Legislature(2003 - 2004)

03/24/2004 01:39 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   HOUSE FINANCE COMMITTEE                                                                                      
                       March 24, 2004                                                                                           
                          1:39 P.M.                                                                                             
                                                                                                                                
TAPE HFC 04 - 66, Side A                                                                                                        
TAPE HFC 04 - 66, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 1:39 P.M.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Hugh Fate                                                                                                        
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative   Peggy    Wilson;   Rick    Urion,   Director                                                                   
Occupational Licensing, Department  of Community and Economic                                                                   
Development;   Johanna   Bales,    Auditor,   Tax   Division,                                                                   
Department  of  Revenue; Kathy  Hansen,  Executive  Director,                                                                   
Southeast Alaska Fishermen's Alliance,  Juneau; Pat Davidson,                                                                   
Legislative Auditor, Legislative Audit Division                                                                                 
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Mr.  Ken   Duckett,  Executive  Director,   Southeast  Alaska                                                                   
Gillnetters; Mr. Brennon Eagle, Wrangell                                                                                        
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 444    An  Act  relating  to  direct  marketing  fisheries                                                                   
          businesses,  to the fisheries business  tax, and to                                                                   
          liability for  payment of taxes and  assessments on                                                                   
          the  sale or  transfer  of fishery  resources;  and                                                                   
          providing for an effective date.                                                                                      
                                                                                                                                
          HB 444 was heard and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HB 424    An Act relating to review  of regulations under the                                                                   
          Administrative Procedure Act by the Legislative                                                                       
          Affairs Agency; and providing for an effective                                                                        
          date.                                                                                                                 
                                                                                                                                
          CS HB 424(JUD) was REPORTED out of Committee with                                                                     
          individual recommendations and two zero fiscal                                                                        
          notes and one indeterminate fiscal note.                                                                              
                                                                                                                                
HB 464    An Act extending the  termination date of the Board                                                                   
          of Certified Real Estate Appraisers                                                                                   
                                                                                                                                
          HB 464 was heard and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
SB 291    An   Act  extending   the  transition  period   for                                                                   
          activities involving unstamped cigarettes; and                                                                        
          providing for an effective date.                                                                                      
                                                                                                                                
          SB 291 was heard and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HOUSE BILL NO. 444                                                                                                            
                                                                                                                                
     An   Act   relating  to   direct   marketing   fisheries                                                                   
     businesses,  to  the  fisheries  business  tax,  and  to                                                                   
     liability  for payment of  taxes and assessments  on the                                                                   
     sale  or transfer  of fishery  resources; and  providing                                                                   
     for an effective date.                                                                                                     
                                                                                                                                
REPRESENTATIVE  PEGGY WILSON  explained  that HB  444 is  the                                                                   
companion  bill  to Senator  Stedman's  SB  286.   The  House                                                                   
Special Committee  on Fisheries recommended  the legislation.                                                                   
It intends  to  encourage value-added  processing and  direct                                                                   
marketing for local fishermen.  It would lower their tax from                                                                   
5%  to 3%  because the  current  tax structure  discriminates                                                                   
against  small boat fishermen  who process  and market  their                                                                   
own catch  directly. These  fishermen are  taxed at  the same                                                                   
rate  as  the  large  floating   processors.  The  bill  also                                                                   
clarifies that the tax is to be  charged on the wholesale and                                                                   
not the retail value of the product.                                                                                            
                                                                                                                                
IAN FISK, STAFF  TO SENATOR BERT STEDMAN, explained  that the                                                                   
change in  the tax rate  from 5% to  3% for direct  marketers                                                                   
would bring  the mainly  Alaskan vessels  into line  with the                                                                   
rate paid  by the  shore plants.   He  said that because  the                                                                   
vessels operate  out of Alaskan communities where  they spend                                                                   
money to  re-supply, it is  felt to be  the fair rate  to tax                                                                   
small  businesses.  Importantly,  it  changes  the  point  of                                                                   
taxation.   Currently  the  processor   pays  the   fisheries                                                                   
business tax  based on  the grounds price,  or the  price the                                                                   
fisherman  receives on  delivering  to the  dock. The  direct                                                                   
marketer's  tax  is  assessed  at the  first  point  of  sale                                                                   
further  down the  supply chain,  and it's  often the  retail                                                                   
price  or the  second wholesale  price. He  pointed out  that                                                                   
it's a disincentive to add value to the resource.                                                                               
                                                                                                                                
Mr. Fisk explained that the bill  rectifies the due dates for                                                                   
all  taxes  that  direct  market   businesses  have  to  pay.                                                                   
Currently  the  businesses  pay the  Fisheries  Business  Tax                                                                   
collected no  later than  April 1 of  the following year.   A                                                                   
salmon fisherman  is responsible for the enhancement  tax for                                                                   
hatcheries  and the  salmon  marketing  assessments that  are                                                                   
currently  collected  monthly.  This  bill  simplifies  their                                                                   
accounting and tax payment systems.                                                                                             
                                                                                                                                
Mr. Fisk pointed  out that the bill applies to  vessels of 65                                                                   
feet and  less, and it conforms  to one of the  licenses from                                                                   
the  Department  of Environmental  Conservation.    The  bill                                                                   
applies  only  to  product  caught   and  sold  by  the  same                                                                   
fisherman. In  terms of fiscal  impacts, the bill  is revenue                                                                   
neutral. He concluded  that the bill would level  the playing                                                                   
field to enable small businesses  to take advantage of direct                                                                   
markets.                                                                                                                        
                                                                                                                                
Representative Foster  referred to the fiscal  note and asked                                                                   
whether the funding of the Tax  Technician II position is $25                                                                   
thousand. Mr.  Fisk affirmed,  and said that  it will  be $25                                                                   
thousand in the first year because  it will be the first year                                                                   
the tax will be  collected. It is not required  to be a year-                                                                   
round position. The position the  Department is requesting is                                                                   
reflected in the $50.2 figure.    Representative Foster asked                                                                   
if it would  cost the state $50  thousand a year to  save the                                                                   
fishermen  money. Mr.  Fisk replied  that  the Department  of                                                                   
Revenue felt  it would  be needed  to assure compliance  with                                                                   
the new law.                                                                                                                    
                                                                                                                                
KEN  DUCKETT,  EXECUTIVE DIRECTOR,  UNITED  SOUTHEAST  ALASKA                                                                   
GILLNETTERS,  VIA  TELECONFERENCE, expressed  strong  support                                                                   
for the bill.  He said that the fishermen have  experienced a                                                                   
number of seasons of very low  prices and they are working to                                                                   
survive by attempting  to add value to their catch.   He felt                                                                   
that this  bill would  facilitate that.  He referenced  their                                                                   
letter of support (copy on file.)                                                                                               
                                                                                                                                
BRENNON EAGLE,  VIA TELECONFERENCE, WRANGELL,  explained that                                                                   
he  has direct-marketed  salmon,  halibut and  shrimp for  12                                                                   
years.   He expressed  strong support for  both parts  of the                                                                   
bill  to define  the  value and  lower the  tax  rate to  put                                                                   
fishermen on  an equal  footing with shore-based  processors.                                                                   
He expressed  that this bill is  part of the solution  and it                                                                   
is important to  pass it this year to encourage  this segment                                                                   
of the industry.                                                                                                                
                                                                                                                                
KATHY   HANSEN,   EXECUTIVE    DIRECTOR,   SOUTHEAST   ALASKA                                                                   
FISHERMEN'S   ALLIANCE,  JUNEAU,   stated  that  the   Salmon                                                                   
Industry   Task  Force   has  worked   intensively  on   this                                                                   
legislation  during the past  two years.  It is a  compromise                                                                   
bill resulting  from work with  industry, processors  and all                                                                   
three agencies  involved in direct  marketing. She  said that                                                                   
it is a tightly  woven compromise that had  unanimous support                                                                   
from  the  Salmon  Industry  Task  Force,  and  it  basically                                                                   
involves  tax parity and  a better  business environment  for                                                                   
small businesses.                                                                                                               
                                                                                                                                
HB  444  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 424                                                                                                            
                                                                                                                                
     An Act relating to review of regulations under the                                                                         
     Administrative Procedure Act by the Legislative Affairs                                                                    
     Agency; and providing for an effective date.                                                                               
                                                                                                                                
Co-Chair Williams  announced that the  sponsor of HB  424 had                                                                   
agreed to zero out the fiscal notes.                                                                                            
                                                                                                                                
Co-Chair  Harris  MOVED  to  report CS  HB  424(JUD)  out  of                                                                   
Committee with  the accompanying fiscal notes  and individual                                                                   
recommendations.  There   being  NO  OBJECTION,   it  was  so                                                                   
ordered.                                                                                                                        
                                                                                                                                
CS HB  424(JUD) was REPORTED out  of Committee with  two zero                                                                   
fiscal notes,  one indeterminate fiscal note,  and individual                                                                   
recommendations.                                                                                                                
                                                                                                                                
HOUSE BILL NO. 464                                                                                                            
                                                                                                                                
     An Act extending the termination date of the Board of                                                                      
     Certified Real Estate Appraisers.                                                                                          
                                                                                                                                
PAT   DAVIDSON,  LEGISLATIVE   AUDITOR,   LEGISLATIVE   AUDIT                                                                   
DIVISION, explained  that the Division  has done a  review of                                                                   
the Board and  has recommended its extension for  a period of                                                                   
four  years,   to  June  30,   2008.  The  Division   has  no                                                                   
operational  recommendations for  the Board.  She noted  that                                                                   
the  licensing for  real estate  appraisers is  found in  the                                                                   
federal  regulations in  response to  the congressional  1989                                                                   
Financial Institutions  Reform Recovery and  Enforcement Act.                                                                   
The intent of the Act was twofold:   to ensure that federally                                                                   
related  transactions,  or mortgages  having  involvement  by                                                                   
Freddie  Mac  and Fannie  Mae,  would  be completed  by  real                                                                   
estate  appraisers   who  met  minimum  qualifications;   and                                                                   
secondly, that  the appraisals  were conducted in  compliance                                                                   
with uniform standards.                                                                                                         
                                                                                                                                
Representative Foster  asked how often the Board  meets.  Ms.                                                                   
Davidson  was  unsure,  but  thought it  was  twice  a  year.                                                                   
Representative Foster asked if  the fiscal note reflected the                                                                   
Board's travel  and per  diem.   Ms. Davidson explained  that                                                                   
the Board's costs include licensing,  the licensing examiner,                                                                   
travel  and per  diem,  and  costs related  to  investigative                                                                   
functions.  Representative  Foster asked if  appraisers pay a                                                                   
licensing  fee each year.   Ms.  Davidson answered  that fees                                                                   
for occupational licensing are on a biannual basis.                                                                             
                                                                                                                                
Representative Fate  questioned why the revenue  of the Board                                                                   
dropped  from  $77  thousand  to $18  thousand  in  the  year                                                                   
spanning 2001-2002.   Ms. Davidson  replied that  it reflects                                                                   
the biannual  licensing.  The  big influx of  revenues during                                                                   
the  year of  licensing drops  during the  year it's  carried                                                                   
forward.  The   Division  has  analyzed  the   Board  on  the                                                                   
cumulative 2-year  basis when  considering if the  fee covers                                                                   
its costs.  She referred  to page 12  of the report  (copy on                                                                   
file), noting  that the schedule  shows a cumulative  deficit                                                                   
for  the Board.  Ms. Davidson  pointed out  that the  renewal                                                                   
fees  have been  increased,  which  is expected  to  increase                                                                   
revenues by 45% to sufficiently address the deficit.                                                                            
                                                                                                                                
RICK  URION, DIRECTOR,  DIVISION  OF OCCUPATIONAL  LICENSING,                                                                   
DEPARTMENT  OF  COMMERCE &  ECONOMIC  DEVELOPMENT,  commented                                                                   
that  the  bill   extends  the  Board.    He   brought  up  a                                                                   
housekeeping amendment for the committee's consideration.                                                                       
                                                                                                                                
Co-Chair  Harris  pointed out  that  only the  Co-Chairs  had                                                                   
copies  of  the amendment.  Co-Chair  Williams  advised  that                                                                   
amendments must be  provided to the committee  the day before                                                                   
the hearing on a bill.                                                                                                          
                                                                                                                                
Mr. Urion explained that the bill's  sponsor didn't know that                                                                   
the bill would be heard in the committee today.                                                                                 
                                                                                                                                
Co-Chair  Harris   MOVED  to  ADOPT  Amendment   1.  Co-Chair                                                                   
Williams OBJECTED.                                                                                                              
                                                                                                                                
Co-Chair Williams  announced that  HB 464  would be  moved to                                                                   
the bottom of the calendar.                                                                                                     
                                                                                                                                
SENATE BILL NO. 291                                                                                                           
                                                                                                                                
     An Act extending the transition period for activities                                                                      
     involving unstamped cigarettes; and providing for an                                                                       
     effective date.                                                                                                            
                                                                                                                                
                                                                                                                                
SENATOR  CON BUNDE  explained  that  the bill  addresses  the                                                                   
unfair  treatment  of tobacco  product  retailers  conducting                                                                   
legitimate  business. The  Legislature passed  a tobacco  tax                                                                   
and subsequently  also required  cigarettes to be  stamped to                                                                   
track who  was paying the  tax, so that legitimate  retailers                                                                   
would  not  be  at a  financial  disadvantage  to  the  black                                                                   
market. The original legislation  gave the retailers a 90-day                                                                   
window  to dispose of  unstamped stock  when the  legislation                                                                   
passed. It  appeared to  be an  adequate time period  because                                                                   
manufacturers previously  had a policy that  any excess stock                                                                   
could be  returned to  the manufacturer.   The  manufacturers                                                                   
have since  ended that  practice, putting  the burden  on the                                                                   
Alaskan retailers.  The bill would  extend the  deadline from                                                                   
March 31 to  June 30, 2004 for holding  unstamped cigarettes.                                                                   
It  is  an   adequate  time  period  for   selling  unstamped                                                                   
cigarettes.  Senator Bunde  said that  if the  bill does  not                                                                   
pass, the retailers' unstamped stock would be confiscated.                                                                      
                                                                                                                                
Representative  Fate asked  if  the sponsor  had studied  the                                                                   
turnover rate of  cigarette sales, and whether  June 30, 2004                                                                   
is an  adequate time period for  the depletion of  the stock.                                                                   
Senator Bunde deferred to Ms. Bales.                                                                                            
                                                                                                                                
JOHANNA BALES, AUDITOR, TAX DIVISION,  DEPARTMENT OF REVENUE,                                                                   
noted that she is also the Program  Manager for the Cigarette                                                                   
and Tobacco  Products Tax,  and has worked  in this  tax type                                                                   
since  1997. She  explained that  the normal  shelf life  for                                                                   
cigarettes is 4-6 months, so given  the additional 90 days in                                                                   
the bill;  the retailers would  have a full six-month  period                                                                   
since  the  cigarette  stamp  legislation  was  enacted.  She                                                                   
anticipated that  some retailers would still  have product on                                                                   
hand, but  most retailers indicated  that the  additional 90-                                                                   
day period would be sufficient.                                                                                                 
                                                                                                                                
Co-Chair Harris  asked if  this would allow  for a $1  a pack                                                                   
tax  increase on  stamped cigarettes.  Senator Bunde  replied                                                                   
that he doubted it, considering the bill title.                                                                                 
                                                                                                                                
Representative   Hawker   questioned    why   the   cigarette                                                                   
manufacturers' liberal  return goods policy has  changed. Ms.                                                                   
Bales replied  that the  Tobacco Master Settlement  Agreement                                                                   
has  driven  the return  goods  policy.    In the  past,  the                                                                   
manufacturers  allowed distributors  and retailers  to return                                                                   
product  for the retail  price  on the day  it was  returned,                                                                   
regardless of  what they paid  for it. One manufacturer  told                                                                   
Ms.  Bales  that the  return  goods  policy  was felt  to  be                                                                   
"liberal to the point of stupidity."  The return goods policy                                                                   
changed  after SB  168 was  signed into  law, without  notice                                                                   
that this would happen.                                                                                                         
                                                                                                                                
Vice-Chair  Meyer requested  clarification  that the  tobacco                                                                   
companies' decision  not to take product back  is not related                                                                   
to the  passage of the tobacco  stamp and relates  instead to                                                                   
the Master Settlement, and asked  if it is happening in other                                                                   
states.  Ms.  Bales  affirmed  that it  has  been  instituted                                                                   
nationwide.   She explained that  the Division tried  to work                                                                   
with  the manufacturers  to allow  a window  to take  product                                                                   
back after the stamp was enacted,  but the manufacturers were                                                                   
concerned that it would set a precedent with other states.                                                                      
                                                                                                                                
Vice-Chair Meyer  asked how much  inventory would need  to be                                                                   
sold.    Ms. Bales  was  unsure.  She  pointed out  that  the                                                                   
Division  came to  a compromise  with  the manufacturers  who                                                                   
agreed  to  take  product  back   temporarily,  allowing  the                                                                   
Division under statute  to give a credit to  the distributors                                                                   
but  not to  the retailers.  The Division  believed that  the                                                                   
retailers  would  be given  a  full  90-day period,  but  the                                                                   
retailers have  continued to get  unstamped product  from the                                                                   
distributors who  used the initial 90-day period  to sell off                                                                   
their unstamped product.  The  retailers haven't been given a                                                                   
90-day period  like the distributors.  The Division  has been                                                                   
given  assurances  by  the distributors  that  all  of  their                                                                   
product will be stamped by the end of March 2004.                                                                               
                                                                                                                                
Vice-Chair  Meyer  asked how  it  is known  that  90 days  is                                                                   
enough  time for  retailers to  sell the  product. Ms.  Bales                                                                   
admitted  that it would  not be  enough time  for all  of the                                                                   
retailers. The  Division told  the retailers that  they could                                                                   
have "fire sales"  and reduce their prices  without violating                                                                   
the minimum pricing laws that  were enacted at the same time.                                                                   
The retailers she had spoken with  felt that 90 days would be                                                                   
adequate.                                                                                                                       
                                                                                                                                
Vice-Chair  Meyer asked  if Alaska  Bush  retailers would  be                                                                   
adversely  impacted  by  selling   by  July  1  if  they  had                                                                   
stockpiled product.  Ms. Bales  replied that she had received                                                                   
about 100  calls from  across the  state indicating  that the                                                                   
90-day extension would be an adequate amount of time.                                                                           
                                                                                                                                
Senator Bunde  clarified that  the intent of  the bill  is to                                                                   
ensure that the tax laws are enforced,  because an open-ended                                                                   
extension would  allow some businesses to circumvent  the tax                                                                   
laws, an unfair advantage.                                                                                                      
                                                                                                                                
Vice-Chair Meyer  agreed with collecting  the tax as  soon as                                                                   
possible, stating that it should  be implemented immediately.                                                                   
He  questioned   the  time  period  of  the   extension,  and                                                                   
disagreed with  allowing a "fire  sale" because it  would not                                                                   
discourage kids from smoking.                                                                                                   
                                                                                                                                
Senator Bunde expressed that a  "bonfire sale" might be good.                                                                   
He  pointed  out  that  the  distributors  have  moved  their                                                                   
unstamped  product,   so  it  involves  a  lower   volume  of                                                                   
cigarettes at the retailer level.                                                                                               
                                                                                                                                
Vice-Chair Meyer asked  if the extent of the  black market is                                                                   
known and how much  product is bought off the  Internet.  Ms.                                                                   
Bales replied that the Division  has some preliminary data on                                                                   
the number  of stamps  sold over the  past few months,  which                                                                   
would  yield an  increase in  cigarette tax  revenues if  the                                                                   
current rate holds  steady.  She said that she  has talked to                                                                   
retailers who  have been buying  product on the  Internet and                                                                   
violating the tax laws for years,  as well as not getting the                                                                   
stamp affixed.                                                                                                                  
                                                                                                                                
Representative Chenault commented  that he knows a person who                                                                   
received a bill  from the Department of Revenue  a year after                                                                   
buying cigarettes  over the Internet.  He asked  if retailers                                                                   
are required to  turn in names of persons who  buy cigarettes                                                                   
over  the   Internet.  Ms.  Bales  affirmed.   Representative                                                                   
Chenault voiced that  he did not think Internet  sales pose a                                                                   
major problem.   Currently he  could have cigarettes  sent to                                                                   
him from  out of state  without paying  any tax, and  run the                                                                   
very  small risk  of  prosecution  for smuggling.  The  State                                                                   
wants to ensure  that it gets every dollar for  every pack of                                                                   
cigarettes sold  in the state,  which he implied is  the real                                                                   
reason the state has chosen to stamp cigarettes.                                                                                
                                                                                                                                
Senator  Bunde   clarified  that  the  stamp   simply  allows                                                                   
enforcement   of   the  current   law.     He   agreed   with                                                                   
Representative  Chenault that  the  incentive behind  raising                                                                   
the  tax  is   to  make  smoking  more  expensive   and  less                                                                   
attractive.                                                                                                                     
                                                                                                                                
Vice-Chair  Meyer commented  that his  concern prompting  the                                                                   
question  about  the black  market  related to  receiving  an                                                                   
email  message  saying,  "start  smoking now  and  get  cheap                                                                   
cigarettes."  He  asked if  military  bases  are exempt.  Ms.                                                                   
Bales  affirmed. Vice-Chair  Meyer asked  how it  works if  a                                                                   
member of  the military lives  off base. Ms.  Bales explained                                                                   
that federal  law prohibits  the State  from taxing  sales to                                                                   
the military, but there is a mandate  to the military to sell                                                                   
cigarettes  at no less  than 90%  of the surrounding  market.                                                                   
She had been in  stores on base and observed  that the prices                                                                   
are  not significantly  different  than retail  prices.   Ms.                                                                   
Bales said  that the  Department doesn't  see a problem  with                                                                   
the military.                                                                                                                   
                                                                                                                                
Vice-Chair  Meyer  asked  if the  stamp  applies  to  chewing                                                                   
tobacco, snuff  and pipe tobacco.   Ms. Bales  explained that                                                                   
the stamps are not affixed to  other tobacco products because                                                                   
all cigarette packages  are about the same size,  while other                                                                   
products are of varied size.   She was not aware of any other                                                                   
state  requiring  a  stamp on  tobacco  products  other  than                                                                   
cigarettes.                                                                                                                     
                                                                                                                                
SB  291  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
HOUSE BILL NO. 464                                                                                                            
                                                                                                                                
     An Act extending the termination date of the Board of                                                                      
     Certified Real Estate Appraisers.                                                                                          
                                                                                                                                
Co-Chair Williams noted the previous  motion on Amendment #1,                                                                   
and he asked Mr. Urion to explain the amendment.                                                                                
                                                                                                                                
RICK  URION, DIRECTOR,  DIVISION  OF OCCUPATIONAL  LICENSING,                                                                   
DEPARTMENT  OF  COMMERCE &  ECONOMIC  DEVELOPMENT,  explained                                                                   
that  the  proposed  amendment  attempts  to  solve  a  long-                                                                   
standing issue  with the Department.  The amendment was  in a                                                                   
bill that  the Governor  intended to  introduce last  session                                                                   
before other  legislation assumed priority. The  amendment is                                                                   
not currently  in a bill.   Mr. Urion said that  the Division                                                                   
of Occupational Licensing  is mandated by law  to charge fees                                                                   
for any profession  that it licenses, and the  fees cover the                                                                   
costs  of regulation.  It  has been  assumed  that fines  for                                                                   
professional violations  are included in those  fees, but Mr.                                                                   
Urion  pointed out  that the  law  does not  allow for  this.                                                                   
Although the collected  fines have always been  divided among                                                                   
occupations, the  Division has been  told that it  cannot use                                                                   
those fines under the current  ethics law, and that it may be                                                                   
in violation of that law.                                                                                                       
                                                                                                                                
Mr. Urion  continued explaining  that the proposed  amendment                                                                   
allows  the division  to  continue  its practice,  and  every                                                                   
licensed  professional   in  the  state  supports   it.    He                                                                   
explained   that   disciplinary  action   involving   hearing                                                                   
officers, investigators  and attorney generals is  one of the                                                                   
biggest expenses  borne by each  profession. He said  that it                                                                   
only seems  fair that  the professions  should also  reap the                                                                   
benefits of  the fines arising  from those actions.  He noted                                                                   
that the  annual average is  $66 thousand, and  the licensing                                                                   
of thousands of  people reaps a tiny benefit.   The amendment                                                                   
would allow the  Division to take the fines  it collects from                                                                   
a  profession  and add  them  to  the  fees charged  for  the                                                                   
license.                                                                                                                        
                                                                                                                                
Amendment #1 reads:                                                                                                             
                                                                                                                                
                                                 23-LS1706\A.1                                                                  
                                                       Mischel                                                                  
                                                                                                                                
                                                                                                                                
                      A M E N D M E N T                                                                                     
                                                                                                                                
                                                                                                                                
OFFERED IN THE HOUSE                  BY REPRESENTATIVE SAMUELS                                                                 
     TO:  HB 464                                                                                                                
                                                                                                                                
                                                                                                                                
Page 1, line 2, following "Appraisers":                                                                                       
   Insert "; and relating to occupational licensing fees                                                                      
and receipts"                                                                                                                 
                                                                                                                                
Page 1, following line 3:                                                                                                       
     Insert new bill sections to read:                                                                                          
   "* Section 1.  AS 08.01.065(c) is amended to read:                                                                       
          (c)  The [EXCEPT AS PROVIDED IN (f) - (i) OF THIS                                                                 
     SECTION, THE] department shall establish fee levels                                                                        
     under (a) of this section so that the total amount of                                                                      
     fees, together with the fines and penalties collected                                                                  
     for all occupations regulated by a board [AN                                                                           
     OCCUPATION] approximately equals the total actual                                                                      
     [REGULATORY] costs of the  board and the department for                                                                
     all occupations regulated by that board [FOR THE                                                                       
     OCCUPATION].  If the department  regulates more than one                                                               
    occupation under another chapter of this title, the                                                                     
     department shall establish the fee levels so that the                                                                  
     total amount of fees, together with the fines and                                                                      
     penalties collected by the department for all                                                                          
     occupations regulated by the department under that                                                                     
     chapter, approximately equals  the total actual costs of                                                               
     the department for all of  the occupations regulated by                                                                
     the department under that chapter.  The department                                                                     
     shall annually review each fee level to determine                                                                          
     whether the [REGULATORY] costs for the relevant                                                                        
     occupations [OF EACH OCCUPATION] are approximately                                                                     
     equal to the fines, penalties, and fee collections                                                                     
     related to those occupations  [THAT OCCUPATION].  If the                                                               
    review indicates that the fines, penalties, and [AN                                                                     
     OCCUPATION'S] fee collections [AND REGULATORY COSTS]                                                                       
     are not approximately equal to the costs for the                                                                       
     relevant occupations, the department shall calculate                                                                   
     fee adjustments and adopt  regulations under (a) of this                                                                   
     section to implement the adjustments.  In January of                                                                       
     each year, the department shall report on all fee                                                                          
     levels and revisions for the previous year under this                                                                      
     subsection to the office  of management and budget.  If                                                                    
     a board regulates an occupation  or group of occupations                                                               
     covered by this chapter,  the department shall consider                                                                    
    the board's recommendations concerning occupational                                                                     
     [THE OCCUPATION'S] fee levels and [REGULATORY] costs                                                                       
     before revising fee schedules to comply with this                                                                          
     subsection.  [IN THIS SUBSECTION, "REGULATORY COSTS"                                                                       
     MEANS COSTS OF THE DEPARTMENT  THAT ARE ATTRIBUTABLE TO                                                                    
     REGULATION OF AN OCCUPATION PLUS                                                                                           
               (1)  ALL EXPENSES OF THE BOARD THAT REGULATES                                                                    
     THE OCCUPATION IF THE BOARD REGULATES ONLY ONE                                                                             
     OCCUPATION;                                                                                                                
               (2)  THE EXPENSES OF A BOARD THAT ARE                                                                            
     ATTRIBUTABLE TO THE OCCUPATION IF THE BOARD REGULATES                                                                      
     MORE THAN ONE OCCUPATION.]                                                                                                 
   * Sec. 2.  AS 08.01.065(f) is amended to read:                                                                             
          (f)  [NOTWITHSTANDING (c) OF THIS SECTION, THE                                                                        
     DEPARTMENT SHALL ESTABLISH  FEE LEVELS UNDER (a) OF THIS                                                                   
     SECTION SO THAT THE TOTAL AMOUNT OF FEES COLLECTED BY                                                                      
     THE STATE BOARD OF REGISTRATION FOR ARCHITECTS,                                                                            
     ENGINEERS, AND LAND SURVEYORS  APPROXIMATELY EQUALS THE                                                                    
     TOTAL REGULATORY COSTS OF  THE DEPARTMENT AND THE BOARD                                                                    
     FOR ALL OCCUPATIONS REGULATED BY THE BOARD.]  The                                                                          
     department shall set [THE]  fee levels under (a) of this                                                               
     section [FOR THE ISSUANCE AND RENEWAL OF A CERTIFICATE                                                                 
     OF REGISTRATION ISSUED UNDER AS 08.48.211] so that the                                                                     
     fee levels are the same for  all occupations regulated                                                                     
     by the State Board of Registration  for Architects,                                                                    
     Engineers, and Land Surveyors  under AS 08.48 [BOARD].                                                                 
   * Sec. 3.  AS 08.01.065(g) is amended to read:                                                                             
          (g)  [NOTWITHSTANDING (c) OF THIS SECTION, THE                                                                        
     DEPARTMENT SHALL ESTABLISH FEE LEVELS UNDER (a) OF THIS                                                                    
     SECTION SO THAT THE TOTAL  AMOUNT OF FEES COLLECTED BY                                                                     
     THE DEPARTMENT FOR ALL OCCUPATIONS  REGULATED UNDER                                                                        
     AS 08.11 APPROXIMATELY EQUALS  THE TOTAL REGULATORY                                                                        
     COSTS OF THE DEPARTMENT FOR  ALL OCCUPATIONS REGULATED                                                                     
     BY THE DEPARTMENT UNDER AS  08.11.]  The department                                                                        
    shall set [THE] fee levels under (a) of this section                                                                    
     [FOR THE ISSUANCE AND RENEWAL OF LICENSES ISSUED UNDER                                                                     
     AS 08.11] so that the fee  levels are the same for all                                                                     
     occupations regulated by the department under AS 08.11.                                                                    
   * Sec. 4.  AS 08.01.065(i) is amended to read:                                                                             
          (i)  [NOTWITHSTANDING (c) OF THIS SECTION, THE                                                                        
     DEPARTMENT SHALL ESTABLISH FEE LEVELS UNDER (a) OF THIS                                                                    
     SECTION SO THAT THE TOTAL  AMOUNT OF FEES COLLECTED BY                                                                     
    THE DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT                                                                        
     FOR SPECIALTY CONTRACTORS, HOME INSPECTORS, AND                                                                            
     ASSOCIATE HOME INSPECTORS  APPROXIMATELY EQUALS THE                                                                        
     TOTAL REGULATORY COSTS OF  THE DEPARTMENT FOR THOSE                                                                        
     THREE REGISTRATION CATEGORIES.]   The department shall                                                                     
     set [THE] fee levels under (a) of this section [FOR THE                                                                
     ISSUANCE AND RENEWAL OF A  CERTIFICATE OF REGISTRATION                                                                     
     ISSUED UNDER AS 08.18] so  that the fee levels are the                                                                     
    same for specialty contractors, home inspectors, and                                                                    
     associate home inspectors under AS 08.18 [ALL THREE OF                                                                 
     THESE REGISTRATION CATEGORIES]  and so that the fee                                                                        
     level for a home inspector with a joint registration is                                                                    
     not different from the fee  level for a home inspector                                                                     
     who does not have a joint registration.  In this                                                                           
     subsection, "joint registration" has the meaning given                                                                     
     in AS 08.18.171."                                                                                                          
                                                                                                                                
Page 1, line 4:                                                                                                                 
     Delete "Section 1"                                                                                                       
     Insert "Sec. 5"                                                                                                          
                                                                                                                                
Page 1, following line 6:                                                                                                       
     Insert new bill sections to read:                                                                                          
   "* Sec. 6.  AS 37.05.146(c)(24) is amended to read:                                                                      
               (24)  receipts of the Department of Community                                                                    
    and Economic Development under AS 08.01.065 and from                                                                    
     fines and penalties collected in licensing and                                                                         
     disciplinary actions for occupations under AS 08.01.010                                                                
     [AS 08.01.065(a), (c), AND (f)];                                                                                           
   * Sec. 7.  AS 08.95.920 is repealed."                                                                                      
                                                                                                                                
                                                                                                                                
Co-Chair  Harris  questioned how  it  would  differ from  the                                                                   
courts' decision  that their collected  fines go  directly to                                                                   
the General Fund to be appropriated by the Legislature.                                                                         
                                                                                                                                
TAPE HFC 04 - 66, Side B                                                                                                      
                                                                                                                              
Co-Chair  Harris  continued, asking  for  clarification  that                                                                   
when the  Division imposed a fine,  the fine returns  for use                                                                   
by   the   Division   rather  than   appropriation   by   the                                                                   
Legislature.  Mr. Urion affirmed.                                                                                               
                                                                                                                                
PAT   DAVIDSON,  LEGISLATIVE   AUDITOR,   LEGISLATIVE   AUDIT                                                                   
DIVISION,  replied that Mr.  Urion brought  up an issue  that                                                                   
concerns   the  Legislative   Audit   Division  relating   to                                                                   
including the  fines.  She noted  that there are a  couple of                                                                   
boards with fewer  than 30 licensees, and a fine  of a couple                                                                   
thousand dollars spread across  only 25 or 30 licensees would                                                                   
mean a benefit of only a couple  hundred dollars to the board                                                                   
which  decided to  impose the  fine.  The concern  is that  a                                                                   
combination  of a  certain  board and  a  certain fine  could                                                                   
raise questions about the Executive Branch Ethics Act.                                                                          
                                                                                                                                
With  regard  to  the  concern   about  other  statutes,  Ms.                                                                   
Davidson said  it is her  understanding that imposing  a fine                                                                   
must  take  place  through  a due  process  conducted  by  an                                                                   
unbiased individual.  Otherwise,  it may end  up in  court on                                                                   
the allegation that the board  can't impose a fine that is so                                                                   
high  that the  board  may appear  to  benefit  from it.  Ms.                                                                   
Davidson  said that  those  are the  only  arguments she  has                                                                   
heard with respect to including  the fines in the calculation                                                                   
of the fees.                                                                                                                    
                                                                                                                                
Co-Chair Harris  asked what the  fines are imposed for.   Mr.                                                                   
Urion  replied  that  it's  varied  and  includes  unlicensed                                                                   
practice  and  drug  and  alcohol abuse.  In  response  to  a                                                                   
question by  Co-Chair Harris,  Mr. Urion answered  that fines                                                                   
are not  imposed for criminal  activity.  The people  who are                                                                   
licensed pay enforcement.                                                                                                       
                                                                                                                                
Co-Chair Harris asked if there  is an unbiased or neutral way                                                                   
these fines  could be appealed.   Mr. Urion explained  that a                                                                   
hearing officer makes  the decision, the board  says "yea" or                                                                   
"nay,"  and the defendant  can  accept it,  or reject it  and                                                                   
take it to the next higher court.                                                                                               
                                                                                                                                
Co-Chair Harris  asked who pays for  the legal fees  if it is                                                                   
taken to the  next higher court, and if the  state reimburses                                                                   
the legal costs  if the person is found innocent.   Mr. Urion                                                                   
replied that to his knowledge,  it has never happened before.                                                                   
                                                                                                                                
In  response to  a  question by  Co-Chair  Harris, Mr.  Urion                                                                   
replied  that the  cases  taken to  higher  court have  never                                                                   
prevailed.  The  hearing officers'  decisions  are  extremely                                                                   
well written  and thorough. He  gave the example of  a recent                                                                   
$20 thousand fine in the real  estate industry, and said that                                                                   
the defendant  accepted it.   He  stated that the  infraction                                                                   
had been  going on  for years,  and it  was the highest  fine                                                                   
ever levied.                                                                                                                    
                                                                                                                                
In  response to  a  question by  Co-Chair  Harris. Mr.  Urion                                                                   
explained  that Amendment #1  applies to  all the boards  and                                                                   
commissions of every profession.                                                                                                
                                                                                                                                
Representative  Hawker  commented  that  the  bill  seems  to                                                                   
change the character  of how the state  assesses occupations,                                                                   
from the individual  to the collective.  He asked  if that is                                                                   
the intent.   Mr. Urion replied that it is  current practice,                                                                   
and would allow an apprentice to pay less than a licensee.                                                                      
                                                                                                                                
Representative  Hawker thought that  the bill indicates  that                                                                   
occupations are  regulated by an individual board,  and would                                                                   
have to meet the costs of that  board. Mr. Urion said that is                                                                   
true.                                                                                                                           
                                                                                                                                
Representative Stoltze  expressed concern that  the amendment                                                                   
has merit  as a stand-alone bill,  and he didn't want  to see                                                                   
the bill  extending the  real estate  appraisers bogged  down                                                                   
with this amendment  when the administration  has the ability                                                                   
to introduce  it through the  Rules Committee. It's  a policy                                                                   
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Williams  stated that  it was  not his intention  to                                                                   
move the bill today.                                                                                                            
                                                                                                                                
Mr.  Urion responded  to Representative  Stoltze,  explaining                                                                   
that he  had brought  the amendment  before Labor &  Commerce                                                                   
Committee, and the Committee wanted  to move the bill and let                                                                   
Finance make the  decision. He would have introduced  it in a                                                                   
bill if he could have.                                                                                                          
                                                                                                                                
Co-Chair Harris asked  how long the bill has  been sitting in                                                                   
Co-Chair Williams's office.  Mr.  Urion was unsure.  Co-Chair                                                                   
asked why the  amendment was not incorporated  into a Finance                                                                   
Committee Substitute  through the office of  the Co-Chairman.                                                                   
Mr.  Urion  apologized,  and said  that  he  tried to  do  it                                                                   
through the sponsor  who was wary of killing  the real estate                                                                   
appraisers  bill. He  asserted  that this  is an  appropriate                                                                   
vehicle  and  title,  and  that   every  licensed  profession                                                                   
supports the amendment.                                                                                                         
                                                                                                                                
Co-Chair  Williams  expressed   concern  that  the  committee                                                                   
members did not have the amendment  earlier, and he suggested                                                                   
that Mr. Urion talk to the Finance members individually.                                                                        
                                                                                                                                
HB  464  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 2:40 P.M.                                                                                          

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