Legislature(1999 - 2000)
02/04/1999 08:05 AM House CRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
February 4, 1999
8:05 a.m.
MEMBERS PRESENT
Representative Andrew Halcro, Co-Chairman
Representative John Harris, Co-Chairman
Representative Carl Morgan
Representative Lisa Murkowski
Representative Fred Dyson
Representative Albert Kookesh
MEMBERS ABSENT
Representative Reggie Joule
COMMITTEE CALENDAR
*HOUSE BILL NO. 57
"An Act relating to immunity for certain claims against the state,
a municipality, or agents, officers, or employees of either,
arising out of or in connection with the year 2000 date change; and
providing for an effective date."
- MOVED HB 57 OUT OF COMMITTEE
HOUSE BILL NO. 22
"An Act relating to investigations of property by a municipal
assessor or the assessor's agent; and providing for an effective
date."
- MOVED CSHB 22(CRA) OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HB 57
SHORT TITLE: STATE & MUNI IMMUNITY FOR Y2K
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
1/22/99 64 (H) READ THE FIRST TIME - REFERRAL(S)
1/22/99 64 (H) CRA, JUDICIARY
1/22/99 64 (H) ZERO FISCAL NOTE (ADM)
1/22/99 64 (H) GOVERNOR'S TRANSMITTAL LETTER
2/04/99 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 22
SHORT TITLE: INVESTIGATIONS BY MUNICIPAL ASSESSOR
SPONSOR(S): REPRESENTATIVES(S) OGAN
Jrn-Date Jrn-Page Action
1/19/99 23 (H) PREFILE RELEASED 1/8/99
1/19/99 23 (H) READ THE FIRST TIME - REFERRAL(S)
1/19/99 23 (H) CRA
2/02/99 (H) CRA AT 8:00 AM CAPITOL 124
2/02/99 (H) HEARD AND HELD
2/04/99 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
ROBERT POE, Commissioner
Department of Administration
PO Box 110200
Juneau, Alaska 99811-0200
Telephone: (907) 465-5670
POSITION STATEMENT: Discussed Y2K issue and HB 57.
BRAD THOMPSON, Director
Division of Risk Management
Department of Administration
PO Box 110218
Juneau, Alaska 99811-0218
Telephone: (907) 465-5723
POSITION STATEMENT: Discussed Y2K issue and HB 57.
GAIL VOIGTLANDER, Assistant Attorney General
Special Litigation Section
Department of Law
1031 West 4th, Suite 200
Anchorage, Alaska 99501
POSITION STATEMENT: Answered questions regarding HB 57.
REPRESENTATIVE OGAN
Alaska State Legislature
Capitol Building, Room 128
Juneau, Alaska 99801
Telephone: (907) 465-3878
POSITION STATEMENT: Discussed proposed CSHB 22.
STEVE VAN SANT, State Assessor
Department of Community & Regional Affairs
333 West 4th, Suite 200
Anchorage, Alaska 99501
POSITION STATEMENT: Discussed "actual possession" language.
ACTION NARRATIVE
TAPE 99-4, SIDE A
Number 001
CO-CHAIRMAN HALCRO called the House Community and Regional Affairs
Standing Committee meeting to order at 8:05 a.m. Members present
at the call to order were Representatives Halcro, Harris, Morgan,
and Dyson. Representatives Murkowski and Kookesh arrived at 8:08
a.m. and 8:07 a.m. respectively.
HB 57 - STATE & MUNI IMMUNITY FOR Y2K
Number 024
CO-CHAIRMAN HALCRO announced the first order of business as, HOUSE
BILL NO. 57 "An Act relating to immunity for certain claims against
the state, a municipality, or agents, officers, or employees of
either, arising out of or in connection with the year 2000 date
change; and providing for an effective date."
ROBERT POE, COMMISSIONER, Department of Administration, explained
that the year 2000 (Y2K) problem is related how computers read
dates. Most computer programs were written to handle a two digit
date as on a checkbook where "19" is already present. Placing "20"
in front of the two digits creates some real challenges. The
Gartner Research Group, a national think tank, estimates the
cleanup costs for Y2K problems to be between $300-$400 billion in
the United States. The Gardner Group further estimates the cost of
litigation to be $1 trillion. Commissioner Poe used the Northstar
Borough's 911 system, which is a little over a year old, as an
example. The Northstar Borough 911 system will fail in significant
ways because the system cannot handle the year 2000 date change;
the date stamping specifying when a call came in will fail. "The
Northstar Borough may have a beef with the contractor who sold them
that system only a year-and-a-half before these date changes
occurred." The state could become involved in much of the
litigation related to Y2K failures.
Number 109
In fixing the Y2K problem in Alaska, the state is only fixing 89 of
the 200 major functions. Commissioner Poe said that the state has
had to prioritize in terms of time and funding. A triage was
applied regarding a system's impact on life, health, safety, or the
economic well-being of Alaskans. If a system has significant
impact in the aforementioned areas, attempts to fix that system
would be made. Those systems that do not have a significant impact
in those areas would be covered by a contingency plan which would
provide an understanding of what to do during failure, but no funds
would go to toward fixing that system. Commissioner Poe
acknowledged that in the current fiscal climate, a $19 million
request is not viewed lightly. However, a $19 million request for
Y2K funding is relatively small.
Number 130
Commissioner Poe expressed concern with the issue of risk
management because the state is self-insured which could lead to
exposure. One of the largest threats related to Y2K problems is
litigation. The legal community generally agrees that the best
defense is to take a due diligence approach to solving the problem
which has been the approach thus far. With the due diligence
approach, the five-step process that is utilized nationwide is
documented. Currently, risk management funds are being used to
move the project forward as funding for specific Y2K projects is
discussed. Even under the due diligence approach, there is no real
protection against litigation. For example, the company Intuit
which produces Quick Books placed information on the Internet
specifying which systems were Y2K compliant and those which were
not. An attorney saw that as an opportunity for a class action
suit. This class action suit claims that folks should be awarded
damages based on the fact that Quick Books would fail which could
impact the persons financial management. The courts have ruled
that one cannot sue for something that has not yet happened not to
mention that the company has offered to fix the system or provide
an upgrade. Commissioner Poe said that there are hundreds of such
suits. He pointed out that the committee packet should contain
information regarding the various laws as well as laws under
consideration at the federal and state level.
Number 193
One of the most important laws at the federal level is the Good
Samaritan Bill. Commissioner Poe emphasized that one of the most
important pieces in fixing the Y2K problem is the sharing of
information. The Good Samaritan Bill makes the good faith sharing
of Y2K information not a basis for litigation. This federal bill
has helped in the sharing of information which reduces the cost of
dealing with the Y2K problem. Commissioner Poe said, "The more you
look at it, frequently the less problems you find out that you
have." For example, in the 300 or so rural airports in Alaska only
one had a problem which has been fixed. The Anchorage Airport has
minimal problems.
Number 248
Commissioner Poe informed the committee that there has been review
of state facilities regarding heating, ventilation and control
systems. Heating, ventilation and control systems are linked to
the calendar; for example, determining when there is a holiday in
which the lights should not come on. He noted that all the state
systems are being reviewed to determine the problems and the
associated cost to fix the problem. When possible the problem is
fixed as it is identified. The first estimate of cost to fix these
systems was $6.5 million, but has dropped to $4.5 million which
includes auditing. Commissioner Poe said, "That number continues
to go down as we get smarter."
Number 280
BRAD THOMPSON, Director, Division of Risk Management, Department of
Administration, informed the committee that the Division of Risk
Management operates the self-insured property and casualty program
for the state, the state's operations and employees. He echoed
Commissioner Poe's comment regarding the anticipated failures and
expectation of significant litigation. Mr. Thompson noted that
five other states have enacted bills to protect their respective
state and local municipalities; that information is included in the
committee packet. The committee packet also contains information
regarding how accurate and current other states are in considering
and introducing legislation similar to HB 57. Mr. Thompson
explained that Alaska does not have a limitation of liability, as
do 32 states, and HB 57 is not seeking such. The expected
litigation will be technical in nature which could create the need
for expert witness that are expensive. Even if the state were to
prevail, much cost would be incurred that may not be recovered.
Number 325
REPRESENTATIVE MURKOWSKI asked if by enacting HB 57, would the
pressure for Y2K compliance by state agencies be relaxed.
COMMISSIONER POE did not believe so. The people of Alaska should
not be harmed by these systems which has led to the work thus far
as well as the decision to use funding from the Division of Risk
Management in order to move forward with the Y2K project. Using
the funding from that division is a risk because there is no
specific appropriation allowing that. Commissioner Poe expressed
the need to move the process forward, prevent harm, and fix the
systems without the fear of litigation which could debilitate the
good-faith sharing of information. The Y2K problem does pose a
large financial burden on the state. Commissioner Poe believed
that by freeing people from the issue of liability, the process can
move forward.
Number 362
REPRESENTATIVE MURKOWSKI asked if the state has a plan with date
specific benchmarks for the Y2K plan; if there are such benchmarks,
is the state on target?
COMMISSIONER POE explained that the state has taken a three-front
approach with the Y2K problem. First, the state deals with its own
systems and the other two elements are to work with local
governments and small/medium size businesses. Commissioner Poe
further informed the committee that there is a five-step process
that everyone follows. Firstly, inventory the systems with
potential Y2K problems. Secondly, assess the system and determine
if the system has a Y2K problem. Thirdly, determine what is
required to fix the problem and fix the problem. Fourthly, test
the corrected system in order to determine that the Y2K problem is
fixed and no other problems were created. Fifthly, implement the
system. Commissioner Poe informed the committee that Y2K problems
are manifested in software, hardware, and connectivity of systems.
Commissioner Poe reiterated that 200 major functions of the state
have been identified. The triage approach prioritizes 89 systems
that are scheduled to be fixed and the remaining are covered by a
contingency plan.
Number 406
Commissioner Poe explained that each agency has mission critical
systems and the progress of those systems is reported to the
department monthly. Every agency has contingency plans which
continue to be fine-tuned. He pointed out that under the mission
critical systems, the failure date is also being monitored for each
agency. Commissioner Poe informed the committee that the following
failure dates must be considered: June 30, 1999 which is the
change in the state fiscal year; September 9, 1999 (9999) is a
programming trick; September 30, 1999 is the federal fiscal year;
and December 31, 1999. All of those dates can create problems and
some systems have already experienced problems. Commissioner Poe
explained that the failure date determines where the agency should
be in the five-step process.
Commissioner Poe explained the color code system being used to
indicate the progress of the agencies. Yellow indicates that an
agency will complete system corrections before the failure date.
Critical to the agency's progress is the funding. He noted that
several agencies did not request any money because those agencies
are shifting resources to work on Y2K compliance. Currently, every
agency falls under the yellow code. A few greens, such as the
rural airports and the Village Safewater Systems, should emerge
after the next report. Commissioner Poe emphasized that a number
of things could inhibit the expected progress, the main inhibitor
being funding.
Number 445
CO-CHAIRMAN HARRIS noted that HB 57 has a sunset provision of
January 1, 2006. Co-Chairman Harris asked if the $19 million
request would be a one-time expenditure or would there be more
requests in the next year or so.
COMMISSIONER POE pointed out that there will be ongoing computer
updates that must continue. Some of the Y2K problems were dealt
with during previous computer updates. Commissioner Poe said, "I
don't think you'll see specific Y2K requests going out in out
years. I guess I have to leave open the possibility that there may
be some dramatic failure that we didn't expect that would cause
some request in the immediately following year, but I don't see
anything beyond that would be a Y2K related event."
CO-CHAIRMAN HARRIS inquired as to the anticipated exposure to the
state and municipalities.
COMMISSIONER POE reiterated the department's three-front approach.
Reaching out to local governments was done because many Alaskans
receive services at that level. Commissioner Poe noted that small
and medium-sized business were contacted due to the economic
diversification they bring. Commissioner Poe informed the
committee that after the World Trade Center bombing, the building
was closed for about four months which resulted in 49 percent of
the businesses going out of business. This break in business would
be similar to the exposure resulting from Y2K problems.
Number 500
Commissioner Poe identified supply lines as the first Y2K exposure
that Alaska would experience. To America, Anchorage is the end of
the road while to many in Alaska it is the distribution center. In
the U.S. there have already been dramatic supply line problems such
as the failure of the train tracking system in Chicago which left
many train cars sitting and delay in shipments. Supply line
interruptions could occur outside of Alaska and still have a huge
impact on Alaska. Commissioner Poe compared the possible supply
line interruptions to when the milk barge does not arrive.
Telecommunications is another area to which Alaska will be exposed.
The average long-distance call has about nine switch moments all of
which can have a Y2K problem that could prevent communication.
Commissioner Poe identified electric power as one of Alaska's
bright spots regarding Y2K. Most communities can meet their load
demands. Alaska is not as tied into the type of grid system that
is utilized down South. Commissioner Poe highlighted the area of
medicinal supplies such as insulin as a concern related to possible
supply line problems.
Commissioner Poe stated that emergency management response is of
much concern. Alaska may experience Y2K problems over time such as
not having an inventory replenished. He noted that although the
Bush areas usually stock up on the basics, in recent years the Bush
has moved away from traditional food gathering and storage. The
Bush may not experience supply line problems for a month or so.
There may be simultaneous failures across the state and the
emergency management response must be prepared. At the end of
February, there will be table-top exercises in order to review how
well the response will be and who can be relied upon. For example,
in Juneau the marine VHF radios operated by the Coast Guard utilize
seven transmitters of which six go through telephone lines. Such
issues need to be addressed. Commissioner Poe stated that the
exposure the state expects also applies at the community level.
Number 578
CO-CHAIRMAN HARRIS expressed concern that HB 57 only addresses Y2K
immunity for governments; should there be concern and immunity for
the private sector?
MR. THOMPSON referred to the committee packet which includes
information regarding the active consideration at the federal level
for Y2K protection for everyone. The federal litigation is geared
to protect general industry. Mr. Thompson indicated that the
public entity may not be very protected by this federal
legislation. HB 57 is specific to the state and it's public
services. With regard to the previous comments regarding immunity
creating the decline in attempts to remedy the Y2K issue, Mr.
Thompson emphasized that there is the need to continue to provide
public service which is an incentive that may not exist in the
private sector.
CO-CHAIRMAN HALCRO inquired as to why the department has waited so
long to address the Y2K issue.
COMMISSIONER POE pointed out that last year there was a Y2K funding
request that did not receive funding. He informed the committee
that he began work on the Y2K problem August 1, 1998, and Mr.
Thompson recognized that the Y2K problem was a risk management
issue. Mr. Thompson allowed risk management funds to be utilized
to move forward with the Y2K plan. Alaska is not dissimilar to the
position of many states. Commissioner Poe emphasized that state
agencies resolved some of the Y2K issues during normal computer
upgrades. Some of the agencies mainframe computers will be at the
testing stage this week.
Number 634
CO-CHAIRMAN HALCRO referred to a recently introduced bill in
Connecticut which would require managed care organizations to
provide a three month prescription for those classified as
long-term chronic. Is Alaska taking any steps in that direction?
COMMISSIONER POE said that issue is included in the contingency
plans. He noted that he had met with various hospitals, oil
companies, telecommunication companies, et cetera in order to share
information. Hospitals are making steps. Commissioner Poe stated
that the table-top work should include such thought.
REPRESENTATIVE MURKOWSKI expressed the need to have a distinction
between the awareness of the Y2K issue versus paranoia.
Representative Murkowski mentioned that a bank in Alaska was
prepared to hire additional security guards during the month of
December. The bank was concerned that customers may withdraw large
sums of money in December and would need help crossing the parking
lot with the money. Representative Murkowski was interested in
what the state was doing to ensure people that businesses will be
open and systems will work.
Number 673
COMMISSIONER POE agreed. The Y2K issue presents the need for a
delicate balance between information and paranoia. Commissioner
Poe believed having him speak around the state regarding the Y2K
issue is an important investment because it allows more people,
community groups, et cetera to come to terms with this issue as
well as identify possible solutions. The best tactic is to form
community groups to address the Y2K problem at the community level
and come up with appropriate solutions for that community.
Commissioner Poe noted that National Bank of Alaska has a speaking
organization with the small business administration that travels
around the state. The organization talks to small businesses
regarding possible plans for Y2K protection. Commissioner Poe
pointed out that national surveys predict that about 20 percent of
the population believe the Y2K problem is critical which could
create a major problem itself.
TAPE 99-4, SIDE B
Number 006
REPRESENTATIVE MORGAN pointed out that his district is huge. In
his district, about all the supplies, from food to fuel, come from
Anchorage. A supply line problem is felt quick, often sooner than
two weeks, in such an area.
COMMISSIONER POE informed the committee that the department has met
with George Gover, Bureau of Indian Affairs, who is the head of the
Y2K effort. Commissioner Poe emphasized the need to ensure that
villages have the funds to buy all the fuel for the winter. The
Village Safewater Projects are owned by each village, but the folks
in that village are not trained to look in the black box for the
microchip to determine what it will or will not do. Therefore, the
department has checked to determine if the water system has
problems. Those systems should be in the green zone.
Number 085
Commissioner Poe reiterated that Alaska may be exposed to supply
line problems that do not emanate from within Alaska.
Diversification, having more than one supplier, is one of the best
defenses against supply line problems that are not created in
Alaska.
REPRESENTATIVE DYSON commented that the Y2K issue is significant
and will be dealt with in more than one venue. Representative
Dyson encouraged the committee members not to let general interest
deter addressing the specifics, limited liability. When the
federal government began dealing with this a few years ago, the
vendors were asked to guarantee no problems would result. No
vendors would agree. Have we been smarter than the federal
government?
MR. THOMPSON explained, "We have addressed the Y2K within the
conditions of performance. So that when we procure things, we're
saying that we want to have certification that this is going to be,
in fact, performing through the transition of the century change."
Mr. Thompson noted that had been in the procurement language for a
few years now.
Number 142
REPRESENTATIVE DYSON restated his question. Contractors that have
been hired for remedial software work; are those contractors
required to guarantee that there will be no problems and assume
responsibility for collateral damage.
MR. THOMPSON commented that it is difficult to have someone commit
to obligation for consequential or indirect damage arising from the
failure of a system. That problem is relevant to any hardware and
software outside of the Y2K problem.
REPRESENTATIVE DYSON understood that the federal government could
not find anyone to meet the requirements. Representative Dyson
suggested that Alaska should not require contractors be held
responsible for consequential damage.
MR. THOMPSON explained that in the boilerplate contract conditions
for software services the state does not attempt to recover the
consequential remedies. The contractor is held accountable for the
professional standard that is being performed.
Number 180
GAIL VOIGTLANDER, Assistant Attorney General, Special Litigation
Section, Department of Law, offered to answer any questions.
REPRESENTATIVE DYSON felt Ms. Voigtlander would be a good person to
direct Representative Murkowski's earlier question regarding
whether the immunity offered in HB 57 would decline the motivation
to work toward Y2K solutions and compliance.
MS. VOIGTLANDER acknowledged that such an argument is utilized with
immunity statutes. Ms. Voigtlander said, "This bill is to assist
in the total Y2K remediation project. And, so, it is a compliment
to that and it's not an escape from getting the mission critical
systems up and running." The Department of Administration does
have quite an extensive plan and is moving forward as funding has
allowed. These systems must work in order for the state to work.
Ms. Voigtlander felt that this argument is of lesser concern than
in other venues.
In response to Representative Murkowski, Ms. Voigtlander referred
to page 3, under Section 09.50.255 (2) where the "physical
apparatus that is not primarily used as a computer" is defined.
Number 281
CO-CHAIRMAN HARRIS moved to report HB 57 out of committee with
individual recommendations and the accompanying zero fiscal note.
There being no objection, it was so ordered.
HB 22 - INVESTIGATIONS BY MUNICIPAL ASSESSOR
Number 292
CO-CHAIRMAN HALCRO announced the next order of business before the
committee as HOUSE BILL NO. 22, "An Act relating to investigations
of property by a municipal assessor or the assessor's agent; and
providing for an effective date." Co-Chairman Halcro called a
brief at-ease from 9:05 a.m. to 9:07 a.m.
REPRESENTATIVE OGAN, sponsor of HB 22, informed the committee that
the proposed committee substitute (CS) includes language addressing
the concerns brought out at the previous hearing.
CO-CHAIRMAN HARRIS moved to adopt CSHB 22(CRA), Version LS0191\G
Cook dated 2/3/99, as the working document before the committee.
REPRESENTATIVE OGAN referred the committee to page 1, line 9
paragraph (1) which is new language reading, "if the structure is
under construction and not yet occupied;". On page 1, line 11, the
word "actual" was inserted before "possession". Representative
Ogan believed that language protected the right to privacy as well
as due process.
CO-CHAIRMAN HALCRO noted that the requirement of written permission
was not included in the proposed CS.
REPRESENTATIVE OGAN agreed and explained that he did not sense at
the last hearing that the members or the assessors supported
written permission.
Number 346
REPRESENTATIVE MURKOWSKI inquired as to the meaning of "actual
possession", especially regarding a tenant situation. She asked if
the assessors had an opinion on this language.
REPRESENTATIVE OGAN said that he had not discussed the language
with the assessors. Under the constitution the right to privacy
extends to renters as well as owners. Representative Ogan believed
that a renter should have the right to refuse access to the
dwelling. If the owner of the property wants the assessor to enter
the property, then the owner can contact the assessor and encourage
the use of a court order to enter.
Number 380
STEVE VAN SANT, State Assessor, Department of Community & Regional
Affairs, emphasized the industry policy that when an assessor is
refused entry the assessor leaves. Mr. Van Sant did not have a
problem with the "actual possession" language. In response to
Co-Chairman Harris, Mr. Van Sant said that he had seen the proposed
CS and did not have a problem with that.
Number 412
REPRESENTATIVE DYSON moved to report CSHB 22(CRA) out of committee
with individual recommendations. There being no objection, it was
so ordered.
CO-CHAIRMAN HALCRO noted that HB 22 was given an additional
referral to House Judiciary.
ADJOURNMENT
There being no further business before the committee, the House
Community & Regional Affairs Standing Committee meeting was
adjourned at 9:15 a.m.
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