Legislature(2003 - 2004)
05/06/2004 09:00 AM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
May 06, 2004
9:00 A.M.
TAPE HFC 04 - 108, Side A
TAPE HFC 04 - 108, Side B
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 9:00 A.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 Fred Dyson; Robert D. Storer, Executive
Director, Alaska Permanent Fund Corporation, Department of
Revenue; Grey Mitchell, Director, Labor Standards and
Safety, Department of Community & Economic Development;
Rachel Lewis, Unclaimed Property Manager, Department of
Revenue; Tom Boutin, Deputy Commissioner, Department of
Revenue; Stacy Kraly, Assistant Attorney General, Department
of Law; Myra Push, Staff, Senator Bettye Davis; Greg
O'Claray, Commissioner, Department of Labor; Jason Hooley,
Staff, Senator Fred Dyson
PRESENT VIA TELECONFERENCE
Shelby Larsen, Division of Health Care Services, Department
of Health & Social Services, Anchorage
SUMMARY
HB 466 An Act relating to investments of Alaska permanent
fund assets; and providing for an effective date.
CS HB 466 (FIN) was reported out of Committee with
a "do pass" recommendation and with zero note #1
by the Department of Revenue.
CS SB 30(JUD) am
An Act relating to information and services
available to pregnant women and other persons; and
ensuring informed consent before an abortion may
be performed, except in cases of medical
emergency.
HCS CS SB 30(FIN) was reported out of Committee
with "no recommendation" and with fiscal notes #3
and #4 by the Department of Health & Social
Services.
CS SB 65(FIN) am
An Act relating to the qualifications of
correctional officers, parole officers, and
probation officers; authorizing the Department of
Corrections to enter into lease- purchase
agreements with municipalities for new or expanded
public correctional facilities in the Fairbanks
North Star Borough, the Matanuska-Susitna Borough,
Bethel, the Municipality of Anchorage, and the
City of Seward; relating to the development and
financing of privately operated correctional
facility space and services; authorizing the
Department of Corrections to enter into a lease-
purchase agreement with the City of Whittier for
the confinement and care of prisoners in privately
operated correctional facility space if the state
cannot provide the same level of services required
in state law or regulation for the same or less
cost; giving notice of and approving, and
authorizing the entry into and issuance of
certificates of participation for, the upgrade,
expansion, and replacement of certain jails in
Dillingham and Kodiak; and providing for an
effective date.
SB 65 was SCHEDULED but not HEARD.
CS SB 231(FIN)
An Act relating to unclaimed property; and
providing for an effective date.
CS SB 231 (FIN) was reported out of Committee with
"no recommendation" and with fiscal note #2 by the
Department of Revenue.
CS SB 272(FIN)
An Act relating to certain monetary advances in
which the deposit or other negotiation of checks
to pay the advances is delayed until a later date;
and providing for an effective date.
CS SB 272 (FIN) was SCHEDULED but not HEARD.
CS SB 278(FIN)
An Act relating to fees for the inspection of
recreational devices, including instructional
devices, for certificates of fitness for
electrical wiring and plumbing, and for licenses
for boiler operators; relating to the building
safety account; and providing for an effective
date.
CS SB 278 (FIN) was reported out of Committee with
"no recommendation" and with zero note #3 by the
Department of Labor & Workforce Development and
fiscal note #4 by the Department of Labor &
Workforce Development.
CS SB 288(JUD)
An Act relating to temporary custody hearings, and
to certain determinations concerning placement of
a child in child-in-need-of-aid proceedings; and
providing for an effective date.
CS SB 288 (JUD) was SCHEDULED but not HEARD.
SB 349 An Act requiring licensure of midwifery birth
centers; and providing for an effective date.
SB 349 was reported out of Committee with a "do
pass" recommendation and with fiscal note #1 by
the Department of Health & Social Services.
CS SB 357(FIN)
An Act relating to the regulation of insurance,
insurance licenses, qualifications of insurance
producers, surplus lines, fraud investigations,
electronic transactions, and compliance with
federal law and national standards; and providing
for an effective date.
CS SB 357 (FIN) was SCHEDULED but not HEARD.
HOUSE BILL NO. 466
An Act relating to investments of Alaska permanent fund
assets; and providing for an effective date.
Representative Foster MOVED to ADOPT work draft #23-
LS1699\H, Cook, Craver, 5/5/04, as the version of the bill
before the Committee. There being NO OBJECTION, it was
adopted.
ROBERT D. STORER, EXECUTIVE DIRECTOR, ALASKA PERMANENT FUND
CORPORATION, DEPARTMENT OF REVENUE, commented that the
request would increase investment flexibility. He noted
that most funds must follow the prudent investor expert
rule, however, that the Permanent Fund contains an extra
obligation, a statutory list outlining what can be invested
in. Four years ago, the Legislature gave the Permanent Fund
Corporation the ability to invest up to 5% in types of
investments not mentioned in the statutory list, referred to
as the "basket clause". It provides a 5% limitation. After
studying it for four years, regarding the various ways to
use it, a strategy was implemented providing a modest amount
in private equities and a conservative amount in a pilot
program with an absolute return. Presently, there is a
problem. If the strategy works and grows, the Permanent
Fund will be forced to liquidate assets because of the
statutory limitations. The proposed legislation requests
two items:
· On Line 14 provides "housecleaning items" from the
existing intent of the basket clause; and
· On Page 2, Line 3, instead of 5%, increasing it to
10%.
Mr. Storer pointed out that the second change resulted from
an amendment passed on the Senate side. The 10% would
provide a few years of latitude and then "down the road",
the Permanent Fund could come back and ask for increased
flexibility. He indicated that Version H would be
acceptable to the Permanent Fund.
Representative Joule inquired if the 15% request had been
based on projections. Mr. Storer advised that over the
interim, there would be no change in the projection. It
will take a number of years to implement the strategy. The
15% was intended to essentially give future administrators,
greater flexibility in a dynamic industry while addressing a
changing market as it occurs. The State would continue to
target a 5% real rate of return. He hoped that by
increasing the latitude, it would allow investors a better
chance of achieving the 5%, while allowing latitude to
reduce the volatility of the expected returns.
Vice Chair Meyer asked why the Senate choose 10% over the
requested 15%. Mr. Storer understood that the Senate was
concerned about taking on too much risk. The Permanent Fund
Corporation does not agree that would be the case. The
history of the Permanent Fund has been very conservative in
applications. During the technology bubble, the Fund did
not own any of those types of stocks. He added that it took
four years to implement the basket clause. The Fund Board
is cautious and deliberative when making investment
decisions.
Vice Chair Meyer asked the current breakdown of asset
allocations in the Fund. Mr. Storer noted that the asset
allocation target was:
· 56% equities and of that 18% is in non-dollar
international equities
· The U.S. bond portfolio is 28%
· A 10% target in real estate
· The non-dollar bond portfolio is at about 4%
· A 2% private equity currently being implemented
· A 1% target for absolute strategy or hedge fund
Vice Chair Meyer asked clarification if the hedge funds
included futures or commodities. Mr. Storer replied that
they do not include commodities but have used futures from
time to time. There must be a modest leverage.
Representative Fate asked the return for the last five
years. Mr. Storer pointed out that the investment board
recommends a rolling 10-year average, which never has gone
below a 5% rate of return average. One year, there was a 3%
real and another with a 2% real; currently, the returns are
up over the 5%. In a down turned market, there were two
years with a less than a 5% return.
Representative Fate inquired if protections would be made if
the 10% number was given by the Legislature. Mr. Storer
explained that would provide the latitude needed to increase
flexibility in an amount of perhaps one quarter to one half
percent. He noted that is a lot of money when dealing with
a $28 billion dollar fund. The key in achieving the goal is
allowing current investments to rise, taking advantage of
the full market cycle.
Representative Croft noted with a 5% internal target, it is
appropriate to have a 10% ceiling, so that successful
investments will not have to be sold. Mr. Storer agreed.
Representative Croft inquired the target. Mr. Storer
replied that with a 5% limitation, the fund is using 3% as a
cushion, no matter what.
Representative Foster MOVED to report CS HB 466 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS HB 466 (FIN) was reported out of Committee with a "do
pass" recommendation and with zero note #1 by the Department
of Revenue.
SENATE BILL NO. 349
An Act requiring licensure of midwifery birth centers;
and providing for an effective date.
MYRA PUSH, STAFF, SENATOR BETTYE DAVIS, explained that there
are six birth centers in Alaska, five registered and one
licensed. The owners of the birth centers admit the need to
have one licensed standard for all birthing centers. The
licensed birth centers will have one set of regulations to
follow, comply with annual inspections and put safeguards in
place to guarantee the birth center is a safe environment
for families.
She noted that in March 2004, the birth center owners
collaborated, rewriting regulations for licensed birth
centers, which had not been changed since 1983. The
recommendations have been submitted. Through SB 349, the
registered birth centers will be considered licensed six
months after the effective date of the new adopted
regulations. The Midwives Association of Alaska has agreed
there should be one uniform standard for birth centers and
recommends passage of the legislation.
Representative Foster MOVED to report SB 349 out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
SB 349 was reported out of Committee with a "do pass"
recommendation and with fiscal note #1 by the Department of
Health & Social Services.
CS FOR SENATE BILL NO. 30(JUD) am
An Act relating to information and services available
to pregnant women and other persons; and ensuring
informed consent before an abortion may be performed,
except in cases of medical emergency.
STACEY KRALY, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW,
explained the differences between the House Judiciary
version of the bill and work draft #23-LS0193\Y, Mischel,
4/29/04 version.
She noted that when the bill arrived in the House Judiciary
Committee, an opinion was requested from the Attorney
General's office regarding the constitutionality of the
provisions. As a result, recommendations were made to that
Committee and some amendments were submitted based on that
review, which were all adopted.
REPRESENTATIVE FRED DYSON, SPONSOR, did not know if the Y
version would meet with the Department of Law's approval.
He noted the conditions contained within the committee
substitute. The Department of Health & Social Services does
not want the State Medical Board to have obstetricians
determine the information placed on the website. The
Department believes that they can handle that from within.
Ms. Kraly commented that the recommendation during the House
Judiciary proceedings was that the provisions in the website
would be information developed in a medically accurate
manner. She stressed that it is important that the
information is not politically motivated but rather
medically accurate. The State Medical Board is not
interested in performing that duty. She reiterated that the
information should be medically accurate.
Representative Stoltze asked if the Attorney General was
interested in being involved in this matter. Ms. Kraly
advised that the Attorney General is familiar with the
concern.
Senator Dyson addressed issue #2: Language inserted in the
House Judiciary Committee appears to establish the criteria
transmitted to the woman, which is based on a physician's
standard. In the Y version, the language is better fit for
the patient standard and information. Ms. Kraly responded
that the Judiciary version creates two provisions by which
informed consent may be imparted. One provides information
through the State maintained web site. The second mechanism
in the G version would be to create a mechanism by which a
physician could choose not to use the website information,
but rather impart information, which the doctor "reasonably"
believes is necessary for the patient to make an informed
choice. That language is on Page 6, Lines 24-27, in the G
version.
Representative Croft asked if that reference was made in the
Y version. Ms. Kraly did not know, as she had just received
that copy. She thought that the committee substitute
removed the language.
Ms. Kraly noted that the State of Alaska has an informed
consent provision under Title 9, in which the standard
creates a "reasonable patient standard". General case law
dealing with informed consent issues in Alaska has been a
reasonable patient standard not a reasonable physician
standard. That being said, the changes recommended by
Senator Dyson, make sense that the body of law is consistent
in the sense of not having conflicting provisions in the
law. She thought that the Y version section should be
amended to make it more clear that the standard is for a
reasonable patient standard. Constitutionally, it might not
be a problem, but that the language should be consistent.
Senator Dyson voiced concern when dealing with a doctor
doing the procedure. There is a pattern, where a caring
doctor, could have pressure to minimize the issues regarding
termination. He thought that more complete information
would allow women to make better decisions. He understood
that the Y version would leave the doctors the alternatives;
however, the intention of the legislation is to use the
Department's information, which would be immune from legal
action.
Senator Dyson added that the real issue was whether or not
the 24-hour waiting period would be problematic under the
Alaska Constitution. Ms. Kraly responded that the issue of
the 24-hour waiting period with respect to the informed
consent provision would be a difficult question. The Alaska
Constitution provides greater protections under the right to
privacy and equal protection than the federal constitution.
The Alaska Supreme Court has interpreted provisions relating
to the restrictions of reproductive rights and consistently
upheld that it is a fundamental right and in order to
restrict it, there must be a fundamental constricting State
interest. It is the opinion of the Department of Law that
the 24-hour waiting period would be viewed as an undue
burden under the right to choose. It makes the bill less
constitutionally sound than if the provision was not in it.
She reiterated that in the opinion of the Department of Law,
the 24-hour provision would be problematic.
Senator Dyson pointed out that many states have fought this
battle. He understood that the Department of Law might get
challenged.
Co-Chair Williams asked the anticipated cost of such a
challenge. Ms. Kraly agreed that there would be a challenge
and that the bill would be more defensible without the 24-
hour waiting period. She warned that litigation is
expensive and time consuming and that it could cost hundreds
of thousands of dollars to litigate these issues. The
appeal process could take a few years to get through. It
will be a timely and costly venture if it should pass.
Co-Chair Williams asked clarification that if the 24-hour
rule were left in, the legislation would most likely be
challenged. Ms. Kraly predicted that no matter what version
passes, it will be challenged on some level. If the 24-hour
provision was removed, there would be one less issue to
litigate.
Senator Dyson pointed out that presently, in law, there
exists a "severability concept", which does not negate the
entire idea.
Representative Croft pointed out how verbally careful the
attorney general's office was being. If the bill passes,
the Department of Law will be defending it and if they truly
believe that it is not constitutional, it would be used in
that case. He pointed out that Ms. Kraly was very careful
not to mention things during the Committee meeting that
could be used in defending the lawsuit later. He added that
the testimony sounded conditional because of the public
nature of the situation.
Senator Dyson maintained that the Y version does not raise
constitutional issues except for the 24-hour rule.
Vice Chair Meyer MOVED to ADOPT version #23-LS0193\Y,
Mischel, 4/29/04. There being NO OBJECTION, it was adopted.
Representative Croft MOVED a conceptual amendment removing
"at least 24 hours" on Page 5, Line 16 and on Page 6, Lines
11 & 12. Vice Chair Meyer OBJECTED for the purpose of
discussion. He invited the sponsor's opinion.
Senator Dyson stated that the bill is of great value even
without the 24-hour rule. He stated that he would prefer to
keep the language in the bill but would hold no grudges, as
he wanted to see the bill pass from Committee. He added
that he thought that it could survive a court challenge.
A roll call vote was taken on the motion.
IN FAVOR: Croft, Moses
OPPOSED: Stoltze, Chenault, Fate, Foster, Hawker,
Meyer, Williams
Representative Joule and Co-Chair Harris were not present
for the vote.
The MOTION FAILED (2-7).
Representative Foster MOVED to report HCS CS SB 30 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
HCS CS SB 30(FIN) was reported out of Committee with "no
recommendation" and with fiscal notes #3 and #4 by the
Department of Health & Social Services.
TAPE HFC 04 - 108, Side B
CS FOR SENATE BILL NO. 278(FIN)
An Act relating to fees for the inspection of
recreational devices, including instructional devices,
for certificates of fitness for electrical wiring and
plumbing, and for licenses for boiler operators;
relating to the building safety account; and providing
for an effective date.
GREG O'CLARAY, COMMISSIONER, DEPARTMENT OF LABOR, commented
that the Department supports the bill.
GREY MITCHELL, DIRECOTR, LABOR STANDARDS AND SAFETY,
DEPARTMENT OF COMMUNITY & ECONOMIC DEVELOPMENT, explained
that SB 278 would establish fees for inspection and
licensing services, based on the concept that users should
bare the costs of services. He offered to provide a
sectional analysis.
Representative Chenault questioned if the intent was to
raise boiler operator fees from $160 dollars to $200
dollars. Mr. Mitchel acknowledged that was correct.
Representative Chenault pointed out that boilers in
apartment complexes are subject to yearly inspection. He
commented that there is a big difference between a small
boiler and a large boiler. Mr. Mitchel explained that the
bill would not have an affect on the boiler inspection fees.
He pointed out that Section 2 indicates that the operator
license would be used for a person who obtains a license to
work on a boiler. It is not associated with the fee charged
on the inspection. Representative Chenault clarified that
the bill affects the work license for boiler installers.
In response to a query made by Representative Stoltze,
Commissioner O'Clary stated that the owner of the mentioned
facility, had testified in the House Labor and Commerce
Committee and as a result, the bill was amended to waive the
Department's fee as long as the out-of-state inspector had
the required certifications. He added that both the
National Electrical Contractors Association and the IBW-
Local #50 & #47, testified in favor of the proposed
legislation.
Representative Foster MOVED to report CS SB (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CS SB 278 (FIN) was reported out of Committee with "no
recommendation" and with zero note #3 by the Department of
Labor & Workforce Development and fiscal note #4 by the
Department of Labor & Workforce Development.
CS FOR SENATE BILL NO. 231(FIN)
An Act relating to unclaimed property; and providing
for an effective date.
TOM BOUTIN, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
stated that SB 231 would bring Alaska in concert with the
unclaimed property uniform codes across the nation.
RACHEL LEWIS, UNCLAIMED PROPERTY MANAGER, DEPARTMENT OF
REVENUE, added that the entire bill except for four sections
had been directly taken from the 1995 Uniform Law
Commissioners Act on Unclaimed Property. Alaska adopted the
1981 Act in 1986. Alaska is a little outdated and adoption
of SB 231 would bring Alaska up to date. She addressed the
issues that are different from the 1995 Act.
· Page 3, Section 5, speaks to "demutualization" of
insurance companies. Demutualization was a new type
of property, not existing in 1995 and was not
addressed in that Act. There are fourteen states
that have already adopted that language.
· Page 5, Section 10, would be unique language for
Alaska, for unclaimed property under the value of
$750 dollars, the State of Alaska does not want the
hassle of the $2.50 payment. It would be a
convenence and a courtesy. That language currently
exists in statute and is ambiguous.
· Page 7, Section 13, requires advertising the names
of people with unclaimed property of $100 dollar or
more. Last year, the Department spent $30 thousand
dollars to advertise 3,000 names. The State
received only 340 claims for that work. The
Department should evaluate the best way to promote
it, encouraging owners to come forward and claim
their property.
· Page 9, Section 17, amends "Gift Certificates" by
adding new language.
Representative Stoltze commented that some utility
cooperatives use their own claims and redistribute them for
scholarships. He asked if that would be affected. Ms.
Lewis replied that utility coops have an unique exemption
and the legislation would not touch that concern. They
would be responsible for locating their members and the
money would continue to be pooled through the coop.
Representative Croft asked if the definition of mineral and
mineral proceeds had been made in the legislation. Ms.
Lewis responded that it has not been defined before and that
it would be taken directly from the 1995 Act.
Representative Fate asked the procedure after the initial
notification. Ms. Lewis advised that there are over 80,000
names listed for unclaimed properties ranging in value from
$25 to $250,000 dollars. Everyone is listed on the
Internet. The information is "out there" but the Department
does not actively attempt locating them. The property is
held into perpetuity.
Representative Fate questioned the number of people not
located. Ms. Lewis replied that since 1986, $18 million
dollars had been returned to people living in Alaska. There
is always a 25%-30% percentage that cannot be found, but
with technology, those numbers are decreasing.
Representative Chenault commented on the fiscal analysis,
noting the increase. Mr. Boutin interjected that it was
intended to speed up the collection process. Ms. Lewis
added that the intent was to compress seven years into five.
Representative Foster MOVED to report CS SB 231 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CS SB 231 (FIN) was reported out of Committee with "no
recommendation" and with fiscal note #2 by the Department of
Revenue.
ADJOURNMENT
The meeting was adjourned at 10:11 A.M.
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