Legislature(2011 - 2012)HOUSE FINANCE 519

04/06/2011 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 146(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 164(FIN) Out of Committee
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 6, 2011                                                                                            
                         1:42 p.m.                                                                                              
1:42:31 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Thomas  called the House Finance  Committee meeting                                                                    
to order at 1:42 p.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Bill Thomas Jr., Co-Chair                                                                                        
Representative Anna Fairclough, Vice-Chair                                                                                      
Representative Mia Costello                                                                                                     
Representative Mike Doogan                                                                                                      
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Mike Hawker (Alternate)                                                                                          
Representative Reggie Joule                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative  Alan Austerman;  Shirley Gifford,  Director,                                                                    
Alcohol  Beverage   Control  Board,  Department   of  Public                                                                    
Safety;  Sue Stancliff,  Special  Assistant,  Office of  the                                                                    
Commissioner,  Department  of  Public Safety;  Wyn  Menefee,                                                                    
Acting  Director,  Division  of   Mining,  Land  and  Water,                                                                    
Department  of  Natural  Resources;  Linda  Hall,  Director,                                                                    
Division  of Insurance,  Department  of Commerce,  Community                                                                    
and   Economic  Development;   Representative  Kurt   Olson,                                                                    
PRESENT VIA TELECONFERENCE                                                                                                    
Dale   Fox,  President   &  CEO,   Alaska  Cabaret,   Hotel,                                                                    
Restaurant   and  Retailers   Association  (Alaska   CHARR),                                                                    
Anchorage;  Belen  Cook,  Member, Alcohol  Beverage  Control                                                                    
Board  of Directors,  Cordova;  Elizabeth Ripley,  Executive                                                                    
Director,  Mat-Su  Health   Foundation,  and  Chair,  Mat-Su                                                                    
Substance   Abuse   Prevention    Coalition;   Glen   Brady,                                                                    
President, Silver  Gulch Brewing,  and Member,  CHARR; Jerry                                                                    
McCutcheon, Anchorage; Bonnie  Woldstad, North Pole; Richard                                                                    
Bouhan, Executive Director,  National Association of Surplus                                                                    
Lines Offices, Ltd. (NAPSLO), Missouri.                                                                                         
HB 125    ALCOHOLIC BEVERAGE CONTROL BOARD                                                                                      
          HB 125 was HEARD and HELD in Committee for                                                                            
          further consideration.                                                                                                
HB 146    LAND TRANSFER FROM STATE AND ALASKA RR                                                                                
          CSHB 146(FIN) was REPORTED out of Committee with                                                                      
          a "do pass" recommendation and with previously                                                                        
          published fiscal notes: FN1 (CED); FN2 (DNR).                                                                         
HB 164    INSURANCE:  HEALTH CARE & OTHER                                                                                       
          CSHB 164(FIN) was REPORTED out of Committee with                                                                      
          a   "no   recommendation"    and   with   attached                                                                    
          previously published fiscal note: FN1 (CED).                                                                          
HOUSE BILL NO. 125                                                                                                            
     "An Act moving the  Alcoholic Beverage Control Board to                                                                    
     the  Department of  Commerce,  Community, and  Economic                                                                    
     Development and relating to  duties of that department;                                                                    
     and providing for an effective date."                                                                                      
1:42:44 PM                                                                                                                    
Vice-chair  Fairclough   continued  with   public  testimony                                                                    
related to HB 125.                                                                                                              
DALE   FOX,  PRESIDENT   &  CEO,   ALASKA  CABARET,   HOTEL,                                                                    
RESTAURANT   AND  RETAILERS   ASSOCIATION  (ALASKA   CHARR),                                                                    
ANCHORAGE (via teleconference),  continued his testimony. He                                                                    
commented  that  for   many  years  significant  cooperation                                                                    
existed  between  local  police,   State  Troopers  and  the                                                                    
Alcoholic  Beverage Control  (ABC) Board.  He believed  that                                                                    
cooperation between agencies was  necessary to enforce Title                                                                    
4  statutes  appropriately.  A board  relocation  would  not                                                                    
substantially  affect   enforcement.  He  referred   to  the                                                                    
document,  "ABC  Board  Audit  Review  Subcommittee  of  the                                                                    
Legislative Budget and Audit Committee"  (copy on file). The                                                                    
subcommittee  concluded  that   the  legislation  would  not                                                                    
significantly   restrict    or   change    the   enforcement                                                                    
responsibilities  of the  ABC or  the  Department of  Public                                                                    
Safety (DPS).                                                                                                                   
Mr. Fox  concurred with  the audit  review. He  informed the                                                                    
committee that the board's  enforcement positions required a                                                                    
background  in  enforcement.  Currently, two  former  police                                                                    
chiefs and  a former state  trooper held seats.  Grant money                                                                    
for compliance checks must solely  be used for that purpose.                                                                    
He expected enforcement efforts  to remain robust. He opined                                                                    
that  the Department  of  Commerce,  Community and  Economic                                                                    
Development  (DCCED) was  better suited  to help  businesses                                                                    
with the  licensing process through education,  training and                                                                    
support.  He  admitted  that there  were  underage  drinking                                                                    
problems.  He asserted  that youth  did  not obtain  alcohol                                                                    
from  licensees.  Alaska  was  the best  in  the  nation  at                                                                    
refusing service to minors at licensed premises.                                                                                
1:46:35 PM                                                                                                                    
Mr.  Fox  did  not  expect  any  adverse  effects  from  the                                                                    
BELEN  COOK, MEMBER,  ABC BOARD  OF DIRECTORS,  CORDOVA (via                                                                    
teleconference),  testified in  opposition  to  HB 125.  She                                                                    
shared positive  experiences related to the  board. During a                                                                    
board meeting in  Nome a restaurant owner  thanked the board                                                                    
for providing  compliance checks  and took pride  in passing                                                                    
her   establishment's   inspection.  She   relayed   further                                                                    
positive  experiences. Community  members in  Kotzebu voiced                                                                    
that the  ABC was  very accessible and  supportive regarding                                                                    
local  licensing and  enforcement issues.  Community members                                                                    
in  Cordova and  other parts  of the  state shared  concerns                                                                    
about  moving the  board out  of DPS.  The residents  feared                                                                    
underage drinking would increase.                                                                                               
1:51:14 PM                                                                                                                    
Ms.  Cook declared  that board  inspections  are not  "sting                                                                    
operations."  She urged  the use  of "compliance  checks" in                                                                    
Representative  Gara  stated  concerns about  the  effective                                                                    
placement of the  ABC. He queried the  practical problems of                                                                    
a move to  DCCED. Ms. Cook worried that moving  the board to                                                                    
DCCED  could  result  in slower  and  less  efficient  board                                                                    
operations.  Representative Gara  asked  for specifics.  Ms.                                                                    
Cook could not provide anything more concrete.                                                                                  
ELIZABETH   RIPLEY,   EXECUTIVE  DIRECTOR,   MAT-SU   HEALTH                                                                    
FOUNDATION,  AND CHAIR,  MAT-SU  SUBSTANCE ABUSE  PREVENTION                                                                    
COALITION  (via teleconference),  testified against  HB 125.                                                                    
She  spoke  in  support   of  strong  ABC  enforcement.  She                                                                    
announced that  the coalition's  mission was  the prevention                                                                    
and reduction  of youth substance  abuse. She  explained the                                                                    
three objectives of the coalition:                                                                                              
       · Data driven strategies and decision making                                                                             
        · Coordinating community response to alcohol abuse                                                                      
        · Strive to be a leader in the state on the issue                                                                       
Ms.  Ripley relayed  that the  coalition  sought to  address                                                                    
substance  abuse   at  the  local  level   through  changing                                                                    
community  culture to  support  healthy  families via  sound                                                                    
public policy.  She related "alarmingly" high  statistics of                                                                    
teen alcohol  use in  the Mat-Su  attributed to  a coalition                                                                    
survey;  68  percent of  eleventh  grade  students had  used                                                                    
alcohol.  Youth   risk  behavior  survey  data   for  Alaska                                                                    
determined that 77 percent of  seniors had used alcohol. She                                                                    
opined that  alcohol use  had become a  rite of  passage for                                                                    
teens.  Mat-Su  teens  reported  that  alcohol  was  readily                                                                    
available to them.                                                                                                              
1:56:35 PM                                                                                                                    
Ms.  Ripley  furthered that  the  most  prevalent access  to                                                                    
alcohol for youth  took place in the home.  She offered that                                                                    
7 percent  of teen access came  from licensed establishments                                                                    
that  did not  check  identification. According  to the  ABC                                                                    
website,  15  percent  of  establishment  compliance  checks                                                                    
failed. The  non-compliant establishments became  portals to                                                                    
access. She  alleged that the  legislation was  developed to                                                                    
curtail  enforcement.   Compliance  checks  were   a  proven                                                                    
strategy to reduce youth access and consumption.                                                                                
Ms. Ripley  declared that  moving the  board to  DCCED would                                                                    
undermine  enforcement. She  emphasized  that the  coalition                                                                    
advocated for  increased and  more uniform  enforcement. The                                                                    
coalition stood in strong opposition to HB 125.                                                                                 
Representative Hawker  asked for evidence that  HB 125 would                                                                    
curtail enforcement.  Ms. Ripley acknowledged  her statement                                                                    
was fear-based. She attributed her  belief to testimony from                                                                    
Legislative Budget  and Audit  Committee (BUD)  hearings and                                                                    
surmised that diminished enforcement  was the motivation for                                                                    
the bill.                                                                                                                       
Representative  Hawker  did  not believe  her  statement  or                                                                    
conclusion  was  accurate.  Ms.  Ripley  admitted  that  her                                                                    
remarks were founded on industry pushing hard for the bill.                                                                     
2:00:08 PM                                                                                                                    
Representative Joule  wondered whether Ms. Ripley  had heard                                                                    
earlier testimony from industry  member Bob Winn endorsing a                                                                    
"three-legged  stool" approach.  He  relayed  that Mr.  Winn                                                                    
felt enforcement  was at a  minimum. He  advocated increased                                                                    
enforcement  with  the  additional  licensing  and  commerce                                                                    
support.  Ms.  Ripley  answered   that  she  had  heard  the                                                                    
GLEN  BRADY, PRESIDENT,  SILVER GULCH  BREWING, AND  MEMBER,                                                                    
CHARR (via teleconference),  spoke in support of  HB 125. He                                                                    
referred  to earlier  testimony that  spoke to  the negative                                                                    
consequences of  ABC relocation in other  states. He offered                                                                    
that  Alaska was  more proactive  than other  states. Alaska                                                                    
was only  one of  six states  with mandatory  alcohol server                                                                    
Mr.  Brady characterized  a productive  relationship between                                                                    
ABC and industry that  addressed irresponsible retailers. He                                                                    
desired  a more  collaborative  relationship. He  reiterated                                                                    
that he did not  support diminished enforcement efforts. The                                                                    
licensing and  economic development  aspect of  the industry                                                                    
was adequately recognized. He  thought the legislation would                                                                    
help   move  the   industry  forward   with  education   and                                                                    
responsible business practices.                                                                                                 
2:04:17 PM                                                                                                                    
Representative  Wilson asked  what the  positive effects  of                                                                    
switching the ABC  Board to DCCED were.  Mr. Brady discerned                                                                    
that board  relocation would positively alter  the nature of                                                                    
the   relationship   with   industry   and   allow   for   a                                                                    
collaborative and open dialogue to address the issues.                                                                          
JERRY  MCCUTCHEON,  ANCHORAGE  (via  teleconference),  spoke                                                                    
against   the   legislation.   He  opined   that   weakening                                                                    
enforcement   could  lead   to   corruption  and   selective                                                                    
enforcement. He  likened the situation to  the adage, "Don't                                                                    
fix  it if  it isn't  broke." He  speculated that  mandatory                                                                    
identification checks  were on  the way and  industry feared                                                                    
that would  mean less business.  Industry could gain  by not                                                                    
having enforcement function properly.                                                                                           
2:08:35 PM                                                                                                                    
Mr.  McCutcheon  concluded  that   HB  125  was  about  non-                                                                    
SHIRLEY GIFFORD,  DIRECTOR, ALCOHOL BEVERAGE  CONTROL BOARD,                                                                    
DEPARTMENT   OF   PUBLIC   SAFETY,   addressed   the   audit                                                                    
recommendations by  the Division  of Legislative  Audit. She                                                                    
reported  that the  board developed  and wrote  policies and                                                                    
procedures. New fee,  revenue, and reconciliation procedures                                                                    
were  implemented.   New  manuals  for  fee,   revenue,  and                                                                    
reconciliation  and  licensing   were  distributed  for  key                                                                    
positions  in the  agency. She  informed the  committee that                                                                    
the  board  developed  a  strategic  enforcement  plan  that                                                                    
involved  an  inspection  tracking form  to  ensure  regular                                                                    
2:12:36 PM                                                                                                                    
Ms. Gifford expounded that the  compliance check program was                                                                    
a  significant  piece  of the  strategic  enforcement  plan.                                                                    
Under  the plan  the state  was divided  into eight  regions                                                                    
with  separate goals.  She added  that FY  11 was  the first                                                                    
year  all of  the goals  were met.  The board  would perform                                                                    
compliance  checks once  each  year  per establishment.  She                                                                    
furthered  that the  board  implemented other  improvements.                                                                    
She created  a check-list  for board meetings.  She improved                                                                    
board  meeting  notification.  Meeting  notices  and  public                                                                    
testimony were  posted on the board's  website. She enhanced                                                                    
quality   control   measures.  She   established   recording                                                                    
compliance  checks to  ensure professional  behavior by  the                                                                    
ABC investigator.                                                                                                               
2:17:02 PM                                                                                                                    
Ms.   Gifford  referred   to  age   assessment.  The   board                                                                    
researched and wrote a compliance  and procedure manual. She                                                                    
studied procedures  of 26 other states  and incorporated the                                                                    
best practices  into Alaska's compliance check  program. For                                                                    
example, one  particular state employed  a panel  of judges,                                                                    
teachers, and citizens to  approve the participants involved                                                                    
in age  assessment. She implemented a  similar procedure and                                                                    
believed  the   process  was  fair  and   objective  to  the                                                                    
Vice-chair Fairclough  noted that  Ms. Gifford  was speaking                                                                    
to HB 206  [Extend Alcoholic Beverage Control  Board] and HB
125. She  asked for  Ms. Gifford's position  on HB  125. Ms.                                                                    
Gifford  felt  her testimony  was  relevant.  She wanted  to                                                                    
illustrate ABC's  efforts to achieve  an objective  and fair                                                                    
agency  that   cooperated  with  industry.  The   board  was                                                                    
committed  to  the  same level  of  professionalism  in  any                                                                    
department they resided.                                                                                                        
Ms.   Gifford  addressed   the  issue   of  access   to  law                                                                    
enforcement.   She  informed   that   the   Board  has   two                                                                    
investigators (Juneau and Fairbanks)  housed with the Alaska                                                                    
State Troopers.  The investigators travel with  the troopers                                                                    
to remote areas.  She worried that contact would  be lost if                                                                    
the agency was moved.                                                                                                           
2:21:44 PM                                                                                                                    
Ms. Gifford stated concerns  about private membership clubs.                                                                    
She explained that  private clubs were licensees  and had to                                                                    
show  compliance with  state  statute  and regulations.  She                                                                    
recommended private clubs  exemption from compliance checks;                                                                    
industry protested. She related  problems gaining entry into                                                                    
private clubs  for compliance checks and  requested magnetic                                                                    
key  or identification  cards for  random  entry. She  noted                                                                    
instances of  cooperation with clubs that  provided magnetic                                                                    
cards  to  the ABC.  The  clubs  were 76  percent  compliant                                                                    
compared  to  other  establishments  85  percent  compliance                                                                    
rate. She  wondered how provisions  in CS HB  125(L&C) would                                                                    
affect private club compliance checks.                                                                                          
Representative  Hawker asked  how  the  board would  operate                                                                    
differently if relocated to DCCED.                                                                                              
2:26:47 PM                                                                                                                    
Ms.  Gifford did  not  anticipate  a change.  Representative                                                                    
Hawker referred  to concerns  outlined in  public testimony.                                                                    
He  asked  whether  relocation  would  curtail  the  board's                                                                    
enforcement  activities.  Ms.  Gifford  responded  that  she                                                                    
intended to carry out enforcement.                                                                                              
Representative Hawker  asked if she felt  coerced to curtail                                                                    
enforcement. Ms. Gifford responded in the negative.                                                                             
Representative  Hawker cited  the  collaboration with  state                                                                    
troopers and  asked whether change to  DCCED would adversely                                                                    
affect  those   relationships.  Ms.  Gifford   worried  that                                                                    
physical  removal  from  DPS  could  result  in  enforcement                                                                    
delays.  The move  could jeopardize  the board's  ability to                                                                    
communicate  and  share  proprietary  information  with  the                                                                    
troopers on a daily basis.                                                                                                      
2:29:20 PM                                                                                                                    
Representative  Hawker offered  that  the legislation  would                                                                    
relocate  the  ABC Board  to  DCCED  from an  administrative                                                                    
standpoint. He  asked if she  thought the  legislation would                                                                    
prohibit the ABC investigators from  being housed with state                                                                    
troopers.   Ms.  Gifford   answered   that   she  did   not.                                                                    
Representative Hawker  suggested that the  committee request                                                                    
an  affirmation  from  DPS  that it  would  not  abandon  or                                                                    
compromise  its relationship  with  ABC's investigative  and                                                                    
enforcement personnel.                                                                                                          
Representative  Edgmon requested  clarification of  industry                                                                    
compliance  statistics. Ms.  Gifford  answered  that the  85                                                                    
percent  success   rate  was  based  on   compliance  checks                                                                    
conducted.  She felt  it was  a fair  representation of  the                                                                    
Representative  Edgmon asked  what relocation  to DPS  would                                                                    
entail for the board. Ms.  Gifford reported that she did not                                                                    
discuss the logistics  of the move with DPS.  She noted that                                                                    
the  commissioner of  DPS offered  assurance that  the board                                                                    
could remain in its current office for the near future.                                                                         
Representative  Doogan   asked  for  clarification   on  the                                                                    
meanings  of  "age   assessment,"  "compliance  check,"  and                                                                    
"sting." Ms. Gifford explained how  age assessment was done.                                                                    
The board  chose candidates between  the ages of 18  to 20.5                                                                    
years  of  age  to  pose   as  underage  buyers.  The  board                                                                    
determines  if the  "buyer" looked  their  age. She  defined                                                                    
that  a compliance  check was  the attempt  of the  underage                                                                    
buyer  to purchase  alcohol in  an establishment.  Sting was                                                                    
the  slang  terminology  the  industry   liked  to  use  for                                                                    
compliance check.                                                                                                               
2:34:28 PM                                                                                                                    
Representative  Gara  recapped  that  the  board's  physical                                                                    
relocation could create  inefficient, untimely communication                                                                    
between the troopers and the board. Ms. Gifford agreed.                                                                         
Vice-chair  Fairclough  clarified  that Ms.  Gifford  stated                                                                    
that the commissioner  of DPS assured that  ABC could remain                                                                    
in its present office. She  asked whether that was accurate.                                                                    
Ms.  Gifford answered  in the  affirmative.  She added  that                                                                    
there was uncertainty about future relocation.                                                                                  
Representative  Gara requested  a commitment  from DPS  that                                                                    
the board could stay in  its present location and maintain a                                                                    
close relationship  with the troopers. He  asked whether she                                                                    
had  other  concerns.  Ms.  Gifford  replied  that  physical                                                                    
location was only  one aspect of being a part  of DPS. There                                                                    
were additional benefits to  the board's identification with                                                                    
the agency.                                                                                                                     
Co-Chair Stoltze contended that  the board considered itself                                                                    
an enforcement  agency rather than a  regulatory agency. The                                                                    
industry was mostly  compliant and not a  criminal class. He                                                                    
did not want to diminish  the state's enforcement of illegal                                                                    
activities, but endorsed a focus on regulation.                                                                                 
2:38:43 PM                                                                                                                    
Co-Chair Stoltze  continued to  discuss compliance  and club                                                                    
licenses.  He believed  that an  ABC  industry board  member                                                                    
pressed  for compliance  checks for  clubs because  they are                                                                    
competitors   with  business   establishments.  He   related                                                                    
concerns  about  the  way   industry  directed  the  board's                                                                    
treatment of  military organizations,  VFW Halls,  Elks, and                                                                    
other fraternal organizations.  He expressed dissatisfaction                                                                    
with the  industry for its  competitive treatment  of clubs,                                                                    
but he was  also unhappy with the way  DPS treated industry.                                                                    
He divulged that he was torn  on the issue. He advocated for                                                                    
strong  regulation, but  felt the  industry was  policed and                                                                    
not treated  as a  regulated form  of commerce.  Ms. Gifford                                                                    
did not believe that the  board's approach was to single out                                                                    
and go  after private clubs.  The board reasoned  that clubs                                                                    
should  be  included  if other  licensees  were  subject  to                                                                    
compliance  checks. Co-Chair  Stoltze  wondered whether  the                                                                    
board had been directed by an industry member of the board.                                                                     
2:43:25 PM                                                                                                                    
Ms.  Gifford  refuted the  claim  that  the board  conspired                                                                    
against  private clubs.  She reiterated  that she  initially                                                                    
excluded  clubs  from  compliance   checks  because  of  the                                                                    
difficulty  to   gain  entry   by  ABC   investigators.  She                                                                    
reexamined  the policy  and  included  clubs for  compliance                                                                    
checks.  Private clubs  were licensees  and  subject to  the                                                                    
same laws and regulation.                                                                                                       
Vice-chair Fairclough  referred to  testimony from  a police                                                                    
officer in  Fairbanks who believed private  clubs should not                                                                    
be subject to compliance checks.                                                                                                
Representative Wilson  was alarmed  to learn that  the state                                                                    
was employing underage adults  to perform compliance checks.                                                                    
Ms.  Gifford replied  that using  older people  would defeat                                                                    
the  purpose  of  the  inspection,   since  no  illegal  act                                                                    
occurred.  The participants  understood the  purpose of  the                                                                    
program. The  activity was covered by  statute. The underage                                                                    
employee   was  supervised   by  law   enforcement  or   ABC                                                                    
2:47:47 PM                                                                                                                    
Representative Costello  wondered about  the mission  of the                                                                    
ABC Board. Ms. Gifford replied  that the board's mission was                                                                    
to protect the safety  of communities through enforcement of                                                                    
statute.  Representative Costello  referred to  testimony by                                                                    
Bob Winn, who  had discussed the three  legged stool concept                                                                    
of regulation. She  asked whether the board  devoted time to                                                                    
other areas besides enforcement.  Ms. Gifford explained that                                                                    
the  ABC administered  enforcement and  licensing. Licensing                                                                    
was  a   huge  responsibility  for  the   board.  Two  board                                                                    
examiners and  a licensing supervisor worked  with licensees                                                                    
on a daily basis. She  added that licensing consumed more of                                                                    
its time than enforcement.                                                                                                      
Representative  Edgmon  wondered  whether the  board  worked                                                                    
with  the Division  of Occupational  Licensing. Ms.  Gifford                                                                    
replied  that ABC  did their  licensing in-house.  The board                                                                    
worked  with the  Department  of Environmental  Conservation                                                                    
(DEC), the Department of Revenue  (DOR), and local governing                                                                    
Representative    Edgmon   wondered    whether   information                                                                    
technology  services  and   ABC's  statewide  database  were                                                                    
provided  by DPS.  Ms. Gifford  responded that  the database                                                                    
was provided by the agency.                                                                                                     
2:50:57 PM                                                                                                                    
Vice-chair Fairclough CLOSED public testimony.                                                                                  
Vice-chair Fairclough  requested that DPS address  the issue                                                                    
of housing the ABC Board if the legislation was adopted.                                                                        
SUE   STANCLIFF,   SPECIAL    ASSISTANT,   OFFICE   OF   THE                                                                    
COMMISSIONER,  DEPARTMENT  OF  PUBLIC  SAFETY,  shared  that                                                                    
there  was  much discussion  within  the  department but  no                                                                    
decision was made.                                                                                                              
2:54:03 PM                                                                                                                    
Representative Gara remarked that  the governor's office did                                                                    
not have a position on the  bill. He asked if ABC relocation                                                                    
would  affect enforcement.  Ms.  Stancliff  stated that  the                                                                    
governor welcomed  the public debate  and did not  endorse a                                                                    
position. She reported that DPS  shared the concerns related                                                                    
to  board relocation.  The department  was  committed to  do                                                                    
whatever  it took  to make  enforcement  work if  relocation                                                                    
occurred.  Alcohol  issues were  a  serious  problem in  the                                                                    
state.  She  referred  to   comments  made  by  Commissioner                                                                    
Masters  that  the  department's single  focus  was  "public                                                                    
policy  protecting the  public's best  interest…and safety."                                                                    
The department's  concern was that  moving the  agency would                                                                    
be contrary  to the express recommendations  of two studies:                                                                    
The Alaska Plan to Reduce  and Prevent Underage Drinking and                                                                    
the Alaska Strategic Safety Plan.  Both plans were developed                                                                    
with extensive public input.                                                                                                    
Representative  Joule asked  whether DPS  intended to  reach                                                                    
out  to  ABC  in  the  event  of  physical  relocation.  Ms.                                                                    
Stancliff responded  that the department  did not  intend to                                                                    
abandon the board. The department  would include the board's                                                                    
enforcement personnel in  strategic planning. The department                                                                    
would not  include Ms. Gifford in  the department's internal                                                                    
directors meetings. She  characterized the department's fear                                                                    
as,  "Out  of  sight,  out of  mind."  She  reiterated  that                                                                    
Commissioner  Masters  would  do  everything  possible;  his                                                                    
overall goal was public safety.                                                                                                 
2:59:01 PM                                                                                                                    
Representative Joule asked whether  staying connected to ABC                                                                    
included reaching across departmental  lines for meetings to                                                                    
continue. Ms. Stancliff answered in the affirmative.                                                                            
HB  125  was  HEARD  and   HELD  in  committee  for  further                                                                    
2:59:32 PM                                                                                                                    
AT EASE                                                                                                                         
3:07:29 PM                                                                                                                    
HOUSE BILL NO. 146                                                                                                            
     "An  Act  authorizing the  transfer  of  land from  the                                                                    
     State of Alaska and  the Alaska Railroad Corporation to                                                                    
     property  owners  along  the  Eielson  Spur  Line;  and                                                                    
     providing for an effective date."                                                                                          
3:07:34 PM                                                                                                                    
Vice-chair Fairclough MOVED to ADOPT  CS Work Draft CSHB 146                                                                    
(FIN)  27-LS0505\I  (4/5/11  Kane)  as  a  working  document                                                                    
before the committee.                                                                                                           
Co-Chair Stoltze OJBECTED for discussion.                                                                                       
REPRESENTATIVE  TAMMY WILSON,  SPONSOR  spoke  to the  title                                                                    
change in the  CS. She remarked that the title  of the House                                                                    
Resources   Committee  version   was   very  specific.   The                                                                    
legislation was thoroughly vetted  and discussed between all                                                                    
parties  and their  attorneys before  it was  drafted. House                                                                    
Bill 146  was a  culmination of  seven years  of negotiation                                                                    
and hard work between involved  parties. She shared that her                                                                    
constituent,   Bonnie  Wolstad   was  instrumental   in  the                                                                    
Representative  Wilson  explained  that HB  146  restored  a                                                                    
reversionary property right taken  away from property owners                                                                    
along  the   Eielson  Spur.   In  2003,   Congress  repealed                                                                    
reversionary sections  of the  Alaska Railroad  Transfer Act                                                                    
(ARTA)  at the  request of  the Alaska  Railroad Corporation                                                                    
(ARC)  to   address  title  issues.  In   the  process,  the                                                                    
landowner's  reversionary  rights  were repealed.  The  bill                                                                    
restored ownership of their property  after the easement was                                                                    
no  longer used.   She  stressed that  the legislation  only                                                                    
restored  a right  that was  taken away  and does  not grant                                                                    
anyone  special   privileges  beyond  the   original  rights                                                                    
established  in  ARTA.  In addition,  all  affected  parties                                                                    
agreed on the bill.                                                                                                             
3:11:18 PM                                                                                                                    
Representative Wilson  believed that  the issue  was simple.                                                                    
The  property  owners  granted  the  railroad  easements  to                                                                    
enable   railroad  expansion.   Subsequently,  the   federal                                                                    
government  changed   the  law.  She  emphasized   that  the                                                                    
legislation restored property  owner's rights. She confirmed                                                                    
that the bill would not affect the military.                                                                                    
BONNIE WOLDSTAD,  NORTH POLE (via  teleconference), recapped                                                                    
that  HB   146  reinstated  the  original   ARTA  provisions                                                                    
(Sections  1208-1209) that  provided a  mechanism to  revert                                                                    
property  ownership  back  to  the  landowners  if  the  ARC                                                                    
abandons use of the property.                                                                                                   
Co-Chair Stoltze  reported that ARC retained  many easements                                                                    
in   his   district.   He  expressed   disappointment   that                                                                    
legislation was required  for the railroad to  "do the right                                                                    
thing."  Representative Wilson  assured  that the  attorneys                                                                    
from  all parties  approved the  language in  the bill.  She                                                                    
cautioned that the CS title  change could complicate passage                                                                    
of the  bill. Co-Chair Stoltze  read the new title,  "An Act                                                                    
relating to  the Alaska Railroad Corporation;  and providing                                                                    
for an effective date." He  maintained that the substance of                                                                    
the bill  did not  change. He  remained committed  to fixing                                                                    
the problem.                                                                                                                    
3:16:00 PM                                                                                                                    
Co-Chair  Stoltze  asked whether  the  new  CS would  ensure                                                                    
resolution of the issue between ARC and the landowners.                                                                         
WYN MENEFEE,  ACTING DIRECTOR, DIVISION OF  MINING, LAND AND                                                                    
WATER, DEPARTMENT  OF NATURAL RESOURCES, responded  that the                                                                    
change would not affect the outcome.                                                                                            
Representative  Gara   asked  if  the   landowners  received                                                                    
compensation  in exchange  for ARC  easement. Representative                                                                    
Wilson  answered  that  compensation  was not  part  of  the                                                                    
reversionary agreement.                                                                                                         
Co-Chair Stoltze closed public testimony.                                                                                       
Vice-chair Fairclough  MOVED to report CSHB  146(FIN) out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
CSHB  146(FIN) was  REPORTED  out of  Committee  with a  "do                                                                    
pass"  recommendation and  with previously  published fiscal                                                                    
notes: FN1, CED; FN2, DNR.                                                                                                      
HOUSE BILL NO. 164                                                                                                            
     "An Act relating to insurance;  relating to health care                                                                    
     insurance,  exemption of  certain insurers,  reporting,                                                                    
     notice, and  record-keeping requirements  for insurers,                                                                    
     biographical   affidavits,   qualifications  of   alien                                                                    
     insurers assuming  ceded insurance,  risk-based capital                                                                    
     for insurers,  insurance holding  companies, licensing,                                                                    
     federal requirements for  nonadmitted insurers, surplus                                                                    
     lines  insurance,   insurance  fraud,   life  insurance                                                                    
     policies and annuity contracts,  rate filings by health                                                                    
     care  insurers,  long-term care  insurance,  automobile                                                                    
     service  corporations,  guaranty  fund  deposits  of  a                                                                    
     title   insurer,   joint  title   plants,   delinquency                                                                    
     proceedings,  fraternal   benefit  societies,  multiple                                                                    
     employer  welfare  arrangements, hospital  and  medical                                                                    
     service    corporations,    and   health    maintenance                                                                    
     organizations; and providing for an effective date."                                                                       
3:19:18 PM                                                                                                                    
LINDA HALL,  DIRECTOR, DIVISION OF INSURANCE,  DEPARTMENT OF                                                                    
COMMERCE, COMMUNITY AND  ECONOMIC DEVELOPMENT, addressed two                                                                    
areas of  major concern  related to  HB 164.  She identified                                                                    
page 50, Section 79, of  the legislation. She explained that                                                                    
Section 79 intended  to act as a  disincentive for employers                                                                    
to drop their  group health coverage. She  read Section (a),                                                                    
lines 6-7,  "an insurer may  not issue an  individual health                                                                    
care insurance  policy to an  employee of an  employer." She                                                                    
related that a group plan  must adhere to specific statutory                                                                    
requirements   that  protect   consumers.  Guarantee   issue                                                                    
insurance  coverage for  the  small group  market  (2 to  50                                                                    
employees) provided that an insurer  could not deny coverage                                                                    
to small  employers. She furthered that  Section (b) allowed                                                                    
for two exceptions.  An employee and insurer  may provide an                                                                    
individual health  insurance policy  with employer  funds if                                                                    
the employee was eligible as  defined by statute. She listed                                                                    
eligible  employees:  part-time,   temporary,  and  seasonal                                                                    
employees  not  eligible  for  a   group  plan.  The  second                                                                    
exception  exempted employers  that did  not provide  health                                                                    
insurance coverage and  had not within the  last six months.                                                                    
She   elaborated   that   individual   coverage   was   more                                                                    
restrictive   than   group   coverage.  For   example,   the                                                                    
individual market  excluded maternity coverage;  small group                                                                    
plans provided it.  The Division of Insurance  opted to help                                                                    
people  denied  coverage  due   to  existing  conditions  in                                                                    
Section   79.  Employees   forced  to   purchase  individual                                                                    
policies due to  a dropped group plan  would be underwritten                                                                    
for  deniable  health  conditions.  The  section  would  not                                                                    
protect the  other employees  that must  wait six  months or                                                                    
more for other health coverage.                                                                                                 
3:23:32 PM                                                                                                                    
Vice-chair Fairclough  referred to testifiers  concerns that                                                                    
Section 79 would severely  limit employer's flexibility. Her                                                                    
interpretion was  that the employee received  the penalty in                                                                    
the event an employer  can only provide individual coverage,                                                                    
not the  employer. The employee  was left at risk.  She felt                                                                    
the policy decision was left open for debate.                                                                                   
3:28:17 PM                                                                                                                    
Ms. Hall  directed attention  to Section  46 (line  16, page                                                                    
27) t related to surplus lines.                                                                                                 
REPRESENTATIVE  KURT OLSON,  SPONSOR,  spoke  in support  of                                                                    
Section  46. He  explained that  the National  Conference of                                                                    
Insurance Legislators (NCOIL)  proposed model legislation, a                                                                    
national tax and collection  authority that relinquished the                                                                    
authority from states Division of Insurance.                                                                                    
He  reported a  conflict  of  interest as  a  member of  the                                                                    
Executive Committee  of NCOIL and  member of  the Interstate                                                                    
Insurance Product Review Committee (IIPRC).                                                                                     
Representative Olson  declared that  he was  in wholehearted                                                                    
support  of Section  46. He  believed that  the NCOIL  model                                                                    
legislation was hastily crafted  and not fully developed. He                                                                    
believed that  Section 46 was thoughtfully  fashioned by the                                                                    
division  and conformed  to the  federal  mandate. He  noted                                                                    
that  20  other  states   proposed  legislation  similar  to                                                                    
Section  46. The  Alaska Surplus  Lines Association  was the                                                                    
main  opposition  to  Section  46.  He  concluded  that  the                                                                    
division had the existing structure  and experience to carry                                                                    
out  the provisions  of Section  46. Passage  will save  the                                                                    
state money and lead to faster implementation.                                                                                  
Vice-chair   Fairclough  understood   that  existing   state                                                                    
statute granted  the division tax-collecting  authority. The                                                                    
provisions of Section  46 would enable Alaska  to benefit if                                                                    
particular [insurance] products were sold.                                                                                      
Representative  Gara read  page 28,  lines 3-4,  Section 46:                                                                    
"The tax paid  by the insurer under this section  is in lieu                                                                    
of  all   insurer  taxes…"  He  wondered   how  the  section                                                                    
influenced the  amount of tax  the state could  collect from                                                                    
insurance companies.  Ms. Hall replied  that HB 164  did not                                                                    
change  the  amount of  taxes  owed.  The bill  defined  the                                                                    
surplus  lines tax  rate.  The only  change  combined a  2.7                                                                    
percent tax  and a 1  percent stamping  fee to a  single 3.7                                                                    
percent tax.                                                                                                                    
3:33:03 PM                                                                                                                    
Representative  Gara asked  for  an  explanation of  surplus                                                                    
lines. Ms. Hall explained that  surplus lines were a type of                                                                    
insurance  written  differently   than  admitted  insurance.                                                                    
Admitted  insurers must  file  authorizations  for form  and                                                                    
rate approval.  A class of "other"  insurers underwrote more                                                                    
difficult  lines of  insurance  such as  earthquake or  some                                                                    
marine  coverage. They  did  not file  forms  and rates  for                                                                    
approval. The  taxes were paid  by surplus lines  brokers as                                                                    
opposed to the actual insurance company.                                                                                        
Ms. Hall elaborated  that Section 46 introduced  a new "home                                                                    
state"  concept based  on changes  in the  federal law  that                                                                    
preempted state  statutes from the  type of  tax collection.                                                                    
The  state currently  collected  premium taxes  only on  the                                                                    
portion of a multi-state  surplus line insurance policy with                                                                    
a risk  located in the  state of Alaska. In  compliance with                                                                    
the new federal law, the  state would collect 100 percent of                                                                    
the tax  debt if Alaska was  declared the home state  of the                                                                    
multi-state business owner.                                                                                                     
Vice-chair Fairclough  asked how  many insurers  sell multi-                                                                    
state surplus  lines. Ms. Hall identified  approximately 900                                                                    
surplus lines  brokers; 100 were residents  of Alaska. Vice-                                                                    
chair Fairclough  asked whether  the state stood  to benefit                                                                    
from  Section 49  if an  Alaskan surplus  lines broker  sold                                                                    
their product  in another  state. Ms.  Hall replied  that it                                                                    
did  not matter  where  the insurer  selling  a product  was                                                                    
located;  what  mattered was  the  location  of the  insured                                                                    
property.  Vice-chair  Fairclough  asked  how  Alaska  would                                                                    
benefit from the statute change.  Ms. Hall informed that the                                                                    
provision enabled the state to  continue to collect taxes on                                                                    
surplus lines  risk. She contended  that the  division could                                                                    
not  collect taxes  on multiple  state  risks, estimated  at                                                                    
$500 thousand,  if the  state failed to  conform to  the new                                                                    
federal mandate.                                                                                                                
3:37:58 PM                                                                                                                    
Representative Gara referred  to Section 64 of  the bill. He                                                                    
inferred  that  long-term  care  insurance  could  not  deny                                                                    
coverage for  a pre-existing condition. He  noted the change                                                                    
in the  definition of "pre-existing".  He asked  whether the                                                                    
statute made it easier or  harder to deny coverage. Ms. Hall                                                                    
responded   that  "the   intent   was  to   take  away   the                                                                    
subjectivity of  an ordinary prudent  person and  instead to                                                                    
rely  on  medical advice  or  treatment  as opposed  to  the                                                                    
opinion of an ordinary prudent person."                                                                                         
Representative Gara asked  whether HB 164 made  it harder or                                                                    
more  expensive to  procure insurance  or reduced  coverage.                                                                    
Ms. Hall answered in the  negative.                                                                                             
Representative Wilson  asked whether  HB 164 was  written in                                                                    
response to changes in federal  law. Ms. Hall responded that                                                                    
only Section 46 (the section  on surplus lines) was included                                                                    
due to federal law. She  elaborated that the legislation was                                                                    
influenced   by  the   National  Association   of  Insurance                                                                    
Commissioners   (NAIC),  loosely   described   as  a   trade                                                                    
association of all the insurance  regulators in the country.                                                                    
The   Association   attempted  to   implement   self-imposed                                                                    
uniformity of  insurance laws.  The division  was accredited                                                                    
by NAIC and  many of the changes in HB  164 were included to                                                                    
maintain  accreditation standards.  She  noted  that all  50                                                                    
states  were accredited,  which ensured  financial oversight                                                                    
of insurance companies.                                                                                                         
3:41:42 PM                                                                                                                    
Representative Wilson  asked if  a state board  of insurance                                                                    
existed. Ms. Hall replied in the negative.                                                                                      
RICHARD BOUHAN, EXECUTIVE  DIRECTOR, NATIONAL ASSOCIATION OF                                                                    
PROFESSIONAL SURPLUS LINES  OFFICES, LTD. (NAPSLO), MISSOURI                                                                    
(via  teleconference), spoke  in opposition  to the  surplus                                                                    
lines and  tax collection provisions  in HB 164.  He alleged                                                                    
that the  legislation would not  conform to the  new federal                                                                    
law.  The  legislation  required  the  establishment  of  an                                                                    
allocation  formula for  surplus lines  tax collection.  The                                                                    
formula proposed  by NAIC  in their  "non-admitted insurance                                                                    
multi-state  agreement" was  burdensome to  brokers and  did                                                                    
not simplify the tax payment  process as mandated by federal                                                                    
law.  He  opposed  paying  taxes  to  a  clearinghouse  that                                                                    
allowed states  to distribute  revenue from  taxes collected                                                                    
on  multi-state surplus  lines risk  policies. He  felt that                                                                    
the  tax  rates  established  under the  structure  did  not                                                                    
comply with federal regulations. He  added that only 5 to 15                                                                    
percent of surplus lines were  multi-state. He was uncertain                                                                    
that any state would gain  revenue by entering into a multi-                                                                    
state compact.                                                                                                                  
Vice-chair Fairclough asked the  witness if he had contacted                                                                    
any Alaskan insurers on the  issue. Mr. Bouhan answered that                                                                    
he  contacted insurance  companies  and  brokers dealing  in                                                                    
Vice-chair Fairclough CLOSED public testimony.                                                                                  
Representative Wilson  MOVED to report  CS HB 164  (L&C) 27-                                                                    
LS0444/B  out of  Committee with  individual recommendations                                                                    
and the accompanying fiscal note.                                                                                               
3:50:27 PM                                                                                                                    
AT EASE                                                                                                                         
3:51:04 PM                                                                                                                    
Representative Wilson WITHDREW her motion.                                                                                      
Representative Wilson  MOVED to Adopt  CS HB 164  (FIN) (27-                                                                    
LS0444\I, Bailey,  4/1/11) as a working  document before the                                                                    
Vice-chair  Fairclough   OBJECTED  for  discussion   on  the                                                                    
difference between the versions.                                                                                                
Ms. Hall  reported that the  CS reflected  minor corrections                                                                    
or formatting  changes and did  not contain  any substantive                                                                    
changes. She  listed the revisions. She  referenced page 38,                                                                    
line  13, the  addition of  three  words "the  sum of."  She                                                                    
identified that page 62, line  13, corrected a repealer. She                                                                    
concluded that on  line 15, page 62, the  number 14 replaced                                                                    
13 as the correct number.                                                                                                       
Vice-chair Fairclough REMOVED her  OBJECTION. There being NO                                                                    
further OBJECTION, it was so ordered.                                                                                           
Representative Wilson  MOVED to report CSHB  164(FIN) out of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
CSHB  164(FIN) was  REPORTED  out of  Committee  with a  "no                                                                    
recommendation"  and  with   attached  previously  published                                                                    
fiscal note: FN1, CED.                                                                                                          
3:54:06 PM                                                                                                                    
The meeting was adjourned at 3:54 PM.                                                                                           

Document Name Date/Time Subjects
HB 146 Chronolgy Final.pdf HFIN 4/6/2011 1:30:00 PM
HB 146
CSHB146 Sponsor Statement.pdf HFIN 4/6/2011 1:30:00 PM
HB 146
Dec_17_RR_letter[1].pdf HFIN 4/6/2011 1:30:00 PM
HB 146
Corp_ARTA_2005_excerpt.pdf HFIN 4/6/2011 1:30:00 PM
HB 146
HB 164 CS WORKDRAFT 27-LS0444-I.pdf HFIN 4/6/2011 1:30:00 PM
HB 164
HB 125 Kate Burkhart AMHB Testimony and responses 040611.pdf HFIN 4/6/2011 1:30:00 PM
HB 125
HB 125 ABC Mission.pdf HFIN 4/6/2011 1:30:00 PM
HB 125
HB 146 CS WORKDRAFT 27-LS0505-I.pdf HFIN 4/6/2011 1:30:00 PM
HB 146