Legislature(2005 - 2006)HOUSE FINANCE 519

04/20/2006 08:30 AM House FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 132 HUMAN RIGHTS COMMISSION TELECONFERENCED
Moved Out of Committee
+ SB 216 BAIL RESTRICTIONS/UNLAWFUL EVASION TELECONFERENCED
Moved HCS CSSB 216(FIN) Out of Committee
+ SB 306 UNEMPLOYMENT INSURANCE FUND & TAXES TELECONFERENCED
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 304 COMMERCIAL FISHING LOAN PROGRAM TELECONFERENCED
Moved CSHB 304(FIN) Out of Committee
<Bill Hearing Rescheduled from 04/18/06>
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 20, 2006                                                                                           
                         8:48 a.m.                                                                                              
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer called the House  Finance Committee meeting to                                                                   
order at 8:48:17 AM.                                                                                                          
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Bill Stoltze, Vice-Chair                                                                                         
Representative Richard Foster                                                                                                   
Representative Jim Holm                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Beth Kerttula                                                                                                    
Representative Carl Moses                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mike Hawker                                                                                                      
Representative Bruce Weyhrauch                                                                                                  
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator   Bunde;   Representative  Coghill;   Greg   Winegar,                                                                   
Director,  Division of Investments,  Department of  Commerce;                                                                   
Rynnieva   Moss,  Staff,  Representative     Coghill;   Wayne                                                                   
Stevens,  Alaska  State  Chamber  of  Commerce;  Tom  Nelson,                                                                   
Director,  Division of Employment  Securities, Department  of                                                                   
Labor;  Josh Tempel,  Staff, Senator  Charlie Huggins;  Randy                                                                   
Ruaro, Legislative Liaison, Department of Law.                                                                                  
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Commissioner Merkes,  Human Rights Commission;  Steve Koteff,                                                                   
Human Rights Commission.                                                                                                        
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
                                                                                                                                
HB 304    "An  Act relating  to the  commercial fishing  loan                                                                   
          program; and providing for an effective date."                                                                        
                                                                                                                                
          CSHB304 (FIN) was REPORTED OUT of Committee with a                                                                    
          new zero fiscal note (CCED) and individual                                                                            
          recommendations.                                                                                                      
                                                                                                                                
SB 306    "An Act  requiring an employing unit  with a change                                                                   
          in ownership, management, or control or similar                                                                       
          change to notify the Department of Labor and                                                                          
          Workforce  Development of  the change; relating  to                                                                   
          the unemployment contribution  rate of an employing                                                                   
          unit; defining 'business'  for purposes of statutes                                                                   
          setting     unemployment    contribution     rates;                                                                   
          establishing    the   crime    of   obtaining    an                                                                   
          unemployment  rate by deception; and  providing for                                                                   
          an effective date."                                                                                                   
                                                                                                                                
          SB306  was  Reported  Out  of  Committee  with  one                                                                   
          previously  published  zero fiscal  note (LWF)  and                                                                   
          Individual Recommendations.                                                                                           
                                                                                                                                
SB 216    "An Act relating to bail."                                                                                            
                                                                                                                                
          HCS CS SB216 (FIN) was Reported Out of Committee                                                                      
          with  two  fiscal  notes:   #1,  zero,  (COR);  #2,                                                                   
          indeterminate,(ADM)and  individual recommendations.                                                                   
                                                                                                                                
SB 132(efd fld)                                                                                                                 
                                                                                                                                
          "An   Act  relating   to  complaints  filed   with,                                                                   
          investigations,  hearings, and  orders of,  and the                                                                   
          interest  rate on  awards of  the State  Commission                                                                   
          for   Human    Rights;   and   making    conforming                                                                   
          amendments."                                                                                                          
                                                                                                                                
          CSSB132  (FIN) was REPORTED  OUT of Committee  with                                                                   
          two  previously published  zero  fiscal notes  (#3,                                                                   
          OOG; #4, LAW) and No Recommendation.                                                                                  
                                                                                                                                
HOUSE BILL NO. 304                                                                                                            
                                                                                                                                
"An Act relating to the commercial  fishing loan program; and                                                                   
providing for an effective date."                                                                                               
                                                                                                                                
REPRESENTATIVE  JOHN COGHILL,  SPONSOR  introduced the  bill.                                                                   
He explained  the history  of the  bill, regarding  the State                                                                   
loaning to  the fisheries.   He discussed his  initial desire                                                                   
years  ago  to  disassemble  the loan  program,  and  how  it                                                                   
eventually  educated  him  on  how  the  program  helped  the                                                                   
fishers of Alaska.  He noted that  fishers could be competing                                                                   
in the same waters, while their  loans were being provided at                                                                   
different levels  of service.  He also noted  that permitting                                                                   
in  Alaska  was  designed  to  keep  fishing  in  Alaska.  He                                                                   
concluded  that the fishing  loan program  has served  a good                                                                   
purpose.                                                                                                                        
                                                                                                                                
Representative Coghill went on  to propose, however, that the                                                                   
purpose of the  program should be as a safety  net, used only                                                                   
as  a "last  resort".    Although  he commended  the  current                                                                   
operation, he commented  that the purpose of the  bill was to                                                                   
set guidelines,  for example  requiring that applicants  also                                                                   
apply   at   other  lending   institutions,   including   the                                                                   
commercial fishing agricultural loan bank.                                                                                      
                                                                                                                                
8:52:24 AM                                                                                                                    
                                                                                                                                
Representative   Coghill  directed   the  Committee   to  the                                                                   
requirements outlined  on page 2 of the bill,  since SEFAB is                                                                   
not  federally  chartered,  but  is the  only  other  lending                                                                   
institution statutorily  able to make loans on  permits.  The                                                                   
bill is  intended to  encourage fishers,  if viable  at other                                                                   
lending institutions, to make  their loan privately.  He also                                                                   
referred to Section  2, which changes the limit of  a loan as                                                                   
a percentage of collateral from 90% to 80%.                                                                                     
                                                                                                                                
8:53:51 AM                                                                                                                    
                                                                                                                                
Section  3  limits loans:    up  to $35,000  of  federal  tax                                                                   
obligations, an allowance based  on the upward cpi; community                                                                   
quota shares  may not  exceed $2  million for each  community                                                                   
eligible under  federal statute;  the amount of  an aggregate                                                                   
loan is  limited to  $400,000.   The Sponsor  noted he  began                                                                   
with a  limit of  $300,000, but  adjusted to match  portfolio                                                                   
limits.                                                                                                                         
                                                                                                                                
8:54:29 AM                                                                                                                    
                                                                                                                                
Representative  Coghill referred to  a change in  the lending                                                                   
rate, on Page  5, line 1.   He explained that prime  plus two                                                                   
percent was  the calculation used.   He expressed  support of                                                                   
an amendment that  clarifies this calculation.   He concluded                                                                   
that the  bill made  the loan  program more streamlined,  but                                                                   
still effective  in helping  Alaskan fishers.   He  suggested                                                                   
that it  also introduced "reality"  for fishers  in servicing                                                                   
their debt.   He  finally noted  services available  that are                                                                   
not given by other institutions:   1) (lower) application fee                                                                   
2)  refinancing   fees  waived  3)  deferred   interest  rate                                                                   
subsidy. These are benefits and  flexibilities unique to this                                                                   
program.  The Sponsor stated that  fishers in Alaska need the                                                                   
system, but proposed it should serve as a safety net.                                                                           
                                                                                                                                
8:56:56 AM                                                                                                                    
                                                                                                                                
Representative  Holm referred to  line 4 of  Page 5,  and the                                                                   
change to  80 percent  of value of  collateral. He  asked why                                                                   
this change  was made.   Representative  Coghill stated  that                                                                   
this  brought  the percentages  in  line with  other  lending                                                                   
institutions.                                                                                                                   
                                                                                                                                
Representative  Coghill  conceded  that  while  this  was  an                                                                   
unfamiliar topic for  the interior, it came from  a desire to                                                                   
keep the  government from competing  with the open  market in                                                                   
providing loan service to Alaskan fishers.                                                                                      
                                                                                                                                
Representative Chenault  asked for the Department  to address                                                                   
the fiscal note.                                                                                                                
                                                                                                                                
8:59:35 AM                                                                                                                    
                                                                                                                                
GREG WINEGAR,  DIRECTOR, DIVISION OF INVESTMENTS,  DEPARTMENT                                                                   
OF COMMERCE,  testified regarding  the bill.   He noted  that                                                                   
his division had worked with the  Sponsor for quite some time                                                                   
to make program changes that would  not harm the fund itself.                                                                   
He  noted that  thousands  of  Alaskans benefited  from  this                                                                   
fund,   and   expressed  appreciation   for   the   Sponsor's                                                                   
willingness to work with Department  concerns.  He noted that                                                                   
the issue had been  worked on since the 1970's,  in an effort                                                                   
to  ensure  that Alaskans  could  participate  in  fisheries.                                                                   
They have  helped over 6,000  harvesters. He stated  that the                                                                   
program has been successful, ultimately  bringing monies into                                                                   
the General Fund.  He urged caution  in making changes to the                                                                   
program.   He expressed that they  believe that the  bill was                                                                   
able to accomplish changes effectively.                                                                                         
                                                                                                                                
9:01:24 AM                                                                                                                    
                                                                                                                                
Mr.  Winegar referred  to the  fiscal note,  and pointed  out                                                                   
that by reducing the amount of  refinancing from $300 to $200                                                                   
thousand, it would  result in one fewer loan per  year.  Also                                                                   
by reducing  the limits on loans  from $600 thousand  to $400                                                                   
thousand, it would potentially  reduce the number of loans by                                                                   
one loan  per year.   The  fiscal note  reflects the  reduced                                                                   
interest income over a six-year period.                                                                                         
                                                                                                                                
9:02:11 AM                                                                                                                    
                                                                                                                                
Representative Chenault  asked  about the delinquency rate of                                                                   
9.6  percent, and  whether this  was normal  for the  market.                                                                   
Mr. Winegar  commented that the  rate indicated  was actually                                                                   
higher  than the  current  rate  of 4.9  percent.   The  rate                                                                   
varies over  the years, depending  on how fisheries  succeed,                                                                   
and 9.6 percent is an average over years.                                                                                       
                                                                                                                                
9:02:54 AM                                                                                                                    
                                                                                                                                
Representative Chenault  referred   to   the   current   $400                                                                   
thousand  limit on outstanding  loan balances.   Mr.  Winegar                                                                   
noted  that  this  referred to  the  combination  of  various                                                                   
loans, as  fisheries can apply  for different kinds  of loans                                                                   
on different  sections of statute.   Responding to  a follow-                                                                   
up, Mr.  Winegar confirmed  that this  number was  previously                                                                   
$630  thousand, and  currently was  at $930  thousand due  to                                                                   
recent legislation referring to  product quality for tenders.                                                                   
He noted  that they had  never had anyone  borrow up  to that                                                                   
limit; while one  borrower currently owed $400  thousand, the                                                                   
majority of the portfolio is well under the limits.                                                                             
                                                                                                                                
9:04:23 AM                                                                                                                    
Co-Chair  Meyer noted  that in  the fiscal  note, the  amount                                                                   
would be  lowered from $630 to  $335 thousand, as  opposed to                                                                   
$400 thousand in  the bill.  Mr. Winegar confirmed  that this                                                                   
figure needed  to be updated.   It was discovered that  a new                                                                   
fiscal note reflects the correct amount.                                                                                        
                                                                                                                                
9:04:58 AM                                                                                                                    
                                                                                                                                
Representative Holm asked if it  was expected that the number                                                                   
of  delinquencies or  write  offs would  change  commensurate                                                                   
with legislative changes.  Mr.  Winegar noted that he did not                                                                   
expect  changes;  the statute  would  reduce  to 80  from  90                                                                   
percent the  loan to  value ratio,  something that  by policy                                                                   
was  already occurring,  which  was  more typical  for  other                                                                   
lending institutions.                                                                                                           
                                                                                                                                
Responding  to  a  follow  up  by  Representative  Holm,  Mr.                                                                   
Winegar noted that the default  rate was at one percent, with                                                                   
a delinquency rate of 4.9 percent.                                                                                              
                                                                                                                                
9:06:23 AM                                                                                                                    
                                                                                                                                
Representative Kelly MOVED   to  ADOPT   Amendment  #1,   24-                                                                   
LS0523\S.    He pointed  out  a  typographical error  in  the                                                                   
amendment,  from "point"  to "points"  on line  3.   Co-Chair                                                                   
Meyer     OBJECTED.                                                                                                             
                                                                                                                                
Co-Chair Meyer closed public testimony on the bill.                                                                             
                                                                                                                                
RYNNIEVA MOSS,  STAFF, REPRESENTATIVE  COGHILL explained  the                                                                   
Amendment.   She  noted that  the current  loan program  used                                                                   
prime rate plus,  and that the provision was  amended to 10.5                                                                   
percent  in  House Resources  Committee.    These  percentage                                                                   
rates  reflect  a  difference   in  philosophy  in  terms  of                                                                   
percentage rate  restrictions.   She pointed out  the concern                                                                   
that, when the 10.5 percent cap  was placed into statute, the                                                                   
loaning agency did not have the  ability to refinance.  There                                                                   
is also concern over the lack  of a cap on the interest rates                                                                   
used to  make bonds,  which could  hypothetically exceed  the                                                                   
interest rate on the loan.  This  provision gives the ability                                                                   
to adjust the interest rates if necessary.                                                                                      
                                                                                                                                
9:09:01 AM                                                                                                                    
                                                                                                                                
Responding  to a  question  by Representative  Chenault,  Ms.                                                                   
Moss  noted that  prime rate  was currently  7.75, and  their                                                                   
rate was 9.5.   She explained that rates are  determined on a                                                                   
quarterly basis.                                                                                                                
                                                                                                                                
9:09:33 AM                                                                                                                    
                                                                                                                                
Representative Kerttula  noted  the  delinquency and  default                                                                   
rates and  asked what raising  the interest rate might  do to                                                                   
the amount of  defaults.  Mr. Winegar noted  that this simply                                                                   
added a 10.5 percent cap.  Representative Kerttula asked                                                                        
what the result was for fishers  that exceeded that cap.  Mr.                                                                   
Winegar  noted  that  their  expense  would  be  higher,  and                                                                   
mentioned a program for repayment.                                                                                              
                                                                                                                                
9:10:51 AM                                                                                                                    
                                                                                                                                
Representative Kerttula  observed   that   the  program   was                                                                   
currently successful,  bringing in  money for the  state with                                                                   
low delinquency rates.                                                                                                          
                                                                                                                                
9:11:20 AM                                                                                                                    
                                                                                                                                
Ms. Moss  pointed  out that this  bill would  not affect  the                                                                   
current portfolio, and only new loans.                                                                                          
                                                                                                                                
Responding  to  a  question  by  Representative  Foster,  Mr.                                                                   
Winegar confirmed  that the loan  program was only  for those                                                                   
who have been Alaska residents for at least two years.                                                                          
                                                                                                                                
Co-Chair Meyer REMOVED his OBJECTION.                                                                                           
                                                                                                                                
Representative Kerttula  OBJECTED   to  Amendment  #1.    She                                                                   
expressed her  belief that there  was no reason for  a change                                                                   
in the program.                                                                                                                 
                                                                                                                                
9:12:49 AM                                                                                                                    
                                                                                                                                
Ms. Moss  explained that part of  the intent of the  bill was                                                                   
responding to a fairness issue,  since many fishers were able                                                                   
to go to  private lending institutions. She  pointed out that                                                                   
when  the  economy  changed  and  interest  rates  rose,  all                                                                   
fishers  would be  affected.   She  proposed  that since  the                                                                   
program  contained  subsidies,  it  would  provide  a  bigger                                                                   
advantage with limited interest rates.                                                                                          
                                                                                                                                
Representative Kerttula  stressed  that  the  program was  to                                                                   
help  those   who  were   not  able   to  apply  to   lending                                                                   
institutions.   She stated that  since the program  was doing                                                                   
well, there was no need to change it.                                                                                           
                                                                                                                                
Ms.  Moss expressed  on behalf  of the  Sponsor that  caution                                                                   
should be  exercised for  these borrowers  in terms  of their                                                                   
overall  indebtedness.   She noted  that  currently a  fisher                                                                   
could apply  for up to $930  thousand, and that the  bill was                                                                   
an attempt  to limit  the amount that  fishers could  go into                                                                   
debt.                                                                                                                           
                                                                                                                                
A ROLL CALL VOTE was taken on the Amendment #1:                                                                                 
                                                                                                                                
In Favor:  Kelly; Foster; Holm; Chenault; Meyer                                                                                 
Opposed: Kertulla; Moses                                                                                                        
                                                                                                                                
Amendment #1 was ADOPTED on a Vote of 5 to 2.                                                                                   
                                                                                                                                
Representative Foster    MOVED   to  REPORT  HB  304  out  of                                                                   
Committee as Amended with individual  recommendations and one                                                                   
new, zero fiscal  notes (CCED).   There being  NO OBJECTIONS,                                                                   
it was so ordered.                                                                                                              
                                                                                                                                
CSHB304 (FIN) was  REPORTED OUT of Committee with  a new zero                                                                   
fiscal note (CCED) and individual recommendations.                                                                              
                                                                                                                                
SENATE BILL NO. 306                                                                                                           
                                                                                                                                
"An  Act  requiring  an  employing  unit  with  a  change  in                                                                   
ownership,  management,  or  control  or  similar  change  to                                                                   
notify the Department  of Labor and Workforce  Development of                                                                   
the change;  relating to  the unemployment contribution  rate                                                                   
of an  employing unit;  defining 'business'  for purposes  of                                                                   
statutes    setting    unemployment    contribution    rates;                                                                   
establishing the  crime of obtaining an unemployment  rate by                                                                   
deception; and providing for an effective date."                                                                                
                                                                                                                                
SENATOR  BUNDE, SPONSOR,  spoke to  the bill.   He  explained                                                                   
that  the  bill  provided  deterrents   to  unemployment  tax                                                                   
avoidance.   He stated  that some  businesses tried  to avoid                                                                   
paying unemployment tax by acquiring  a business with a lower                                                                   
rating, and using  that as a basis for their  obligation.  He                                                                   
noted that this costs the system and other businesses.                                                                          
                                                                                                                                
Representative Bunde stated that  the bill requires employers                                                                   
to notify  the Department  of Labor of  a business  change or                                                                   
acquisition,  implements standards  addressing transfers  and                                                                   
assignment of  rates, and establishes the crime  of obtaining                                                                   
an unemployment  rating by deception  and sets  penalties for                                                                   
that  crime.    He  proposed  that  the  bill  maintains  the                                                                   
integrity  of  the  unemployment  system,  and  prevents  the                                                                   
increase  of   rates  through   under-funding,  as   well  as                                                                   
promoting meaningful penalties for tax avoidance.                                                                               
                                                                                                                                
9:18:18 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer opened the floor to public testimony.                                                                            
                                                                                                                                
WAYNE STEVENS, ALASKA STATE CHAMBER  OF COMMERCE testified in                                                                   
strong  support of  the  bill.   He  pointed  out that  SB306                                                                   
addresses the issues of State  Unemployment Tax dumping.  The                                                                   
federal   legislation   established  a   nationwide   minimum                                                                   
standard  for  curbing  certain  unemployment  insurance  tax                                                                   
avoidance activities  by employers.  He noted  that if states                                                                   
do not  adopt similar  language as  contained in the  federal                                                                   
legislation, the  state and businesses in those  states stand                                                                   
to  lose   significant  exemptions  currently   available  to                                                                   
businesses.                                                                                                                     
                                                                                                                                
Mr. Stevens  went on to state  that failure to pass  the bill                                                                   
would   result  in   the  de-certification   of  the   Alaska                                                                   
Unemployment  Insurance  (UI) program  and  employers in  the                                                                   
state  would  lose  their  federal  offset  credit  of  5.4%,                                                                   
resulting   in  $103.9   million  in   additional  taxes   to                                                                   
employers.     The  state  would   lose  $30.8   million  for                                                                   
administrative and  operational funding for UI  programs.  He                                                                   
concluded that  the businesses community believes  passage of                                                                   
this legislation is imperative.                                                                                                 
                                                                                                                                
TOM  NELSON,  DIRECTOR, DIVISION  OF  EMPLOYMENT  SECURITIES,                                                                   
DEPARTMENT OF LABOR  testified regarding the bill.   He noted                                                                   
that they  currently lacked  the penalties  to prevent  those                                                                   
tax avoidance behaviors that are  already being tracked.  The                                                                   
bill would provide those needed penalties.                                                                                      
                                                                                                                                
9:22:14 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer closed public testimony on the bill.                                                                             
                                                                                                                                
Representative Foster    MOVED   to  Report  SB  306  out  of                                                                   
Committee with individual recommendations  and one previously                                                                   
published   zero  fiscal   note  (LWF).     There  being   NO                                                                   
OBJECTIONS, it was so ordered.                                                                                                  
                                                                                                                                
SB306  was Reported  Out  of  Committee with  one  previously                                                                   
published   zero    fiscal   note   (LWF)    and   Individual                                                                   
Recommendations.                                                                                                                
                                                                                                                                
SENATE BILL NO. 216                                                                                                           
                                                                                                                                
"An Act relating to bail."                                                                                                      
                                                                                                                                
Representative Stoltze   MOVED   to  ADOPT  Work   Draft  24-                                                                   
LS1300\S,  Luckhaupt, 4/19/06.   There  being NO  OBJECTIONS,                                                                   
the Committee Substitute was ADOPTED.                                                                                           
                                                                                                                                
9:24:17 AM                                                                                                                    
                                                                                                                                
JOSH TEMPEL,  STAFF, SENATOR HUGGINS  spoke to the bill.   He                                                                   
gave serious  examples of  prisoners who  had been  placed on                                                                   
temporary  release and  either  did not  return or  committed                                                                   
other  crimes.   He discussed  the changes  in the  Committee                                                                   
Substitute:  making exceptions  for those with  misdemeanors,                                                                   
class  B or  C  felonies, family  death,  birth  of a  child,                                                                   
medical or dental treatments.                                                                                                   
                                                                                                                                
9:26:59 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer expressed  his   gratitude  for  Mr.  Tempel's                                                                   
active service in the Marines.                                                                                                  
                                                                                                                                
Representative Stoltze   stated  that  this  does not  impact                                                                   
the  general premise  of a  judge setting  bail, only  limits                                                                   
temporary  bail release  restrictions.   He noted  that if  a                                                                   
prisoner  appeared  trustworthy,  a  judge  might  use  their                                                                   
discretion in  setting temporary releases.  He  proposed that                                                                   
the bill  met the  mandates for  compassion, and pointed  out                                                                   
that  judges  may  sometimes   be  unaware  of  the  specific                                                                   
circumstances for  a particular case.   He thanked  the House                                                                   
Judiciary  Committee for  adding  exceptions.   He  confirmed                                                                   
that he was sponsoring a House companion bill.                                                                                  
                                                                                                                                
9:29:13 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer closed public testimony.                                                                                         
                                                                                                                                
Representative Foster    MOVED  to REPORT HCS CS  SB216 (FIN)                                                                   
out of Committee with two previously  published fiscal notes:                                                                   
#1,  zero,  COR;  #2 indeterminate,  ADM.    There  being  NO                                                                   
OBJECTIONS, it was so ordered.                                                                                                  
                                                                                                                                
HCS CS  SB216 (FIN)  was Reported Out  of Committee  with two                                                                   
fiscal notes:  #1, zero, (COR);  #2, indeterminate, (ADM) and                                                                   
individual recommendations.                                                                                                     
                                                                                                                                
SENATE BILL NO. 132                                                                                                           
                                                                                                                                
"An Act  relating to complaints  filed with,  investigations,                                                                   
hearings, and orders  of, and the interest rate  on awards of                                                                   
the  State Commission  for  Human Rights;  making  conforming                                                                   
amendments; and providing for an effective date."                                                                               
                                                                                                                                
Representative Foster    MOVED   to  ADOPT  Work   Draft  24-                                                                   
GS1110\Y, Kane, 4/17/06.                                                                                                        
                                                                                                                                
Representative  Kertulla  OBJECTED to  allow  time to  review                                                                   
upcoming  amendments.   Following  brief  discussion, it  was                                                                   
determined that  amendments could be addressed  subsequently,                                                                   
and she REMOVED HER OBJECTION.                                                                                                  
                                                                                                                                
There  being  NO OBJECTIONS,  the  Committee  Substitute  was                                                                   
ADOPTED.                                                                                                                        
                                                                                                                                
RANDY   RUARO,  LEGISLATIVE   LIAISON,   DEPARTMENT  OF   LAW                                                                   
testified regarding the Y Version  of the bill.  He explained                                                                   
that  this   version  maintained   changes  made   the  House                                                                   
Judiciary  Committee, with  the exception  of two  amendments                                                                   
which had  been made by Representative  Gara:  1) to  place a                                                                   
statute of limitations for filing  claims with the Commission                                                                   
into statute  and extend  the limit from  180 days to  a year                                                                   
and  2) to  allow for  an award  of full  attorney's fees  in                                                                   
court  cases  where  a  plaintiff prevailed  on  a  claim  of                                                                   
discrimination.   These two amendments were  dropped from the                                                                   
bill.   One of  the more  important changes  was to  give the                                                                   
Executive Director  of the Commission  the ability  to decide                                                                   
when  to  go  forward  with  a   case.    He  explained  that                                                                   
currently,  the Commission  was  required to  proceed on  all                                                                   
cases  with substantial  evidence  of discrimination.     The                                                                   
bill allows  the Director to  look at an employer's  defenses                                                                   
and decide whether  or not to proceed.  The passage  of the Y                                                                   
version would  also zero out the  fiscal note, since  the two                                                                   
positions  necessitated  by  the amendments  were  no  longer                                                                   
necessary.  He  pointed out that the Committee  would need to                                                                   
adopt  Fiscal Note  #3, a  previously  published zero  fiscal                                                                   
note.                                                                                                                           
                                                                                                                                
9:34:57 AM                                                                                                                    
                                                                                                                                
Representative Kerttula  clarified    that   the    Judiciary                                                                   
Committee  version   originally  contained  the   statute  of                                                                   
limitations extension and allowed for attorney's fees.                                                                          
                                                                                                                                
9:35:15 AM                                                                                                                    
                                                                                                                                
Representative Stoltze   opened    the   floor    to   public                                                                   
testimony.                                                                                                                      
                                                                                                                                
COMMISSIONER MERKES,  HUMAN RIGHTS COMMISSION,  testified via                                                                   
teleconference.   She commented  on the amendments  which had                                                                   
been deleted.    She stated that the Commission  believed the                                                                   
365 statute  of limitations had  been too long a  period, and                                                                   
that  180 days  was sufficient.    She also  noted that  they                                                                   
would like  to keep this out  of statute and  in regulations.                                                                   
Regarding the  awarding of attorney's  fees, she  stated that                                                                   
the Commission did not believe  that this bill was the proper                                                                   
vehicle to carry this provision.                                                                                                
                                                                                                                                
9:37:32 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer closed public testimony.                                                                                         
                                                                                                                                
Representative Kerttula  MOVED  Amendment #1,  24-GS1110\Y.2,                                                                   
Kane, 4/19/06.  Co-Chair Meyer OBJECTED.                                                                                        
                                                                                                                                
Representative  Kertulla explained  that the Amendment  would                                                                   
allow  one  year  within  which  a  plaintiff  could  file  a                                                                   
complaint, as  opposed to 180  days currently  in regulation.                                                                   
This  was  the  amendment  originally   added  in  the  House                                                                   
Judiciary  Committee   and  then   dropped  in  the   current                                                                   
Committee Substitute.   She conceded  that this  might result                                                                   
in new cases for the Human Rights Commission.                                                                                   
                                                                                                                                
Mr.  Ruaro  pointed out  opposition  to  the amendment.    He                                                                   
stated  that  the  Commission  has  handled  the  statute  of                                                                   
limitations  for 43 years,  and would  like to maintain  that                                                                   
control.  32 out of 46 states  with a Human Rights Commission                                                                   
utilize the  180-day standard.   Also,  he stressed  that the                                                                   
public had not indicated by testimony  that this time was too                                                                   
short.  Most cases are against  employers, many of them small                                                                   
businesses, and  70 percent of  the cases were  dismissed for                                                                   
lack of evidence, after having  incurred time and expense for                                                                   
these employers  to defend  themselves.   He noted  that more                                                                   
employers  would then  have to  go through  this process  and                                                                   
expense.    He  added that  the  State  Chamber  opposes  the                                                                   
amendment.                                                                                                                      
                                                                                                                                
Representative Joule asked  if by  regulation the  Commission                                                                   
can currently choose  to hear a case that is  past the statue                                                                   
of limitations.  Mr. Ruaro responded  that the Commission has                                                                   
statutory  authority to  set  the time  period  for filing  a                                                                   
claim.   The time  limit has  been set  at 180 days,  meaning                                                                   
that they  could not  arbitrarily hear a  case that  was past                                                                   
this time  period.  By putting  the limitation  into statute,                                                                   
as opposed  to regulations,  the Commission  could no  longer                                                                   
change  the   limitation  except   through  the   legislative                                                                   
process.                                                                                                                        
                                                                                                                                
9:42:50 AM                                                                                                                    
                                                                                                                                
Representative  Joule  asked whether  the  caseload  prevents                                                                   
hearing of  current cases.   Mr. Ruaro  noted that  there was                                                                   
some backlog, but not inordinate.                                                                                               
                                                                                                                                
Commissioner  Merkes stated that  the backlog was  extensive,                                                                   
at nearly 100 cases,  and that these take up  to eight months                                                                   
to process.                                                                                                                     
                                                                                                                                
Representative Joule asked about  the reason for the backlog.                                                                   
Commissioner Merkes  noted that by  the time the  backlog was                                                                   
caught up, much  of the information was outdated.   She noted                                                                   
that in  the new budget  two additional staff  positions were                                                                   
requested.   She pointed  out that with  the 365  days limit,                                                                   
intake cases would be increased by approximately 125 cases.                                                                     
                                                                                                                                
STEVE  KOTEFF,   HUMAN  RIGHTS   COMMISSION,  testified   via                                                                   
teleconference.    Responding  to  a follow  up  question  by                                                                   
Representative Joule,  Mr. Koteff stated that  the Commission                                                                   
reviewed cases  in the order  in which  they were filed.   He                                                                   
also noted that  at times cases might be taken  out of order,                                                                   
if violence or an egregious nature warranted it.                                                                                
                                                                                                                                
9:45:58 AM                                                                                                                    
                                                                                                                                
Representative Joule observed  that if the amendment  was put                                                                   
in  place,  the waiting  list  would  increase.   Mr.  Koteff                                                                   
confirmed that this would increase  the backlog of cases.  He                                                                   
pointed out the  fiscal note that included more  personnel to                                                                   
handle the backlog were the amendment adopted.                                                                                  
                                                                                                                                
9:46:45 AM                                                                                                                    
                                                                                                                                
Representative Kerttula  maintained  that  the  bill  gave  a                                                                   
basis  to dismiss  cases  more  expediently,  based upon  the                                                                   
evidence available.   She  proposed that  this would  help to                                                                   
clean up a backlog and offset any waiting list.                                                                                 
                                                                                                                                
Mr. Koteff commented  that the discretion of  the bill leaned                                                                   
more toward  cases with substantial  evidence.   He indicated                                                                   
that  presently  the  law  read that  a  complainant  had  an                                                                   
absolute  right to  a  hearing.   The  Commission would  then                                                                   
decide  whether  it  was  appropriate  to  go  forward.    He                                                                   
observed  that  it would  not  change  the backlog  of  cases                                                                   
waiting  to be  investigated.    He noted  that  it would  be                                                                   
arbitrary   for  the   staff  to  dismiss   cases  prior   to                                                                   
investigation.                                                                                                                  
                                                                                                                                
9:48:51 AM                                                                                                                    
                                                                                                                                
Representative Kerttula  asked  if  there  was  a  regulatory                                                                   
ability to  go immediately  to the  Director if evidence  was                                                                   
not available  from the onset.   Mr. Koteff noted  that there                                                                   
was a screening  process, but not a regulatory  discretion to                                                                   
which  she  referred.    Once   a  complaint  is  filed,  the                                                                   
Commission  has  a mediation  program  to handle  cases  more                                                                   
quickly.   As for  evaluation of  evidence, statute  mandates                                                                   
that every case be investigated  thoroughly.  The standard of                                                                   
substantial   evidence   was  not   so   high   as  to   make                                                                   
determination  difficult.    Some  cases  are  resolved  more                                                                   
easily  without   as  much  evidence.    He   explained  that                                                                   
sometimes discrimination is not immediately apparent.                                                                           
                                                                                                                                
9:51:42 AM                                                                                                                    
                                                                                                                                
Representative Kerttula  also   asked  how  many  cases  were                                                                   
turned  down after the  180-day limitation,  and whether  any                                                                   
were pre-screened.   Mr. Koteff  did not have  these figures.                                                                   
He stated  that the Commission  established a  regulation for                                                                   
the time for  filing of 180 days.    The time for  filing has                                                                   
always been  in regulation but  not always the same  time; it                                                                   
was previously 300 days, changed  due to resources available.                                                                   
It was  believed that the 180  days were adequate.   Although                                                                   
he conceded  that perhaps some  cases had not been  filed, he                                                                   
stated that it was difficult to  quantify the number of cases                                                                   
that were  not investigated  past the time  limit.   He added                                                                   
that  Alaskans  could  be  referred   to  the  federal  Equal                                                                   
Employment Opportunity Commission  (EEOC) whose limit was 300                                                                   
days to file.  This occurred when  employers employ 15 people                                                                   
or more.                                                                                                                        
                                                                                                                                
Responding  to a follow  up by  Representative Kerttula,  Mr.                                                                   
Koteff  conceded  that  there   were  valid  cases  that  had                                                                   
exceeded the 180  time limit, and stated that  in those cases                                                                   
they were  usually referred to  the EEOC.  Since  those cases                                                                   
were  presented  just  through   recitation  of  facts  by  a                                                                   
potential  complainant,  they  could  not  evaluate  evidence                                                                   
without benefit of a full investigation.                                                                                        
                                                                                                                                
9:55:13 AM                                                                                                                    
                                                                                                                                
Representative Kerttula  observed  that the main  problem was                                                                   
adequate staffing to handle the  number of cases, and not the                                                                   
length of the timeline.   She proposed that 180  days was too                                                                   
short a timeline.                                                                                                               
                                                                                                                                
9:55:53 AM                                                                                                                    
                                                                                                                                
Representative Joule concurred    that   the   resources   of                                                                   
personnel  seemed  to be  the  main  issue of  operating  the                                                                   
Commission.   But he proposed  that expanding the  time would                                                                   
not  solve  this  issue.    He  maintained  that  unless  the                                                                   
resources  were  granted,  changing  the  timeline  might  be                                                                   
counterproductive.                                                                                                              
                                                                                                                                
Representative Kerttula WITHRDREW Amendment #1.                                                                                 
                                                                                                                                
9:57:17 AM                                                                                                                    
                                                                                                                                
Representative Kerttula  MOVED  Amendment #2.  Representative                                                                   
Kelly OBJECTED.                                                                                                                 
                                                                                                                                
Representative Kerttula  explained   the   amendment.     She                                                                   
proposed  that since  the  Commission might  not  be able  to                                                                   
quickly  investigate cases,  a complainant  could approach  a                                                                   
private  attorney  with the  case,  and  if the  case  proved                                                                   
successful,  they  could recoup  the  attorney's  fees.   She                                                                   
added  that there  would also  be a  denial if  the case  was                                                                   
proven frivolous,  causing the  complainant to be  liable for                                                                   
attorney's fees.  She noted that  the Judiciary Committee had                                                                   
worked  on this approach,  and suggested  that the  Committee                                                                   
ought to defer to their work.                                                                                                   
                                                                                                                                
9:59:01 AM                                                                                                                    
                                                                                                                                
Mr. Ruaro  stated that the  Commission opposed  Amendment #2.                                                                   
He pointed out  that no one from the public  had come forward                                                                   
to  request the  Amendment.   He  also proposed  that if  the                                                                   
amendment  were   passed,  employers  would   receive  demand                                                                   
letters  from plaintiff's  attorneys,  threatening them  with                                                                   
the payment of legal fees unless they made amends.                                                                              
                                                                                                                                
10:00:16 AM                                                                                                                   
                                                                                                                                
Representative Kerttula  maintained   that  such  threatening                                                                   
behavior was not tolerated by  the Bar Association, and noted                                                                   
that it  was unethical.   She also  noted that lawyers  often                                                                   
did not take these kinds of cases,  since they were difficult                                                                   
and represented  small fees.   She expressed her  belief that                                                                   
not  to prosecute  these  kinds  of cases  was  not good  for                                                                   
society.  She  proposed that this was one method  of ensuring                                                                   
that  people with  these complaints  received  justice.   She                                                                   
expressed  openness  to working  with  the industry  and  the                                                                   
Department  of Law to  streamline the  amendment and  make it                                                                   
more successful on the Floor.                                                                                                   
                                                                                                                                
10:02:26 AM                                                                                                                   
                                                                                                                                
Representative   Stoltze  referred  to   his  history   as  a                                                                   
legislator,  and frustrations  he  experienced in  advocating                                                                   
for small businesses  in his district when dealing  with this                                                                   
kind of  process.  He suggested  that there were  protections                                                                   
in  our society  for individuals,  and  that businesses  also                                                                   
needed protections.   He proposed  that there were  two sides                                                                   
to the issue.                                                                                                                   
                                                                                                                                
10:04:56 AM                                                                                                                   
                                                                                                                                
Representative  Joule  discussed   his  experience  as  being                                                                   
discriminated against for height  in trying to become a State                                                                   
Trooper.   He  stated that  at the  time, he  was unaware  of                                                                   
avenues   through  which   he   could  pursue   a  claim   of                                                                   
discrimination.                                                                                                                 
                                                                                                                                
10:05:40 AM                                                                                                                   
                                                                                                                                
Representative Kerttula  acknowledged  that small  businesses                                                                   
had a difficult time dealing with  these issues and committed                                                                   
to advocating for them as well.                                                                                                 
                                                                                                                                
Mr. Ruaro noted  that the cost of discrimination  claims were                                                                   
not typically  covered by the insurance of  small businesses,                                                                   
and that attorney fees would come from their pocket.                                                                            
                                                                                                                                
A ROLL CALL VOTE was taken on Amendment #2.                                                                                     
                                                                                                                                
In Favor:  Kertulla; Joule                                                                                                      
Opposed:  Stoltze; Foster; Holm; Kelly; Chenault                                                                                
                                                                                                                                
Amendment #2 FAILED on a vote of 5 to 2.                                                                                        
                                                                                                                                
Representative Chenault  pointed  out  the  two  zero  fiscal                                                                   
notes, previously prepared prior  to the amendments, from the                                                                   
Office  of the Governor,  Commissions  and the Department  of                                                                   
Law.                                                                                                                            
                                                                                                                                
Representative  Foster   MOVED  to  REPORT  SB   132  out  of                                                                   
Committee with  two zero fiscal  notes (#3, OOG; #4  LAW) and                                                                   
individual recommendations. There  being NO OBJECTIONS it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CSSB132  (FIN)  was  REPORTED   OUT  of  Committee  with  two                                                                   
previously  published zero  fiscal notes  (#3, OOG;  #4, LAW)                                                                   
and No Recommendation.                                                                                                          
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:08 AM                                                                                           
                                                                                                                                
                                                                                                                                

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