Legislature(2003 - 2004)

04/09/2003 01:45 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 09, 2003                                                                                           
                         1:45 P.M.                                                                                              
                                                                                                                                
TAPE HFC 03 - 55, Side A                                                                                                        
TAPE HFC 03 - 55, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Williams called the House  Finance Committee meeting                                                                   
to order at 1:45 P.M.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative John Harris, Co-Chair                                                                                            
Representative Bill Williams, Co-Chair                                                                                          
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Mike Chenault                                                                                                    
Representative Eric Croft                                                                                                       
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Bill Stoltze                                                                                                     
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Tom   Anderson;  Anne  Carpeneti,   Assistant                                                                   
Attorney General, Criminal Division,  Department of Law; Eddy                                                                   
Jeans,  Manger,   School  Finance  and  Facilities   Section,                                                                   
Department   of  Education   and   Early  Development;   Greg                                                                   
O'Claray,  Commissioner, Department  of  Labor and  Workforce                                                                   
Development                                                                                                                     
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Chris  Beheim, Director,  State Crime  Lab, Anchorage;  Bruce                                                                   
Richter,  Program  Manager,  National   Law  Enforcement  and                                                                   
Correctional Technology Center,  Anchorage; Jennifer Esteral,                                                                   
American  Civil  Liberties  Union  (ACLU),  Anchorage;  Linda                                                                   
Wilson,  Deputy Public  Defender,  Anchorage; John  Wheatley,                                                                   
Senior  Vice President,  Brady  Company, Insurance  Brokerage                                                                   
Firm,  Anchorage;   Terry  Fike,  President,   Alcan  General                                                                   
Contractors, Anchorage;  Dick Cattanach, Executive  Director,                                                                   
Associated  General Contractors,  Anchorage; Vince  Beltrami,                                                                   
President,  Anchorage Building  and  Construction and  Trades                                                                   
Council,  Anchorage; Nancy  Peterson,  City  of Valdez;  Phil                                                                   
Anderson,  President,   AGC  Landscaping,   Fairbanks;  Sarah                                                                   
Lefebvre, Vice  President, Exclusive Landscaping  and Paving,                                                                   
Fairbanks                                                                                                                       
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 49     An Act relating to the DNA identification                                                                             
          registration   system;   and   providing   for   an                                                                   
          effective date.                                                                                                       
                                                                                                                                
          CS HB 49 (JUD) was reported out of Committee with                                                                     
          a  "do pass"  recommendation and  with zero  fiscal                                                                   
          note  #1 by the Department  of Public  Safety, zero                                                                   
          fiscal  note  #2  by  the Department  of  Law,  and                                                                   
          fiscal    note   #3    by    the   Department    of                                                                   
          Administration.                                                                                                       
                                                                                                                                
HB 155    An  Act  relating  to  the  submission  of  payroll                                                                   
          information   by  contractors  and   subcontractors                                                                   
          performing work on a  public construction contract;                                                                   
          and providing for an effective date.                                                                                  
                                                                                                                                
          HB 155 was HEARD and HELD in Committee for further                                                                    
          consideration.                                                                                                        
                                                                                                                                
HB 171    An Act repealing the  charter school grant program;                                                                   
          and providing for an effective date.                                                                                  
                                                                                                                                
          HB 171 was reported out of Committee with                                                                             
          "individual"  recommendations and with  fiscal note                                                                   
          #1   by  the  Department   of  Education   &  Early                                                                   
          Development.                                                                                                          
                                                                                                                                
HOUSE BILL NO. 49                                                                                                             
                                                                                                                                
     An Act relating to the DNA identification registration                                                                     
     system; and providing for an effective date.                                                                               
                                                                                                                                
REPRESENTATIVE  TOM ANDERSON  noted that  HB 49 would  expand                                                                   
the  Alaska State  database  of DNA  samples  to include  all                                                                   
persons convicted  of a crime against a person  or any felony                                                                   
under  Alaska's criminal  code.   It would  also require  the                                                                   
collection of  DNA samples  from those juveniles  adjudicated                                                                   
as a delinquent  for the same  offense.  Additionally,  HB 49                                                                   
makes  provisions  for  volunteer  and  anonymous  donations.                                                                   
Persons  required  registering,  as sex  offenders  are  also                                                                   
required  to submit  DNA  into  the database.    HB 49  would                                                                   
require that all offenders and  minors currently incarcerated                                                                   
on State supervised parole for  felony convictions or certain                                                                   
sexual   misdemeanor   offenses   provide  samples   to   the                                                                   
Department of Public Safety.                                                                                                    
                                                                                                                                
Representative Anderson  stated that expanding  the databases                                                                   
to  include  all  convicted  offenders  would  have  multiple                                                                   
benefits:                                                                                                                       
                                                                                                                                
 · Solves crimes - DNA collection from all convicted                                                                            
     felons, rather than just  sex offenders and perpetrators                                                                   
     of  serious violent  crimes,  which would  result in  an                                                                   
     increase  in  the  amount   of  violent  crimes  solved.                                                                   
     Offenders who are required  to submit DNA when convicted                                                                   
     of  non-violent  felonies would  be  identified as  they                                                                   
     leave DNA behind at a rape and/or murder scene.                                                                            
 · Prevents crimes, helps solving a crime, and solving it                                                                       
     quickly,  which  has  a   direct  effect  on  preventing                                                                   
     additional crimes by the  same perpetrator.  An offender                                                                   
     who is not  apprehended in a timely manner  remains free                                                                   
     to commit more crimes.                                                                                                     
 · Exonerates the innocent - Increases the DNA database to                                                                      
     those  convicted of  non-violent  offenses, which  would                                                                   
     reduce  the  occurrence   of  innocent  people  who  are                                                                   
     wrongly  suspected,  arrested  and convicted  of  crimes                                                                   
     they  did not commit.   Two  common scenarios  exemplify                                                                   
     how  a  larger  DNA  database   protects  such  innocent                                                                   
     people,  one  where  the  guilty  party  is  listed  and                                                                   
     secondly, where the innocent party is in the database.                                                                     
 · Increases Cost Efficiencies - According to a study                                                                           
     completed by the National  Institute of Justice, rape is                                                                   
     the costliest  crime in America,  in which  victim costs                                                                   
     can  total  up  to  $127 billion  dollars.    The  study                                                                   
     estimated  that  when all  factors  are considered,  the                                                                   
     estimated cost  of rape per  victim is $87,000.   If the                                                                   
     average rapist  commits eight rapes, but  a DNA databank                                                                   
     stops  the offender  half  way through  the spree,  then                                                                   
     four rapes are prevented  creating a savings of $348,000                                                                   
     dollars.                                                                                                                   
                                                                                                                                
Representative  Anderson  identified  the  numerous  agencies                                                                   
indicating support  and letters  of endorsement  ranging from                                                                   
the Chief of Police Association  to the Alaska Peace Officers                                                                   
Association.  The fiscal note  indicates zero because federal                                                                   
funding is concurrent  with the program.  President  Bush has                                                                   
indicated that he intends to supplement  this cause with over                                                                   
$1 billion dollars  of continuous funding for  the program to                                                                   
make it state and nationwide.                                                                                                   
                                                                                                                                
Representative Croft  referenced Page 3, Lines 27  & 28, "law                                                                   
enforcement  cases including".   He  asked if  there was  any                                                                   
limitation  on  the  law  enforcement.    He  stated  he  was                                                                   
concerned about how broad that language was.                                                                                    
                                                                                                                                
Representative  Anderson explained  that  language was  taken                                                                   
from original  law.  He  assumed that the federal  government                                                                   
and the Federal  Bureau of Investigation (FBI)  has different                                                                   
regulations, however, they would  be able to utilize the same                                                                   
information through the coded system.                                                                                           
                                                                                                                                
Representative  Croft  mentioned   the  "parameters"  of  the                                                                   
language.   He questioned the  basic protections in  the bill                                                                   
from misuse.  Representative Anderson  referred that question                                                                   
to  Ms.  Carpeneti   from  the  Attorney   General's  Office,                                                                   
Department of Law.                                                                                                              
                                                                                                                                
Co-Chair  Harris  referenced the  indeterminate  fiscal  note                                                                   
from  the  Department  of  Administration,   Public  Defender                                                                   
Agency.  He asked  what would happen if that  note was zeroed                                                                   
out.                                                                                                                            
                                                                                                                                
LINDA WILSON,  (TESTIFIED VIA TELECONFERENCE),  DEPUTY PUBLIC                                                                   
DEFENDER  AGENCY,  ANCHORAGE,  commented  that  their  agency                                                                   
cannot predict  what the fiscal impact  is going to  be.  Ms.                                                                   
Wilson  claimed  that  the  legislation  would  significantly                                                                   
increase the number of cases for  the number of crimes, which                                                                   
a person  may have to submit  a sample.  There  currently are                                                                   
32 offenses  and the legislation  would add over 80  more for                                                                   
which a  person must  submit a DNA  sample.  The  legislation                                                                   
would include those  on probation or parole  on the effective                                                                   
date.  That  creates a very broad  reach.  Ms. Wilson  had no                                                                   
idea how  many cases it would  include.  She  reiterated that                                                                   
the note  was indeterminate because  there is no way  for the                                                                   
Agency to predict the impact.                                                                                                   
                                                                                                                                
Co-Chair Harris  inquired if the  Public Defender  Agency had                                                                   
received  a  supplemental  request  this year.    Ms.  Wilson                                                                   
acknowledged that they had.                                                                                                     
                                                                                                                                
CHRIS  BEHEIM,  (TESTIFIED  VIA   TELECONFERENCE),  DIRECTOR,                                                                   
STATE CRIME LAB,  ANCHORAGE, testified that the  DNA database                                                                   
has had a positive  impact on law enforcement.   It has aided                                                                   
34 different  investigations this  past year.   The  State of                                                                   
Alaska  has  one of  the  more  successful databases  in  the                                                                   
country.    He  added  that the  State  could  do  better  by                                                                   
collecting the DNA from all felons  and individuals convicted                                                                   
of sex offenses.  Mr. Beheim reiterated  that the legislation                                                                   
could enhance the current system even more.                                                                                     
                                                                                                                                
At this time, there are approximately  140 unsolved homicides                                                                   
and sexual assault  cases and with an expanded  database, the                                                                   
number of unsolved crimes could  increase.  He concluded that                                                                   
this is an extremely important  tool for law enforcement that                                                                   
is cost effective.                                                                                                              
                                                                                                                                
BRUCE  RICHTER,   (TESTIFIED  VIA  TELECONFERENCE),   PROGRAM                                                                   
MANAGER,   NATIOANL   LAW   ENFORCEMENT    AND   CORRECTIONAL                                                                   
TECHNOLOGY  CENTER, ANCHORAGE,  stated  that the  legislation                                                                   
would be the  single most cost effective tool  that the State                                                                   
could give law  enforcement for expanding their  reach of the                                                                   
database.  The success of other  states could be reflected in                                                                   
what will  happen in  Alaska.  Mr.  Richter trusted  that the                                                                   
down-stream federal funding would come.                                                                                         
                                                                                                                                
Representative  Croft  inquired  about  the  Alaskan  success                                                                   
stories.     Mr.   Beheim  listed   various  sexual   assault                                                                   
situations that  have occurred  throughout the State  and how                                                                   
the DNA technology helped solve  those crimes.  He elaborated                                                                   
that this  indicates the power  of DNA to both  exonerate and                                                                   
bring people to justice.                                                                                                        
                                                                                                                                
JENNIFER  ESTERAL, (TESTIFIED  VIA TELECONFERENCE),  AMERICAN                                                                   
CIVIL LIBERTIES  UNION (ACLU),  ANCHORAGE, voiced  opposition                                                                   
to the proposed  bill.  She noted  that ACLU urges  an end to                                                                   
the progressive expansion of the  collection of the DNA.  She                                                                   
stressed that  this is not  only fingerprinting and  that DNA                                                                   
provides  the government  control over  personal and  private                                                                   
information.    Ms.  Esteral   stressed  that  the  laws  are                                                                   
becoming  progressively more  inclusive.   DNA  is now  being                                                                   
collected before the crime has happened.                                                                                        
                                                                                                                                
Ms. Esteral  pointed out  that the ACLU  supports the  use of                                                                   
DNA database  for positive medical, scientific,  and forensic                                                                   
purposes;  however, she  stressed  that  there is  tremendous                                                                   
potential  for abuse  and  that  HB 49  does  not create  any                                                                   
safeguards.                                                                                                                     
                                                                                                                                
Representative Joule asked if  there had been cases of misuse                                                                   
from  the DNA  collection base.   Mr.  Beheim responded  that                                                                   
there has  never been  a case where  the DNA database  sample                                                                   
was  misused.    He added  that  there  are  many  safeguards                                                                   
involved.   It can  be used only  for identification  and law                                                                   
enforcement identification purposes.                                                                                            
                                                                                                                                
Mr.  Richter added  that once  that  the crime  lab has  made                                                                   
confirmation  of identification,  that information  serves as                                                                   
the application  base for  a search  warrant.  He  emphasized                                                                   
that there  are checks  and balances  built into the  current                                                                   
system.                                                                                                                         
                                                                                                                                
ANNE CARPENETI,  ASSISTANT ATTORNEY  GENERAL, LEGAL  SERVICES                                                                   
SECTION,  CRIMINAL DIVISION,  DEPARTMENT OF  LAW, voiced  the                                                                   
Department's  support  for the  bill  and offered  to  answer                                                                   
questions of the Committee.                                                                                                     
                                                                                                                                
Representative  Croft  questioned  if  there  should  be  any                                                                   
constraints placed  on law enforcement use of the  DNA.   Ms.                                                                   
Carpeneti explained  the language referenced currently  is in                                                                   
existing law.  She pointed out  that the word "including" was                                                                   
added because  law enforcement attempted to  identify missing                                                                   
body parts  from victims.   That language has  been effective                                                                   
since  the DNA  concern was  enacted.   She interjected  that                                                                   
there have  been no problems to  date and that the  bill does                                                                   
contain protections.                                                                                                            
                                                                                                                                
Representative   Whitaker    commented   on    the   possible                                                                   
elimination  of  federal  funding and  that  the  Legislature                                                                   
should  recognize the  potential  costs  associated with  the                                                                   
bill.  He voiced his support.                                                                                                   
                                                                                                                                
Representative Foster  MOVED to report CS HB 49  (JUD) out of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal notes.                                                                                                      
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
CS  HB 49  (JUD) was  reported out  of Committee  with a  "do                                                                   
pass"  recommendation and  with zero  fiscal note  #1 by  the                                                                   
Department  of Public  Safety,  zero fiscal  note  #2 by  the                                                                   
Department of  Law, and fiscal  note #3 by the  Department of                                                                   
Administration.                                                                                                                 
                                                                                                                                
HOUSE BILL NO. 171                                                                                                            
                                                                                                                                
     An Act repealing the charter school grant program; and                                                                     
     providing for an effective date.                                                                                           
                                                                                                                                
EDDY JEANS,  MANGER, SCHOOL  FINANCE AND FACILITIES  SECTION,                                                                   
DEPARTMENT  OF  EDUCATION AND  EARLY  DEVELOPMENT,  explained                                                                   
that the HB  171 would eliminate charter school  grants.  The                                                                   
State grant  program implemented  in FY2002, allocates  money                                                                   
per  ADM  for each  new  charter  school.   The  funding  was                                                                   
intended  to  supplement  the  federal start  up  grants  for                                                                   
charter schools.                                                                                                                
                                                                                                                                
The Alaska Department  of Education and Early  Development is                                                                   
working  closely   with  U.S.  Department  of   Education  to                                                                   
increase  the  level  of  start-up  grants  provided  by  the                                                                   
federal  government therefore  eliminating the  need for  the                                                                   
State supplemental  grant program  beginning in FY  2005. The                                                                   
State will  allocate to new  charter schools $150,000  a year                                                                   
for the  first three  years and  $45,000 in  the forth  year,                                                                   
totaling $495,000  dollars start  up funds  over a  four year                                                                   
period.                                                                                                                         
                                                                                                                                
The  bill  becomes  effective  July 1,  2004.    The  delayed                                                                   
implementation   will  allow   the  State   to  fulfill   its                                                                   
commitment  of  start-up  grants   to  the  existing  charter                                                                   
schools.  Any  new charter schools approved to  operate in FY                                                                   
2004 would be eligible for the federal grant funds.                                                                             
                                                                                                                                
Co-Chair  Harris asked  if the  State  could anticipate  more                                                                   
federal  money.   Mr.  Jeans  replied  that was  the  "bottom                                                                   
line".                                                                                                                          
                                                                                                                                
Co-Chair Harris  asked what would  happen without  the money.                                                                   
Mr.  Jeans  advised that  with  the  one-year delay,  if  the                                                                   
federal funds  do not come  through, the Department  would be                                                                   
back before  the Legislature requesting reinstitution  of the                                                                   
program.   However, he added  that every indication  from the                                                                   
federal government  indicates that the grant  request will be                                                                   
looked upon favorably.                                                                                                          
                                                                                                                                
Co-Chair Harris  asked the  benefits of  a charter  school to                                                                   
students  and the  State  of Alaska.    Mr.  Jeans noted  the                                                                   
amount  of parental involvement  in those  schools.   Charter                                                                   
schools are "grass  root movements" and the  parents are very                                                                   
involved   in  the   classrooms.     Charter   schools   have                                                                   
flexibility in their regulations;  however, they are required                                                                   
to  follow  the  same  assessments   as  the  regular  public                                                                   
schools.   Charter  schools  are public  schools  and have  a                                                                   
contract  with their  local school  district  to operate  the                                                                   
program.                                                                                                                        
                                                                                                                                
Co-Chair  Harris inquired  how  much the  State provides  for                                                                   
each  student in  the charter  school.   Mr. Jeans  explained                                                                   
that  would vary  depending  on  the program.    Some of  the                                                                   
charter school  programs are correspondence programs  and are                                                                   
funded at 80%.  The main difference  results from the student                                                                   
population of  the charter  school.  If  there are  less than                                                                   
150 students,  the current  foundation statute requires  them                                                                   
to  be   added  to  the   local  school  in   that  district.                                                                   
Therefore,  their funding  would be  reduced.   If they  have                                                                   
over 150 students, they are allowed  to go through the school                                                                   
size  adjustment  table just  as  any  public school  in  the                                                                   
district.                                                                                                                       
                                                                                                                                
Co-Chair Harris  asked if there  were less than  150 students                                                                   
in  the charter  school, would  they  then get  added to  the                                                                   
regular  school  system  and  counted  as such.    Mr.  Jeans                                                                   
explained  that in  statute is  the  "school size  adjustment                                                                   
table",  which  adjusts for  the  student economy  of  scale.                                                                   
Within that section  of statute, it stipulates  that before a                                                                   
charter school is counted as a  separate, independent school,                                                                   
there must  be more  than 150  students.   If there  were not                                                                   
that many students,  it would be added to the  largest school                                                                   
for funding  purposes.   Mr. Jeans  reiterated that  if there                                                                   
are over  150 students,  they are then  counted as  their own                                                                   
separate school.                                                                                                                
                                                                                                                                
Co-Chair  Harris noted  that  the correspondence  program  is                                                                   
separate.  Mr. Jeans acknowledged  that was correct, pointing                                                                   
out  that there  are a  couple  charter schools  funded as  a                                                                   
correspondence  program.   Those programs  will be funded  at                                                                   
80%.                                                                                                                            
                                                                                                                                
Vice-Chair  Meyer  inquired if  there  had been  a  statewide                                                                   
increase  in   the  charter  school  programs.     Mr.  Jeans                                                                   
acknowledged  that   charter  schools  are  on   an  increase                                                                   
statewide.   That is directly  related to legislation  passed                                                                   
in 2001,  which expanded  the  number from  30 to 60  charter                                                                   
schools in the  State that can be operated by  districts.  He                                                                   
added that  the State Board  of Education just  approved four                                                                   
new charter  schools for this  upcoming year; (1)  in Mat-Su,                                                                   
(2) in Anchorage and (1) in Ketchikan.                                                                                          
                                                                                                                                
Vice-Chair  Meyer  asked how  much  additional  money does  a                                                                   
charter school  receive.  Mr.  Jeans explained that  there is                                                                   
not an  easy answer and  that it does  depend on the  size of                                                                   
the student  population.  The  formula adjusts  for economies                                                                   
of scale.  If there is a small  school of 150 students, there                                                                   
will  be fixed  costs associated,  which  would increase  the                                                                   
amount.  The formula adjusts for the economies of scales.                                                                       
                                                                                                                                
Representative  Croft  pointed  out that  the  State  expects                                                                   
money  for  the  FY05  budget,  not this  year.    Mr.  Jeans                                                                   
corrected Representative  Croft pointing  out that  the State                                                                   
expects to receive  the money this year.  The  effective date                                                                   
is  FY04 because  the Department  is attempting  to make  the                                                                   
districts that  are under the current State  program "whole".                                                                   
That request is  in the FY04 budget.    Mr.  Jeans added that                                                                   
once the federal grants are closed,  they cannot be reopened.                                                                   
All  new  charter  schools  will be  under  the  new  federal                                                                   
allocation for charter school start up.                                                                                         
                                                                                                                                
Representative Croft asked about  moving the State system and                                                                   
shifting  it over  to  the federal  area.    He inquired  why                                                                   
language should be repealed.                                                                                                    
                                                                                                                                
Representative  Croft voiced  concern  about the  possibility                                                                   
that only part of the federal  money might come through.  Mr.                                                                   
Jeans  explained  that  the Department  does  not  intend  to                                                                   
continue operating  the State grant program.   If the federal                                                                   
money does  not come through,  the Department will  come back                                                                   
to the Legislature  to determine if they want  to reinstitute                                                                   
the State grant program.  He noted  that Senator Dyson shared                                                                   
that  concern as  well  and put  contingent  language in  the                                                                   
Senate  version   of  the  bill,  which  would   address  the                                                                   
repealler.                                                                                                                      
                                                                                                                                
Representative Croft  maintained that if the  State can fully                                                                   
utilize federal money  now, the statute should  remain on the                                                                   
books in case the  federal funds are not guaranteed.   He did                                                                   
not understand the need for the legislation.                                                                                    
                                                                                                                                
Mr.  Jeans  advised  that  the  reason  that  the  Department                                                                   
submitted  the bill  is that  under the  proposal before  the                                                                   
federal government, the State  will be able to allocated more                                                                   
money to  the school  districts through  the federal  program                                                                   
than they receive  for both programs currently  combined.  If                                                                   
the State statute remains on the  books, the State allows the                                                                   
entitlement program to remain  on the books for districts and                                                                   
schools  to continue  to apply  in the future  for the  State                                                                   
grant.   That would send a  clear message that  the intention                                                                   
is  to  transition  from  the combined  system  to  a  single                                                                   
system.                                                                                                                         
                                                                                                                                
Co-Chair Harris asked  why the fiscal note does  not indicate                                                                   
federal revenues.   Mr. Jeans understood that  there would be                                                                   
sufficient   federal  authorization   in  the  Teaching   and                                                                   
Learning Division to absorb the grant request.                                                                                  
                                                                                                                                
Representative  Foster   MOVED  to  report  HB   155  out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal.                                                                                                            
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
HB  171  was reported  out  of  Committee  with  "individual"                                                                   
recommendations and with fiscal  note #1 by the Department of                                                                   
Education & Early Development.                                                                                                  
                                                                                                                                
                                                                                                                                
TAPE HFC 03 - 55, Side B                                                                                                      
                                                                                                                              
HOUSE BILL NO. 155                                                                                                            
     An   Act  relating   to   the  submission   of   payroll                                                                   
     information    by   contractors    and    subcontractors                                                                   
     performing work  on a public construction  contract; and                                                                   
     providing for an effective date.                                                                                           
                                                                                                                                
GREG  O'CLARAY,   COMMISSIONER,   DEPARTMENT  OF  LABOR   AND                                                                   
WORKFORCE  DEVELOPMENT, testified  that the  bill would  be a                                                                   
"revenue   producer"  for   the  State   and  would   provide                                                                   
sufficient   regulations  for   proper  enforcement   of  the                                                                   
prevailing  wage rate  under Title  36.  He  stated that  the                                                                   
Administration  supports the House  Judiciary version  of the                                                                   
bill and it would be a cost shift from general funds.                                                                           
                                                                                                                                
Representative Joule inquired  if costs were being shifted to                                                                   
the  bid  processor  on  the   "other  side".    Commissioner                                                                   
O'Claray  replied that  there  would be  a cost  shift.   The                                                                   
general contractor would pay for  the cost.  At present time,                                                                   
there is  no fee being charged  for the service.   The people                                                                   
that  use State  services should  pay their  "fair share"  in                                                                   
supporting those services.  He  added that would be a minimal                                                                   
charge.                                                                                                                         
                                                                                                                                
Vice-Chair Meyer asked  if HB 155 was the bill  that had been                                                                   
discussed  in the Department  of Labor  Subcommittee  and how                                                                   
the proposed fiscal costs had  been determined.  Commissioner                                                                   
O'Claray responded  the fiscal  note was  new.  The  original                                                                   
bill  moved  the recording  requirement  to  the  contracting                                                                   
agency,  therefore,  eliminating  a  clerk  position  in  the                                                                   
Department  of  Labor &  Workforce  Development.   Under  the                                                                   
proposed  fiscal   note  there   is  a  requirement   for  an                                                                   
accounting   tech  employee   to  keep   track  of   all  the                                                                   
information.                                                                                                                    
                                                                                                                                
Vice-Chair Meyer pointed out the  $14 thousand dollars fiscal                                                                   
note  difference.   Commissioner  O'Claray acknowledged  that                                                                   
was correct.                                                                                                                    
                                                                                                                                
JOHN WHEATLEY,  (TESTIFIED VIA  TELECONFERENCE), SENIOR  VICE                                                                   
PRESIDENT,   BRADY   COMPANY,   INSURANCE   BROKERAGE   FIRM,                                                                   
ANCHORAGE,  voiced concern  about the  bill.   He noted  that                                                                   
that  final   payment  would   not  be  released   until  the                                                                   
Department  of Labor  & Workforce  Development verifies  that                                                                   
all the  contractors on the  project indicate that  they paid                                                                   
prevailing wage.   The concern  rests with the fact  that the                                                                   
contractor's receipt of final  payment could be withheld.  He                                                                   
asked what  would happen if the  Department had a  backlog of                                                                   
work  and needed  to undertake  an investigation.   The  time                                                                   
line could lead  to issues of cash flow, which  is of concern                                                                   
for many companies.   He added that could lead  to limitation                                                                   
of  bonding  credit  for  the   contractors.    Mr.  Wheatley                                                                   
emphasized that this  would be an unfair position  to put the                                                                   
contractors in.                                                                                                                 
                                                                                                                                
TERRY FIKE, (TESTIFIED VIA TELECONFERENCE),  PRESIDENT, ALCAN                                                                   
GENERAL  CONTRACTORS, ANCHORAGE,  voiced strong  disagreement                                                                   
with the bill particularly in  Section 2©, the withholding of                                                                   
the final  payment on  a public  construction contract.   Mr.                                                                   
Fike claimed that  it is not appropriate to  have the general                                                                   
contractor sign  an affidavit that they will  pay Davis-Bacon                                                                   
wages when they already agreed  to that when the contract was                                                                   
originally  signed.    In  current  law,  the  contractor  is                                                                   
required  through  public  contract,   to  submit  a  weekly-                                                                   
certified  payroll.   The general  contractor has  no way  to                                                                   
enforce that  requirement.   There are no  rights to go  to a                                                                   
subcontractor's office and request  to see his books to check                                                                   
if  they   are  paying  Davis-Bacon   wages.     The  general                                                                   
contractors do not  have the authority to do  that and cannot                                                                   
be held  liable to sign an  affidavit stating that  they will                                                                   
do that.  Mr.  Fike reiterated that there would  be no way to                                                                   
enforce  that  requirement.     He  inquired the  time  frame                                                                   
expected final payment would be received.                                                                                       
                                                                                                                                
DICK  CATTANACH, (TESTIFIED  VIA  TELECONFERENCE),  EXECUTIVE                                                                   
DIRECTOR, ASSOCIATED GENERAL CONTRACTORS,  ANCHORAGE, pointed                                                                   
out areas of concern with the legislation.                                                                                      
                                                                                                                                
 · Section 1 - The report should be filed every second                                                                          
     week.  He noted that in the House Labor and Commerce                                                                       
     Committee, he had suggested that it be filed                                                                               
                                                    strd                                                                        
     consistently every two weeks, either on the 1 and 3                                                                        
                   ndth                                                                                                         
     or on the 2 and 4 week and be consistent for                                                                               
     everyone.                                                                                                                  
 · Section 2 © - Regarding withholding the final payment                                                                        
     against the  contractor for acts of some  sub contractor                                                                   
     that  he has  no control  over.  The  contractor has  no                                                                   
     legal  authority over that  person and  there is  no way                                                                   
     that the contractor could  place pressure on that person                                                                   
     to sign the affidavit.  That  requirement would penalize                                                                   
     the  contractor  who  abides  by  the  law  for  another                                                                   
     persons action.                                                                                                            
 · Section 4 - Applies to on-going projects.  The                                                                               
     contractor is responsible  for getting the affidavit and                                                                   
     complying with Section 2© again.                                                                                           
                                                                                                                                
Mr.  Cattanach  summarized  that   if  the  bill  moves  from                                                                   
Committee,  there is  no  question that  the  cost of  public                                                                   
construction  will increase  statewide.    The bill  extracts                                                                   
money from the  construction budget to the  operating budget.                                                                   
The  bill  would   take  the  payments  from   the  complying                                                                   
contractors and  delay them indefinitely until  they meet the                                                                   
conditions  of 2©.   Non-complying contractors  would  not be                                                                   
penalized for their actions.   Paper work associated with the                                                                   
bill  will  skyrocket   and  will  seriously   drive  up  the                                                                   
construction costs in the State of Alaska.                                                                                      
                                                                                                                                
Representative  Croft referenced  Section 2©  and asked  what                                                                   
language could  help.   Mr. Cattanach  explained that  if the                                                                   
general  contractor did  not  originally  file the  requested                                                                   
affidavit, then the  penalty would make sense.   He, however,                                                                   
questioned  if  payment  should   be  held  up  for  everyone                                                                   
involved.                                                                                                                       
                                                                                                                                
VINCE  BELTRAMI, (TESTIFIED  VIA TELECONFERENCE),  PRESIDENT,                                                                   
ANCHORAGE  BUILDING  AND  CONSTRUCTION  AND  TRADES  COUNCIL,                                                                   
ANCHORAGE, noted  that they oppose the bill.   The Governor's                                                                   
letter attached to  the introduction of the  bill stated that                                                                   
there would  be $1.15  million general  fund dollars  revenue                                                                   
generated.   Mr. Beltrami pointed  out the cuts laid  out for                                                                   
the Title  36 program.   He  believed that  there would  be a                                                                   
greater  burden on  the Department  in keeping  track of  the                                                                   
affidavits and  bookwork.  He understood that  the Department                                                                   
would loose  the one and only  wage and hour  technician that                                                                   
the State  currently has.   Contractors  would be waiting  on                                                                   
the release of  funds and waiting for the Department  to sign                                                                   
off on those funds with less staff.                                                                                             
                                                                                                                                
Mr.  Beltrami  requested  that the  House  Finance  Committee                                                                   
grant program  receipt authority to  the Title 36  program to                                                                   
capture  a  portion  of  the   $1.15  million  dollars.    He                                                                   
recommended  that  action could  help  save  the much  needed                                                                   
position in the Title 36 program  and perhaps help to fund an                                                                   
additional    position   to    help   with   the    increased                                                                   
responsibilities  so that the  contractors would not  be left                                                                   
waiting for that final payment.                                                                                                 
                                                                                                                                
NANCY  PETERSON,  (TESTIFIED  VIA  TELECONFERENCE),  CITY  OF                                                                   
VALDEZ, reiterated  previous testimony  concern with  Section                                                                   
2©.  She commented that the held  release of the funds causes                                                                   
a  burden  to that  City.   If  the  building  is done  in  a                                                                   
reasonable time  frame, then recommendations should  be built                                                                   
in.                                                                                                                             
                                                                                                                                
PHIL  ANDERSON, (TESTIFIED  VIA  TELECONFERENCE),  PRESIDENT,                                                                   
AGC  LANDSCAPING, FAIRBANKS,  spoke in  strong opposition  to                                                                   
the   proposed  legislation.      He  maintained   that   the                                                                   
legislation would place the contractor  in a "working for the                                                                   
Department  of Labor  & Workforce  Development" position  and                                                                   
that he  would have to collect  his money from  another State                                                                   
agency.    Mr.  Anderson  claimed that  the  funds  that  the                                                                   
Department expects to receive  would end up costing the State                                                                   
more on the other  end.  To hold up final  payment, the State                                                                   
would be obligated to pay interest.   The Department would be                                                                   
penalizing  not  just the  Department  of Labor  &  Workforce                                                                   
Development  and other  state agencies  through interest  and                                                                   
user fees but the construction  companies would pass them on.                                                                   
                                                                                                                                
SARAH   LEFEBVRE,   (TESTIFIED  VIA   TELECONFERENCE),   VICE                                                                   
PRESIDENT,  EXCLUSIVE  LANDSCAPING   AND  PAVING,  FAIRBANKS,                                                                   
testified in  opposition to the  legislation.   She commented                                                                   
that if  the purpose of  the bill is  to generate  revenue to                                                                   
the  State then  the  legislation  should be  streamlined  to                                                                   
focus on revenue  and eliminate the portion of  the bill that                                                                   
cause the problems.  Section 2,  Lines 4 - 22 is problematic.                                                                   
She  asserted that  the  affidavit process  was  unnecessary.                                                                   
Ms. Lefebvre maintained that fees would be paid up front.                                                                       
                                                                                                                                
Representative Croft  asked if penalties against  the general                                                                   
and subcontractors  should be divided.  Mr.  Cattanach agreed                                                                   
that  would  be  more  appropriate  but  cautioned  that  the                                                                   
contractor   could  still   be  placed   in  a   "contractual                                                                   
loggerhead" with the subcontractor.                                                                                             
                                                                                                                                
Representative  Stoltze  disapproved  of the  position  paper                                                                   
submitted by the  Department of Labor.  He noted  that it had                                                                   
not been dated  and was not written on letterhead.   He asked                                                                   
that   future   correspondence   from   the   Department   be                                                                   
appropriately submitted.                                                                                                        
                                                                                                                                
HB  155  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 3:01 P.M.                                                                                          

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