                                    
the  two communities,  the different  public input,  and the                                                                    
different interests of the local governments.                                                                                   
Co-Chair   MacKinnon  asked   for   verification  that   Ms.                                                                    
McConnell was referencing regulation and not statute.                                                                           
Ms.  McConnell   replied  that   she  was   referencing  the                                                                    
statutory  section the  bill proposed  to delete.  The board                                                                    
worked to implement statute and regulation.                                                                                     
Co-Chair MacKinnon  asked if Ms.  McConnell was  speaking to                                                                    
Section 4. Ms. McConnell clarified  that she was speaking to                                                                    
Section 3 of the bill.                                                                                                          
3:45:25 PM                                                                                                                    
Senator Micciche  thought the  issue might  be related  to a                                                                    
problem  occurring  in  Alaska  where  individuals  who  had                                                                    
invested  their  savings  in a  business  that  was  license                                                                    
premised  were subject  to  the decision  by  the board  and                                                                    
staff to evaluate  renewal differently than they  had in the                                                                    
past.  He asked  how Ms.  McConnell would  feel if  the bill                                                                    
only  allowed   the  decision  to  change   in  a  different                                                                    
geographic  location  as   opposed  to  particular  licensed                                                                    
Ms. McConnell asked if Senator  Micciche was suggesting that                                                                    
the application  of precedent section be  more specific with                                                                    
regard to location and time.                                                                                                    
Senator  Micciche stated  he had  assumed Ms.  McConnell was                                                                    
concerned the board could be  locked into a decision made in                                                                    
Juneau,  which may  be a  very different  situation than  an                                                                    
issue the  board may be  dealing with in  another community.                                                                    
He posed  a scenario where  the board was  protected against                                                                    
having the same  decision throughout the state.  He asked if                                                                    
there was a  way to protect the board from  a decision based                                                                    
on  geographic  location versus  a  different  reading as  a                                                                    
license regarded as grandfathered in one location.                                                                              
Ms. McConnell  expected there were  many ways to  phrase the                                                                    
bill to try to accommodate  the board's concerns with regard                                                                    
to acting in  the public interest and the  types of concerns                                                                    
raised  by  the  committee.  She did  not  have  a  specific                                                                    
suggestion at present.                                                                                                          
Co-Chair MacKinnon CLOSED public testimony.                                                                                     
3:48:21 PM                                                                                                                    
AT EASE                                                                                                                         
3:49:34 PM                                                                                                                    
Co-Chair   MacKinnon   referenced    a   document   entitled                                                                    
"Alcoholic  Beverage Control  Board,"  which listed  current                                                                    
board  members  and  detailed  board  information  (copy  on                                                                    
file).  She stated  that the  committee  would persevere  to                                                                    
obtain additional information.                                                                                                  
Senator Micciche  requested to  from the  sponsor pertaining                                                                    
to Section 3.                                                                                                                   
Representative  Wool  referenced  a memorandum  authored  by                                                                    
legislative  counsel  Linda  Bruce  with  Legislative  Legal                                                                    
Services dated April  3, 2018 on the  subject of application                                                                    
of precedent  (copy on file).  The memo noted that  no other                                                                    
board  had the  provision, including  the Marijuana  Control                                                                    
Board. The memo  stated that the language  could present due                                                                    
process and equal protection  problems by treating similarly                                                                    
situated   licenses  differently   and  potentially   giving                                                                    
different punishments for  similar violations. He understood                                                                    
the  regional  differences  and   applauded  the  board  for                                                                    
considering  the situations  differently.  He explained  the                                                                    
removal of the section did not  mean the board had to adhere                                                                    
to  precedent. The  section specified  that the  board could                                                                    
ignore  precedent, which  he found  troubling. He  continued                                                                    
that   Ms.  McConnell   was  correct   that  he   felt  some                                                                    
frustration from  hearing from different  parties, including                                                                    
licensees with  licenses that were  not being  renewed after                                                                    
35  years due  to a  law change.  He referenced  frustration                                                                    
expressed  by Alaska  Airlines and  other anecdotal  stories                                                                    
from licensees he had spoken with.                                                                                              
Representative Wool  explained that Section 3  had come from                                                                    
Legislative  Legal Services.  He believed  it would  help in                                                                    
looking at  situations he had  been made aware  of regarding                                                                    
board  decisions  in  the past.  He  mentioned  that  Alaska                                                                    
Airlines had been  treated one way for a decade  or more and                                                                    
had  suddenly  been  asked  to provide  22  sets  of  finger                                                                    
prints. He and the  industry found the situation cumbersome.                                                                    
He  wondered whether  the  board could  come  to a  solution                                                                    
without  going  through  its  normal  process  involving  an                                                                    
administrative  law  judge  and  state  superior  court.  He                                                                    
reiterated his  earlier testimony  that the situation  was a                                                                    
little  more  doable  for  a  big  corporation  but  may  be                                                                    
impossible  for a  small business  (especially if  they were                                                                    
facing  closure). He  was trying  to remove  road blocks  to                                                                    
making good decisions.                                                                                                          
3:53:20 PM                                                                                                                    
Senator  von Imhof  recalled that  Alaska Airlines  had gone                                                                    
from a  requirement of 5 sets  of finger prints to  22 sets.                                                                    
She gleaned  that the  board was  adhering to  statutes more                                                                    
literally than  in the  past, which was  the reason  for the                                                                    
requirement  for the  additional  finger  prints. She  asked                                                                    
whether Alaska  Airlines could go  back to providing  5 sets                                                                    
of finger prints if Section 3 was repealed.                                                                                     
Representative Wool  stated that  he was not  suggesting the                                                                    
action mentioned by  Senator von Imhof. He  explained it was                                                                    
a  legal  question. The  ABC  Board  had  a lawyer  who  had                                                                    
communicated  the  requirement for  the  22  sets of  finger                                                                    
prints, even though  it had not been the  requirement in the                                                                    
past. The audit requested that  the board adhere to statute.                                                                    
He  reiterated  that  he  was  trying  to  remove  potential                                                                    
obstacles to using  evidence that could make  the board more                                                                    
amenable to removing road blocks  in situations like the one                                                                    
facing  Alaska Airlines.  He explained  Alaska Airlines  had                                                                    
been presented  with providing 22  sets of finger  prints or                                                                    
creating a  corporation within Alaska  for the  sole purpose                                                                    
of holding  liquor licenses it  used in Alaska.  He surmised                                                                    
that  the  issue was  manageable  for  large companies  like                                                                    
Alaska  Airlines, but  not all  companies  could handle  the                                                                    
burdensome  needs  required to  adhere  to  the statute.  He                                                                    
reiterated  that no  other board  had the  provision and  it                                                                    
could be a due process problem.                                                                                                 
3:55:14 PM                                                                                                                    
Co-Chair  MacKinnon reported  that amendments  were due  the                                                                    
following day  by noon. She  discussed the schedule  for the                                                                    
following meeting.                                                                                                              
CSHB 299(FIN)  was HEARD and  HELD in committee  for further                                                                    
Co-Chair  MacKinnon asked  if members  wanted  to hear  from                                                                    
anyone else in the future regarding CSHB 299(FIN).                                                                              
Senator von Imhof  thought it could be helpful  to hear from                                                                    
the Department of Law.                                                                                                          
Co-Chair MacKinnon provided additional closing remarks                                                                          
regarding the schedule.                                                                                                         

Document Name Date/Time Subjects
CSHB299 (HFIN) Explanation of Changes ver A to ver U 4.9.18.pdf SFIN 4/14/2018 10:00:00 AM
HB 299
HB 299 - Additional Backup - Precedent Alaska Airlines.pdf SFIN 4/14/2018 10:00:00 AM
HB 299
HB 275 Work Draft Version O.pdf SFIN 4/14/2018 10:00:00 AM
HB 275
HB 299 Alcoholic Beverage Control Board Fact Sheet and Roster - with Source.pdf SFIN 4/14/2018 10:00:00 AM
HB 299
HB 215 DPH response SFIN 4-11-2018.pdf SFIN 4/14/2018 10:00:00 AM
HB 215
HB 299 ABC Board Resolution re amendment to HB 299.pdf SFIN 4/14/2018 10:00:00 AM
HB 299
HB299_ABC Board Resolution.pdf SFIN 4/14/2018 10:00:00 AM
HB 299