Legislature(1997 - 1998)
02/10/1998 01:50 PM House FIN
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HOUSE FINANCE COMMITTEE February 10, 1998 1:50 P.M. TAPE HFC 98 - 25, Side 1 TAPE HFC 98 - 25, Side 2 TAPE HFC 98 - 26, Side 1 CALL TO ORDER Co-Chair Gene Therriault called the House Finance Committee meeting to order at 1:50 p.m. PRESENT Co-Chair Hanley Representative Kelly Co-Chair Therriault Representative Kohring Representative Davies Representative Martin Representative Davis Representative Moses Representative Foster Representative Mulder Representative Grussendorf ALSO PRESENT Representative Gene Kubina; Representative Norman Rokeberg; Margaret Pugh, Commissioner, Department of Corrections; Catherine Reardon, Director, Division of Occupational Licensing, Department of Commerce and Economic Development; Larry Spencer, Alaska Real Estate Commission; The following testified via the teleconference network: Art Clark, Real Estate Unlimited, Anchorage; Debra Britt, Anchorage; Shane Osowski, Community Associations Institute, Anchorage; David Garrison, Anchorage; William Brady, Remax, Anchorage; John Carman, Anchorage; Clair Ramsey, Real Estate Commission; Ron Polloch, Jack White Real Estate, Anchorage; Eric Dyrud, Anchorage Board of Realtors, Anchorage; Bob Baer, Totem, Anchorage; Ron Johnson, President, Kenai Peninsula Boar of Realtors. SUMMARY HB 33 "An Act relating to real estate licensing and the real estate surety fund; and providing for an effective date." HB 33 was HELD in Committee for further consideration. HB 53 "An Act relating to the authority of the Department of Corrections to contract for facilities for the confinement and care of prisoners, and annulling a regulation of the Department of Corrections that limits the purposes for which an agreement with a private agency may be entered into; authorizing an agreement by which the Department of Corrections may, for the benefit of the state, enter into one lease of, or similar agreement to use, space within a correctional facility that is operated by a private contractor, and setting conditions on the operation of the correctional facility affected by the lease or use agreement; and giving notice of and approving a lease-purchase agreement or similar use-purchase agreement for the design, construction, and operation of a correctional facility, and setting conditions and limitations on the facility's design, construction, and operation." HB 53 was HELD in Committee for further consideration. HOUSE BILL NO. 53 "An Act relating to the authority of the Department of Corrections to contract for facilities for the confinement and care of prisoners, and annulling a regulation of the Department of Corrections that limits the purposes for which an agreement with a private agency may be entered into; authorizing an agreement by which the Department of Corrections may, for the benefit of the state, enter into one lease of, or similar agreement to use, space within a correctional facility that is operated by a private contractor, and setting conditions on the operation of the correctional facility affected by the lease or use agreement; and giving notice of and approving a lease-purchase agreement or similar use-purchase agreement for the design, construction, and operation of a correctional facility, and setting conditions and limitations on the facility's design, construction, and operation." MARGARET PUGH, COMMISSIONER, DEPARTMENT OF CORRECTIONS provided members with a handout titled, What is the Problem? (Copy on file). She observed that there are 3,239 inmates in Alaskan correctional facilities. The emergency capacity of the Department of Corrections is 2,691 inmates. The Department is over capacity by 548 inmates. The state of Alaska has been ordered by the Court to find a way to reduce its prison population to 2,691 by May 1, 1998. Commissioner Pugh reviewed the handout: What Is the Problem? * Alaska's prison's and jails are severely overcrowded; * There is no space for new criminals; * Projections show system will grow by 200 prisoners each year; * The State is under Court Order to decrease overcrowding; * The State is being assessed fines for overcrowding; and * No legislative action has been taken. What Has Been Done? * In 1995, the Department sent over 200 prisoners out of State; * In 1996, "Protecting the People" was introduced by the Criminal Justice Cabinet; The Governor introduced the G.O. Bond bill to implement "Protecting the People"; Legislation to build a private prison in Anchorage was discussed ; and An initiative was placed on the ballot to block the building of a private prison in Anchorage. * In 1997, the Criminal Justice Cabinet offered to work with the Legislature; The Legislature discussed issues and introduced a variety of bills, but no legislation passed; and A ballot measure passed effectively blocking construction of a prison in South Anchorage. * In 1998, the Governor introduced a bill for Phase I of a statewide expansion. What must we do right away? Givens: * To do "nothing" is unacceptable; * The Governor will not commute sentences; and * The State needs to move over 500 prisoners by May 1. Options: * We can use more CRC beds for low risk offenders; * We can send more dangerous prisoners out-of-state; and * We can place non-dangerous misdemeanants in tents or other temporary structures on prison grounds surrounded by a secure fence. What are our long-term choices? * The legislature can review, amend, and adopt the Governor's statewide expansion plan (HB 368, SB 267). * The legislature can expand Spring Creek, replace Sixth Avenue Jail, expand the state prison at Palmer, and build a private prison at Palmer (SB 179). As proposed, this does not meet DOC principles. * The legislature can authorize the conversion of Ft. Greely at Delta Junction into a medium-security prison for 800 prisoners (HB 53). As proposed, this does not meet DOC principles. In response to a question by Co-Chair Hanley, Commissioner Pugh reviewed the Department of Corrections principles. To warrant serious consideration, any prison or jail expansion proposal must be: - Safe; - Statewide (comprehensive and meets regional needs); - Consistent with best correctional practices; - Involve community participation (government to government); and - Cost effective. Co-Chair Hanley observed that HB 53 does not meet the Administration's statewide comprehensive concern. Commissioner Pugh agreed and added that Bethel is the most chronically overcrowded correctional facility. Co-Chair Hanley asked the total per diem cost to implement the Governor's plan, including capital and operating expenses. He observed that the Palmer facility expansion would cost $16.5 million dollars for 221 beds. He clarified that the total per diem amount should include construction costs amortized over 20 years. Co-Chair Therriault stressed that the Legislature needs the Department of Corrections to provide it with numbers. Commissioner Pugh stated that she would complete the math to the best ability of the Department. She noted that she has questions about the cost of implementing HB 53. She questioned what the $70 dollar a day rate includes. The Department of Corrections' $100 dollar per diem cost includes; total operations at an institutional site, institutional programs, correctional industries, transportation, inmate health care, building and equipment depreciation, capital replacements and all administrative and support costs. The Arizona contract does not include inmate health care, major medical, transportation or inmate gratuities. She asked how many years the $70 dollar a day rate would hold. She questioned what would happen if the contractor defaults. She asked what is the total price of converting and operating Fort Greely as a medium security prison. In response to a question by Representative Martin, Commissioner Pugh stated that the prison and jail populations have out stripped the growth in state population. Crime is down, but arrests are up. She stated that "people are not getting out." She quoted a previous commissioner of the department as saying that the "stopper is in the bathtub, and the water is on." She added that either a bigger bathtub has to be built or the facet has to be turned off. She maintained that the bathtub is over flowing. Representative Martin asked if a Fort Greely facility would ease the problem. Commissioner Pugh stressed that she cares about what happens to the people of Delta Junction. She maintained that she would like to work with the Legislature, but added that she has concerns and questions regarding the proposal. Co-Chair Therriault noted that the Cleary moderator stated that the Governor's plan is not acceptable. He observed that the Governor's plan has not been established to be the most cost effective. Representative Kelly asked if the $70 dollar a day rate compares with the Department's $100 dollar a day cost. He questioned if the Delta project would take the pressure off. Commissioner Pugh acknowledged that the Fort Greely facility would take pressure off. Representative Kelly observed that the proposal would alleviate part of the prison problem without putting an additional burden on the state's capital appropriations. He asked Commissioner Pugh's to outline her objections to HB 53. Commissioner Pugh stated that she does not have a good feel for the financing package and the total cost of the legislation. She did not know if the total cost of the facility and operations could be covered at $70 dollars a day. Representative Kelly asked if she would be supportive if the cost of the facility and operations could be covered for $70 dollars a day. Commissioner Pugh felt that $70 dollars a day would be low if all the factors were taken into account. She acknowledge that her level of comfort would be increased if it can be demonstrated that $70 dollars a day would cover all the costs. Commissioner Pugh provided members with a facility count in response to questions from Co-Chair Hanley during a previous meeting (copy on file). Co-Chair Hanley clarified that his request was in response to the insinuation that there would not be enough medium security prisoners to fill 800 beds. He noted that the handout does not show security levels. Commissioner Pugh clarified that most prisoners do fall in the medium custody level. Co-Chair Hanley noted that projections show that the state correctional facilities would be over capacity by 1,300 prisoners. Commissioner Pugh noted that the State paid for the full cost of halfway houses even when they were not full. Contracts with halfway houses are now on a per diem basis. Prisoners at Palmer, Wildwood and in Arizona are medium security inmates. Representative Davies asked what kind of health care facilities are in Delta Junction, who would be called in case of a riot and are there additional costs for fire safety. Commissioner Pugh noted that standards established by the American Corrections Association state that a prison should be located no farther than 50 miles from a major city of 10,000. This standard was established to assure proximity to emergency services. She stressed that the problems regarding HB 53 are not insurmountable. She noted that issues such as response to fires or riots would need to be addressed. Transportation in case of an emergency is also an issue. She noted that prisoners could be screened for medical concerns. She observed that there is a good runway at Fort Greely, but added that it is more expensive to airlift a person. Representative Davies asked Commissioner Pugh to attach a cost to these issues. She stressed that it will be difficult to get a true "apples to apples cost." In response to a question by Representative Mulder, Commissioner Pugh noted that the department is working on a Request for Proposal (RFP) for out-of-state medium security beds. The Arizona contract expires on June 30, 1998. The RFP would be for up to 600 beds. Representative Mulder pointed out that 600 beds are needed today. The Fort Greely facility would not come on line for a couple of years. Commissioner Pugh acknowledged that it is a reasonable expectation that 800 beds will be necessary. In response to a question by Representative Davis, Commissioner Pugh clarified that security levels relate to buildings and custody levels relate to the degree of supervision. Each inmate has a custody and security level. There are five custody levels: maximum, closed, medium, minimum and community. The majority of inmates are in medium custody. Representative Davies pointed out that if prisoners for out- of-state or rural facilities are screened for pre-existing medical conditions and other needs than prisoners in facilities near town would require more expensive care. Co-Chair Therriault pointed out that the Legislature trusts the Department to write a contract for out-of-state inmates. He added that the Legislature would trust the Department to write a contract to implement HB 53 if it is enacted. Commissioner Pugh clarified that the out-of-state contract will go out to bid as an RFP. She reiterated that she would appreciate guidance. (Tape Change, HFC 98 - 25, Side 2) MARGOT KNUTH, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW pointed out that many of the prisoners in overcrowded institutions cannot be moved since they are pretrial prisoners or serving short sentences. She pointed out that regional facilities would need to be expanded. HB 53 was HELD in Committee for further consideration. HOUSE BILL NO. 33 "An Act relating to real estate licensing and the real estate surety fund; and providing for an effective date." REPRESENTATIVE NORMAN ROKEBERG, SPONSOR, testified in support of HB 33. He observed that the legislation represents four years of hard work by members of the real estate community, the Alaska Real Estate Commission, the House Labor and Commerce Committee and the sponsor. The legislation is the result of a task force formed in 1994 by the Alaska Real Estate Commission to take up the issues of property management and community association management. There are no regulations for community association management in the state of Alaska. He maintained that the legislation enhances consumer protections. There are 2,200 real estate licenses in the state of Alaska. He referred to an unlicensed individual that embezzled $57 thousand dollars from 18 separate community associations in Anchorage. He observed that the Commission rewrote a significant portion of the real estate chapter. The Commission is given more authority to regulate licensees. The legislation also expands educational opportunities. Representative Rokeberg noted that he is a commercial real estate broker, licensed in the state of Alaska. He emphasized that he has not sold a house in 25 years. Under current statute, Representative Rokeberg is required to take at least 8 of the 20 required hours every two years on selling houses. The legislation creates specialties for education. The legislation updates the provisions for when a license is required, for office locations, branch offices, record keeping, contracts and signs. Fees are only due when there is a written existing contract. The Conflict of Interest declarations are expanded as the result of a 1995 Legislative Budget and Audit Committee audit. It proscribes prohibited conduct of unlicensed activity by adopting language promulgated by the Mississippi Real Estate Commission. This language has been tested in federal courts. Exceptions are expanded to 20 under AS 161. Representative Rokeberg observed that Amendment C would add an additional exception (copy on file). Amendment C would allow management by a natural person of property for another person without a fee, other than the reimbursement of expenses (copy on file). Condominium and townhouse associations can continue to manage their own activities. A unit owner resident in an association project has the right to manage that project for a profit. Only individuals that manage more than one association would be covered under the statute. Representative Rokeberg emphasized that the interests of real estate practitioners and the public have been balanced by the legislation. He observed that the legislation has wide support among real estate groups and the Administration. Representative Rokeberg provided members with Amendments A, B and C (copy on file). He stated that Amendment A contains language clarifications. He reviewed Amendment A. He noted that there are three references to deletion of "a mobile home or." He explained that mobile home dealers were inadvertently swept into real estate activities. The amendment clarifies that real estate licensees do not wish to have exclusive right to manage mobile home parks. Representative Rokeberg observed that Amendment B incorporates recommendations by the Alaska Chapter of Community Associations. Definitions of conduct of investigation and community association accounts are clarified. Association fund's may not be commingled with funds of other associations or the licensee's. Representative Rokeberg noted that Amendment C was added at the request of Representative Cowdery. This amendment would allow a person to have another person manage their property without a fee. In response to a question by Co-Chair Hanley, Representative Rokeberg clarified that the proposed amendments were not drafted by Alaska Legal Services. Alaska Legal Services did review the amendments. Co-Chair Hanley noted that Representative Rokeberg could legally sell a house. He observed that Representative Rokeberg would not be required to take refresher classes on selling a house. He questioned if there is a prohibition on selling houses if that portion of the education update is not taken. Representative Rokeberg emphasized that there is a 20-hour mandate for continuing education. Specialty classes represent 8 of the 20 hours. He would not have to take the residential sale portion. Co-Chair Hanley stressed that education requirements are set to assure that the statues are understood "across the board". He reiterated that the legislation allows sell of homes by licensees that are not required to take that portion of the educational requirements. Representative Rokeberg noted that the original legislation would have created different types of licenses. He observed that the proposal was controversial among the real estate community. The legislation represents a consensus position. Representative Rokeberg noted that the legislation would grant current community association managers that can demonstrate that they have performed the function for 24 months a limited community association license. A limited community association license would restrict their activity to management of associations only. They would be forbidden to participate in other types of real estate activities. Representative Rokeberg noted that the legislation provides for the expansion of the education requirements for pre- licensing to include community association management topics. Representative Rokeberg asserted that the legislation would improve real estate education. Co-Chair Hanley noted that the legislation prevents the Alaska Real Estate Commission from saying that the 20-hour requirement cannot be taken in two days. In response to a question by Representative Martin, Representative Rokeberg explained that the legislation allows associations to manage themselves or retain the services of a resident owner to manage the association for a profit. Representative Mulder disclosed that he has a real estate license. In response to a question by Representative Mulder, Representative Rokeberg noted that the Commission cannot assess civil penalties. The legislation would allow a civil penalty of up to $5 thousand dollars beyond the amount that the person benefited. He noted that the activity would have to be egregious before the Department of Law would prosecute. The Alaska Real Estate Commission requested the authority to assess fines. The Commission did not have any authority over non-licensed activity. Representative Mulder asked if other boards are allowed to assess fines. RON JOHNSON, PRESIDENT, KENAI PENINSULA BOARD OF REALTORS testified on HB 33. He referred to Amendment A. He noted that "financial institution" would be substituted for "banks" on page 18, line 4. He questioned if the Federal Deposit Insurance Corporation (FDIC) covers financial institutions. If they are not covered by FDIC they would not be insured funds. He suggested that "sales person" could be replaced with "real estate services licensee". He asserted that mobile homes are not a real estate item. He observed that a restriction on the number of hours that can be taken in a day would hurt rural areas. He maintained that the ability of person to retain information is not affected by the amount hours that they sit in a chair. Representative Rokeberg noted that "financial institution" was inserted on the request of the State Bank and Securities Commission. He stressed that to the best of his knowledge "real estate services licensee" is used where it can be used. He observed that there are three types of licenses. He stressed that the term licensee cannot be used to distinguish between other types of licenses. ART CLARK, REAL ESTATE UNLIMITED, ANCHORAGE testified in support of HB 33. He observed that he also represents the Alaska Association of Realtors and is on the Board of Directors for the Community Association Institute. He spoke in support of the amendments. He spoke against limiting the number of educational hours that can be taken in a day. LARRY SPENCER, ALASKA REAL ESTATE COMMISSION explained that there are seven members on the Commission. There are two public members, one from each judicial district and two members at large. Judicial district members are licensees. Co-Chair Therriault expressed concern that the legislation would overrule policy set by the Commission. He questioned why the Commission felt the number of educational hours should be restricted to 7 per day. DEBRA BRITT, PIONEER MANAGMENT ANCHORAGE testified in support of HB 33. She noted that she manages community associations. She spoke in support of the amendments. SHANE OSOWSKI, PRESIDENT, COMMUNITY ASSOCIATIONS INSTITUTE, ANCHORAGE testified in support of HB 33. He observed that he is an attorney practicing real estate construction law. He noted that Representative Rokeberg has incorporated his comments into the bill. He spoke in support of the amendments. DAVID GARRISON, ASSOCIATE BROKER, ANCHORAGE testified in support of HB 33. He questioned the affect of section 30, page 19. WILLIAM BRADY, REMAX, ANCHORAGE testified in support of HB 33. He noted that he is also the Chairman of Industry Issues for the State Association of Realtors. He spoke in support of the amendments. He clarified that the intent is to break down educational requirements of licensees who are practicing in different areas of real estate. He maintained that it is not fair to a commercial agent or a property manager to take classes dealing with residential property sales. The legislation would allow licensees to take the core hours specific to their area of expertise. He noted that the Commission is not recommending a limit on hours that can be taken in a day. (Tape Change, HFC 98 - 26, Side 1) JOHN CARMAN, HOME STATE MORTGAGE, ANCHORAGE testified in support of HB 33. He spoke in support of the provision to exclude unlicensed parties from receiving fees from real estate transactions. CLAIR RAMSEY, REAL ESTATE COMMISSION, ANCHORAGE testified in support of HB 33 and urged the Committee to pass HB 33 during this legislative session. RON POLLOCH, JACK WHITE REAL ESTATE, ANCHORAGE testified in support of HB 33. He observed that the legislation balances many interests. The legislation clarifies that an unlicensed person cannot receive a fee. He referred to the civil penalty provisions. He noted that the Alaska Real Estate Commission has no jurisdiction against an unlicensed person performing a licensed activity. ERIC DYRUD, ANCHORAGE BOARD OF REALTORS, ANCHORAGE testified in support of HB 33. He urged prompt passage of the legislation. BOB BAER, TOTEM, ANCHORAGE testified in support of HB 33. He is also chairman of Concern Advocates for Real Estate Services. Mr. Spencer testified in support of HB 33. He stated that he is a member at large of the Alaska Real Estate Commission. He emphasized that the legislation represents over four years of work. The Alaska Real Estate Commission has passed a resolution in support of civil penalties for unlicensed activities. Currently, unlicensed activities are referred to the Department of Law. He observed that the Division of Occupational Licensing has limited attorney time. Only egregious offenses are pursued. The Alaska Real Estate Commission recognizes the need to restate and reinterpret current laws restricting fees or commissions to licensed persons. He emphasized that the legislation enhances consumer protection by regulating the practice of professional management of condominium associations. Co-Chair Therriault asked the position of the Alaska Real Estate Commission regarding to the number of training hours that can be taken per day. Mr. Spencer noted that the Commission has taken actions in the education areas to make the 20-hour component more effective. The Commission originally recommended limiting training to seven hours per day. Marketing courses were eliminated. Computer courses were eliminated. Credit for people that arrive late was eliminated. The real estate industry resisted the seven- hour restriction. The Alaska Real Estate Commission concluded that they did not have documentation to support the premise that educational quality would be more effective with a seven hour per day limit. The Commission also recognized the difficulty of individuals in rural areas that have to fly in to take educational classes. The Alaska Real Estate Commission does not regulate the number of hours per day. Representative Rokeberg spoke in support of section 7. He noted that expansion the 20-hour biannual educational requirement was discussed. Co-Chair Therriault noted that section 7 on pages 5 and 6 delineates the specific types of courses that the Commission must accept. Representative Rokeberg stated that section 7 balances competing interests within the industry. He noted that the Commission has not always recognized courses offered at national conventions. He noted that the conventions offer six-day courses with tuition of $1 thousand dollars or more. He pointed out that these nationally recognized courses lead to professional designations. Mr. Spencer reviewed educational requirements. He noted that the bill conforms to recommendations of the Alaska Real Estate Commission Task Force. Representative Rokeberg stated that there is a need to write regulations into law. He observed the importance of real estate law. In response to a question by Representative Grussendorf, Mr. Spencer noted that property managers do not generally sell houses. He added that a small number of individuals are involved in strictly commercial real estate. Co-Chair Therriault expressed concerns that individuals who are not required to take continuing education relating to residential sales may sell a house. Representative Rokeberg maintained that there are only 5 - 6 uniquely specialized individuals. Mr. Spencer noted that next year's core courses include ethics, disclosure and agency contracts. CATHERINE REARDON, DIRECTOR, DIVISION OF OCCUPATIONAL LICENSING, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT testified in support of HB 33. She maintained that the legislation provides enhanced consumer protection and fixes some holes in the statutes. In response to a question by Representative Mulder, Ms. Reardon noted that the Board of Architects and Land Surveyors has a similar statute that permits them to charge people committing an unlicensed activity. She noted that the Division has requested similar civil penalty authority. Money could be collected through garnishment of permanent fund dividends. She stressed that the civil penalties will contribute to enforcement of licensing laws. Representative Mulder noted that the reciprocity section was deleted. Representative Rokeberg noted that there are no reciprocity arrangements with other states. Co-Chair Therriault referred to section 7, subsection (4). This subsection would mandate that the Commission approve "courses offered and attended at a national convention for real estate licenses if the courses were approved for continuing education credit by the real estate licensing board of the state in which the convention was held." He questioned why the state of Alaska should recognize educational requirements of states that do not recognized Alaskan real estate licenses. Representative Rokeberg clarified that the Commission did not request section 7, subsection (4). Representative Kelly pointed out that convention courses would focus on the issues that cross state boundaries. Co-Chair Therriault questioned why the decision is not left to the Alaska Real Estate Commission. Representative Kelly stressed that real estate courses are difficult to find. Representative Rokeberg asserted that the legislation expands opportunities for education to better courses. Representative Davis stated that subsection (4) seems to give the courses credibility. In response to a question by Co-Chair Therriault, Ms. Reardon noted that the Commission currently has subpoena power. Ms. Reardon noted that other regulatory agencies issue fines. In response to a question by Representative Mulder, Representative Rokeberg observed that the Endorsement Concept has been deleted from the legislation. Representative Davies expressed concern with page 3, line 25. Representative Rokeberg noted that existing law requires the Commission to publish disciplinary actions three times. The legislation would allow the Commission to release the information in their newsletter. Representative Davies suggested that "must" be changed to "shall" on page 5, line 31 and a caveat be added stating that "unless the Commission finds in writing reasons for disallowing" a course it will be approved. Representative Davies questioned the deletion of "natural" on page 6, line 25. Representative Rokeberg spoke in support of deleting "natural". In response to a question by Representative Mulder, Representative Rokeberg noted that section 1, on page 1 clarifies that real estate can mean an interest in a mobile home. The legislation exempts real estate licensees from mobile home dealer licensing requirements. Ms. Reardon noted that there are other problems with statutes relating to mobile home dealer licensing. Co-Chair Therriault referred to section 48, page 28. He noted that section 48 states that the chapter does not apply to a person who manages a total of four or fewer residential units for other persons. He interpreted the statute to state that a person who manages a total of four or fewer residential units for other persons is exempt from the Title. He suggested that they could sell a home. He noted that the person should not be exempted from the provisions of the Title. The activity should be exempted. Mr. Reardon added that page 30, line 1 should exempt the bookkeeper or accounting function not the person. HB 33 was HELD in Committee for further consideration. ADJOURNMENT The meeting adjourned at 4:07 p.m. House Finance Committee 15 2/10/98
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