Legislature(2007 - 2008)HOUSE FINANCE 519

05/10/2007 08:30 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 22 EXTEND BOARD OF GOVERNORS ABA TELECONFERENCED
Moved Out of Committee
<Teleconference Listen Only>
+= SB 125 PERS /TRS CONTRIBUT'NS;UNFUNDED LIABILITY TELECONFERENCED
Heard & Held
<Teleconference Listen Only>
+ SB 84 TESTING & PACKAGING OF CIGARETTES TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                        May 10, 2007                                                                                            
                         8:54 a.m.                                                                                              
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer called the House  Finance Committee meeting to                                                                   
order at 8:54:17 AM.                                                                                                          
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Bill Stoltze, Vice-Chair                                                                                         
Representative Harry Crawford                                                                                                   
Representative Richard Foster                                                                                                   
Representative Les Gara                                                                                                         
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Mary Nelson                                                                                                      
Representative Bill Thomas, Jr.                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Pat  Shier, Director,  Division of  Retirement and  Benefits,                                                                   
Department   of   Administration;    Kevin   Brooks,   Deputy                                                                   
Commissioner, Department  of Administration;  Virginia Ragle,                                                                   
Assistant   Attorney  General,   Labor  and  State   Affairs,                                                                   
Department  of Law;  Senator  Donny Olson;  Denise  Liccioli,                                                                   
Staff, Senator Donny Olson                                                                                                      
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Warren Cummings,  Alaska Fire Chiefs Association,  Fairbanks;                                                                   
Doug  Schrage,  Anchorage Fire  Department;  Steve  Belanger,                                                                   
State  Fire  Marshall,  Anchorage; Jack  Smith,  Barrow  Fire                                                                   
Department; Emily Nenon, American Cancer Society                                                                                
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 22     "An Act extending the termination date for the                                                                        
          Board of Governors of the Alaska Bar Association;                                                                     
          and providing for an effective date."                                                                                 
                                                                                                                                
          HB  22 was  REPORTED out  of Committee  with a  "do                                                                   
          pass" recommendation  and with zero fiscal  note #1                                                                   
          by Department  of Commerce, Community  and Economic                                                                   
          Development  and with  zero fiscal  note #2  by the                                                                   
          Office of the Governor.                                                                                               
                                                                                                                                
CSSB 125(FIN) "An Act relating to the accounting and                                                                            
          payment  of  contributions   under  the  retirement                                                                   
          plans  of the Public  Employees' Retirement  System                                                                   
          of Alaska  and the Teachers' Retirement  System, to                                                                   
          calculations    of   contributions    under   those                                                                   
          retirement  plans,  and  to participation  in,  and                                                                   
          termination of and amendments  to participation in,                                                                   
          the  defined   benefit  plans  of   those  systems;                                                                   
          relating  to employer  contributions to the  health                                                                   
          reimbursement  arrangement plan; making  conforming                                                                   
          amendments; and providing for an effective date."                                                                     
                                                                                                                                
          CSSB 125 (FIN) was heard  and HELD in Committee for                                                                   
          further consideration.                                                                                                
                                                                                                                                
CSSB 84(JUD)   "An Act relating to the testing and packaging                                                                    
          of  cigarettes to  be  sold, offered  for sale,  or                                                                   
          possessed  in  this  state; and  providing  for  an                                                                   
          effective date."                                                                                                      
                                                                                                                                
          CSSB 84  (JUD) was heard and HELD  in Committee for                                                                   
          further consideration.                                                                                                
                                                                                                                                
8:54:30 AM                                                                                                                    
                                                                                                                                
CS FOR SENATE BILL NO. 125(FIN)                                                                                               
                                                                                                                                
     "An  Act  relating  to the  accounting  and  payment  of                                                                   
     contributions under  the retirement plans  of the Public                                                                   
     Employees'   Retirement   System  of   Alaska  and   the                                                                   
     Teachers'   Retirement   System,  to   calculations   of                                                                   
     contributions  under  those  retirement  plans,  and  to                                                                   
     participation in,  and termination of and  amendments to                                                                   
     participation  in, the  defined benefit  plans of  those                                                                   
     systems;  relating  to  employer  contributions  to  the                                                                   
     health    reimbursement    arrangement   plan;    making                                                                   
     conforming  amendments; and  providing for an  effective                                                                   
     date."                                                                                                                     
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT Amendment #1:                                                                                     
                                                                                                                                
     Page 1, line 6, following "plan;"                                                                                          
          Insert "relating to participation in the public                                                                       
     employees'  defined  contribution   retirement  plan  by                                                                   
     certain elected officials;"                                                                                                
                                                                                                                                
     Page 14, following line 1:                                                                                                 
          Insert a new bill section to read:                                                                                    
        "*  Sec. 22.   The  uncodified  law of  the State  of                                                                 
     Alaska is amended by adding a new section to read:                                                                         
          PARTICIPATION IN THE DEFINED CONTRIBUTION PLAN OF                                                                     
     THE  PUBLIC  EMPLOYEES'  RETIREMENT  SYSTEM  BY  CERTAIN                                                                   
     ELECTED OFFICIALS.  (a) If HCS CSSB 123(FIN),  passed by                                                                   
     the  first  session  of the  Twenty-Fifth  Alaska  State                                                                   
     Legislature, is enacted into  law, contributions must be                                                                   
     deducted  under AS 39.35.730  and contributions  must be                                                                   
     made under AS 39.35.750 by the                                                                                             
     (1) state  on behalf of  an Alaska State  Legislator who                                                                   
     becomes  a member  of the  Public Employees'  Retirement                                                                   
     System   defined   contribution  plan   established   by                                                                   
     AS 39.35.700  - 39.35.990 as  a result of  the enactment                                                                   
     of the amendment to AS 39.35.990(16)  by sec. 111 of HCS                                                                   
     CSSB  123(FIN);  contributions  must  be  based  on  the                                                                   
     compensation  paid by the state  to the member  from the                                                                   
     date  that  the  member  was sworn  into  office  as  an                                                                   
     elected official until the effective date of this Act;                                                                     
     (2)  political subdivision  on behalf  of the  political                                                                   
     subdivision's elected official  who becomes eligible for                                                                   
     membership  in the Public  Employees' Retirement  System                                                                   
     defined contribution plan  established by AS 39.35.700 -                                                                   
     39.35.990 as  a result of the enactment  of AS 39.35.725                                                                   
     made by  sec. 83 of HCS  CSSB 123(FIN), and who  has not                                                                   
     filed  a  waiver of  participation  in  that plan  or  a                                                                   
     waiver  of   participation  under  AS  39.35.125(a)  for                                                                   
     service  as   an  elected  official  of   the  political                                                                   
     subdivision;   contributions  must   be  based   on  the                                                                   
     compensation  paid by the  political subdivision  to the                                                                   
     elected  official  for service  as  an elected  official                                                                   
     from the date  that the elected official  was sworn into                                                                   
     office until the effective date of this Act.                                                                               
          (b) The period of time covered by contributions                                                                       
     made under  (a) of  this section constitutes  membership                                                                   
     service for the purposes  of determining eligibility for                                                                   
     medical  benefits  under  AS 39.35.300 -  39.30.495  and                                                                   
     AS 39.36.700 - 39.35.990.                                                                                                  
          (c) In this section, "compensation" has the                                                                           
     meaning given in AS 39.35.990. "                                                                                           
                                                                                                                                
Vice Chair Stoltze OBJECTED.                                                                                                    
                                                                                                                                
PAT  SHIER, DIRECTOR,  DIVISION OF  RETIREMENT AND  BENEFITS,                                                                   
DEPARTMENT  OF ADMINISTRATION,  explained that the  amendment                                                                   
rectifies an  issue regarding certain elected  officials who,                                                                   
because they were  not previously members of  PERS, were left                                                                   
out of  the new  defined contribution  (DC) retirement  plan.                                                                   
There is  no fiscal note  accompanying the amendment.   Those                                                                   
individuals  would have  to  make up  past  service cost,  as                                                                   
well.                                                                                                                           
                                                                                                                                
Co-Chair  Meyer asked  how many  people were  affected.   Mr.                                                                   
Shier said four.                                                                                                                
                                                                                                                                
8:58:44 AM                                                                                                                    
                                                                                                                                
Representative Hawker questioned  what the amendment would do                                                                   
for state legislators.                                                                                                          
                                                                                                                                
VIRGINIA RAGLE,  ASSISTANT ATTORNEY GENERAL, LABOR  AND STATE                                                                   
AFFAIRS,  DEPARTMENT  OF  LAW,  reported that  a  couple  new                                                                   
legislators  were not covered  by the DC  plan under  SB 123.                                                                   
Representative  Hawker concluded  that SB  125 would  benefit                                                                   
seated legislators.   Representative  Hawker asked if  SB 123                                                                   
has provisions  for future legislators and  elected officials                                                                   
to participate  in the DC  plan.  Ms.  Ragle replied  that is                                                                   
correct.  Representative  Hawker asked if this  is uncodified                                                                   
law.  Ms. Ragle said yes.                                                                                                       
                                                                                                                                
9:01:57 AM                                                                                                                    
                                                                                                                                
KEVIN    BROOKS,   DEPUTY    COMMISSIONER,   DEPARTMENT    OF                                                                   
ADMINISTRATION,  added  that  HB  141  inadvertently  omitted                                                                   
several categories.   Two individuals will benefit,  but will                                                                   
have to catch up "out of pocket".                                                                                               
                                                                                                                                
Representative   Gara   asked  if   anyone   else  has   been                                                                   
inadvertently  excluded.   Mr. Brooks  explained that  only a                                                                   
small group of people were affected.                                                                                            
                                                                                                                                
Vice Chair  Stoltze WITHDREW  his objection.  There being  NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Co-Chair Meyer asked  if Amendment #2, which will  come up at                                                                   
a later time, would impact the  fiscal note.  Mr. Brooks said                                                                   
it would not.                                                                                                                   
                                                                                                                                
9:04:46 AM                                                                                                                    
                                                                                                                                
Mr.  Brooks addressed  fiscal note  #2 by  the Department  of                                                                   
Administration.   He explained  that $193,113.2 is  the total                                                                   
appropriation for FY 08.  There  is currently $180 million in                                                                   
HB 95,  which would  require an  additional appropriation  of                                                                   
$13.1  million.     The  bill  provides  a   "hold  harmless"                                                                   
provision for  PERS employers  currently paying below  the 22                                                                   
percent level,  which comes to  $5.4 million.  The  bill also                                                                   
provides  a "rebate" provision  for employers  who have  made                                                                   
additional contributions,  which totals $7.2 million.   Those                                                                   
two  combined  equal  $12.6  million,   and  the  actuarially                                                                   
determined  rate  at  22 percent,  required  $180.5  million.                                                                   
There  is $180  million  in the  appropriation  bill, so  the                                                                   
differential of  $500,000 with  the other two  pieces, brings                                                                   
it  up to  $13.1 million.   It  contemplates a  rate of  32.5                                                                   
percent, which  the Alaska Retirement Management  Board (ARM)                                                                   
supports.  If the legislation  passes, there will always be a                                                                   
blended rate for PERS employers.                                                                                                
                                                                                                                                
9:07:41 AM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer asked  if fiscal  note #1 is  dated 3/16  and                                                                   
fiscal note #2 is dated 5/3.  Mr. Brooks said yes.                                                                              
                                                                                                                                
Mr. Brooks  explained that  fiscal note #1  shows no  cost to                                                                   
the  Division   of  Retirement  and  Benefits;   however,  an                                                                   
appropriation  would  be required  to  comply  with the  cost                                                                   
share provisions of the bill.                                                                                                   
                                                                                                                                
Co-Chair Meyer  noted that fiscal  note #2 does not  show the                                                                   
$180 million  already in  the operating  budget.  Mr.  Brooks                                                                   
pointed to the information on  page 2 of the fiscal note that                                                                   
addresses that amount.                                                                                                          
                                                                                                                                
Co-Chair Meyer requested an explanation  of Amendment #2. Mr.                                                                   
Shier explained  that Amendment #2 would  prevent prejudicing                                                                   
of possible  recovery in a  suit about the previous  actuary.                                                                   
There is language that states  any contributions of the state                                                                   
should  not  be  considered  as  an  offset  for  any  future                                                                   
recovery.  The purpose is to protect the state's interest.                                                                      
                                                                                                                                
Representative Crawford  asked for clarification.   Mr. Shier                                                                   
explained  that if  there is  a  court action  and one  party                                                                   
recovers from  another party, but they have  also "recovered"                                                                   
from another source, that can  diminish the court award.  The                                                                   
amendment would prevent that from happening.                                                                                    
                                                                                                                                
Co-Chair Meyer set CSSB 125 (FIN) aside.                                                                                        
                                                                                                                                
CSSB 125  (FIN) was heard and  HELD in Committee  for further                                                                   
consideration.                                                                                                                  
                                                                                                                                
9:11:23 AM                                                                                                                    
                                                                                                                                
CS FOR SENATE BILL NO. 84(JUD)                                                                                                
                                                                                                                                
     "An Act relating to the testing and packaging of                                                                           
     cigarettes to be sold, offered for sale, or possessed                                                                      
     in this state; and providing for an effective date."                                                                       
                                                                                                                                
SENATOR  DONNY OLSON,  sponsor, explained  that a  fire in  a                                                                   
small village  is very  devastating.   He related a  personal                                                                   
story about  a fire in  Nome to explain  why he  sponsored SB                                                                   
84.  SB  84 mandates that only self-extinguishing  cigarettes                                                                   
can be sold in Alaska.                                                                                                          
                                                                                                                                
DENISE  LICCIOLI, STAFF,  SENATOR DONNY  OLSON, related  that                                                                   
the  bill provides  that only  self-extinguishing  cigarettes                                                                   
can be sold  in the state.   It also establishes  testing and                                                                   
certification  requirements.   These cigarettes are  designed                                                                   
to be less likely to ignite soft  furnishings.  The bill also                                                                   
requires cigarette  packaging to be marked,  identifying them                                                                   
as self-extinguishing.                                                                                                          
                                                                                                                                
Ms.  Liccioli  continued  to  say  that  cigarettes  are  the                                                                   
leading cause  of home fire fatalities  in Alaska and  in the                                                                   
United States.   The most common materials first  ignited are                                                                   
mattresses  and  bedding,  upholstered  furniture  and  floor                                                                   
coverings.    She shared  a  story  about  a recent  fire  in                                                                   
Juneau.                                                                                                                         
                                                                                                                                
9:15:04 AM                                                                                                                    
                                                                                                                                
Ms. Liccioli  reported statistics  relevant to the  danger of                                                                   
cigarettes.   She pointed to a  handout (copy on  file) which                                                                   
demonstrates  the self-extinguishing  property.   She  shared                                                                   
statistics about  legislation in  ten other states  regarding                                                                   
this issue.  SB 84 is supported  by the Association of Alaska                                                                   
Fire    Chiefs   Association,    the   Alaska    Firefighters                                                                   
Association,  and the Department  of Public Safety,  Division                                                                   
of Fire Protection.   She reported that during  the first six                                                                   
months since  New York  has had  this law,  there has  been a                                                                   
significant  reduction  in the  number  of  cigarette-related                                                                   
fires.   SB 84 will  save lives, as  well as reduce  injuries                                                                   
and damage  to property in Alaska.   It will have  a positive                                                                   
impact  because it  allows a fee  to be  charged which  would                                                                   
more than cover the expense of the program.                                                                                     
                                                                                                                                
9:18:32 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer  asked if fees  or receipts could be  used for                                                                   
the program.   Ms.  Liccioli said  that is  the intent.   The                                                                   
fiscal  notes  for  the Departments  of  Revenue  and  Public                                                                   
Safety need to be revised to show that.                                                                                         
                                                                                                                                
Vice  Chair Stoltze  asked if  this bill  would regulate  the                                                                   
sale of papers  for rolled cigarettes.  Ms.  Liccioli said it                                                                   
would not.   Vice  Chair Stoltze  asked if  the paper  is the                                                                   
self-extinguishing  substance.    Ms. Liccioli  replied  that                                                                   
there  are several  ways  that  this could  be  accomplished.                                                                   
"Speed bumps" are  built into the cigarettes  themselves.  In                                                                   
response to a question by Vice-Chair  Stoltz, she reported no                                                                   
loss of  tax revenue  due to decreased  smoking.   Vice Chair                                                                   
Stoltze stated support for the bill.                                                                                            
                                                                                                                                
9:22:08 AM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  asked if  the  cigarettes  cost more.    Ms.                                                                   
Liccioli said  there is no  additional cost.   Co-Chair Meyer                                                                   
asked if  there is a difference  in the taste.   Ms. Liccioli                                                                   
reported that studies  show no difference in  taste or health                                                                   
impact.   Co-Chair Meyer  asked if  the cigarette would  burn                                                                   
out at rest.   Ms. Liccioli explained how the  speed bumps in                                                                   
the cigarettes work.                                                                                                            
                                                                                                                                
Representative Gara noted that  the American Lung Association                                                                   
supports the bill.                                                                                                              
                                                                                                                                
Representative Crawford asked  about an additive in the paper                                                                   
that would make a cigarette burn  continuously.  He asked how                                                                   
long it  would continue  to burn  between speed  bumps.   Ms.                                                                   
Liccioli thought  the additive  was in  the tobacco,  not the                                                                   
paper.  Soon after the speed bump, the filter is reached.                                                                       
                                                                                                                                
9:26:22 AM                                                                                                                    
                                                                                                                                
In  response  to  a question  by  Representative  Joule,  Ms.                                                                   
Liccioli referred  to the transitional section,  which states                                                                   
the affective date  when the old cigarettes would  need to be                                                                   
out of the stock.                                                                                                               
                                                                                                                                
Representative   Hawker  observed   that  "reverse   ignition                                                                   
propensity"  is very  appropriate.   Ms.  Liccioli  corrected                                                                   
"reduced     ignition     propensity"     is     appropriate.                                                                   
Representative Hawker said RIP is appropriate.                                                                                  
                                                                                                                                
In response  to a  question by  Co-Chair Meyer, Ms.  Liccioli                                                                   
reported  that the  tobacco  industry is  in  support of  the                                                                   
legislation.   The industry's  wish is  that all states  have                                                                   
similar legislation.                                                                                                            
                                                                                                                                
9:29:54 AM                                                                                                                    
                                                                                                                                
STEVE  BELANGER,  STATE  FIRE   MARSHALL,  ANCHORAGE,  stated                                                                   
support  for  SB  84.    He  related   statistics  caused  by                                                                   
cigarette fires.                                                                                                                
                                                                                                                                
DOUG SCHRAGE, ANCHORAGE FIRE DEPARTMENT,  spoke in support of                                                                   
SB 84.                                                                                                                          
                                                                                                                                
9:32:57 AM                                                                                                                    
                                                                                                                                
JACK SMITH, BARROW  FIRE DEPARTMENT, testified  in support of                                                                   
SB 84.  He  related personal experience with  fires caused by                                                                   
cigarettes.                                                                                                                     
                                                                                                                                
WARREN CUMMINGS,  ALASKA FIRE CHIEFS ASSOCIATION,  FAIRBANKS,                                                                   
testified in support of the bill.                                                                                               
                                                                                                                                
9:35:53 AM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer turned  to the  fiscal notes.   Ms.  Liccioli                                                                   
noted a change to fiscal note  #3, which would move money out                                                                   
of  the general  fund.   The money  would  come from  receipt                                                                   
supported services instead.                                                                                                     
                                                                                                                                
9:36:36 AM                                                                                                                    
                                                                                                                                
At-ease.                                                                                                                        
                                                                                                                                
9:38:50 AM                                                                                                                    
                                                                                                                                
Ms. Liccioli  clarified the  change in fiscal  note #3.   The                                                                   
fiscal note by the Department  of Revenue, which is where the                                                                   
expenditures   are,  should  come   from  receipt   supported                                                                   
services, which  is the revenue  that is shown in  the fiscal                                                                   
note by the Department of Public Safety.                                                                                        
                                                                                                                                
EMILY NENON,  AMERICAN CANCER  SOCIETY, testified  that there                                                                   
does not  seem to be evidence  that the new  cigarettes would                                                                   
have a negative affect on a person's health.                                                                                    
                                                                                                                                
CSSB 84  (JUD) was  heard and HELD  in Committee  for further                                                                   
consideration.                                                                                                                  
                                                                                                                                
9:42:00 AM                                                                                                                    
                                                                                                                                
HOUSE BILL NO. 22                                                                                                             
                                                                                                                                
     "An Act extending the termination date for the Board of                                                                    
     Governors of the Alaska Bar Association; and providing                                                                     
     for an effective date."                                                                                                    
                                                                                                                                
Vice Chair  Stoltze MOVED to REPORT  HB 22 out  of Committee.                                                                   
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
HB  22  was  REPORTED  out of  Committee  with  a  "do  pass"                                                                   
recommendation and with zero fiscal  note #1 by Department of                                                                   
Commerce, Community  and Economic  Development and  with zero                                                                   
fiscal note #2 by the Office of the Governor.                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 9:43 AM.                                                                                           

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