Legislature(2005 - 2006)HOUSE FINANCE 519

04/15/2005 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 147 INSURANCE TELECONFERENCED
Moved CSHB 147(FIN) Out of Committee
+ HB 144 ADVISORY VOTE ON COMMUNITY DIVIDEND TELECONFERENCED
<Bill Hearing Canceled>
Bills Previously Heard/Scheduled
+ HB 33 EFFECT OF REGULATIONS ON SMALL BUSINESSES TELECONFERENCED
Moved CSHB 33(FIN) Out of Committee
+= HB 71 AK PENINSULA OIL & GAS LEASE SALE; TAXES TELECONFERENCED
Moved CSHB 71(FIN) Out of Committee
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 15, 2005                                                                                           
                         1:46 p.m.                                                                                              
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer called the House  Finance Committee meeting to                                                                   
order at 1:46:45 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 Mike Kelly                                                                                                       
Representative Carl Moses                                                                                                       
Representative Bruce Weyhrauch                                                                                                  
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Reggie Joule                                                                                                     
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Mike Pawlowski,  Staff, Representative Meyer;  Sally Saddler,                                                                   
Legislative Liaison,  Office of the Commissioner,  Department                                                                   
of Commerce, Community and Economic  Development; Linda Hall,                                                                   
Division of Insurance, Department  of Commerce, Community and                                                                   
Economic  Development;  Suzanne Cunningham,  Staff,  Co-Chair                                                                   
Meyer;  Jerry  Burnett, Legislative  Liaison,  Department  of                                                                   
Revenue;  Steve Porter,  Deputy  Commissioner, Department  of                                                                   
Revenue; Wayne  Stevens, President,  Alaska State  Chamber of                                                                   
Commerce; Kristin  Ryan, Director, Division  of Environmental                                                                   
Health,  Department   of  Environmental  Conservation;   Joel                                                                   
Gilbertson,  Commissioner,  Department  of  Health  &  Social                                                                   
Services;   Tom Brice, Council  of Laborers 942 &  341, Local                                                                   
71                                                                                                                              
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Dan  Dickinson,   Director,  Tax   Division,  Department   of                                                                   
Revenue,   Anchorage;  Chris   Kennedy,  Assistant   Attorney                                                                   
General, Department  of Law; Connie Marshall,  Small Business                                                                   
Advocate,   Office    of   Advocacy,   US    Small   Business                                                                   
Administration                                                                                                                  
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 71     "An Act relating to a credit for certain                                                                              
          exploration   expenses    against   oil   and   gas                                                                   
          properties   production  taxes   on  oil   and  gas                                                                   
          produced  from a  lease or  property in the  state;                                                                   
          relating  to the deadline  for certain  exploration                                                                   
          expenditures  used  as credits  against  production                                                                   
          tax  on  oil  and  gas produced  from  a  lease  or                                                                   
          property  in the Alaska  Peninsula competitive  oil                                                                   
          and  gas area wide  lease sale  area after  July 1,                                                                   
          2004; and providing for an effective date."                                                                           
                                                                                                                                
          CSHB 71 (FIN) was REPORTED  out of Committee with a                                                                   
          "do  pass" recommendation  and with  a zero  fiscal                                                                   
          impact note  by the Department of Revenue  and with                                                                   
          a  new  indeterminate  fiscal  impact note  by  the                                                                   
          Department of Natural Resources.                                                                                      
                                                                                                                                
HB 33     "An Act relating to the effect of regulations on                                                                      
          small  businesses; and  providing for an  effective                                                                   
          date."                                                                                                                
                                                                                                                                
          CSHB 33 (FIN) was REPORTED  out of Committee with a                                                                   
          "no  recommendation"  recommendation  and with  the                                                                   
          following   new   fiscal    impact   notes:      an                                                                   
          indeterminate  note by  the Department  of Law,   a                                                                   
          zero note  prepared by the House  Finance Committee                                                                   
          for the  Department of Environmental  Conservation,                                                                   
          a  fiscal  note  by  the  Department  of  Commerce,                                                                   
          Community  and Economic  Development,  a zero  note                                                                   
          prepared  by the  House Finance  Committee for  the                                                                   
          Department of Health  and Social Services, and zero                                                                   
          note  by  the  Department of  Labor  and  Workforce                                                                   
          Development.                                                                                                          
                                                                                                                                
HB 147    "An Act relating to the regulation of insurance,                                                                      
          insurance   licensing,   surplus   lines,   insurer                                                                   
          deposits,   motor    vehicle   service   contracts,                                                                   
          guaranteed  automobile protection products,  health                                                                   
          discount  plans, third-party administrators,  self-                                                                   
          funded multiple employer  welfare arrangements, and                                                                   
          self-funded  governmental plans; and  providing for                                                                   
          an effective date."                                                                                                   
                                                                                                                                
          CSHB 147  (FIN) was REPORTED out of  Committee with                                                                   
          a  "no recommendation"  recommendation  and with  a                                                                   
          zero  fiscal  impact  note  by  the  Department  of                                                                   
          Commerce, Community and Economic Development.                                                                         
                                                                                                                                
1:47:29 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 71                                                                                                             
                                                                                                                                
     "An  Act relating  to a credit  for certain  exploration                                                                   
     expenses  against  oil  and  gas  properties  production                                                                   
     taxes on oil  and gas produced from a  lease or property                                                                   
     in  the state;  relating  to  the deadline  for  certain                                                                   
     exploration   expenditures  used   as  credits   against                                                                   
     production tax  on oil and gas produced from  a lease or                                                                   
     property  in the  Alaska Peninsula  competitive oil  and                                                                   
     gas area  wide lease sale  area after July 1,  2004; and                                                                   
     providing for an effective date."                                                                                          
                                                                                                                                
SUZANNE  CUNNINGHAM, STAFF,  CO-CHAIR  MEYER, explained  that                                                                   
the new  CS, version P addresses  concerns about  the ability                                                                   
to potentially collect 80 percent  of incentives.  The new CS                                                                   
clarifies  incentives   in  Section  1,  page   1,  where  it                                                                   
discusses 20  percent of  the total exploration  expenditures                                                                   
that qualify  only under (c)  of this section.   Subparagraph                                                                   
(2)  deals   with  20  percent   of  the  total   exploration                                                                   
expenditures  that qualify  only under  (d) of this  section.                                                                   
Subparagraph   (3)  addressed   40  percent   of  the   total                                                                   
exploration  expenditures   that qualify  under both  (c) and                                                                   
(d) of this section.                                                                                                            
                                                                                                                                
Co-Chair Chenault  MOVED to  adopt the work  draft to  HB 71,                                                                   
version  24-GH1040\P,  Chenoweth, 4/15/05.    There being  NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
1:49:31 PM                                                                                                                    
                                                                                                                                
Ms.  Cunningham continued  to explain  that subparagraph  (4)                                                                   
deals with 40  percent of the total exploration  expenditures                                                                   
that qualify  only under (e) of  this section and  pertain to                                                                   
seismic exploration.   This  prohibits layering  and reaching                                                                   
80 percent.   The  new CS  also incorporates  the Cook  Inlet                                                                   
area for work performed on or  after July 1, 2005, and before                                                                   
July 1, 2010.  The House Resources  version of the bill added                                                                   
Nenana  Basin,  and there  was  discussion about  adding  the                                                                   
Healy  and Red  Dog areas.   Areas  south of  68 degrees,  15                                                                   
minutes  are  eligible  for incentives  for  exploration  and                                                                   
production,  which takes  the North  Slope and  ANWR off  the                                                                   
table.                                                                                                                          
                                                                                                                                
Co-Chair Meyer clarified that it includes the Red Dog area.                                                                     
                                                                                                                                
1:51:37 PM                                                                                                                    
                                                                                                                                
STEVE  PORTER, DEPUTY  COMMISSIONER,  DEPARTMENT OF  REVENUE,                                                                   
addressed principles of the tax  credit.  Tax credits look at                                                                   
reservoirs  that  need assistance.  For  those  that are  not                                                                   
getting good exploration in a  particular area, but there are                                                                   
decent  prospects, an  incentive  may be  appropriate.   That                                                                   
decision  should   happen  in   the  Department   of  Natural                                                                   
Resources.  Once that discussion  occurs, then the Department                                                                   
of Revenue determines the level  of incentive to provide.  It                                                                   
is designed  to benefit the taxpayer.   There is  currently a                                                                   
discussion as to  whether or not to incentivize  new areas in                                                                   
the North  Slope.  He suggested  working with  the Department                                                                   
of Revenue  to decide, and  he encouraged exploration  there.                                                                   
He  also suggested  that  the  committee get  an  exploration                                                                   
manager to  tell them what  kind of benefit those  incentives                                                                   
are to exploration programs.                                                                                                    
                                                                                                                                
1:54:58 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer expressed  confusion  because HB  71 was  the                                                                   
governor's bill and it dealt with  the Bristol Bay area.  Now                                                                   
other areas  have been added.   From a policy  standpoint the                                                                   
committee wants to encourage exploration  and production.  He                                                                   
related that he  does not know what areas to add  to the bill                                                                   
and has to rely  on the department and the  governor's office                                                                   
for advice.                                                                                                                     
                                                                                                                                
Mr. Porter responded that from  Department of Revenue's point                                                                   
of  view,   the  expansion   is  a   policy  call   based  on                                                                   
conversations with  the Department of Natural  Resources.  He                                                                   
agreed if incentives are needed,  then it is fine to go ahead                                                                   
with the expansion.                                                                                                             
                                                                                                                                
1:56:58 PM                                                                                                                    
                                                                                                                                
JERRY BURNETT,  LEGISLATIVE LIAISON,  DEPARTMENT OF  REVENUE,                                                                   
clarified that Section  8 in the new CS says  that provisions                                                                   
of this section  do not apply to taxes applicable  under this                                                                   
chapter,  attributable   to  production  from   oil  and  gas                                                                   
produced from  an oil and gas  lease, or gas produced  from a                                                                   
gas  only lease,  located north  of 68  degrees, 15  minutes,                                                                   
North latitude, or  on the ANWR.  He asked if  the intent for                                                                   
this section  is to take away  credit immediately, or  if the                                                                   
credit is meant to be for exploration  or production.  This a                                                                   
major change in how the tax incentive works.                                                                                    
                                                                                                                                
Co-Chair Chenault  replied that it is not the  intent to take                                                                   
away from any tax credit currently  available.  The intent is                                                                   
to provide for  credit in a specific area.                                                                                      
                                                                                                                                
1:59:08 PM                                                                                                                    
                                                                                                                                
Ms. Cunningham  said that is correct.   The intent is  not to                                                                   
adversely impact  areas that would have incentives  expire in                                                                   
2007.   It is  to extend the  areas south  of 68 degrees,  15                                                                   
minutes, to 2010.  She suggested  that a conceptual amendment                                                                   
would be in order.                                                                                                              
                                                                                                                                
2:00:05 PM                                                                                                                    
                                                                                                                                
DAN  DICKINSON,   DIRECTOR,  TAX   DIVISION,  DEPARTMENT   OF                                                                   
REVENUE,  ANCHORAGE,  (via  teleconference)  said  the  point                                                                   
raised  is  correct.   It  will  not  apply  to north  of  68                                                                   
degrees.  He agreed that a conceptual  amendment is in order.                                                                   
He  asked   if  the  discussion   is  about  exploration   or                                                                   
production in this area.                                                                                                        
                                                                                                                                
2:01:19 PM                                                                                                                    
                                                                                                                                
Representative   Croft  requested   clarification  from   Mr.                                                                   
Dickinson  regarding  Section 8.    He inquired  if  anything                                                                   
North  of  68 degrees,  15  minutes  expires  in 2007.    Mr.                                                                   
Dickinson  replied yes  and suggested  that there needn't  be                                                                   
any limitation on  exploration.  The only way  the credit can                                                                   
be  modified  is by  selling  to  someone  who does  not  pay                                                                   
production tax.  He stressed focusing on exploration.                                                                           
                                                                                                                                
Co-Chair  Meyer asked  how it  impacts  the production  side.                                                                   
Mr. Dickinson  replied that  it does not  need to  impact the                                                                   
production  side.   He  explained that  the  credit could  be                                                                   
taken by someone who has production  tax and is producing, or                                                                   
by  someone  who   is  not  producing  or   lacks  sufficient                                                                   
production tax.   There is no  intent to restrict  the market                                                                   
for selling the credit.                                                                                                         
                                                                                                                                
2:04:26 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  noted that  the  committee would  return  to                                                                   
Section 8 to make the necessary amendments.                                                                                     
                                                                                                                                
Co-Chair Chenault informed the  committee about provisions in                                                                   
the new CS for Cook Inlet oil  and gas credit.  The dates for                                                                   
the  Cook Inlet  Basin incentive  credits  would be  extended                                                                   
from  2003 until  2010.   It  provides  language that  allows                                                                   
exploration wells  in the Cook Inlet to be  within the 3-mile                                                                   
limit, subject  to review and  approval by the  commissioner.                                                                   
That  would  provide  a  20  percent  credit.    It  provides                                                                   
language  that decreases  the  25-mile boundary  limit to  10                                                                   
miles, which also provides a 20 percent credit.                                                                                 
                                                                                                                                
2:06:15 PM                                                                                                                    
                                                                                                                                
Mr. Dickinson  added that  there is a  $20 million  limit for                                                                   
the amount of  credits granted in the Cook  Inlet under these                                                                   
rules.                                                                                                                          
                                                                                                                                
Co-Chair Meyer set HB 71 aside.                                                                                                 
                                                                                                                                
Representative  Kelly asked  how requirements  in Cook  Inlet                                                                   
were lessened.   Co-Chair Chenault responded  that the 3-mile                                                                   
limit is  one area that the  commissioner would look  at, and                                                                   
the 10-mile limit would be statutory.                                                                                           
                                                                                                                                
2:08:38 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 33                                                                                                             
                                                                                                                                
     "An Act relating to the effect of regulations on small                                                                     
     businesses; and providing for an effective date."                                                                          
                                                                                                                                
Co-Chair Meyer  gave a brief  history of  the bill.   In 1980                                                                   
Congress passed  the Regulatory Flexibility Act  (RFA), which                                                                   
mandated  that   agencies  consider   the  impact   of  their                                                                   
regulations  on small businesses.   Based  on the success  of                                                                   
that  federal program,  the Office  of  Advocacy has  drafted                                                                   
legislation for states to follow.   Over 37 states have found                                                                   
success with  this program.   This  bill would require  state                                                                   
regulatory agencies  to consider the impact  of regulation on                                                                   
small businesses and have the  freedom to examine alternative                                                                   
methods.  More expense would not be added to the agencies.                                                                      
                                                                                                                                
2:11:00 PM                                                                                                                    
                                                                                                                                
MIKE PAWLOWSKI,  STAFF,  CO-CHAIR MEYER,  referred to  a flow                                                                   
chart "Steps in the Regulation  Adoption Process Under HB 33"                                                                   
(copy on file.)   He proceeded to inform the  committee about                                                                   
the various  steps  that would  be taken under  this bill  to                                                                   
change the  regulatory process.   He  related the history  of                                                                   
regulation, including checks and balances.                                                                                      
                                                                                                                                
Co-Chair Meyer  noted that  most of the  other 37  states did                                                                   
not need a fiscal impact note  attached to their legislation.                                                                   
Mr.  Pawlowski concurred.   He  described the  office of  the                                                                   
small business advocate.                                                                                                        
                                                                                                                                
2:16:30 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  asked if  Amendment  1  would zero  out  all                                                                   
fiscal notes.  Mr. Pawlowski replied that it would.                                                                             
                                                                                                                                
2:16:57 PM                                                                                                                    
                                                                                                                                
CONNIE  MARSHALL,   SMALL  BUSINESS   ADVOCACY,  U.S.   SMALL                                                                   
BUSINESS ADMINISTRATION,  (via teleconference)  read portions                                                                   
from her written testimony:                                                                                                     
                                                                                                                                
     As the Regional  Advocate for Region X, my job  is to be                                                                   
     the  direct link  between state  and local  governments,                                                                   
     small  business  groups and  small  business owners  and                                                                   
     employees   and  the  Office   of  Advocacy,   based  in                                                                   
     Washington,  DC.  My chief  concern is to  help identify                                                                   
     regulatory concerns of small  business by monitoring the                                                                   
     impact of  federal and state policies at  the grassroots                                                                   
     level.  It is my goal to  see that programs and policies                                                                   
     that  encourage  fair  regulatory   treatment  of  small                                                                   
     business are developed and  implemented to ensure future                                                                   
     growth and prosperity.   This is why I  am testifying in                                                                   
     support of  proposed legislation, which  will strengthen                                                                   
     small business regulatory flexibility in Alaska.                                                                           
                                                                                                                                
     The   Office  of   Advocacy   enforces  the   Regulatory                                                                   
     Flexibility Act  (RFA) on the federal level  in order to                                                                   
     lessen the  regulatory burden  on small business.   More                                                                   
     than 93 percent  of businesses in every  state are small                                                                   
     businesses.   As  you may  know,  small businesses  with                                                                   
     less  than  20  employees  spend $6,975  each  year  per                                                                   
     employee to  comply with federal regulations-that  is 60                                                                   
     percent  more per  employee than  large firms with  more                                                                   
     than 500 employees spend.   And that is just the cost of                                                                   
     federal  regulations.  Small  business owners  also have                                                                   
     to shoulder the cost of state regulations.                                                                                 
                                                                                                                                
     Under the  RFA, Advocacy has  shown time and  again that                                                                   
     regulations  can  be reduced  and the  economy  improved                                                                   
     without    sacrificing   such    important   goals    as                                                                   
     environmental  quality,  travel  safety,  and  workplace                                                                   
     safety.   By working with federal agencies  to implement                                                                   
     the  RFA, in  2004 the  Office of  Advocacy saved  small                                                                   
     businesses  nationwide  over  $17  billion  in  foregone                                                                   
     regulatory costs  that can now  be used to  create jobs,                                                                   
     buy  equipment  and expand  access  to health  care  for                                                                   
     millions    of    Americans,    or    simply    maintain                                                                   
     competitiveness in the marketplace.                                                                                        
                                                                                                                                
     While  some  states have  state  regulatory  flexibility                                                                   
     legislation  that  mandates  state agencies  to  perform                                                                   
     economic impact  analysis before they regulate,  many do                                                                   
     not.   For that reason, in  December of 2002  the Office                                                                   
     of Advocacy  drafted model  legislation patterned  after                                                                   
     the federal Regulatory Flexibility  Act and presented it                                                                   
     in a report titled, Small  Business Friendly Regulation:                                                                   
     Model Legislation, which  can be found on our website at                                                                   
     www.sba.gov.advo.                                                                                                          
                                                                                                                                
     There  are  five  critical  elements  contained  in  the                                                                   
     Regulatory  Flexibility  Act  model  bill.    Successful                                                                   
     state-level  regulatory  flexibility laws  should  have:                                                                   
     (1)  a  small business  definition  that  includes  most                                                                   
     small businesses, (2) a requirement  that state agencies                                                                   
     perform   an  economic  impact   analysis  before   they                                                                   
     regulate,   (3)  a  requirement   that  state   agencies                                                                   
     consider  less burdensome  alternatives that still  meet                                                                   
     regulatory  goals, (4) judicial  review so that  the law                                                                   
     has teeth,  and (5) a provision for state  government to                                                                   
     periodically  review   all  its  regulations.     To  be                                                                   
     effective, there  should be few, if any  exemptions from                                                                   
     the  law.     Even   the  best  regulatory   flexibility                                                                   
     initiative  has little  value if  the majority  of state                                                                   
     agencies are exempted from  it.  In order for regulatory                                                                   
     flexibility to work, there  is a need for the Governor's                                                                   
     leadership,  trained and  educated  state agencies  that                                                                   
     understand  their  responsibilities, and  the  continued                                                                   
     involvement of the small business community.                                                                               
                                                                                                                                
     During  this time  of tight  state budgets,  you may  be                                                                   
     wondering  how  much  it  costs  a  state  to  implement                                                                   
     regulatory flexibility  for small business.   The answer                                                                   
     is  that implementing  a  regulatory flexibility  system                                                                   
     can  be done  at little  to  no additional  cost to  the                                                                   
     state.  Let me share information  from three states that                                                                   
     have   recently   implemented   regulatory   flexibility                                                                   
     provisions.                                                                                                                
                                                                                                                                
     In  North Dakota,  agencies were  granted no  additional                                                                   
     funds  to  carry out  their  duties  under the  new  RFA                                                                   
     legislation.  The state legislative  review committee is                                                                   
     responsible  for reviewing  the  regulations that  their                                                                   
     state  agencies, using  economic  impact analysis,  have                                                                   
     determined   might  be   overly   burdensome  to   small                                                                   
     business. So  other than additional regulations  for the                                                                   
     committee  to review, North  Dakota has simply  absorbed                                                                   
     the new duties into their already existing system.                                                                         
                                                                                                                                
     Similarly,  in   Colorado,  agencies  were   granted  no                                                                   
     additional  funds to  carry out  their duties under  the                                                                   
     new RFA legislation.  The  Office of Policy Research and                                                                   
     Regulatory   Review   in    Colorado's   Department   of                                                                   
     Regulatory   Agencies  was   given  responsibility   for                                                                   
     implementing the new law.   To meet the new obligations,                                                                   
     they  shifted personnel  in their  office and  dedicated                                                                   
     part  of an IT  person to  implement their  e-rulemaking                                                                   
     notification  system.     Like  North  Dakota,  Colorado                                                                   
     simply  absorbed  the new  responsibilities  into  their                                                                   
     current structure.                                                                                                         
                                                                                                                                
     In  Oklahoma, the  fiscal note estimated  that  it would                                                                   
     cost  $ 75,000 per  year to  support the Small  Business                                                                   
     Regulatory  Review   Committee  in  the   Department  of                                                                   
     Commerce  and to  implement  the regulatory  flexibility                                                                   
     law.     Since   implementation  began   in  2002,   the                                                                   
     Department  of Commerce  has not  exceeded the  $ 75,000                                                                   
     budget.   Expenditures have been for  printing marketing                                                                   
     materials, travel compensation  for the review committee                                                                   
     members    and    compensation   for    the    committee                                                                   
     coordinator's time.                                                                                                        
                                                                                                                                
     The benefits  of implementing  a regulatory  flexibility                                                                   
     system  truly outweigh the  costs.  Let  me give  you an                                                                   
     example  of  how  regulatory flexibility  works  from  a                                                                   
     state  that has  had  an active  regulatory  flexibility                                                                   
     program  for nearly  ten years.   In  October 2004,  New                                                                   
     York State  adopted an  emergency regulation  to prevent                                                                   
     prescription fraud  by requiring the use  of an official                                                                   
     State prescription form for  all prescribing done in New                                                                   
     York.  The official prescription  forms utilize security                                                                   
     features  that will  curtail  alterations and  forgeries                                                                   
     that divert  drugs to black market sale  to unsuspecting                                                                   
     patients  and  cost  New  York's  Medicaid  program  and                                                                   
     private  insurers tens of  millions of dollars  annually                                                                   
     in fraudulent claims.                                                                                                      
                                                                                                                                
     Under New York's State Administrative  Procedure Act and                                                                   
     an  Executive  Order  signed  by  Governor  Pataki,  the                                                                   
     Department   of  Health  was   required  to   perform  a                                                                   
     regulatory  flexibility   analysis  for  small  business                                                                   
     (RFASB).   It  was found  that  the proposed  regulation                                                                   
     would  affect small  businesses  such as  practitioners,                                                                   
     pharmacists,  retail pharmacies,  hospitals and  nursing                                                                   
     homes.                                                                                                                     
                                                                                                                                
     Therefore,  in drafting the  regulation, the  Department                                                                   
     of  Health met  with and  considered  comments from  the                                                                   
     affected  small businesses.   By  consulting with  small                                                                   
     business  throughout the rule  writing process,  the New                                                                   
     York  Department   of  Health   was  able  to   craft  a                                                                   
     regulation that  met its goals without  unduly burdening                                                                   
     small entities.   For  example, the regulation  includes                                                                   
     the following flexibilities for small business:                                                                            
    · Establishes a grant administered by the Department of                                                                     
       Health to defray costs for software adjustments faced                                                                    
       by pharmacies;                                                                                                           
                                                                                                                                
    · Eliminates the official prescription fee for                                                                              
       practitioners and institutions; and                                                                                      
                                                                                                                                
    · Allows practitioners, pharmacists, retail pharmacies,                                                                     
       hospitals and nursing homes 18 months to transition                                                                      
       to the new prescription form system.                                                                                     
                                                                                                                                
     As a  result of the  Serialized Official New  York State                                                                   
     Prescription Form  regulation, private insurers  and the                                                                   
     Medicaid  program  are  expected  to  save  millions  of                                                                   
     dollars  by  reducing  fraudulent   prescription  claims                                                                   
     while  at  the  same  time  benefiting  the  state,  its                                                                   
     citizens, and private insurers.                                                                                            
                                                                                                                                
     Since  December of  2002, my  fellow Regional  Advocates                                                                   
     and I  have been working  with state legislators  across                                                                   
     the  country to  make regulatory  flexibility for  small                                                                   
     business  a  legislative priority.      In 2003,  twelve                                                                   
     states  introduced regulatory  flexibility  legislation.                                                                   
     Governors   in   North  Dakota   and   Colorado   signed                                                                   
     regulatory  flexibility   legislation  into  law,  while                                                                   
     Massachusetts  Governor Mitt  Romney  and West  Virginia                                                                   
     Governor Bob  Wise signed Executive Orders  to implement                                                                   
     regulatory   flexibility.       In   2004,   17   states                                                                   
     (California,  Connecticut,   Georgia,  Idaho,  Illinois,                                                                   
     Kansas,  Kentucky,   Missouri,  Nebraska,   New  Jersey,                                                                   
     Pennsylvania,   Rhode  Island,  South   Carolina,  South                                                                   
     Dakota,    Tennessee,   Washington,    and    Wisconsin)                                                                   
     introduced regulatory flexibility  legislation and seven                                                                   
     states have  signed it into law (Connecticut,  Kentucky,                                                                   
     Missouri,  Rhode Island,  South Carolina, South  Dakota,                                                                   
     and Wisconsin).                                                                                                            
                                                                                                                                
     To  date  in  2005,  eighteen   states  have  introduced                                                                   
     regulatory  flexibility  legislation  (Alaska,  Alabama,                                                                   
     Hawaii, Indiana,  Iowa, Mississippi, Missouri,  Montana,                                                                   
     New Jersey,  New Mexico,  North Carolina, Ohio,  Oregon,                                                                   
     Pennsylvania,    Tennessee,    Utah,    Virginia,    and                                                                   
     Washington).   Virginia  Governor  Mark  Warner and  New                                                                   
     Mexico   Governor   Bill  Richardson   recently   signed                                                                   
     regulatory flexibility legislation  into law.  Also this                                                                   
     year,   Arkansas  Governor   Mike  Huckabee  signed   an                                                                   
     Executive Order to implement regulatory flexibility.                                                                       
                                                                                                                                
     One  of the many  reasons, I  believe, this  legislation                                                                   
     has  been  so successful  over  the  last two  years  is                                                                   
     because policy  makers across the country  are realizing                                                                   
     that   regulatory   flexibility   is  as   an   economic                                                                   
     development  tool.   There are over  23.7 million  small                                                                   
     businesses  in the United  States and  they are  the job                                                                   
     creators: small  firms create between 60  and 80 percent                                                                   
     of the net new jobs in our economy.                                                                                        
                                                                                                                                
     There  is  no  question   that  small  business  is  the                                                                   
     backbone  of the economy  here in Alaska  just as  it is                                                                   
     throughout  the  country.    According  to  the  federal                                                                   
     definition  of small business  (500 employees  or less),                                                                   
     96.9   percent  (15,485)   of  Alaska's  employers   are                                                                   
     considered small and employ  over 59.6 percent (127,757)                                                                   
     of Alaska's non-farm sector employees.                                                                                     
                                                                                                                                
     Sometimes,   because  of   their  size,  the   aggregate                                                                   
     importance  of  small  businesses   to  the  economy  is                                                                   
     overlooked.   Because of this,  it is very easy  to fail                                                                   
     to notice  the negative impact of  regulatory activities                                                                   
     on them.   The intent of HB 33 is to  require regulatory                                                                   
     agencies to  consider small businesses  when regulations                                                                   
     are  developed  and  particularly  to  consider  whether                                                                   
     there are  alternative regulatory solutions  that do not                                                                   
     unduly burden  small business  but still accomplish  the                                                                   
     agency goal.   Giving small  employers a voice  early in                                                                   
     the process is a key to reducing  the negative impact of                                                                   
     regulations  on small businesses,  increasing  the level                                                                   
     of regulatory compliance  and passing on cost savings to                                                                   
     state economies.                                                                                                           
                                                                                                                                
     This legislation  is good  for small business  in Alaska                                                                   
     and  the Office of  Advocacy commends  you for  bringing                                                                   
     House Bill 33 forward.                                                                                                     
                                                                                                                                
2:23:39 PM                                                                                                                    
                                                                                                                                
WAYNE STEVENS,  PRESIDENT, ALASKA STATE CHAMBER  OF COMMERCE,                                                                   
testified in support  of HB 33.  He asked the  legislature to                                                                   
create  and  maintain  an  efficient,   expedient  regulatory                                                                   
environment, which  is supportive of business  investment and                                                                   
development, and encourages businesses  to locate and grow in                                                                   
Alaska.  He  spoke in favor of having an  effective oversight                                                                   
mechanism,  simplified   regulations,  and  a   reduction  in                                                                   
administrative costs.                                                                                                           
                                                                                                                                
2:24:59 PM                                                                                                                    
                                                                                                                                
KRISTIN  RYAN, DIRECTOR,  DIVISION  OF ENVIRONMENTAL  HEALTH,                                                                   
DEPARTMENT OF ENVIRONMENTAL CONSERVATION,  suggested that the                                                                   
fiscal note for the department be zeroed out.                                                                                   
                                                                                                                                
Representative Kelly requested  that exceptions to the law be                                                                   
addressed.                                                                                                                      
                                                                                                                                
2:27:18 PM                                                                                                                    
                                                                                                                                
Mr. Pawlowski replied  that the bill has gone  through a long                                                                   
process.   He  shared  some of  the reasons  for  going to  a                                                                   
limited  application.   Some  troubling  issues were  raised.                                                                   
Questions about  the Natural Resources sector  and allocation                                                                   
decisions by the  Boards of Fish and Game were  taken off the                                                                   
table.                                                                                                                          
                                                                                                                                
Representative Kelly  asked, of the  37 states, how  many did                                                                   
the  same thing.   Mr.  Pawlowski replied  that several  did,                                                                   
especially  those  with  heavy   resource  development.    He                                                                   
referred  to  a map  showing  the  states that  have  adopted                                                                   
regulatory  flexibility  (copy on  file.)    It varies  among                                                                   
states,  but most  have exceptions.   He  offered to  provide                                                                   
more details.                                                                                                                   
                                                                                                                                
2:30:08 PM                                                                                                                    
                                                                                                                                
Representative  Kelly   asked  if  this  bill   captures  "90                                                                   
percent".  Co-Chair Meyer replied yes.                                                                                          
                                                                                                                                
2:30:31 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment 1:                                                                                      
                                                                                                                                
     Page 1, line 14:                                                                                                           
     Delete "(c)"                                                                                                               
     Insert "(d)"                                                                                                               
                                                                                                                                
     Page 2, line 2:                                                                                                            
     Delete "(e)"                                                                                                               
     Insert "(f)"                                                                                                               
                                                                                                                                
     Page 2, line 4:                                                                                                            
     Delete "The economic effect"                                                                                               
                                                                                                                                
     Page 2, line 5:                                                                                                            
     Delete "statement must provide"                                                                                            
     Insert  "(c)  The economic effect statement  required by                                                                   
     (a)  of this  section must  provide,  if available  from                                                                   
     information gathered under (b) of this section,"                                                                           
                                                                                                                                
     Page 2, line 18:                                                                                                           
     Delete "(c)"                                                                                                               
     Insert "(d)"                                                                                                               
                                                                                                                                
     Page 2, line 25:                                                                                                           
     Delete "(d)"                                                                                                               
     Insert "(e)"                                                                                                               
     Delete "(c)"                                                                                                               
     Insert  "(d)"                                                                                                              
                                                                                                                                
     Page 3, line 6:                                                                                                            
     Delete "(e)"                                                                                                               
     Insert "(f)"                                                                                                               
                                                                                                                                
     Page 3, line 8:                                                                                                            
     Delete "(f)"                                                                                                               
     Insert "(g)"                                                                                                               
                                                                                                                                
     Page 3, line 15:                                                                                                           
     Delete "or"                                                                                                                
                                                                                                                                
     Page 3, line 18:                                                                                                           
     Delete "."                                                                                                                 
     Insert ";"                                                                                                                 
                                                                                                                                
     Page 3, following line 18:                                                                                                 
     Insert the following new material:                                                                                         
               "(6) that address standards, requirements, or                                                                    
     conditions  for reimbursement  by  the designated  state                                                                   
     agency  for services  to be  rendered on  behalf of  the                                                                   
     designated state  agency, that address amounts  or rates                                                                   
     of that reimbursement,  or that adjust those  amounts or                                                                   
     rates   to   contain   costs  within   the   amount   of                                                                   
     appropriations from  the legislature for a  state fiscal                                                                   
     year; or                                                                                                                   
               (7) that establish standards, requirements,                                                                      
     or conditions  for the eligibility of an  individual for                                                                   
     assistance  under AS  18  or AS  47,  or that  establish                                                                   
     standards for determining  the amount of assistance that                                                                   
     an eligible person is entitled to receive."                                                                                
                                                                                                                                
     Page 3, line 19:                                                                                                           
     Delete "(g)"                                                                                                               
     Insert "(h)"                                                                                                               
                                                                                                                                
     Page 3, line 24:                                                                                                           
     Delete "(h)"                                                                                                               
     Insert "(i)"                                                                                                               
                                                                                                                                
Co-Chair Chenault OBJECTED.                                                                                                     
                                                                                                                                
Mr. Pawlowski noted that most  of the amendment is conforming                                                                   
language.    The  primary  purpose  of  the  amendment  is  a                                                                   
clarification in  Section 1 of the proposed  legislation.  It                                                                   
brings the  economic effect statement  out of  subsection (b)                                                                   
to subsection  (c), a clarification which gives  the agencies                                                                   
better  direction.   The second  major change  is on page  3,                                                                   
following  line  18.    This   addresses  Health  and  Social                                                                   
Services regulation such as reimbursement,  cost containment,                                                                   
and eligibility  standards.  He  explained that  this section                                                                   
clarifies that cost reimbursement is off the table.                                                                             
                                                                                                                                
2:33:24 PM                                                                                                                    
                                                                                                                                
CHRIS  KENNEDY,  ASSISTANT ATTORNEY  GENERAL,  DEPARTMENT  OF                                                                   
LAW, (via  teleconference)  explained that  he does  not have                                                                   
more to add to  the discussion of Amendment 1.   The solution                                                                   
is satisfactory to everyone concerned.   He offered to answer                                                                   
questions.                                                                                                                      
                                                                                                                                
2:34:30 PM                                                                                                                    
                                                                                                                                
Representative  Croft  related that  the  first  part of  the                                                                   
amendment makes  a lot of  sense by not requiring  businesses                                                                   
to seek extra,  independent analysis.  He spoke  of a concern                                                                   
on the second  page of the amendment  regarding reimbursement                                                                   
rates for services provided by  small businesses.  The effect                                                                   
on small  businesses by the  Department of Health  and Social                                                                   
Services is so pervasive that  it would take too much time to                                                                   
consider.   It  goes  from being  a  burden  to defining  the                                                                   
business.   He opined that  it seems  to be vital  and should                                                                   
not be shied away from.                                                                                                         
                                                                                                                                
Co-Chair  Meyer  noted  that  this  was  discussed  with  the                                                                   
Commissioner.                                                                                                                   
                                                                                                                                
2:37:08 PM                                                                                                                    
                                                                                                                                
Representative  Hawker related that  the Commissioner  was in                                                                   
agreement with the amendment.   He referred to Representative                                                                   
Croft's comment  and opined that  there is a  differentiation                                                                   
between  a   small,  private   business  and  outsourcing   a                                                                   
necessary state service.   He spoke in strong  support of the                                                                   
amendment.                                                                                                                      
                                                                                                                                
2:39:01 PM                                                                                                                    
                                                                                                                                
Mr. Pawlowski  added that regulations  have to be  drafted to                                                                   
achieve  cost containment.   Policy  calls  need to  consider                                                                   
whether  this is  an  effective use  of  state resources  and                                                                   
whether  there is  a  benefit  to the  private  sector.   The                                                                   
application to  this from a  public policy statement  is that                                                                   
consideration needs  to be done  at the finance  level during                                                                   
the  approval  of   the  budget,  and  perhaps   not  in  the                                                                   
implementation  of   the  regulations.  It  happens   at  the                                                                   
regulatory   review  committee   level  and  during   finance                                                                   
committee meetings.                                                                                                             
                                                                                                                                
Representative Croft  related that when Department  of Health                                                                   
and Social Services establishes  a new Medicaid rate, if that                                                                   
rate is  lowered, it is  viewed as cost  containment.   If by                                                                   
lowering  that  rate,  more services  are  provided  to  more                                                                   
people, it  is viewed as a  benefit.  What is  not adequately                                                                   
considered is the effect on the  people trying to provide the                                                                   
services.   This needs to  be looked  in terms of  impacts on                                                                   
small businesses and alternative means sought.                                                                                  
                                                                                                                                
2:43:23 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer  said the argument  is that it should  be done                                                                   
when the budget is set, rather than by regulation.                                                                              
                                                                                                                                
Mr. Pawlowski  offered  a point of  clarification about  cost                                                                   
containment  and  reimbursement   in  eligibility  regulation                                                                   
exemptions.   He  referred to  the Department  of Health  and                                                                   
Social  Services proposed  regulations  to  Title VII,  which                                                                   
govern the conduct of small business.                                                                                           
                                                                                                                                
Representative  Croft commented that  it does not  make sense                                                                   
to not discuss how daily rates  affect small businesses.  Co-                                                                   
Chair  Meyer argued  that the  daily rate  is set  up by  the                                                                   
budget process rather than by regulation.                                                                                       
                                                                                                                                
2:45:49 PM                                                                                                                    
                                                                                                                                
JOEL GILBERTSON, COMMISSIONER,  DEPARTMENT OF HEALTH & SOCIAL                                                                   
SERVICES,  related that  the  department  has concerns  about                                                                   
regulations  causing  reductions to  programs.    He gave  an                                                                   
example  of a  Medicaid  program appropriation  reduction  of                                                                   
services.     The  concern   is  if   there  are  delays   in                                                                   
implementing  regulations because  every day  of delay  costs                                                                   
the  state.   The department  requested Amendment  1 to  deal                                                                   
with  reimbursement  regulations.   Other  regulations  would                                                                   
remain under this legislation.                                                                                                  
                                                                                                                                
2:49:13 PM                                                                                                                    
                                                                                                                                
Representative  Croft  inquired  about  rate  reductions  and                                                                   
changes  in  the  methods of  reimbursements  to  lessen  the                                                                   
effects  on  providers.   Commissioner  Gilbertson  responded                                                                   
that it is  a continuous balancing act regarding  that issue.                                                                   
He offered the  Medicaid program as an example.   Federal law                                                                   
does not allow for different payment policies.                                                                                  
                                                                                                                                
2:52:13 PM                                                                                                                    
                                                                                                                                
Mr. Pawlowski  added that if  benefits and costs  are reduced                                                                   
on the  "govern the  conduct side",  the amount required  for                                                                   
reimbursement goes  down.  He  implied that there is  still a                                                                   
benefit to the business by addressing  other regulations that                                                                   
are not exempt.                                                                                                                 
                                                                                                                                
Co-Chair Chenault WITHDREW his OBJECTION.                                                                                       
                                                                                                                                
There being NO OBJECTION, Amendment 1 was adopted.                                                                              
                                                                                                                                
2:53:32 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Conceptual Amendment 2:                                                                           
                                                                                                                                
     Page 1, lines 1-2 [Delete all material]                                                                                    
     Page 1, line 1 - Insert:                                                                                                   
     "An  Act  relating  to  requiring  notification  to  the                                                                   
     Department   of   Commerce,   Community   and   Economic                                                                   
     Development,  economic  effect   statements,  regulatory                                                                   
     flexibility   analyses;  a   private  cause  of   action                                                                   
     relating to  the required economic effect  statements or                                                                   
     regulatory  flexibility analyses;  and providing  for an                                                                   
     effective date."                                                                                                           
                                                                                                                                
Co-Chair Chenault OBJECTED for discussion purposes.                                                                             
                                                                                                                                
Co-Chair Chenault withdrew his  OBJECTION to adopt Conceptual                                                                   
Amendment 2.  There being NO OBJECTION,  Conceptual Amendment                                                                   
2 was adopted.                                                                                                                  
                                                                                                                                
2:55:20 PM                                                                                                                    
                                                                                                                                
GUY   BELL,    ASSISTANT   COMMISSIONER,   OFFICE    OF   THE                                                                   
COMMISSIONER, DEPARTMENT OF LABOR  AND WORKFORCE DEVELOPMENT,                                                                   
reported that he  is relieved at the relative  lack of burden                                                                   
to  the department.    He  noted  that the  department  would                                                                   
review  this  legislation and  is  not  bound by  a  positive                                                                   
fiscal note.                                                                                                                    
                                                                                                                                
2:56:12 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer   noted  Department  of  Health   and  Social                                                                   
Services is  ok with a new  zero fiscal note.  The Department                                                                   
of Environmental  Conservation agrees with a  new zero fiscal                                                                   
note.   The  Department of  Law has  an indeterminate  fiscal                                                                   
note.   The  Department of  Labor  and Workforce  Development                                                                   
will  have  a zero  fiscal  note.   Department  of  Commerce,                                                                   
Community and  Economic Development would like  assistance in                                                                   
developing a new fiscal note.                                                                                                   
                                                                                                                                
2:58:01 PM                                                                                                                    
                                                                                                                                
Representative Weyhrauch asked  if boards and commissions are                                                                   
subject to this bill.  Mr. Pawlowski  replied that boards and                                                                   
commissions  confirmed by  the legislature  are subject  to a                                                                   
public   confirmation   process,   and   are   made   up   of                                                                   
representatives from  the industry that are  already aware of                                                                   
the  needs of  the industry.    When a  board or  commissions                                                                   
promulgates  a  regulation, the  costs  of that  process  are                                                                   
borne  by  fees,  which are  returned  to  small  businesses.                                                                   
Representative  Weyhrauch asked if  that applies to  Fish and                                                                   
Game.   Mr.  Pawlowski  replied  that  was a  separate  issue                                                                   
regarding  emergency allocations.   Representative  Weyhrauch                                                                   
asked what  happens if the agency  does not comply  with this                                                                   
statute.   Mr. Pawlowski  said that  the judicial review  was                                                                   
discussed  in the House  Judiciary Committee.   He  explained                                                                   
the history of the judicial review.                                                                                             
                                                                                                                                
3:00:44 PM                                                                                                                    
                                                                                                                                
Representative  Weyhrauch related a  problem he has  with the                                                                   
bill.    Representative  Weyhrauch   expressed  his  concerns                                                                   
regarding federal regulations  and small businesses having no                                                                   
power to affect  regulation.   Mr. Pawlowski  agreed that was                                                                   
a  valid  concern.    He  explained  that  the  agency  would                                                                   
consider  public commentary  and the  review committee  could                                                                   
discuss the regulation.                                                                                                         
                                                                                                                                
3:02:26 PM                                                                                                                    
                                                                                                                                
Representative  Foster  MOVED   to  report  CSHB  33  out  of                                                                   
Committee   with    individual   recommendations    and   the                                                                   
accompanying   revised  fiscal   notes.     There  being   NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
CSHB  33 (FIN)  was  REPORTED  out of  Committee  with a  "no                                                                   
recommendation"  recommendation  and with  the following  new                                                                   
fiscal impact notes: an indeterminate  note by the Department                                                                   
of Law, a zero  note prepared by the House  Finance Committee                                                                   
for the  Department of  Environmental Conservation,  a fiscal                                                                   
note by  the Department of  Commerce, Community  and Economic                                                                   
Development,  a  zero  note prepared  by  the  House  Finance                                                                   
Committee for  the Department of Health and  Social Services,                                                                   
and  zero  note by  the  Department  of Labor  and  Workforce                                                                   
Development.                                                                                                                    
                                                                                                                                
3:03:09 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 147                                                                                                            
                                                                                                                                
     "An  Act  relating  to  the   regulation  of  insurance,                                                                   
     insurance  licensing, surplus  lines, insurer  deposits,                                                                   
     motor vehicle  service contracts, guaranteed  automobile                                                                   
     protection products, health  discount plans, third-party                                                                   
     administrators,  self-funded  multiple employer  welfare                                                                   
     arrangements,  and self-funded  governmental plans;  and                                                                   
     providing for an effective date."                                                                                          
                                                                                                                                
LINDA HALL,  DIVISION OF  INSURANCE, DEPARTMENT OF  COMMUNITY                                                                   
AND  ECONOMIC  DEVELOPMENT,  related  that  HB  147  proposes                                                                   
statutory  changes   that  would   make  the  regulation   of                                                                   
insurance more  efficient for the division, more  uniform for                                                                   
industry,  and provide  protection to  consumers.  The  first                                                                   
area of change is statutory changes  in the licensing area of                                                                   
individual agents  and brokers.  The proposed  changes are to                                                                   
streamline the  licensing process and to conform  to national                                                                   
standards.                                                                                                                      
                                                                                                                                
Ms. Hall explained that the second  area of change deals with                                                                   
surplus lines insurance, insurers  who do not file to operate                                                                   
in Alaska.   A  couple sections  deal with insurance  company                                                                   
deposits:  one  removes the  ability  to use  safety  deposit                                                                   
boxes,  one  permits  the director  to  transfer  and  insure                                                                   
deposit to  the guarantee  fund if  that is assigned  through                                                                   
insolvency  procedures.     Several  sections   deal  with  a                                                                   
commodity  called  Help  Discount   Plans,  which  look  like                                                                   
insurance  but are  not.   From  2000-2002, nationally,  over                                                                   
200,000  of these  plans were  sold, which  resulted in  $252                                                                   
million  worth of  unpaid claims.   The  bill seeks  specific                                                                   
authority to regulate these discount plans.                                                                                     
                                                                                                                                
Ms. Hall  related that  there are a  number of sections  that                                                                   
deal with  third-party administrators,  someone who  provides                                                                   
administrative  services for health  insurance plans.   There                                                                   
is  language  dealing  with  an   owner-contractor  insurance                                                                   
program, written  for large construction  projects.   Some of                                                                   
the rules would be codified in statute in this bill.                                                                            
                                                                                                                                
3:10:07 PM                                                                                                                    
                                                                                                                                
Ms. Hall noted  that in Section 26, standards  for ratemaking                                                                   
in health  insurance  lines have  been added.   She spoke  to                                                                   
discrimination  and financial  statements.    She offered  to                                                                   
answer questions from the committee.                                                                                            
                                                                                                                                
3:10:52 PM                                                                                                                    
                                                                                                                                
Representative  Hawker suggested that  this is an  "esoteric"                                                                   
bill.                                                                                                                           
                                                                                                                                
3:11:34 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment 1:                                                                                      
                                                                                                                                
     Page 15, line 25, following "whether":                                                                                     
     Delete "an"                                                                                                                
                                                                                                                                
     Page 15, line 26:                                                                                                          
     Delete "insurer"                                                                                                           
     Insert ","                                                                                                                 
                                                                                                                                
Co-Chair Chenault OBJECTED for discussion purposes.                                                                             
                                                                                                                                
Ms.  Hall  stated  that  the   amendment  provides  technical                                                                   
changes and would  require the use of a  licensed third-party                                                                   
administrator.                                                                                                                  
                                                                                                                                
Co-Chair Chenault WITHDREW his OBJECTION adopt Amendment 1.                                                                     
                                                                                                                                
There being NO OBJECTION, Amendment 1 was adopted.                                                                              
                                                                                                                                
3:12:42 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment 2:                                                                                      
                                                                                                                                
     Page 11, lines 28 - 29:                                                                                                    
     Delete   "a   self-funded  multiple   employer   welfare                                                                   
     arrangement regulated under AS 21.85"                                                                                      
     Insert  "any  person  issued  or required  to  obtain  a                                                                   
     certificate  of authority under  this title  to transact                                                                   
     life insurance,  annuities, and  health insurance  or to                                                                   
     provide coverage for the cost of medical care"                                                                             
                                                                                                                                
     Page 17, line 2, following "annuities,":                                                                               
     Delete "or"                                                                                                            
                                                                                                                                
     Page 17, lines 2 - 5:                                                                                                      
     Delete  "offered  or  provided  by  an  insurer,  or  in                                                               
     connection with coverage  offered or provided by a self-                                                               
     funded multiple  employer welfare arrangement  regulated                                                               
     under  AS 21.85 or  the Comprehensive  Health  Insurance                                                               
     Association created under AS 21.55"                                                                                    
     Insert ", or  the provision of coverage for  the cost of                                                               
     medical care"                                                                                                          
                                                                                                                                
                                                                                                                                
Co-Chair Chenault OBJECTED.                                                                                                     
                                                                                                                                
Representative  Weyhrauch suggested in  Amendment 1,  on page                                                                   
15,  line 25,  to  delete "and".    Ms. Hall  clarified  that                                                                   
Representative Weyhrauch was referring to Amendment 3.                                                                          
                                                                                                                                
Ms. Hall stated that Amendment  2 is a restatement of Section                                                                   
3 in  the current CS,  version G, which  was put in  error in                                                                   
Chapter 12.   She said it  was a technical  amendment because                                                                   
of an  incorrect placement of  the language.   Co-Chair Meyer                                                                   
pointed out that Ms. Hall was referring to Amendment 3.                                                                         
                                                                                                                                
Co-Chair  Meyer  clarified  that the  committee  was  talking                                                                   
about page  11, lines  28-29.  Ms.  Hall noted that  language                                                                   
was removed on page 11 and new language was inserted.                                                                           
                                                                                                                                
Co-Chair  Chenault WITHDREW  his OBJECTION.   There  being NO                                                                   
further OBJECTION, Amendment 2 was adopted.                                                                                     
                                                                                                                                
3:15:45 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment 3:                                                                                      
                                                                                                                                
     Page 2, line 8, through page 3, line 21:                                                                                   
     Delete all material.                                                                                                       
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 14, following line 31:                                                                                                
     Insert a new bill section to read:                                                                                         
     "*  Sec.  22.   AS 21.36  is  amended  by adding  a  new                                                                 
     section to read:                                                                                                           
          Sec. 21.36.065.  Limitation on owner controlled                                                                     
     and contractor  controlled insurance programs.   (a)  An                                                                 
     owner  controlled  insurance  program  or  a  contractor                                                                   
     controlled   insurance  program   is  subject   to  both                                                                   
     AS 21.39   and  AS 21.42,  must   be  approved   by  the                                                                   
     director,  and  shall  be   allowed  only  for  a  major                                                                   
     construction project.   Owner controlled  and contractor                                                                   
     controlled  insurance programs  are limited to  property                                                                   
     insurance  as  defined  in   AS 21.12.060  and  casualty                                                                   
     insurance as defined in AS 21.12.070.                                                                                      
          (b)  In this section, an owner controlled or                                                                          
     contractor controlled insured program does not include                                                                     
               (1)  builder's risk or course of construction                                                                    
     insurance;                                                                                                                 
               (2)  insurance relating to the transportation                                                                    
     of cargo or other property;                                                                                                
               (3)  insurance covering one or more                                                                              
     affiliates,  subsidiaries,  partners,  or joint  venture                                                                   
     partners of a person; or                                                                                                   
               (4)  insurance policies endorsed to name one                                                                     
     or more persons as additional insureds.                                                                                    
          (c)  In this section,                                                                                                 
               (1)  "contractor" means a person who meets                                                                       
     the definition  of "contractor" in AS 08.18.171  and who                                                                   
     undertakes  the performance  of  a construction  project                                                                   
     for a project owner, its agent, or its representative;                                                                     
               (2)      "contractor    controlled   insurance                                                                   
     program" means  an insurance  program where one  or more                                                                   
     insurance   policies  are  procured   on  behalf   of  a                                                                   
     contractor,  its agent,  or its  representative, by  its                                                                   
     insurance producer, as defined  in AS 21.27.900, for the                                                                   
     purpose of  insuring the contractor  and one or  more of                                                                   
     the following:                                                                                                             
                    (A)  the project owner;                                                                                     
                   (B)  a subcontractor;                                                                                        
                    (C)  an architect;                                                                                          
                    (D)  an engineer; or                                                                                        
                    (E)  a person performing professional                                                                       
          services;                                                                                                             
               (3)  "major construction project" means the                                                                      
     process   of   constructing   a   structure,   building,                                                                   
     facility,  or roadway or  major renovation of  more than                                                                   
     50   percent  of   an  existing   structure,   building,                                                                   
     facility,  or roadway  having  a contract  cost of  more                                                                   
     than $50,000,000 of a definite  term at a geographically                                                                   
     defined project site;                                                                                                      
               (4)  "owner controlled insurance program"                                                                        
     means an  insurance program where one or  more insurance                                                                   
     policies are procured on  behalf of a project owner, its                                                                   
     agent,   or  its   representative,   by  its   insurance                                                                   
     producer,  as defined in  AS 21.27.900, for  the purpose                                                                   
     of insuring  the project  owner and one  or more  of the                                                                   
     following:                                                                                                                 
                    (A)  the contractor;                                                                                        
                   (B)  a subcontractor;                                                                                        
                    (C)  an architect;                                                                                          
                    (D)  an engineer; or                                                                                        
                    (E)  a person performing professional                                                                       
          services;                                                                                                             
               (5)  "project owner" means a person who, in                                                                      
     the  course  of  the  person's   business,  engages  the                                                                   
     service of a contractor for  the purpose of working on a                                                                   
     construction project;                                                                                                      
               (6)  "subcontractor" means a person to whom a                                                                    
     contractor  sublets  all   or  part  of  a  contractor's                                                                   
     initial undertaking."                                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 15, line 25:                                                                                                          
     Delete "AS 21.12.140"                                                                                                      
     Insert "AS 21.36.065"                                                                                                      
                                                                                                                                
     Page 15, line 29:                                                                                                          
     Delete "AS 21.12.140"                                                                                                      
     Insert "AS 21.36.065"                                                                                                      
                                                                                                                                
     Page 17, line 26:                                                                                                          
     Delete "22"                                                                                                                
     Insert "21"                                                                                                                
                                                                                                                                
     Page 17, line 28:                                                                                                          
     Delete "22"                                                                                                                
     Insert "21"                                                                                                                
                                                                                                                                
     Page 17, line 29:                                                                                                          
     Delete "22"                                                                                                                
     Insert "21"                                                                                                                
                                                                                                                                
Co-Chair Chenault OBJECTED for discussion purposes.                                                                             
                                                                                                                                
3:16:33 PM                                                                                                                    
                                                                                                                                
TOM BRICE, COUNCIL OF LABORERS  942 & 341, LOCAL 71, reported                                                                   
that  the unions  have  been tracking  the  legislation.   He                                                                   
stated that there was not an objection  to the (L&C) version.                                                                   
He indicated that there could  be concerns with Amendment #2.                                                                   
                                                                                                                                
Representative  Weyhrauch asked  if  Mr. Brice  has seen  the                                                                   
amendments.  Mr. Brice said he had.                                                                                             
                                                                                                                                
Representative  Weyhrauch asked if  the portion of  Amendment                                                                   
2, lines  5-6, regarding  the cost  of medical care,  affects                                                                   
the  medical trust  administered  by the  union.   Mr.  Brice                                                                   
thought that question  would be better directed  to Ms. Hall.                                                                   
He wondered if  "to provide coverage for the  cost of medical                                                                   
care" is incorporated under individuals  that are required to                                                                   
receive  a  certificate  of  authority   to  participate,  or                                                                   
whether  that is a  separate section.   If  it is a  separate                                                                   
section, that is redefining the public health trust.                                                                            
                                                                                                                                
Ms. Hall  agreed with Mr.  Brice's statement that  the pieces                                                                   
that are controversial  regarding the health  trust should be                                                                   
removed.   She added  that there  is no  intent to require  a                                                                   
person  to  obtain  a  certificate  of  authority.    It  was                                                                   
directed   to    self-funded   multiple   employer    welfare                                                                   
arrangements,  which   are  currently  required   to  have  a                                                                   
certificate of authority.                                                                                                       
                                                                                                                                
3:19:58 PM                                                                                                                    
                                                                                                                                
Ms.   Hall  addressed   Amendment  3,   which  limits   owner                                                                   
controlled  insurance  programs.    She  related  that  these                                                                   
programs would not  change within the current  bill, but move                                                                   
to  AS 21.36.    She offered  to  answer questions  from  the                                                                   
committee.                                                                                                                      
                                                                                                                                
Representative  Hawker referenced to  Section 24,  "except as                                                                   
provided in AS  21.12.140, an insurer, whether  an authorized                                                                   
or  unauthorized   insurer  may   not  underwrite   an  owner                                                                   
controlled   insurance  program   or  contractor   controlled                                                                   
insurance program."   He requested  clarification.   Ms. Hall                                                                   
responded  that   these  programs  are  designed   for  major                                                                   
construction  projects.  It  is not  something that  does not                                                                   
already occur.   Currently, the rules and definitions  are in                                                                   
the Worker's  Compensation manuals.   It is  not a  change in                                                                   
how these programs are used, but  it is a prohibition against                                                                   
expanding  them into  things  other than  large  construction                                                                   
projects.  Typically, these do not happen.                                                                                      
                                                                                                                                
Co-Chair  Chenault WITHDREW  his OBJECTION.   There  being NO                                                                   
further OBJECTION, Amendment 3 was adopted.                                                                                     
                                                                                                                                
Representative  Foster  MOVED  to  report  CSHB  147  out  of                                                                   
Committee  with  individual  recommendations   and  with  the                                                                   
accompanying fiscal  note.  There being NO  OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CSHB  147 (FIN)  was REPORTED  out  of Committee  with a  "no                                                                   
recommendation" recommendation  and with a zero fiscal impact                                                                   
note by  the Department of  Commerce, Community  and Economic                                                                   
Development.                                                                                                                    
                                                                                                                                
3:24:28 PM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 71                                                                                                             
                                                                                                                                
     "An  Act relating  to a credit  for certain  exploration                                                                   
     expenses  against  oil  and  gas  properties  production                                                                   
     taxes on oil  and gas produced from a  lease or property                                                                   
     in  the state;  relating  to  the deadline  for  certain                                                                   
     exploration   expenditures  used   as  credits   against                                                                   
     production tax  on oil and gas produced from  a lease or                                                                   
     property  in the  Alaska Peninsula  competitive oil  and                                                                   
     gas area  wide lease sale  area after July 1,  2004; and                                                                   
     providing for an effective date."                                                                                          
                                                                                                                                
SUZANNE CUNNINGHAM, STAFF, REPRESENTATIVE KEVIN MEYER, noted                                                                    
that two amendments have been drafted to HB 71.  Amendment 1                                                                    
is to page 2, Lines 13-17.                                                                                                      
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment 1:                                                                                      
                                                                                                                                
     Page 2, lines 13-17                                                                                                      
     Delete All Material                                                                                                      
     Insert New Material                                                                                                      
     (b) To qualify  for the production tax  credit under (a)                                                                   
     of  this section,  an  exploration  expenditure must  be                                                                   
     incurred for  work performed on  or after July  1, 2003,                                                                   
     and  before July  1, 2007,  except  that an  exploration                                                                   
     expenditure, in  whole or in part, south  of 68 degrees,                                                                   
     15  minutes, North  latitude must  be incurred  for work                                                                   
     performed  before  July  1,  2010, and  except  that  an                                                                   
     exploration expenditure  for a Cook Inlet  prospect must                                                                   
     be  incurred for  work  performed on  or  after July  1,                                                                   
     2005, and before July 1, 2010, and                                                                                         
                                                                                                                                
     Page 6, line 12                                                                                                          
     Following: "do not apply to"                                                                                             
     Delete:   "taxes    applicable   under    this   chapter                                                                 
     attributable  to production  from oil  and gas  produced                                                                   
     from an  oil and gas  lease, or  to gas produced  from a                                                                   
     gas  only  lease,  located   north  of  68  degrees,  15                                                                   
     minutes, North latitude or on"                                                                                             
                                                                                                                                
Representative Hawker OBJECTED.                                                                                                 
                                                                                                                                
Ms. Cunningham explained the two parts of Amendment 1.                                                                          
                                                                                                                                
Co-Chair Meyer  inquired about  the reference to  68 degrees,                                                                   
15 minutes.   Ms.  Cunningham clarified that  it is  south of                                                                   
the Brooks Range.                                                                                                               
                                                                                                                                
3:27:28 PM                                                                                                                    
                                                                                                                                
Representative Hawker questioned  the wording on page 6, line                                                                   
12 "the  provisions of this  section do  not apply to".   Ms.                                                                   
Cunningham clarified that the language is correct.                                                                              
                                                                                                                                
Co-Chair Chenault  referenced lines 13-17 on page  2, the new                                                                   
language in Amendment 1.  He voiced  concerned that the added                                                                   
language   would   allow   credits   for   work   from   2003                                                                   
retroactively.    He  questioned  if that  would  change  the                                                                   
legislation  from  the  25-mile  to  the  10-mile,  and  also                                                                   
possibly   within  the   3-mile,   with  the   commissioner's                                                                   
approval.  He emphasized that  it was not the original intent                                                                   
for work already performed to be included.                                                                                      
                                                                                                                                
3:30:08 PM                                                                                                                    
                                                                                                                                
Ms.  Cunningham  replied  that  there  would need  to  be  an                                                                   
exemption for Cook Inlet for July 1, 2005 to 2010.                                                                              
                                                                                                                                
DAN  DICKINSON,   DIRECTOR,  TAX   DIVISION,  DEPARTMENT   OF                                                                   
REVENUE,  ANCHORAGE,   (via  teleconference)  spoke   to  the                                                                   
proposed change.   The current  language existing on  page 2,                                                                   
after  the 2010  date, should  be  there.   The new  language                                                                   
should  only change lines  13-15.   Ms. Cunningham  responded                                                                   
that on line  15, 2010 should be deleted because  the current                                                                   
program goes until 2007.                                                                                                        
                                                                                                                                
Mr. Dickinson  explained that if  the amendment were  used to                                                                   
replace all  the language, through  and including  2010, then                                                                   
the clause  that starts  with "except"  would accomplish  the                                                                   
intent.                                                                                                                         
                                                                                                                                
Representative  Croft asked what  would happen  on page  6 if                                                                   
the  provisions  do  not apply.    He  suggested  eliminating                                                                   
Section 8.   Ms. Cunningham replied that the  rewrite on page                                                                   
6,  would   not  apply   to  ANWR.     Representative   Croft                                                                   
acknowledged his mistake.                                                                                                       
                                                                                                                                
3:34:16 PM                                                                                                                    
                                                                                                                                
Co-Chair   Chenault   restated   the   potential   conceptual                                                                   
amendment.   Representative Kelly noted that  the termination                                                                   
date would change.                                                                                                              
                                                                                                                                
3:35:00 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault  MOVED to ADOPT  a Conceptual  Amendment to                                                                   
Amendment  1 that  adds  back  the language  that  expiration                                                                   
expenditures  for Cook  Inlet prospect  must be incurred  for                                                                   
work performed on  or after July 1, 2005, and  before July 1,                                                                   
2010.                                                                                                                           
                                                                                                                                
Representative  Hawker   WITHDREW  his  OBJECTION   to  adopt                                                                   
Amendment 1, as  amended.  There being no  further OBJECTION,                                                                   
Amendment 1 was adopted.                                                                                                        
                                                                                                                                
3:35:54 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment 2:                                                                                      
                                                                                                                                
Page 2, lines 1, 3, and 9                                                                                                     
Following: "under"                                                                                                              
Delete" [(b) AND]                                                                                                               
Insert: (b) and                                                                                                                 
                                                                                                                                
Page 2, line 7                                                                                                                
Following: "under"                                                                                                              
Insert: (b),                                                                                                                    
                                                                                                                                
Representative Hawker OBJECTED for discussion purposes.                                                                         
                                                                                                                                
Ms.  Cunningham   explained  that  the  amendment   reinserts                                                                   
subsections (b)  and (c) and clarifies  that in order  to get                                                                   
the credit,  a company has  to meet the qualifications  under                                                                   
(b)  which sets  out  the  timeframes that  exploration  work                                                                   
occurs and (c), which is the 3-mile limit.                                                                                      
                                                                                                                                
Representative Croft  noted that it  is not the  40/80 issue;                                                                   
it  is  a timing  issue.    Ms. Cunningham  replied  that  is                                                                   
correct.  She elaborated on the timeframe.                                                                                      
                                                                                                                                
3:38:21 PM                                                                                                                    
                                                                                                                                
Representative  Hawker   WITHDREW  his  OBJECTION   to  adopt                                                                   
Amendment  2.   There  being NO  OBJECTION,  Amendment 2  was                                                                   
adopted.                                                                                                                        
                                                                                                                                
3:39:13 PM                                                                                                                    
                                                                                                                                
Representative Kelly asked for  an opinion from Department of                                                                   
Revenue.                                                                                                                        
                                                                                                                                
3:39:40 PM                                                                                                                    
                                                                                                                                
JERRY BURNETT,  LEGISLATIVE LIAISON,  DEPARTMENT OF  REVENUE,                                                                   
stated that the bill preserves the intent of the statute.                                                                       
                                                                                                                                
Co-Chair  Meyer declared  a potential  conflict of  interest.                                                                   
Representatives Kelly and Hawker objected.                                                                                      
                                                                                                                                
3:41:25 PM                                                                                                                    
                                                                                                                                
Representative Hawker  also declared a conflict  of interest.                                                                   
Representative Kelly objected.                                                                                                  
                                                                                                                                
3:42:05 PM                                                                                                                    
                                                                                                                                
Representative  Foster  MOVED   to  report  CSHB  71  out  of                                                                   
Committee   with    individual   recommendations    and   the                                                                   
accompanying fiscal notes.  There  being NO OBJECTION, it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CSHB 71 (FIN) was REPORTED out  of Committee with a "do pass"                                                                   
recommendation  and with  a zero  fiscal impact  note by  the                                                                   
Department  of Revenue  and with a  new indeterminate  fiscal                                                                   
impact note by the Department of Natural Resources.                                                                             
                                                                                                                                
3:44:19 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 3:44 PM.                                                                                           

Document Name Date/Time Subjects