Legislature(2005 - 2006)HOUSE FINANCE 519

03/02/2005 01:30 PM FINANCE

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Heard & Held
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                  HOUSE FINANCE COMMITTEE                                                                                       
                       March 2, 2005                                                                                            
                         1:44 P.M.                                                                                              
CALL TO ORDER                                                                                                                 
Co-Chair Meyer called the House  Finance Committee meeting to                                                                   
order at 1:44:45 PM.                                                                                                          
MEMBERS PRESENT                                                                                                               
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Bill Stoltze, Vice-Chair                                                                                         
Representative Eric Croft                                                                                                       
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Jim Holm                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Bruce Weyhrauch                                                                                                  
MEMBERS ABSENT                                                                                                                
Representative Mike Kelly                                                                                                       
ALSO PRESENT                                                                                                                  
Representative  Tom Anderson,  Sponsor;  Jon Bittner,  Staff,                                                                   
Representative   Tom  Anderson;   Grey  Mitchell,   Director,                                                                   
Division of Labor  Standards and Safety, Department  of Labor                                                                   
and Workforce Development; Jeff  DeSmet, President, Southeast                                                                   
Home  Builders Association,  Juneau;  John Bitney,  Lobbyist,                                                                   
Alaska  State  Home  Building  Association  (ASHBA);  Shannon                                                                   
Straube, Staff,  Senator Ben  Stevens; Diane Casto,  Manager,                                                                   
Division of Behavior Health, Department  of Health and Social                                                                   
Services;  Pat  Davidson,  Legislative  Auditor,  Legislative                                                                   
Audit  Division;  Alan  Wilson,   Southeast  Alaska  Building                                                                   
Association, Juneau                                                                                                             
PRESENT VIA TELECONFERENCE                                                                                                    
Tom   Larkin,  Unregistered   Contractor,   Fairbanks;   Dave                                                                   
Dillard,  Alaska  Home Builders,  Fairbanks;  Richard  Tilly,                                                                   
Alaska  Home Builders,  Fairbanks; Jack  Hebert, Alaska  Home                                                                   
Builders,  Fairbanks;  Mike Musick,  Fairbanks;  Roger  Nash,                                                                   
Real  Estate  Appraiser,  Fairbanks;   William  Bruu,  Matsu;                                                                   
Rockwell  Smith,  Preferred  Plumbing   and  Heating,  Kenai;                                                                   
Jeremy Riddle,  General Contractor,  Fairbanks; Wally  Smith,                                                                   
General Contractor, Fairbanks                                                                                                   
HB 81     An Act establishing an administrative fine and                                                                        
          procedure  for construction contractors  in certain                                                                   
          circumstances;  increasing  the amount  of a  civil                                                                   
          penalty  for  persons  acting  in the  capacity  of                                                                   
          contractors  or  home   inspectors;  modifying  the                                                                   
          elements   of   a    crime   involving   contractor                                                                   
          registration   and  residential  contractors;   and                                                                   
          exempting the administrative  hearings for imposing                                                                   
          an administrative fine  on construction contractors                                                                   
          from  the  hearings  conducted  by  the  office  of                                                                   
          administrative   hearings  in  the   Department  of                                                                   
          HB 81  was HEARD and HELD in Committee  for further                                                                   
SB 60     An Act extending the termination date of the                                                                          
          Statewide    Suicide   Prevention    Council;   and                                                                   
          providing for an effective date.                                                                                      
          SB 60 was HEARD and HELD in Committee for further                                                                     
1:45:01 PM                                                                                                                    
HOUSE BILL NO. 81                                                                                                             
     An   Act  establishing   an   administrative  fine   and                                                                   
     procedure  for   construction  contractors   in  certain                                                                   
     circumstances; increasing  the amount of a civil penalty                                                                   
     for  persons acting  in the capacity  of contractors  or                                                                   
     home  inspectors;  modifying  the  elements of  a  crime                                                                   
     involving   contractor  registration   and   residential                                                                   
     contractors;  and exempting the administrative  hearings                                                                   
     for  imposing  an administrative  fine  on  construction                                                                   
     contractors  from the hearings  conducted by  the office                                                                   
     of  administrative   hearings   in  the  Department   of                                                                   
1:45:43 PM                                                                                                                    
REPRESENTATIVE  TOM ANDERSON,  SPONSOR, explained that  under                                                                   
current law,  the State of  Alaska investigates  and enforces                                                                   
violations  of  construction   contractor  laws.    Both  the                                                                   
Department  of  Labor  and Commerce  and  the  Department  of                                                                   
Community  & Economic  Development have  authority to  pursue                                                                   
violations  of work  performed  by unregistered  construction                                                                   
contractors.   For the most part,  they rely upon  the public                                                                   
complaints and follow up with  investigations.  Under current                                                                   
laws, these agencies enforce violation  by issuing citations.                                                                   
After  a  citation  is  issued,  the  impetus  falls  to  the                                                                   
Department  of Law  as to  whether  or not  to prosecute  the                                                                   
matter in Court.                                                                                                                
Representative   Anderson   noted   that  with   over   1,600                                                                   
unregistered  contractors  operating   under  the  exemption,                                                                   
numerous  reports  have  been  made  about  the  unregistered                                                                   
businesses  offering construction  services  in violation  of                                                                   
the laws.   Enforcement efforts  have proven to  be difficult                                                                   
and many  consumers are unaware  their contractor may  not be                                                                   
qualified to  provide construction  services and  have little                                                                   
or no insurance and warranty protections.                                                                                       
HB 81 would  amend the law  to allow the Department  of Labor                                                                   
and  the  Department   of  Commerce,  Community   &  Economic                                                                   
Development   to  issue  civil   penalties  for   violations.                                                                   
Instead of  going through the  Department of Law,  a violator                                                                   
would either  pay a  fine (proposed at  $1,000 for  the first                                                                   
violation and $1,500 for subsequent  violations) or appeal to                                                                   
an administrative hearing officer.   The system would be much                                                                   
more  effective   toward  penalizing  first-time   violations                                                                   
quickly and  effectively.  The  departments would  retain the                                                                   
option  of  going  through  the  current  criminal  violation                                                                   
process if the fines do not deter a violator.                                                                                   
Representative  Anderson  pointed   out  a  loophole  in  the                                                                   
contractor exemption  statutes that allows  small contracting                                                                   
companies to operate  without a license.  That  has also been                                                                   
closed.    Previously,  an  individual   could  file  for  an                                                                   
exemption  and build  a  residential or  commercial  property                                                                   
every year.   Under HB 81,  the time limit  between buildings                                                                   
would be  raised to 2 years  of occupancy.   Individuals, who                                                                   
need to,  could file for a  hardship waiver to  build another                                                                   
property before the two-year minimum.                                                                                           
1:48:19 PM                                                                                                                    
Representative  Anderson  pointed out  that  HB  81 had  been                                                                   
changed at  the request of  Representative Rokeberg  that the                                                                   
builder  occupy the  house they  built for  no less than  two                                                                   
consecutive  years.   In the  original  bill, the  contractor                                                                   
would have to live in the house  for three consecutive years.                                                                   
The intent of the legislation  is to curb situations in which                                                                   
offsprings  of contractors  construct  houses  and then  sell                                                                   
them quickly.   He interjected that they are  building a home                                                                   
every year  and then  claiming it as  their residence.   They                                                                   
are abusing  their privileges.   HB 81  requires that  if you                                                                   
are not  a registered  general contractor,  the builder  must                                                                   
live in the structure for at least two years.                                                                                   
Representative Anderson urged  the Committee's support of the                                                                   
legislation,  pointing  out that  the  community  homebuilder                                                                   
associations are in support of it.                                                                                              
1:51:13 PM                                                                                                                    
Representative Croft  inquired what are the  requirements for                                                                   
a contractor outside of bonding  and licensing.  He asked the                                                                   
price of a bond.  Representative Anderson did not know.                                                                         
Representative  Croft questioned  if the contractors  license                                                                   
could  be  pulled  if  they  were  not  operating  ethically.                                                                   
Representative  Anderson replied  it could.   If the  builder                                                                   
did  not  have the  license  and  bonding  and they  built  a                                                                   
defective home, the buyer would have no recourse.                                                                               
Representative Croft  asked if the money gathered  from fines                                                                   
could  be  used for  enforcement.    Representative  Anderson                                                                   
replied that language had not  been included.  Co-Chair Meyer                                                                   
agreed it was a good idea.                                                                                                      
1:53:10 PM                                                                                                                    
Representative  Holm  observed   that  not  everyone  gets  a                                                                   
residential endorsement on a contractors bond.                                                                                  
Co-Chair  Chenault  inquired  how  many fines  per  year  are                                                                   
levied  and  what  the  newly  proposed  increase  would  be.                                                                   
Representative  Anderson recommended  that  someone from  the                                                                   
Department address that question.                                                                                               
1:55:16 PM                                                                                                                    
GREY  MITCHELL, DIRECTOR,  DIVISION  OF  LABOR STANDARDS  AND                                                                   
SAFETY,  DEPARTMENT  OF  LABOR   AND  WORKFORCE  DEVELOPMENT,                                                                   
advised that essentially  there are 250 assist  orders issued                                                                   
per year  and relatively  few  fines issued.   Over the  past                                                                   
five years, perhaps  only a dozen have proceeded  through the                                                                   
criminal system,  resulting in a  fine.  He stressed  that it                                                                   
is  difficult  to  reach  the  level  of  proof  required  in                                                                   
criminal prosecution, which is the reason for HB 81.                                                                            
Representative  Holm  interjected   that  it  should  not  be                                                                   
considered criminal  status for a person attempting  to "feed                                                                   
their  family".   He  questioned  how far  the  bar could  be                                                                   
Mr. Mitchell advised  that is the reason that  the bill makes                                                                   
sense.  Currently,  the only enforcement action  is to pursue                                                                   
a criminal prosecution.  The legislation  establishes another                                                                   
mechanism to  address violations.   The builder would  have a                                                                   
new  consideration in  regards  to the  administrative  fine.                                                                   
Essentially, there  would be a quicker result  for those that                                                                   
are  following  the rules.    Additionally, it  protects  the                                                                   
public.  HB 81  attempts to make it easier,  making a penalty                                                                   
that fits the violation.                                                                                                        
1:58:46 PM                                                                                                                    
Representative Croft  asked how onerous are  the requirements                                                                   
for a contractor  to get licensed and bonding.   Mr. Mitchell                                                                   
did not know bonding costs.                                                                                                     
Representative Croft  asked how involved of a  process was it                                                                   
to  get  a  license.    Mr.  Mitchell   explained  it  is  an                                                                   
application  process  through  the Division  of  Occupational                                                                   
Licensing.  After  the application is filled  out, proof must                                                                   
be submitted  for bonding  and insurance  requirements.   Mr.                                                                   
Mitchell did not  know the turn around time for  that.  Also,                                                                   
there  is a  residential  endorsement  test  for the  general                                                                   
contractors building single-family residences.                                                                                  
Representative Croft  inquired if the main cost  would be the                                                                   
insurance requirement.  Mr. Mitchell  stated that was not his                                                                   
area of expertise.                                                                                                              
Representative   Weyhrauch  asked   about   Section  3,   the                                                                   
injunction  civil penalty.   He asked  why the Department  of                                                                   
Commerce, Community & Economic  Development and Department of                                                                   
Labor &  Workforce Development  had been  singled out  rather                                                                   
than just  saying the State of  Alaska.  He pointed  out that                                                                   
the Department of Law is the agency  that would institute the                                                                   
action.   Mr. Mitchell  did not  know, recommending  that the                                                                   
sponsor address  that.  He pointed  out that he had  not been                                                                   
involved in  drafting the legislation; however,  assumed that                                                                   
the reason those two departments  had been listed was because                                                                   
they  are  the  ones  that  have  authority  over  contractor                                                                   
JON BITTNER, STAFF, REPRESENTATIVE  TOM ANDERSON, pointed out                                                                   
that language is in current statute.                                                                                            
2:02:49 PM                                                                                                                    
In  response   to  further   questioning  by   Representative                                                                   
Weyhrauch,  Mr.   Mitchell  explained  that   the  separation                                                                   
results from the two different licenses being discussed.                                                                        
2:03:44 PM                                                                                                                    
JEFF DESMET, PRESIDENT, SOUTHEAST  HOME BUILDERS ASSOCIATION,                                                                   
JUNEAU,  voiced  strong support  for  HB  81.   He  addressed                                                                   
questions  and  concerns  of  the  Committee,  referencing  a                                                                   
situation in  Juneau, where a  confrontation was made  over a                                                                   
loophole regarding  whether the  contractor was  a registered                                                                   
licensed  contractor and  then  selling his  own owner  built                                                                   
home within sixty  days.  That contractor violated  the law's                                                                   
intent.   He  did  not have  a general  contractors  license,                                                                   
violated the  residentual endorsement  and the intent  of the                                                                   
law.  He plumbed  and wired the house himself,  violating the                                                                   
mechanical  code.   Mr.  DeSmet added  that  the builder  had                                                                   
hired  illegal subcontractors  that  he did  not have  proper                                                                   
Mr. DeSmet  stressed that contracting  is expensive  and that                                                                   
being in business is expensive but not impossible.                                                                              
Mr. DeSmet noted that the law  stipulates that a handyman can                                                                   
operate  within   a  $5,000  dollar  limit.     The  builders                                                                   
associations  welcome people  that  do those  jobs and  stays                                                                   
within that limit.  He mentioned  that over the years, he has                                                                   
formed relationships  with all the various law  enforcers and                                                                   
that during  that  time, only  one of his  requests had  been                                                                   
Mr. DeSmet reiterated his support for the legislation.                                                                          
2:08:17 PM                                                                                                                    
Vice-Chair Stoltze  noted that he supported  the requirements                                                                   
and asked  if the  banking industry  provided any  safeguards                                                                   
around the  concern.  Mr.  DeSmet explained that  bankers are                                                                   
eager to  make loans.  The  building associations  prefer not                                                                   
to  spend  time mediating  problems  when  the bank  is  left                                                                   
holding the  bag.  In  some of situations,  the banks  do not                                                                   
deal with the  owner/builder.  The market is  competitive and                                                                   
the bank has to weigh the options.                                                                                              
Vice-Chair  Stoltze  questioned  if  houses  in  Juneau  were                                                                   
moving so quickly  that the banks just "blink and  nod".  Mr.                                                                   
DeSmet  responded  that bankers  do  not  want to  deal  with                                                                   
owner/builders  but if  they have  a  financial package,  the                                                                   
bank will usually take the risk.                                                                                                
2:10:18 PM                                                                                                                    
Representative Foster  inquired where the  examples mentioned                                                                   
by Mr. DeSmet had occurred.  Mr. DeSmet replied in Juneau.                                                                      
Representative Foster  asked which populations  of the State,                                                                   
the  bill would  be affecting.   He  indicated his  confusion                                                                   
with the language indicating less  than 1,000 residents.  Mr.                                                                   
DeSmet  understood  that  the  exemptions apply  to  what  is                                                                   
indicated  in  the  language  and  that  there  would  be  no                                                                   
exemptions   in  Juneau   or  Anchorage.     Co-Chair   Meyer                                                                   
recommended the sponsor answer that query.                                                                                      
Representative  Croft   summarized  that  a   problem  exists                                                                   
because  if there  is a  problem  with the  built house,  the                                                                   
builder might  not have  the bonding  or insurance  to insure                                                                   
repairs.  The buyer would then  have no recourse.  Mr. DeSmet                                                                   
acknowledged that  was correct.  The buyer  could possibly go                                                                   
after the builder's personal assets.                                                                                            
Representative  Croft inquired how  much insurance  costs per                                                                   
year.   Mr. DeSmet  replied for a  small volume builder,  the                                                                   
contractors  is   required  to  buy  a   general  contractors                                                                   
license,  exclusive  for  residential,  renewable  every  two                                                                   
years   at  $250   dollars.     A   residential   endorsement                                                                   
requirement is $100  dollars for a two year  period; however,                                                                   
along  with  that  comes  the  requirement  for  16-hours  of                                                                   
continuing education  units for every license period.   For a                                                                   
new comer, the  handyman stepping into the  next realm, there                                                                   
is  an   arctic  engineering   class  required.  It   is  not                                                                   
impossible  to  take  that  test  and  the  test  is  not  as                                                                   
difficult as the administered in California.                                                                                    
Mr. DeSmet  noted that it costs  about $600 per year  for the                                                                   
bonding  of   $10,000.     Liability  insurance   has  become                                                                   
problematic  and costs $5,000  to $8,000  per year,  based on                                                                   
the gross  income sales.   A policy  limit would be  at least                                                                   
$100,000  dollars.    He  added   that  it  is  getting  more                                                                   
difficult to find liability insurance.                                                                                          
Representative  Croft assumed that  insurance is  the largest                                                                   
cost.    He  asked  why  the   "handymen"  are  not  becoming                                                                   
contractors.   Mr. DeSmet responded that through  a loophole,                                                                   
they end  up "putting  more money  in their  pocket".   Their                                                                   
selling rates are  often the same as the  general contractors                                                                   
but  they  end  up  making  more  money  by  doing  a  "cash"                                                                   
2:16:29 PM                                                                                                                    
Mr. DeSmet pointed  out that it makes the  professionals look                                                                   
bad given the faulty workmanship.                                                                                               
Mr. Bittner revisited Representative  Foster's concern noting                                                                   
that both provisions would have to be met:                                                                                      
  ·    A community would have to be less than a 1,000 and                                                                       
  ·    Not connected by a road to Fairbanks or Anchorage.                                                                       
Representative  Foster pointed  out  that Nome  would not  be                                                                   
exempt  as  there are  over  1,000  residents.   Mr.  Bittner                                                                   
claimed that  was correct.  He  reiterated that if  there are                                                                   
over  1,000  residents,   the  community  does   not  get  an                                                                   
2:18:16 PM                                                                                                                    
TODD  LARKIN, (TESTIFIED  VIA  TELECONFERENCE),  UNREGISTERED                                                                   
CONTRACTOR,   FAIRBANKS,  testified   against  the   proposed                                                                   
legislation, noting  that he was a handyman  in the Fairbanks                                                                   
area.   He added that  he does  "punch lists" for  registered                                                                   
general  contractors working  on  projects far  in excess  of                                                                   
$5,000  dollars.   In  current  law,  it is  questionable  if                                                                   
working for those contractors  is legal.   If the law passes,                                                                   
he believed  that he would  be legal  one day and  a criminal                                                                   
the next.                                                                                                                       
Mr. Larkin  encouraged the Committee  to take  an alternative                                                                   
route that  would protect consumers.   He commented  that the                                                                   
bill contradicts its own premise.   If a citizen is qualified                                                                   
to act as their own contractor,  then that same person should                                                                   
be  qualified to  build  a house  every  month.   Mr.  Larkin                                                                   
claimed  that if  occupancy  is the  standard  but which  the                                                                   
problems  of poor  building appear,  at the  very least,  the                                                                   
occupancy   requirement   should    be   replaced   with   an                                                                   
alternative,  possibly  two years  occupancy  or three  years                                                                   
rental history  with the  owner/operator acting as  landlord.                                                                   
He believed that  within three years, every  consumer problem                                                                   
would come to light.                                                                                                            
Mr. Larkin pointed out that there  are strong disclosure laws                                                                   
in  the State  of  Alaska  and that  the  banks  are a  self-                                                                   
policing agent.   He believed that could be  a powerful force                                                                   
in the market.                                                                                                                  
Mr. Larken  voiced concern  that passage  of the  legislation                                                                   
would  put him  in danger  of citation,  making his  business                                                                   
practices  illegal.    He urged  that the Committee  consider                                                                   
that the  bill would raise rates  to consumers.  If  the goal                                                                   
is  consumer  protection,  there  are  other  avenues.    The                                                                   
occupancy  permit could  be augmented  by  a possible  rental                                                                   
policy or making builders directly  liable for the homes that                                                                   
they build, by making standards  statutorily constructed with                                                                   
a three-year  warranty for every  house built.   He mentioned                                                                   
costs associated with civil litigation.   Mr. Larken believed                                                                   
that if  proof were  set in  law, the  bad builders  would go                                                                   
2:26:09 PM                                                                                                                    
DAVE  DILLARD,  (TESTIFIED  VIA  TELECONFERENCE),  PRESIDENT,                                                                   
ALASKA   HOME   BUILDERS,   FAIRBANKS,    spoke   to   market                                                                   
competition.   He  acknowledged  that the  industry needs  to                                                                   
have handymen.  They need to be  included in the market place                                                                   
for those jobs  under $5,000 dollars.  However,  for projects                                                                   
over $5,000,  it could  be possible to  work for  the general                                                                   
contractor  and   then  the  builder  would   be  covered  by                                                                   
workman's comp.  He reiterated  that good, qualified handymen                                                                   
are important.                                                                                                                  
Mr. Dillard  continued, if everyone takes  responsibility for                                                                   
the work that  they do, the legislation would  not be needed.                                                                   
The largest problem is the home/owner  builder, who sells the                                                                   
built house  quickly.  He  warned that costs  associated with                                                                   
insurance  are  high, continuing  to  "sky rocket"  and  that                                                                   
workmen's compensation insurance  costs are incredible.  This                                                                   
year,  those costs  are anticipated  to be  26% of the  gross                                                                   
sales.   Mr.  Dillard  urged  that  the Legislature  help  to                                                                   
address these problems.                                                                                                         
2:32:52 PM                                                                                                                    
RICHARD TILLY,   (TESTIFIED VIA TELECONFERENCE),  ALASKA HOME                                                                   
BUILDERS,  FAIRBANKS, commented  on the  section of  the bill                                                                   
addressing whether  the home was occupied by  the builder and                                                                   
the length of  time for occupancy.  He emphasized  that there                                                                   
are numerous  builders  statewide following  the rules.   The                                                                   
other  ones that are  building  the homes are  not doing  the                                                                   
work legitimately.  They are committing a crime.                                                                                
Mr. Tilly  spoke to  high insurance  costs.   He pointed  out                                                                   
that  if there  were  an accident  on  the  premise, it  then                                                                   
becomes the homeowner's responsibility  if the builder is not                                                                   
Mr. Tilly echoed  his support for the bill.   He acknowledged                                                                   
that  there  is a  place  for  the handyman  in  the  market,                                                                   
handling jobs  under $5,000 dollars.   He requested  that the                                                                   
Legislature  deal with  the builders  that are  circumventing                                                                   
rules and laws.                                                                                                                 
2:34:59 PM                                                                                                                    
JACK  HEBERT,  (TESTIFIED VIA  TELECONFERENCE),  ALASKA  HOME                                                                   
BUILDERS,  FAIRBANKS, noted  that he  has been designing  and                                                                   
building in Interior Alaska since  1973.  He urged passage of                                                                   
the legislation.   He agreed  that the tradition  of building                                                                   
ones   own  homes   is  ingrained   and   clearly  what   the                                                                   
owner/builder  is all about.   However,  Alaska has  grown in                                                                   
complexity   and  the   costs  of  being   in  business   are                                                                   
complicated and expensive.   The issue needs  to be addressed                                                                   
and must be regulated.  He stressed  that the liabilities are                                                                   
"killers" for the industry.                                                                                                     
Representative  Holm  asked  if the  legislation  would  have                                                                   
ramifications on  "closed shop"  in the industry  or required                                                                   
union  participation  versus  non-union  work.    Mr.  Hebert                                                                   
responded  that he  is personally  is an  "open" union  shop.                                                                   
The option is given  on the residential side.   He noted that                                                                   
his  agreement with  the union  is  that he  can hire  either                                                                   
union or non-union  workers.  He noted that  working with the                                                                   
Fairbanks  unions has  been flexible.   He  pointed out  that                                                                   
workers sometimes  prefer the union  option so that  they can                                                                   
get affordable  health  insurance.  He  commented that  union                                                                   
involvement was not the issue.                                                                                                  
2:39:52 PM                                                                                                                    
MIKE  MUSICK,  (TESTIFIED  VIA   TELECONFERENCE),  PRESIDENT,                                                                   
INTERIOR BUILDING ASSOCIATION,  FAIRBANKS, voiced support for                                                                   
the legislation.  He pointed out  that the difference between                                                                   
himself and the  handyman is that the general  contractor has                                                                   
to go  through 16 hours  continuing education every  year two                                                                   
years in  order to be able  to better understand  the physics                                                                   
of how buildings  operate.  That differs from  someone coming                                                                   
in  from  out of  state.    He informed  members  that  those                                                                   
trainings relate to Alaskan concerns.   He urged that the bar                                                                   
be raised so that all builders are trained properly.                                                                            
Representative  Holm mentioned vapor  barrier concerns.   Mr.                                                                   
Musick  explained that  when  vapor barriers  are  improperly                                                                   
installed, the relative humidity  and temperature can rot the                                                                   
structure  to the  extent  that it  could  break the  framing                                                                   
within five years.                                                                                                              
2:43:03 PM                                                                                                                    
JEREMY  RIDDLE, (TESTIFIED  VIA  TELECONFERENCE),  FAIRBANKS,                                                                   
commented  on his personal  business practices.   He  pointed                                                                   
out  that those  that are  operating  illegally had  undercut                                                                   
him.  He emphasized that a handyman  license allows a builder                                                                   
to be in business with zero overhead.   When someone does not                                                                   
have to carry the expense of insurance  and bonding undercuts                                                                   
the  contractor, it  puts all  employees at  risk.   Builders                                                                   
cannot compete with someone that  is not carrying the burden.                                                                   
Mr. Riddle  stressed that the  legislation would  protect the                                                                   
consumer  and eliminates  unfair advantages  for the  "owner-                                                                   
builder" contracts.                                                                                                             
ROGER   NASH,   (TESTIFIED   VIA    TELECONFERENCE),   REALTY                                                                   
APPRAISER, FAIRBANKS,  spoke in support  of HB 81.   He noted                                                                   
that responsibility for quality  falls back to the appraiser.                                                                   
WALLY   SMITH,  (TESTIFIED   VIA   TELECONFERENCE),   GENERAL                                                                   
CONTRACTOR,  FAIRBANKS, voiced  support for the  legislation.                                                                   
He noted that  he does small remodel projects  and deals with                                                                   
handymen that  do not have  education, insurance  or consumer                                                                   
protection.  He urged that the regulations be enforced.                                                                         
WILLIAM  BRUU,  (TESTIFIED  VIA  TELECONFERENCE),  INSPECTOR,                                                                   
MATSU, addressed the exemption  of applying the bill in rural                                                                   
Alaska.   He  recounted numerous  homes he  had inspected  in                                                                   
rural Alaska.   He  felt that the  rules should be  enforced.                                                                   
That  part of  Alaska should  no  longer be  exempted as  the                                                                   
legislation  is  designed to  protect  the consumer.    Rural                                                                   
Alaska  is being  "victimized"  by contractors  that are  not                                                                   
licensed or bonded.                                                                                                             
Vice-Chair  Stoltze pointed  out that  there are fewer  rural                                                                   
exemptions  than  in the  past.    Mr.  Bruu asked  that  any                                                                   
exemption in rural  Alaska be eliminated, as it  is unfair to                                                                   
those people living in such severe conditions.                                                                                  
ROCKWELL  SMITH, (TESTIFIED  VIA  TELECONFERENCE),  PREFERRED                                                                   
PLUMBING AND HEATING,  KENAI, testified in support  of HB 81.                                                                   
He noted  that he  has held an  Alaskan plumbing  license and                                                                   
has been a mechanical  contractor for 25 years,  with over 15                                                                   
full-time  employees.    He  provided   an  overview  of  the                                                                   
building process  on the  Kenai Peninsula.   Inside  the city                                                                   
limits of Kenai, Soldotna & Seward,  general contractors must                                                                   
apply for a building permit and  post bond permits at the job                                                                   
site before beginning.                                                                                                          
Mr. Smith overviewed a list of  licensing infractions that he                                                                   
had seen  in the recent  past.   He sited specific  examples.                                                                   
The  problem   is  not  with  competition  but   with  unfair                                                                   
competition,  poor workmanship  and improper training,  which                                                                   
can result in hazardous situations  and code violations.  The                                                                   
concerns can be  remedied.  Laws need to be  enforced as well                                                                   
as the penalties.                                                                                                               
Mr. Smith  pointed out  at present, the  impetus to  take the                                                                   
mechanical, electrical,  or general contractors  exam, obtain                                                                   
insurance and bonding, and complete  the continuing education                                                                   
required in order to retain the  license is non-existent.  He                                                                   
stressed  that enforcement  is lax, penalties  are weak,  and                                                                   
the building community  has a "blind eye" to  the violations,                                                                   
which    costs   honest,    legitimate   businesses    money,                                                                   
shortchanges   consumers,   and  undermines   public   safety                                                                   
standards and building codes.                                                                                                   
3:03:08 PM                                                                                                                    
Vice-Chair  Stoltze  asked  if  it  is  difficult  to  get  a                                                                   
building permit in Juneau.                                                                                                      
ALAN WILSON,  SOUTHEAST ALASKA BUILDING ASSOCIATION,  JUNEAU,                                                                   
replied  that  it is  difficult.    He echoed  sentiments  of                                                                   
previous  testimony   regarding  the  urgent  need   for  the                                                                   
3:04:15 PM                                                                                                                    
Co-Chair  Meyer  noted  that   the  bill  would  be  held  in                                                                   
Committee to address some of the issues raised.                                                                                 
HB 81 was HELD in Committee for further consideration.                                                                          
3:04:58 PM                                                                                                                    
SENATE BILL NO. 60                                                                                                            
     An Act extending the termination date of the Statewide                                                                     
     Suicide Prevention Council; and providing for an                                                                           
     effective date.                                                                                                            
SHANNON  STRAUBE, STAFF,  SENATOR  BEN STEVENS,  stated  that                                                                   
suicide is  an Alaskan  tragedy.   On average, suicide  takes                                                                   
130 Alaskans every  year, which is nearly twice  the national                                                                   
average.  With  Alaska's large geography,  multiple cultures,                                                                   
and  many communities,  addressing suicide  is a  complicated                                                                   
Ms.  Straube  continued,  in   2001,  the  22   Alaska  State                                                                   
Legislature  enacted legislation  that created the  Statewide                                                                   
Suicide  Prevention Council  (SSPC)  and tasked  it with  the                                                                   
mission to  reduce suicide  through coordination  with public                                                                   
and  private entities  as well  as its  own initiatives,  and                                                                   
broaden  suicide  awareness.     Under  A.S.  44.29.350,  the                                                                   
Council  is charged  with advising  the  Legislature and  the                                                                   
Governor on "actions that can  and should be taken to improve                                                                   
health and wellness throughout  the State by reducing suicide                                                                   
and its effect on individuals, families and communities."                                                                       
The  Council is  made  up  of 15  members.   In  addition  to                                                                   
legislative  and executive  branch  members,  there are  nine                                                                   
public members.   The public  appointments represent  a broad                                                                   
spectrum  of individuals  from rural  and urban  communities,                                                                   
clergy,  youth, and behavioral  health  community.  There  is                                                                   
one part-time staff person to  coordinate council activities.                                                                   
Ms. Straube  noted that  among the Council's  accomplishments                                                                   
is a  statewide suicide  prevention plan.   The plan  sets up                                                                   
goals and strategies for suicide  prevention.  Currently, the                                                                   
Council is also in the process  of implementing a Follow Back                                                                   
Study and  a public awareness  campaign.  The  media campaign                                                                   
fulfils the Council's mission  to educate Alaskans on suicide                                                                   
and its devastating effects.                                                                                                    
Ms.  Straube continued  that  the  findings from  a  recently                                                                   
conducted sunset  audit recommend the SSPC continue  the work                                                                   
of  research,  broadening  public   awareness,  collaborating                                                                   
prevention and  intervention efforts around the  State and in                                                                   
making recommendations to the Governor and Legislature.                                                                       
Ms.  Straube concluded  that SB  60  extends the  termination                                                                   
date of the  Council to 2009, which will allow  the statewide                                                                   
Suicide Prevention Council to continue in the work.                                                                             
3:07:43 PM                                                                                                                    
PAT   DAVIDSON,  LEGISLATIVE   AUDITOR,   LEGISLATIVE   AUDIT                                                                   
DIVISION, noted  that  the  Division conducted  an  audit  to                                                                   
determine if the termination date  for the Suicide Prevention                                                                   
Council should be extended.                                                                                                     
She pointed out that the Council  advises the Legislature and                                                                   
the Governor  on suicide  and suicide  prevention in  Alaska.                                                                   
Recently,   the  Council   completed   a  statewide   suicide                                                                   
prevention plan,  which establishes goals and  strategies for                                                                   
suicide prevention.   The Council has been  providing suicide                                                                   
prevention   training,    coordinating   statewide    suicide                                                                   
prevention  efforts  and  provides  technical  assistance  to                                                                   
communities  as they develop  their own  plans.  The  Council                                                                   
has been operating in public interest  in a manner consistent                                                                   
with its statutory responsibilities.                                                                                            
Ms. Davidson noted that the termination  date for the Council                                                                   
is  June   30,  2005;  the   Division  recommends   that  the                                                                   
termination date be extended until June 30, 2009.                                                                               
She  continued, during  the review,  the Division  identified                                                                   
that Council funds were misspent  by the Department of Health                                                                   
and Social  Services.   Additionally, unclear  communications                                                                   
between the Department and the  Council about available funds                                                                   
resulted  in  the  Council  curtailing  some  activities  and                                                                   
ultimately, lapsing over 60% of the original funding.                                                                           
Ms. Davidson  advised that  in the  report, the Division  has                                                                   
made recommendations for improvements including:                                                                                
   ·    1. That the community based suicide prevention                                                                          
        grants issued by the Department of  Health and Social                                                                   
        Services,   conform   to   the   recently   developed                                                                   
        statewide suicide prevention  plan.  The  Division is                                                                   
        not recommending that the Council  become involved in                                                                   
        the grant  making process; rather  the Department  of                                                                   
        Health  & Social  Services  staff  modify  the  grant                                                                   
        application  process so  that  communities  read  the                                                                   
        statewide suicide  prevention plan  and certify  that                                                                   
        the grant  for their  local plan  is consistent  with                                                                   
        the State plan.                                                                                                         
   ·    2. That the Department of Health and Social Services                                                                    
        establish a  more formalized  and  helpful system  of                                                                   
        reporting financial information  to the Council.   It                                                                   
        is not clear where the flow of  financial information                                                                   
        between the  Department  and the  Council went  awry.                                                                   
        However,  given   the   Department's  resources   and                                                                   
        sophistication  in obtaining  financial  information,                                                                   
        the Division  believes  it is  incumbent  on them  to                                                                   
        ensure  the   Council   clearly   understands   their                                                                   
        financial situation.                                                                                                    
   ·    3. Besides the lack of effective access to FY04                                                                         
        funds,  the  Council   was  hampered  by   delays  in                                                                   
        appointment  of  members.    The   Legislative  Audit                                                                   
        Division recommends that  the Office of  the Governor                                                                   
        make appointments to the Council in a timely manner.                                                                    
3:11:21 PM                                                                                                                    
Co-Chair Chenault  voiced his appreciation that  the Division                                                                   
had provided  important  information.   He noted his  concern                                                                   
with the impact of the fiscal note.                                                                                             
Representative    Hawker   requested   further    information                                                                   
regarding the fiscal note.                                                                                                      
Ms. Davidson  referenced Page 6  of the Audit Report.   (Copy                                                                   
on File).  Page 6 provides a summary of the FY04 spending.                                                                      
   ·    $35,000 dollars was spent on Council related                                                                            
        activities, which represents 20% of the budget.                                                                         
   ·    $32,000 was spent for office furnishings for the                                                                        
        information    technology    systems    within    the                                                                   
        Department.  The  Division has  identified that  as a                                                                   
        concern.    Statute  addresses  reimbursable  service                                                                   
        agreements and  requires that  services be billed  on                                                                   
        actual  and  specific  costs  or  a  cost  allocation                                                                   
        methodology.   Those costs were  not specified costs.                                                                   
        The Division  looked at  the  reasonableness of  that                                                                   
        amount coming out  of the budget.   The cost  did not                                                                   
        have an allocation plan.                                                                                                
   ·    The Council lapsed $95,000 dollars into various                                                                         
       working reserves accounts in the general fund.                                                                           
Representative Hawker voiced concern  that the Administration                                                                   
had placed the  Council in that situation.   The Reimbursable                                                                   
Service  Agreement   (RSA)  makes   the  legislative   budget                                                                   
difficult.    He  questioned  the  furniture  costs  for  the                                                                   
Council.  Ms.  Davidson stated that those funds  were used to                                                                   
purchase furnishings for the information technology group.                                                                      
Representative Hawker  emphasized that problem,  and that the                                                                   
Committee should  address it.   He questioned if there  was a                                                                   
mechanism in place to help keep spending in line.                                                                               
Ms.  Davidson  advised  that  spending  was  a  violation  of                                                                   
statute.  A  small cost associated with the  Council could be                                                                   
used in  support of  department-wide information  technology,                                                                   
but  clearly not  that amount  of  their budget.   There  are                                                                   
statutes  in place  to prevent  that.   She did  not know  of                                                                   
anything that could be done on a budgetary basis.                                                                               
3:17:06 PM                                                                                                                    
Representative  Hawker stated  that would  be an  appropriate                                                                   
question for the Department.                                                                                                    
DIANE  CASTO,  MANAGER,  PREVENTION  AND  EARLY  INTERVENTION                                                                   
SERVICES FOR THE  DIVISION OF BEHAVIOR HEALTH,  DEPARTMENT OF                                                                   
HEALTH AND SOCIAL SERVICES, advised  that she had been a part                                                                   
of the conversations regarding  the audit and the concerns of                                                                   
the Department.   The Department  is aware of  these concerns                                                                   
and  is committed  to  "not falling  down  that road  again".                                                                   
They  have made  a  commitment to  monitor  the actions  more                                                                   
carefully.   The  Department  was  in the  midst  of a  major                                                                   
reorganization and  new people were coming in and  out of the                                                                   
newly formed Division of Behavioral  Health.  The Council was                                                                   
one of the entities that got "lost"  as their coordinator had                                                                   
quit.  Ms. Casto  pointed out that there are  many oversights                                                                   
that  lead  to  the  confusion.    She  reiterated  that  the                                                                   
Department is committed to doing better monitoring.                                                                             
Vice-Chair  Stoltze   stated  that  the   Suicide  Prevention                                                                   
Council is  so important  and that he  felt outraged  at that                                                                   
type of abuse.                                                                                                                  
3:20:14 PM                                                                                                                    
Representative Joule  inquired if the  bill would be  held in                                                                   
Committee.    Co-Chair  Meyer   replied  that  it  would  and                                                                   
requested that  the Department  be present with  the Director                                                                   
of Administrative Services.                                                                                                     
Representative Joule  noted that the Council  has been tasked                                                                   
with  very heavy  responsibilities and  that the  Legislature                                                                   
cannot sit by idly with that type of interference.                                                                              
Co-Chair  Chenault expressed  how  "upsetting" it  is to  see                                                                   
that  amount of  money being  spent  on such  projects.   The                                                                   
Council is  tasked with an important  job and if they  do not                                                                   
have the  ability to run the  Council in an  appropriate way,                                                                   
then they are impaired.                                                                                                         
Co-Chair  Chenault  questioned   what  has  happened  on  the                                                                   
Council since inception.  He requested  that a Council member                                                                   
be present  at the  next meeting  to discuss these  concerns.                                                                   
He wanted  to know  their goals  in the  future and  how that                                                                   
money related to what has been spent.                                                                                           
3:23:50 PM                                                                                                                    
Representative  Weyhrauch pointed  out that  the Director  of                                                                   
the  Division of  Administrative  Services  also the  Finance                                                                   
Manager  of Services,  should  be  present to  discuss  these                                                                   
concerns.   He reiterated  the importance  of the  questions.                                                                   
He  pointed  out  the fact  that  the  auditor  assessed  the                                                                   
situation and  the Department's  response was defensive.   He                                                                   
referenced    a   letter    dated    December   27,     2004.                                                                   
Representative Weyrauch urged more accountability.                                                                              
3:25:13 PM                                                                                                                    
Representative  Joule  asked if  the  Council  was closer  to                                                                   
hiring a  coordinator.  Ms. Casto  noted that Kathy  Kraft is                                                                   
the current coordinator  for the Council, as  part time work.                                                                   
Originally, it was a full time  position and Mary Carlson was                                                                   
then the  coordinator.   The current  plan is  to look  for a                                                                   
more permanent fulltime coordinator.   Ms. Casto did not know                                                                   
the timeline.                                                                                                                   
Representative Hawker recommended  that the Committee "expand                                                                   
the thought  process" regarding  the issue.   He stated  that                                                                   
there  are a  number of  councils that  are not  consolidated                                                                   
within  the Department  of Health  &  Social Services  budget                                                                   
such as:                                                                                                                        
   ·    Mental Health Board                                                                                                     
   ·    Alcohol and Drug Abuse Advisory Board                                                                                   
   ·    Commission on Aging                                                                                                     
   ·    Suicide Prevention Council                                                                                              
Representative   Hawker  recommended   a  more   consolidated                                                                   
approach, which might provide  a better management structure.                                                                   
He  asked consideration  of  the  discussion  whether or  not                                                                   
there could  be a more effective  manner in dealing  with the                                                                   
concerns  and  bring them  together  in a  more  consolidated                                                                   
3:28:21 PM                                                                                                                    
Co-Chair Meyer  noted that  SB 60 would  be held  for further                                                                   
SB 60 was HELD in Committee for further consideration.                                                                          
The meeting was adjourned at 3:29 P.M.                                                                                          

Document Name Date/Time Subjects