Legislature(2003 - 2004)

04/25/2003 09:10 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 25, 2003                                                                                           
                         9:10 A.M.                                                                                              
                                                                                                                                
 TAPE HFC 03 - 64, Side A                                                                                                       
                                                                                                                                
 CALL TO ORDER                                                                                                                
                                                                                                                                
 Co-Chair Williams called the House Finance Committee meeting                                                                   
 to order at 9:10 A.M.                                                                                                          
                                                                                                                                
 MEMBERS PRESENT                                                                                                              
                                                                                                                                
 Representative John Harris, Co-Chair                                                                                           
 Representative Bill Williams, Co-Chair                                                                                         
 Representative Kevin Meyer, Vice-Chair                                                                                         
 Representative Mike Chenault                                                                                                   
 Representative Eric Croft                                                                                                      
 Representative Richard Foster                                                                                                  
 Representative Carl Moses                                                                                                      
 Representative Bill Stoltze                                                                                                    
 Representative Jim Whitaker                                                                                                    
                                                                                                                                
 MEMBERS ABSENT                                                                                                               
                                                                                                                                
 Representative Mike Hawker                                                                                                     
 Representative Reggie Joule                                                                                                    
                                                                                                                                
 ALSO PRESENT                                                                                                                 
                                                                                                                                
 Kevin  Jardell,   Assistant   Commissioner,   Department   of                                                                  
 Administration;  Susan  Cox,   Assistant  Attorney   General,                                                                  
 Department  of Law;  Jerry  Burnett,  Director,  Division  of                                                                  
 Administrative Services, Department of Corrections                                                                             
                                                                                                                                
                                                                                                                                
 PRESENT VIA TELECONFERENCE                                                                                                   
                                                                                                                                
 Peter Lapinski, Inland Boatman's Union, Ketchikan                                                                              
                                                                                                                                
 SUMMARY                                                                                                                      
                                                                                                                                
 HB 61     An Act establishing an exploration and development                                                                   
           incentive tax  credit for  persons  engaged in  the                                                                  
           exploration for  and development of  less than  150                                                                  
           barrels of  oil or  of gas  for sale  and  delivery                                                                  
           without reference to volume from a      lease    or                                                                  
           property  in  the  state;  and  providing   for  an                                                                  
           effective date.                                                                                                      
                                                                                                                                
           CS HB 61 (FIN)  was reported out of Committee  with                                                                  
           a "do  pass" recommendation  and  with zero  fiscal                                                                  
           note #1 by the Department of Natural Resources  and                                                                  
           zero fiscal note #2 by the Department of Revenue.                                                                    
                                                                                                                                
 SB 115    An  Act  allowing  expenses  of  the  correctional                                                                   
           industries program  that may be  financed from  the                                                                  
           correctional  industries   fund   to  include   the                                                                  
           salaries and benefits of state employees.                                                                            
                                                                                                                                
           SB 115 was HEARD and HELD in Committee for further                                                                   
           consideration.                                                                                                       
                                                                                                                                
 SB 120    An Act relating  to the state's sovereign  immunity                                                                  
           for certain actions  regarding injury, illness,  or                                                                  
           death  of state-employed  seamen  and  to  workers'                                                                  
           compensation  coverage   for   those  seamen;   and                                                                  
           providing for an effective date.                                                                                     
                                                                                                                                
           SB 120 was reported out of Committee with a "do                                                                      
           pass" recommendation  and with a  zero fiscal  note                                                                  
           #1 by Department of Administration and fiscal  note                                                                  
           #2  by the  Department  of  Labor  and  Work  Force                                                                  
           Development.                                                                                                         
                                                                                                                                
 SENATE BILL NO. 120                                                                                                          
                                                                                                                                
      An Act relating  to the state's  sovereign immunity  for                                                                  
      certain actions regarding  injury, illness, or death  of                                                                  
      state-employed  seamen  and  to  workers'  compensation                                                                   
      coverage  for  those   seamen;  and  providing  for   an                                                                  
      effective date.                                                                                                           
                                                                                                                                
 Co-Chair Harris asked  if the Unions  were supportive of  the                                                                  
 proposed legislation.                                                                                                          
                                                                                                                                
 SUSAN COX,  ASSISTANT ATTORNEY  GENERAL, DEPARTMENT  OF  LAW,                                                                  
 advised that there have been hearings in other committees  on                                                                  
 this bill and the  identical House bill,  HB 164.  She  noted                                                                  
 that in the  Senate Labor and Commerce  Committee, the  Union                                                                  
 attorney, Mr. Joe Geldoff  suggested that there be some  kind                                                                  
 of legal  review and  Senator Con  Bunde requested  that  the                                                                  
 Department of Law provide that review.  The Inland Boatman's                                                                   
 Union (IBU) did  have a member testify  in opposition to  the                                                                  
 legislation.  She observed  that testimony seemed to be  more                                                                  
 of a "neutral" observation.                                                                                                    
                                                                                                                                
 Ms.  Cox  continued,  in   the  House  Judiciary  Committee,                                                                   
 Representative  Gara asked  if  the  Inland  Boatman's  Union                                                                  
 (IBU) was for or  against the bill.   The representative  was                                                                  
 not willing  to  take  a position  at  that time.    Ms.  Cox                                                                  
 understood that a  gentleman, Mr. David  Moore, thought  that                                                                  
 the bill  could benefit  98%  of the  members more  than  the                                                                  
 current system does.                                                                                                           
                                                                                                                                
 PETER  LAPINSKI,  (TESTIFIED   VIA  TELECONFERENCE),   INLAND                                                                  
 BOATMANS UNION  (IBU),  KETCHIKAN,  stated  that it  was  the                                                                  
 official position  of  the IBU-Alaska  that they  oppose  the                                                                  
 bill and  that  they do  not want  to  go into  the  worker's                                                                  
 compensation plan.   He stated that  it would be detrimental                                                                   
 to the Union members and not in their best interest.                                                                           
                                                                                                                                
 Co-Chair Harris noted that there had only been one testimony                                                                   
 in opposition to the legislation.                                                                                              
                                                                                                                                
 Co-Chair Harris MOVED to report SB 120 out of Committee  with                                                                  
 individual recommendations and  with the accompanying  fiscal                                                                  
 notes.                                                                                                                         
                                                                                                                                
 Representative Croft OBJECTED.                                                                                                 
                                                                                                                                
 Representative Croft stated  that these employees should  not                                                                  
 be forced out of the Jones Act.  They have testified  through                                                                  
 their Union representative that they do not want the  change.                                                                  
 He  understood  that  worker's compensation   would  severely                                                                  
 limit the benefits and what a jury could award for an  injury                                                                  
 on the job.  The trade-off is that they would receive  a "lot                                                                  
 less money, quicker".  He  recommended that it should be  the                                                                  
 employees that make the decision to change.                                                                                    
                                                                                                                                
 KEVIN  JARDELL,   ASSISTANT   COMMISSIONER,   DEPARTMENT   OF                                                                  
 ADMINISTRATION, noted  that  another IBU  representative  had                                                                  
 testified in the Senate  Judiciary Committee indicating  that                                                                  
 98%-99%  of  their  membership  supports  the  change.    Mr.                                                                  
 Jardell stressed that  the legislation  would provide a  good                                                                  
 policy and that the Administration believes in it.                                                                             
                                                                                                                                
                                                                                                                                
 At-Ease:            9:25 A.M.                                                                                                
 Reconvene:          9:30 A.M.                                                                                                
                                                                                                                                
                                                                                                                                
 Co-Chair Harris asked if  the legislation would require  that                                                                  
 the seamen working  on the Alaska  Highway System would  have                                                                  
 to be under the workmen's compensation insurance rather  than                                                                  
 a different type of protection  system.  Mr. Jardell  replied                                                                  
 that was correct.                                                                                                              
                                                                                                                                
 Co-Chair  Harris  asked  if   at  the  present  time,   those                                                                  
 employees had  the right  to  be under  either system.    Mr.                                                                  
 Jardell stated they did not.   At one time, they did  bargain                                                                  
 to be  included  under  workmen's  compensation.    A  single                                                                  
 individual litigated the issue  of whether it was a  bargain-                                                                  
 able issue.  The Alaska Supreme Court stated that you  cannot                                                                  
 bargain your way  out of the Jones  Act without changing  the                                                                  
 statute asserting the State's immunity.                                                                                        
                                                                                                                                
 SB 120 provides  the statutory authority  to bring the  State                                                                  
 employed seamen under  the worker's compensation  rules.   He                                                                  
 commented that  this  would be  a better  remedy for  a  vast                                                                  
 majority of labor employees on the sea.                                                                                        
                                                                                                                                
 Co-Chair  Harris  asked   the  difference  between  the   two                                                                  
 systems.                                                                                                                       
                                                                                                                                
 Ms. Cox explained  that there are no  fault remedies now  for                                                                  
 seamen.   If a person  becomes injured  or ill  at sea,  they                                                                  
 would be entitled to their wages until the end of the  voyage                                                                  
 without deductions  from  their regular  sick-leave  account.                                                                  
 That person  would receive  their regular  paycheck for  that                                                                  
 voyage.  They  also receive  a maintenance  stipend to  cover                                                                  
 food and  lodging,  which  amounts  to a  $45  dollar  a  day                                                                  
 payment until  they recover  and are  able to  return to  the                                                                  
 vessel.   Ms. Cox  pointed  out that  no fault  remedies  are                                                                  
 currently  being  paid.   In  addition,  if  that  person  is                                                                  
 injured on a vessel and believe that it was the fault  of the                                                                  
 employer, they  would  have the  right  to sue  the  employer                                                                  
 under the Jones Act.  If they do sue, the potential  range of                                                                  
 damages that  could be  recovered would  be more substantial                                                                   
 than would  be available  in the typical,  no-fault  worker's                                                                  
 compensation claim.  She went  on to say that if the  injured                                                                  
 person had no intent  to sue, the $45  dollars a day is  less                                                                  
 significant and  a smaller  payment than  they would  receive                                                                  
 through worker's compensation.   That  payment would be  more                                                                  
 equivalent to 80%  of the net wage,  tax-free.  The  proposed                                                                  
 system would provide as no fault measure more as an  economic                                                                  
 compensation to most  employees with most  injuries.  In  the                                                                  
 case  of  a  more  significant  injury,  the  potential   for                                                                  
 recovery is  greater  under the  Jones  Act but  again,  they                                                                  
 would have to prove fault and would have to hire a lawyer  to                                                                  
 do it.                                                                                                                         
                                                                                                                                
 Co-Chair Harris clarified that the Jones Act would be  better                                                                  
 if the employee had to sue for damages.  Mr. Jardell  replied                                                                  
 that was  not  always  the  case.   There  is  potentially  a                                                                  
 greater windfall  in the  end with  the Jones  Act;  however,                                                                  
 there have been some instances where it has taken four  years                                                                  
 for the  case to  close.  Whereas,  with  worker's comp,  the                                                                  
 claim pays 80% of net income.   He believed the policy  would                                                                  
 benefit State employees.                                                                                                       
                                                                                                                                
 Representative Stoltze  asked what  was the  definition of  a                                                                  
 "seaman" and  how many  employees would  be included  in  the                                                                  
 legislation.  Ms.  Cox responded that it  would apply to  all                                                                  
 the people  that work  on  the ships  for the  Alaska  Marine                                                                  
 Highway  System.    There  are approximately   650  employees                                                                  
 working on those  ships.  Additionally,  there are employees                                                                   
 that work on  law enforcement and  research vessels who  also                                                                  
 would qualify.                                                                                                                 
                                                                                                                                
 Representative  Stoltze  noted  that  the  legislation  would                                                                  
 affect three  different  State agencies,  the  Department  of                                                                  
 Fish  and  Game,  Department   of  Transportation  &   Public                                                                  
 Facilities and Department of Public Safety.                                                                                    
                                                                                                                                
 Mr. Lapinski explained that  in the current contract, if  the                                                                  
 employee becomes sick or  injured, they would continue to  be                                                                  
 paid until  the  end of  the  voyage.   That  language  would                                                                  
 continue to be  in the contract.   He added  that the  Alaska                                                                  
 Marine  Highway  System  is  a  seasonal  job  and  that  the                                                                  
 employees do not make a lot  of money.  He noted that 70%  of                                                                  
 the employees  receive  a  very  minimal payment.    The  $45                                                                  
 dollars a  day, if they  got sick,  helps them  out and  plus                                                                  
 they receive maintenance on their medical and are paid  until                                                                  
 cured.  Under the workman's  comp, if that employee got  sick                                                                  
 on the job, they  receive nothing.   He stressed it would  be                                                                  
 detrimental to the members.                                                                                                    
                                                                                                                                
 Representative Croft advised  that the legislation would  not                                                                  
 be in the best  interest of the employee.   He stressed  that                                                                  
 there are  "good reasons"  that the  employees  want to  stay                                                                  
 under the Jones Act.  He  recommended that they be given  the                                                                  
 choice.                                                                                                                        
                                                                                                                                
 Co-Chair Harris  interjected  that  some individuals  in  the                                                                  
 Union want it and  some do not.   He stated he would  support                                                                  
 the bill.                                                                                                                      
                                                                                                                                
 A roll call  vote was taken  on the motion  to move the  bill                                                                  
 from Committee.                                                                                                                
                                                                                                                                
 IN FAVOR:      Whitaker, Chenault, Foster, Meyer, Stolze,                                                                      
                Harris, Williams                                                                                                
 OPPOSED:       Croft, Moses                                                                                                    
                                                                                                                                
 Representative  Hawker  and  Representative  Joule  were  not                                                                  
 present for the vote.                                                                                                          
                                                                                                                                
 The MOTION PASSED (7-2).                                                                                                       
                                                                                                                                
 SB 120  was  reported  out  of Committee  with  a  "do  pass"                                                                  
 recommendation  and  with  a  zero  fiscal  note  #1  by  the                                                                  
 Department  of   Administration  and   fiscal   note  #2   by                                                                  
 Department of Labor & Workforce Development.                                                                                   
                                                                                                                                
 SENATE BILL NO. 115                                                                                                          
                                                                                                                                
      An Act allowing expenses of the correctional industries                                                                   
      program  that may  be  financed  from  the correctional                                                                   
      industries fund to include the salaries and benefits  of                                                                  
      state employees.                                                                                                          
                                                                                                                                
 JERRY BURNETT,  DIRECTOR, ADMINISTRATIVE  SERVICES DIVISION,                                                                   
 DEPARTMENT OF  CORRECTIONS, stated  that SB  115 would  allow                                                                  
 the  administrative  costs  of the  Correctional  Industries                                                                   
 Program to  be  paid from  product  revenues instead  of  the                                                                  
 general fund.                                                                                                                  
                                                                                                                                
 Currently, 14 correctional  industry positions are paid  from                                                                  
 the general fund.  By  allowing employee salaries to be  paid                                                                  
 from the correctional industries  fund, the Department  would                                                                  
 be taking  the first  step toward  making the  program  self-                                                                  
 sufficient.                                                                                                                    
                                                                                                                                
 Mr.  Burnett  understood  that  Vice-Chair  Meyer  would   be                                                                  
 providing  a  committee  substitute,  which  originated  from                                                                  
 discussions in the House  State Affairs Committee on HB  161,                                                                  
 the  companion   bill.     The  purpose   of  the   committee                                                                  
 substitute, which  the Department would  support, would  make                                                                  
 it clear  that  the correctional  industries  will cooperate                                                                   
 with and  for  the benefit  of  the private  industry.    The                                                                  
 intent is to insure that  revenues could be increased  enough                                                                  
 to make it self-supporting.   Currently,  $960,000 dollars  a                                                                  
 year is paid in salaries.                                                                                                      
                                                                                                                                
 Representative  Stoltze  inquired  the  plans  for   the  Mt.                                                                  
 McKinley meat processing plant.   Mr. Burnett responded  that                                                                  
 at this point,  the Department of  Natural Resources  through                                                                  
 the  Division  of  Agriculture   will  support  the   product                                                                  
 manager's salaries  within  that plant.   The  Department  of                                                                  
 Corrections will  continue  to provide  security  and  inmate                                                                  
 labor.                                                                                                                         
                                                                                                                                
 Co-Chair Harris asked  if it was scheduled  to be shut  down.                                                                  
 Mr. Burnett  replied that  Department of  Corrections has  no                                                                  
 plans to make changes to that operation.                                                                                       
                                                                                                                                
 Co-Chair Harris  noted  that the  $960,000 dollars  would  be                                                                  
 shifted to  the  correctional industry  fund.   He  asked  if                                                                  
 currently,  the  Department   was  making  $960,000   dollars                                                                  
 through that system.  Mr. Burnett replied that at the  end of                                                                  
 FY03, it is expected that there will be approximately  a $400                                                                  
 thousand dollar  balance.  He  added that  the Department  is                                                                  
 looking  at  a  number  of  ways  to  increase  sales.    The                                                                  
 committee substitute  will  provide  more tools  to  increase                                                                  
 revenues.  He listed  measures that the Department  currently                                                                  
 has undertaken.  Recently,  the Department closed the  Juneau                                                                  
 Alaska Correctional Industries office, which consists  of two                                                                  
 people  and a  $50,000  dollar  a  year  grant  and  will  be                                                                  
 avoiding those costs.  He believed that the Department  would                                                                  
 be able to make the projected amount this year.                                                                                
                                                                                                                                
 Co-Chair Harris  reiterated his  question  if the Department                                                                   
 will make the targeted amount of $960,000 dollars this  year.                                                                  
 Mr. Burnett stated  that they  intent to make  that much  "in                                                                  
 the future".   He reiterated  that they  would be increasing                                                                   
 product sales  and would not  be competing  with the  private                                                                  
 sector.     Current   statute  requires   that  correctional                                                                   
 industries will  not compete with  the private  sector.   The                                                                  
 committee substitute makes that a more positive statement  in                                                                  
 regard to the private sector.                                                                                                  
                                                                                                                                
 Representative  Stoltze  asked  what  Mr.  Burnett  meant  by                                                                  
 "avoiding costs".  Mr. Burnett replied that was in reference                                                                   
 to reducing the  lease costs  and avoiding a  cost that  they                                                                  
 currently have been paying at $50,000 a year.                                                                                  
                                                                                                                                
 Co-Chair Williams indicated that the Committee would wait                                                                      
 for the committee substitute to be presented later this                                                                        
 afternoon.                                                                                                                     
                                                                                                                                
 SB 115 was HELD in Committee for further consideration.                                                                        
                                                                                                                                
 HOUSE BILL NO. 61                                                                                                              
                                                                                                                                
      An  Act  establishing  an exploration   and development                                                                   
      incentive  tax  credit   for  persons  engaged  in   the                                                                  
      exploration  for  and  development  of  less  than   150                                                                  
      barrels of oil or of  gas for sale and delivery  without                                                                  
      reference to  volume from  a lease  or property  in  the                                                                  
      state; and providing for an effective date.                                                                               
                                                                                                                                
Representative  Chenault MOVED  to  ADOPT Amendment  #1,  #23-                                                                  
LS0270\Q.4,  Chenoweth, 4/24/03.   (Copy on  File).   Co-Chair                                                                  
Williams OBJECTED for purposes of discussion.                                                                                   
                                                                                                                                
Representative  Chenault explained  that the  amendment  would                                                                  
address concerns voiced  by Representative Hawker at the  last                                                                  
meeting.  The new  language would establish the parameters  of                                                                  
when the tax credit can happen.                                                                                                 
                                                                                                                                
Co-Chair Williams WITHDREW his OBJECTION.                                                                                       
                                                                                                                                
There being NO further OBJECTION, Amendment #1 was adopted.                                                                     
                                                                                                                                
Representative  Chenault MOVED  to  ADOPT Amendment  #2,  #23-                                                                  
LS0270\Q.2,  Chenoweth, 4/24/03.   (Copy on  File).   Co-Chair                                                                  
Harris OBJECTED for purposes of discussion.                                                                                     
                                                                                                                                
Representative  Chenault  explained that  Amendment  #2  would                                                                  
address concerns regarding  "operators".  The amendment  would                                                                  
change the  current language  of "person"  to "operators"  and                                                                  
would  insert  language  on  Page  1,  Line  9:  "That  is  an                                                                  
operator or working interest owner directly".                                                                                   
                                                                                                                                
Co-Chair Harris WITHDREW his OBJECTION.                                                                                         
                                                                                                                                
There being NO further OBJECTION, Amendment #2 was adopted.                                                                     
                                                                                                                                
Representative  Chenault MOVED  to  adopt Amendment  #3,  #23-                                                                  
LS0270\Q.3,  Chenoweth, 4/24/03.   (Copy on  File).   Co-Chair                                                                  
Harris OBJECTED for purposes of discussion.                                                                                     
                                                                                                                                
Representative  Chenault explained that  Amendment #3  inserts                                                                  
new language at the  request of the Department.  The language                                                                   
would tie  the bill  in with  income tax  credit by inserting                                                                   
that language on Page  2, Line 7:  "In or before the tax  year                                                                  
in which the credit  is claimed through the date the reserves                                                                   
produce gas for sale and delivery".                                                                                             
                                                                                                                                
Co-Chair Harris WITHDREW his OBJECTION.                                                                                         
                                                                                                                                
There being NO further OBJECTION, Amendment #3 was adopted.                                                                     
                                                                                                                                
Representative Foster  MOVED to report CS  HB 61 (FIN) out  of                                                                  
Committee  with  individual   recommendations  and  with   the                                                                  
accompanying fiscal notes.                                                                                                      
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
CS  HB 61  (FIN) was  reported  out of  Committee with  a  "do                                                                  
pass"  recommendation and  with  zero fiscal  note #1  by  the                                                                  
Department of  Natural Resources  and zero fiscal  note #2  by                                                                  
the Department of Revenue.                                                                                                      
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 9:48 A.M.                                                                                          
                                                                                                                                

Document Name Date/Time Subjects