Legislature(2013 - 2014)HOUSE FINANCE 519

03/28/2014 08:30 AM FINANCE

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* first hearing in first committee of referral
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<Bill Hearing Canceled>
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSHB 134(HSS) Out of Committee
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 28, 2014                                                                                            
                         8:36 a.m.                                                                                              
8:36:50 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Stoltze called the House Finance Committee meeting                                                                     
to order at 8:36 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Lindsey Holmes                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Bryce Edgmon                                                                                                     
ALSO PRESENT                                                                                                                  
Daniel George, Staff, Representative Bill Stoltze; Michael                                                                      
Paschall, Staff, Representative Eric Feige.                                                                                     
PRESENT VIA TELECONFERENCE                                                                                                    
William  Streur,  Commissioner,  Department  of  Health  and                                                                    
Social Services;  Margaret Brodie,  Director of  Health Care                                                                    
Services,  Department of  Health  and  Social Services;  Ben                                                                    
Mulligan,  Department   of  Fish  and  Game,   Juneau;  Lela                                                                    
Klingert, CEO, CFAB.                                                                                                            
HB 121    COMMERCIAL FISHING & AGRICULTURE BANK                                                                                 
          CSHB 121 (FIN) was HEARD and HELD in committee                                                                        
          for further consideration.                                                                                            
HB 134    MEDICAID PAYMENT FOR MEDISET PRESCRIPTION                                                                             
          CSHB 134 (HSS) was REPORTED out of committee with                                                                     
          a "do pass" recommendation and with one                                                                               
          previously published zero fiscal note: FN1 (DHS).                                                                     
HOUSE BILL NO. 134                                                                                                            
     "An Act requiring Medicaid payment for scheduled unit                                                                      
     dose prescription drug packaging and dispensing                                                                            
     services for specified recipients."                                                                                        
8:37:21 AM                                                                                                                    
Co-Chair Stoltze discussed housekeeping.                                                                                        
Representative  Costello  pointed  out to  the  committee  a                                                                    
letter from  Jason Hooley, Special Assistant,  Department of                                                                    
Health and  Social Services that  addressed the  fiscal note                                                                    
(copy on file).                                                                                                                 
8:38:16 AM                                                                                                                    
WILLIAM  STREUR,  COMMISSIONER,  DEPARTMENT  OF  HEALTH  AND                                                                    
SOCIAL   SERVICES  (via   teleconference),  summarized   the                                                                    
letter. He  relayed that the requirement  for the department                                                                    
to pay  for the delivery of  the medisets on a  weekly basis                                                                    
had been eliminated.  He shared that the  delivery costs had                                                                    
been  a  challenge  for the  department  because  they  were                                                                    
formidable; if  the providers of medisets  decided to expand                                                                    
out  into urban  areas like  Fairbanks or  Juneau the  costs                                                                    
would  be  very  large.  By  removing  the  requirement  and                                                                    
allowing for bi-weekly distribution  the department was able                                                                    
to take the  cost of the service down to  zero. He said that                                                                    
the bill put  in statute the requirement to  continue to pay                                                                    
for  medisets.  He  spoke  to   the  proven  efficiency  and                                                                    
efficacy  of  medisets.  He said  that  the  program  helped                                                                    
patients  maintain integrity  by ensuring  proper dosage  of                                                                    
8:41:28 AM                                                                                                                    
Co-Chair  Austerman asked  whether any  expansion in  dollar                                                                    
value that the  state could pay was included  in the current                                                                    
Medicaid budget.                                                                                                                
Commissioner Streur  replied yes.  He noted that  the growth                                                                    
factor  was built  in and  assumed  in the  fiscal note.  He                                                                    
believed  that   the  growth  could  be   sustained  by  the                                                                    
8:42:53 AM                                                                                                                    
Co-Chair Austerman asked if  the regulations that controlled                                                                    
mediset confined  the places where it  could be distributed.                                                                    
He  wondered  if  mediset  was   confined  to  Anchorage  by                                                                    
regulation  or  because of  the  operational  cost of  doing                                                                    
Commissioner  Streur replied  that  there would  need to  be                                                                    
enough  of a  market  for the  pharmacy  to produce  mediset                                                                    
because it required  an additional cost to  the business. He                                                                    
noted that  some smaller pharmacies did  provide the service                                                                    
for a small  fee or none at  all. He believed that  it was a                                                                    
question  on  volume   and  the  cost  of   setting  up  the                                                                    
capabilities to do mass medisets.                                                                                               
8:44:42 AM                                                                                                                    
Co-Chair Austerman  understood that  the state  and Medicaid                                                                    
split the cost of the medisets 50/50.                                                                                           
Commissioner Streur replied  that certain prescriptions were                                                                    
covered at  a higher  percentage. The fiscal  note accounted                                                                    
for the departments acknowledgement that the bill.                                                                              
8:45:39 AM                                                                                                                    
Representative  Wilson asked  if  the bill  would cover  all                                                                    
seniors with two or more prescriptions.                                                                                         
Commissioner Streur  replied that it would  cover anyone who                                                                    
was eligible.  The person  had to have  a requirement  for a                                                                    
mediset and had to be thoroughly vetted.                                                                                        
Representative Wilson  understood that  people who  were not                                                                    
on Medicaid would have to pay for the program themselves.                                                                       
Commissioner Streur agreed.                                                                                                     
8:46:53 AM                                                                                                                    
Vice-Chair Neuman  asked how much the  program was currently                                                                    
costing the state.                                                                                                              
Commissioner Streur  deferred to the Director  of Healthcare                                                                    
MARGARET BRODIE, DIRECTOR,  HEALTH CARE SERVICES, DEPARTMENT                                                                    
OF HEALTH AND SOCIAL  SERVICES (via teleconference), replied                                                                    
that  the state  currently paid  $375 thousand  annually for                                                                    
mediset packaging.                                                                                                              
Vice-Chair  Neuman asked  if  the  fee was  a  fee that  was                                                                    
typically covered in nationwide dispensing fees.                                                                                
Commissioner Streur replied no.                                                                                                 
Vice-Chair Neuman surmised that  the program would be unique                                                                    
to  Alaska. Commissioner  Streur replied  other states  were                                                                    
beginning to  address the issue. Vice-Chair  Neuman asked if                                                                    
the department had  the ability to manage the  cost fees and                                                                    
structures of  the program.  Commissioner Streur  yes. Vice-                                                                    
Chair  Neuman concluded  that if  it were  to be  written in                                                                    
statue the  state would have the  same ability. Commissioner                                                                    
Streur  said  that  the   current  bill  version  reinstated                                                                    
management to the department.  Vice-Chair Neuman queried the                                                                    
current dispensing fee per month.                                                                                               
Ms.  Brodie  replied that  the  current  dispensing fee  per                                                                    
person, per month was $12.12.                                                                                                   
Vice-Chair  Neuman  asked  what  the  mediset  fee  was  per                                                                    
Commissioner Streur replied $5 per person, per month.                                                                           
Vice-Chair  Neuman  expressed  concern  regarding  expanding                                                                    
healthcare costs.                                                                                                               
Commissioner  Streur countered  that  if  the program  would                                                                    
save  the  state  the additional  costs  caused  by  someone                                                                    
improperly using medications.                                                                                                   
Vice-Chair  Neuman  understood  that   by  putting  it  into                                                                    
statute, instead  of regulation,  the legislature  would not                                                                    
be able to reduce the cost of the program.                                                                                      
Commissioner  Streur  replied  that  the  legislature  could                                                                    
potentially  make  cuts  in   the  department's  budget.  He                                                                    
believed  that if  the department  was asked  to make  cuts,                                                                    
medisets would  not be a  priority. He highlighted  that the                                                                    
way  that  the  legislation   was  written  did  not  change                                                                    
anything that the department was currently doing.                                                                               
8:52:33 AM                                                                                                                    
Representative Munoz  understood that mediset was  paid only                                                                    
to  certain  pharmacies that  reached  a  certain volume  in                                                                    
dispensing;  the   bill  would   open  up  payment   to  all                                                                    
Commissioner Streur replied  that the bill did  not speak to                                                                    
the issue.  He noted that  the regulations required  that 75                                                                    
percent of  prescriptions must be mediset  before they would                                                                    
qualify for  the mediset fee.  He relayed that the  bill did                                                                    
not speak to a minimum number or percentage.                                                                                    
Representative Munoz  asked if the  $5 fee remained  for the                                                                    
new pharmacies that were dispensing,  in addition to the $12                                                                    
Commissioner Streur reiterated that  that was in regulation.                                                                    
The bill did not speak to the issue.                                                                                            
8:54:23 AM                                                                                                                    
Co-Chair   Austerman   understood   that  there   could   be                                                                    
restrictions  on  businesses  based  on  the  percentage  of                                                                    
mediset business  it generated. Commissioner  Streur replied                                                                    
in  the affirmative.  Co-Chair Austerman  asked whether  the                                                                    
regulation  was being  proposed  or if  was already  active.                                                                    
Commissioner Streur replied that  it was under proposal. Co-                                                                    
Chair Austerman queried any concerns  held by the department                                                                    
on the issue.                                                                                                                   
8:55:25 AM                                                                                                                    
Commissioner  Streur  stated  that the  department  believed                                                                    
that medisets  were an important  part of health  and safety                                                                    
for vulnerable  adults and children;  therefore, it  was the                                                                    
departments  believe that  they  should be  accessible on  a                                                                    
statewide  basis  to  a  wider  variety  of  pharmacies.  He                                                                    
admitted that the rate  structure needed further examination                                                                    
before he  could provide a  conclusive answer. He  said that                                                                    
he would  report back to  the committee in order  to clarify                                                                    
Co-Chair Austerman felt  that the regulation would  be a way                                                                    
to   control  cost;   only   larger   pharmacies  in   large                                                                    
communities would benefit.                                                                                                      
Representative  Guttenberg   shared  that  there   were  two                                                                    
pharmacies  in Fairbanks  that provided  medisets, but  that                                                                    
medisets were not  their primary business. He  said that the                                                                    
75  percent   limit  would  prevent  some   pharmacies  from                                                                    
expanding even marginally. He wondered  if that had been the                                                                    
intent of the regulation.                                                                                                       
8:57:09 AM                                                                                                                    
Commissioner  Streur thought  that  he needed  to study  the                                                                    
intent  of the  regulation  more deeply.  He  said that  the                                                                    
regulation was not restricting  any pharmacy from dispensing                                                                    
a  mediset   rather  it  would  restrict   a  pharmacy  from                                                                    
receiving  a mediset  fee. He  thought if  the efficacy  and                                                                    
safety was apparent,  it was incumbent of the  state to look                                                                    
to expanding mediset to the extent that it could.                                                                               
Representative   Guttenberg    relayed   that    under   the                                                                    
description of  a qualifying  pharmacy, the  last qualifier,                                                                    
number 5:                                                                                                                       
     "Delivering   prescriptions   using   the   most   cost                                                                    
     effective method…"                                                                                                         
Representative Guttenberg  thought that pharmacies  could be                                                                    
using the most cost effective  method while not charging the                                                                    
least  amount of  money. He  thought the  language gave  the                                                                    
department a lot of authority for regulation.                                                                                   
Commissioner  Streur stated  that  the  language spoke  only                                                                    
with regard to the delivery of the medisets.                                                                                    
8:59:22 AM                                                                                                                    
Vice-Chair  Neuman  asked  about  the 75  percent  rule.  He                                                                    
understood  that  the  rule  benefited  smaller  communities                                                                    
because  it would  allow more  pharmacies to  participate in                                                                    
the program. He  asked whether the 75 percent  rule had been                                                                    
removed, and if so, why it was removed.                                                                                         
Commissioner Streur offered to  provide the information at a                                                                    
later date.  He added that  the 75 percent rule  was already                                                                    
in the proposed regulation, but was not yet in statute.                                                                         
9:00:56 AM                                                                                                                    
Representative  Costello   understood  that   currently  and                                                                    
pharmacy  that  wanted to  provide  the  service could,  the                                                                    
question was  whether or  not they  would be  reimbursed for                                                                    
the  service.  She  believed   that  the  regulation  review                                                                    
process could  be followed. She  asserted that the  bill was                                                                    
intended to be  a cost savings measure.  She appreciated the                                                                    
home  setting as  a less  expensive solution  to the  rising                                                                    
cost  of medical  care. A  registered  nurse dispensing  the                                                                    
medication was  more costly to  the state. She saw  the bill                                                                    
as  a  compassionate method  to  allow  more individuals  to                                                                    
receive in-home care, surrounded by their family.                                                                               
9:04:10 AM                                                                                                                    
Vice-Chair  Neuman MOVED  to REPORT  CSHB 134  (FIN) out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying  fiscal  note.  Co-Chair Stoltze  OBJECTED  for                                                                    
Vice-Chair  Neuman appreciated  the effects  of the  mediset                                                                    
program  even  if  having the  medisets  delivered  did  not                                                                    
ensure  that the  medications would  be taken  correctly. He                                                                    
expressed  concern with  the growing  cost of  healthcare in                                                                    
the  state.  He  believed  that  in  10  years  the  state's                                                                    
Medicare  costs would  be $3  billion or  higher. He  feared                                                                    
that the  state would be unable  to continue to pay  for the                                                                    
program  in the  future and  believed that  the costs  would                                                                    
need  to  be measured  against  other  senior benefits  when                                                                    
creating  future   budget.  He  warned  that   the  cost  of                                                                    
pharmaceuticals  would be  determined by  the pharmaceutical                                                                    
companies and  not the  state, which  meant the  state would                                                                    
have trouble controlling the cost of the program.                                                                               
9:08:05 AM                                                                                                                    
Representative  Wilson pointed  out Page  2, line  13, which                                                                    
laid out the 5 eligibility  standards. She understood that a                                                                    
person  living  in their  home  would  not be  covered.  She                                                                    
believed that the  program was a good idea  but thought that                                                                    
it  should   be  open  to   all  seniors  and   include  all                                                                    
9:09:55 AM                                                                                                                    
Representative  Guttenberg thought  that the  medisets could                                                                    
inform  paramedics on  a  scene as  to  which medications  a                                                                    
patient had, or  had not, taken. He believed  that the small                                                                    
cost  containment efforts  could make  a huge  difference in                                                                    
the big picture.                                                                                                                
9:11:48 AM                                                                                                                    
Representative Gara  shared his introduction to  the mediset                                                                    
program  while visiting  a senior  center. He  stressed that                                                                    
the fiscal note  could not reflect the savings  to the state                                                                    
from  someone not  having to  be  hospitalized because  that                                                                    
could  not  be  predicted.  He  believed  that  Commissioner                                                                    
Streur had worked harder than  any other commissioner in the                                                                    
state at  trying to find  ways to  save money. He  had faith                                                                    
that the zero fiscal note would prove to be true.                                                                               
9:14:09 AM                                                                                                                    
Representative  Thompson   thought  that  there   should  be                                                                    
further  discussion on  the 75  percent rule.  He said  that                                                                    
pharmacies in  the smaller areas were  providing the service                                                                    
for zero cost.                                                                                                                  
Representative   Costello  replied   that  the   75  percent                                                                    
requirement  was in  regulation and  was currently  under by                                                                    
the  commissioner. She  said that  the bill  would put  into                                                                    
statute  a program  that  was valuable  to  the citizens  of                                                                    
Alaska in  terms of  cost savings and  quality of  life. The                                                                    
regulation  being considered  by  the department  was not  a                                                                    
part of the legislation.                                                                                                        
9:16:59 AM                                                                                                                    
Representative  Thompson thought  that the  75 percent  rule                                                                    
would  drive the  business to  one  pharmacy. He  reiterated                                                                    
discomfort with the regulation.                                                                                                 
Co-Chair Stoltze  appreciated the process that  the bill had                                                                    
traveled through to its current iteration.                                                                                      
Co-Chair  Stoltze WITHDREW  his  OBJECTION.  There being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
CSHB  134 (HSS)  was REPORTED  out of  committee with  a "do                                                                    
pass" recommendation and with  one previously published zero                                                                    
fiscal note: FN 1 (DHS).                                                                                                        
9:21:09 AM                                                                                                                    
AT EASE                                                                                                                         
9:23:08 AM                                                                                                                    
HOUSE BILL NO. 121                                                                                                            
     "An  Act relating  to the  examinations, board,  loans,                                                                    
     records,   and  lobbying   contracts   of  the   Alaska                                                                    
     Commercial Fishing and  Agriculture Bank; and providing                                                                    
     for an effective date."                                                                                                    
9:23:25 AM                                                                                                                    
Vice-Chair  Neuman MOVED  to  ADOPT  the proposed  committee                                                                    
substitute for  HB 121,  Work Draft  28-LS091\N, (Bannister,                                                                    
Co-Chair Stoltze OBJECTED for discussion.                                                                                       
DANIEL   GEORGE,   STAFF,   REPRESENTATIVE   BILL   STOLTZE,                                                                    
explained  the changes  in the  CS.  In Section  1, page  3,                                                                    
lines 11,  18 and  21 a drafting  error had  been corrected;                                                                    
"or  (15) -  (18)" had  been inserted  in place  of (15)  or                                                            
(16). The language  referred to powers of  the bank. Section                                                                  
2 had  been added to the  bill. In Section 2,  page 5, lines                                                                    
10 - 16 amended the lending powers of the bank:                                                                                 
     The  bank  may not  make  a  loan  on a  limited  entry                                                                    
     permitor   other    collateral   to    an   individual,                                                                    
     corporation, partnership, or  limited liability company                                                                    
     engages in  commercial fishing, including  a harvester,                                                                    
     processor, supplier, or marketer,  if the collateral is                                                                    
     to be used in a  mixed stock fishery with the potential                                                                    
     to affect any  discrete stock or species  that has been                                                                    
     declared a  stock of  concern by  the Alaskan  Board of                                                                    
     Fisheries within the last two  life cycles of the stock                                                                    
     or species.                                                                                                                
Mr. George continued. Section 9,  page 7, line 29, reflected                                                                    
the removal of the lobbying prohibition repeal.                                                                                 
9:25:49 AM                                                                                                                    
Vice-Chair  Neuman asked  if  a sport  fishing  guide was  a                                                                    
commercial fisherman.                                                                                                           
MICHAEL  PASCHALL, STAFF,  REPRESENTATIVE ERIC  FEIGE, asked                                                                    
for clarification on the question                                                                                               
Vice-Chair  Neuman asked  if a  person who  was a  guide for                                                                    
sport fishing, whose  primary income was to  take people out                                                                    
sport fishing, identified as a commercial fisherman.                                                                            
Mr. Paschall  assumed that since  the guide was  not fishing                                                                    
they would not be considered a commercial fisherman.                                                                            
Vice-Chair  Neuman  asked if  a  sport  fishing guide  could                                                                    
qualify for any of the programs in the legislation.                                                                             
Mr. Paschall  deferred the question  to Lela  Klingert, CEO,                                                                    
9:28:17 AM                                                                                                                    
Representative Holmes understood that  the rules of the bank                                                                    
were unique. She asked for  further clarification on Section                                                                    
Co-Chair Stoltze spoke to the  intent of the change. He said                                                                    
that  the  loans would  be  primarily  out-of-state to  non-                                                                    
resident  business  people   and  commercial  fisherman.  He                                                                    
thought that if the legislature  was not going to prioritize                                                                    
Alaskan  fisherman   then  out-of-state   business  entities                                                                    
should not  be paid to  enter the state to  harvest, process                                                                    
or market fish.                                                                                                                 
9:30:30 AM                                                                                                                    
Representative  Gara  asked  if the  section  was  returning                                                                    
current law to prior law.                                                                                                       
Co-Chair Stoltze said  that there was an  expansion for out-                                                                    
of-state loans in  the bill and Section 2 would  put a limit                                                                    
on where the out-of-state loans to be distributed.                                                                              
9:31:19 AM                                                                                                                    
Representative Gara  asked what the original  amount of seed                                                                    
money from the state had been to start the bank.                                                                                
Mr. Paschall  believed it  was $32  million. He  stated that                                                                    
the money was repaid to the  state. Once the debt was repaid                                                                    
the state  gave up stock  ownership in the bank.  He relayed                                                                    
that the corporation had always  been private, but the state                                                                    
once had an ownership interest, which it no longer had.                                                                         
9:32:22 AM                                                                                                                    
Representative  Munoz spoke  to  the bank  using permits  as                                                                    
collateral.  She  asked  if  the  addition  of  the  section                                                                    
changed the ability to use  permits as collateral. She asked                                                                    
if the bank was truly private.                                                                                                  
Mr.  Paschall  reiterated  that the  bank  had  always  been                                                                    
private. He  said that  question was  whether the  state had                                                                    
additional controls  over the  bank. He  said that  the bill                                                                    
would restrict collateral to any  loan obtainer of using the                                                                    
collateral  of a  limited entry  permit  in three  different                                                                    
Representative Munoz  asked how  the entity was  exempt from                                                                    
banking regulations in the state.                                                                                               
Mr.  Paschall replied  that  statute specifically  indicated                                                                    
that  the  bank was  not  subject  to  the banking  laws  of                                                                    
privately held or cooperative banks.                                                                                            
Representative  Munoz  asserted  that the  bank  was  quazi-                                                                    
public and not a private bank.                                                                                                  
Mr. Paschall thought  that the question had  been dealt with                                                                    
by the  courts in  the past;  the bank was  an agent  of the                                                                    
state but was not an agency of the state.                                                                                       
9:34:40 AM                                                                                                                    
Co-Chair Austerman stated that  he and Co-Chair Stoltze were                                                                    
in   constant   discussions   concerning  sport   fish   and                                                                    
commercial fish. He did not  believe that the bill addressed                                                                    
the out-of-state  issue, but spoke to  the allocation issue.                                                                    
He  shared  that  the  legislature   had  decided  that  the                                                                    
allocation for  fisheries across the state  would be handled                                                                    
by  the Department  of Fish  and Game  through the  board of                                                                    
fish.  He  explained  that  if   a  commercial  fishery  was                                                                    
intercepting any  fish going to a  discreet stock management                                                                    
area, the bill  said that CFAB could not  loan the fisherman                                                                    
fishing  in  that  fishery. He  expressed  concern  for  the                                                                    
Section having been added.                                                                                                      
Co-Chair  Stoltze rebutted  that  it was  not an  allocation                                                                    
issue.  He said  that  the legislature  was  not making  any                                                                    
decisions on  allocation issues. He  stated that he  was not                                                                    
going to  enable out-of-state agencies  to use  Alaska based                                                                    
money to move in on Alaskans opportunity for fish.                                                                              
Representative  Gara  agreed  with  Co-Chair  Stoltze  about                                                                    
stocks  of concern.  He said  that he  did not  see how  the                                                                    
section would limit Alaskans.                                                                                                   
Co-Chair Stoltze  said that it  had been the  testimony both                                                                    
public  and private  that  the most  folks  that would  take                                                                    
advantage  of the  program were  from out-of-state.  He said                                                                    
that the intent of the bill was to bring in more out-of-                                                                        
state participants through Alaskan loans.                                                                                       
9:39:38 AM                                                                                                                    
Vice-Chair Neuman  appreciated the  effect of Section  2. He                                                                    
felt  that  it was  prudent  not  to  affect the  impact  to                                                                    
certain fisheries  through expansion.  He said  that out-of-                                                                    
state companied could  receive up to $1 million  in loans to                                                                    
fish Alaska's waters.                                                                                                           
9:41:22 AM                                                                                                                    
Mr. Paschall  replied that  part of the  intent of  the bill                                                                    
was to  lift some of  the loan restriction amounts.  He said                                                                    
that there were already  provisions for certain out-of-state                                                                    
companies.  He  relayed  that   the  bill  listed  different                                                                    
provisions for different types of loans.                                                                                        
Vice-Chair Neuman  returned to  Section 2.  He asked  if the                                                                    
section  allowed up  to $1  million in  loans to  commercial                                                                    
fishermen, processors, suppliers or marketers.                                                                                  
9:42:54 AM                                                                                                                    
Mr. Paschall  understood that Section  2 would  prohibit the                                                                    
use  of collateral  for individuals  applying  for loans  it                                                                    
would not  change the amount. He  said that numbers 4,  5, 6                                                                    
and  7 on  Page 2  changed  the limits  on those  particular                                                                    
Co-Chair  Stoltze  asked  for   the  sponsor's  position  on                                                                    
Section 2.                                                                                                                      
Mr. Paschall  replied that  the concern  was that  Section 2                                                                    
put  the  bank  in  a  precarious  situation  and  would  be                                                                    
difficult to enforce.                                                                                                           
9:44:51 AM                                                                                                                    
Vice-Chair  Neuman felt  that the  online application  asked                                                                    
specific  questions  to   applicants  about  their  business                                                                    
practices; he imagined  that it was well  understood who was                                                                    
doing what, and where.                                                                                                          
Mr.  Paschall agreed.  He suggested  that  if an  individual                                                                    
were  to qualify  for a  loan on  a fishing  vessel to  fish                                                                    
outside of  Juneau, and  next year they  decided to  fish in                                                                    
Norton  Sound (an  area of  stock concern),  there would  be                                                                    
nothing that  the bank could  do about it.  The restrictions                                                                    
would only apply when initially qualifying for the loan.                                                                        
9:46:02 AM                                                                                                                    
Representative Gara asked about Page  6, line 1 of the bill.                                                                    
He asked whether Section 5  was meant to govern out-of-state                                                                    
companies. He  wondered if the  percentage of  total capital                                                                    
of the loan would be lifted  from 8 to 25 percent solely for                                                                    
foreign owned businesses.                                                                                                       
Mr. Paschall replied  that Section 5 referred  only to loans                                                                    
that were  made to  non-members of the  bank. The  amount of                                                                    
the loan  was lifted $25,000  to $50,000, and  was primarily                                                                    
intended  for  agriculture. He  believed  that  there was  a                                                                    
residency restriction.                                                                                                          
Representative Gara  asked where the $50,000  figure derived                                                                    
Mr. Paschall  replied that it  was the cumulative  amount of                                                                    
the loans to non-members of the bank.                                                                                           
Co-Chair Stoltze noted that Section  2 was important to some                                                                    
committee members.  He wondered  whether people  would still                                                                    
feel that  they could support  the bill if the  section were                                                                    
Mr.  Paschall though  that the  bank president  could better                                                                    
speak to the impacts of the  section. He said that there was                                                                    
concern with the broadness of the language in the section.                                                                      
Co-Chair  Stoltze  said  that non-commercial  fishermen  had                                                                    
reacted positively to the section.                                                                                              
9:49:39 AM                                                                                                                    
Co-Chair Austerman could  not support the bill  if Section 2                                                                    
remained. He  believed that the  language gave the  bank the                                                                    
burden of  making the determination  as to whether  the area                                                                    
in question was an area of  concern for fish stocks. He felt                                                                    
that   Section  2   warped  the   original  intent   of  the                                                                    
legislation. He  suggested that if  the legislature  did not                                                                    
want the Board  of Fisheries to allocate  the fisheries then                                                                    
their  authority should  be revoked,  and the  issue brought                                                                    
back under the per view of the legislature.                                                                                     
Co-Chair Stoltze felt that  the "broken political structure"                                                                    
had  limited  substantive  conversations  on  the  topic  to                                                                    
commercial fishing only.                                                                                                        
9:52:04 AM                                                                                                                    
Representative  Gara felt  that  Section 2  stated that  the                                                                    
stock in  question had  to be  a stock  of concern  over the                                                                    
last two lifecycles. He related  that he had fished all over                                                                    
the state. He opined that  King Salmon were not returning to                                                                    
the streams in  the Mat-Su Valley or the  Yukon. He lamented                                                                    
that when he  first moved to Alaska  fishermen were catching                                                                    
the "biggest kings in the world."                                                                                               
Co-Chair  Austerman   interjected  that  it  was   not  only                                                                    
commercial fishermen that were catching those kings.                                                                            
Representative Gara agreed.                                                                                                     
Co-Chair Stoltze  argued that those large  kings were caught                                                                    
in nets and  were not recorded because they  were not caught                                                                    
by sport fishermen.                                                                                                             
Representative Gara  believed that  commercial, subsistence,                                                                    
and  sport  fishermen   wanted  to  see  a   return  of  the                                                                    
disappearing stocks  of fish. He  though it  was responsible                                                                    
to no lend out state money  to anyone that wanted to harvest                                                                    
a fishery that had just barely  come back from being a stock                                                                    
of concern.  He stated that  the out-of-state aspect  of the                                                                    
bill did not sit well with him.                                                                                                 
9:54:33 AM                                                                                                                    
Vice-Chair  Neuman appreciated  the  point  of allowing  two                                                                    
life cycles.                                                                                                                    
9:55:25 AM                                                                                                                    
Representative  Wilson  expressed  concern  with  businesses                                                                    
that were located out of state.                                                                                                 
Mr. Paschall  replied that the  different components  of the                                                                    
bill offered  different loan  opportunities. He  stated that                                                                    
the  residency requirement  was being  excluded so  that the                                                                    
individual would not have to  physically reside in the state                                                                    
long  enough to  claim residency.  Under the  same facility,                                                                    
the  business  had  to  be  located in  the  state  and  the                                                                    
majority interest in the processor,  or harvester, had to be                                                                    
held by  a resident of the  United States. He said  that the                                                                    
tie to  the state was  that outside money would  be invested                                                                    
through borrowing in operations in the state.                                                                                   
Representative Wilson understood that  the change would mean                                                                    
that a business  could conduct business in  another state as                                                                    
long  as the  principal portion  of their  business was  in-                                                                    
state, and that they hired Alaskan.                                                                                             
Mr.   Paschall  replied   that   ownership,  residency   and                                                                    
percentage  of in-state  business  would all  be taken  into                                                                    
consideration.  He  said  that  the additions  to  the  bill                                                                    
adjusted  the provisions  to make  the requirements  for the                                                                    
loans less restrictive.                                                                                                         
Representative  Wilson  said  that  making  the  loans  less                                                                    
restrictive was the  problem. She stressed that  she did not                                                                    
want  to give  people a  reason to  move out  of state.  She                                                                    
understood  that currently  a person  could only  qualify if                                                                    
they resided  in-state. She believed that  businesses moving                                                                    
out-of-state  would  be  an unintended  consequence  of  the                                                                    
10:00:26 AM                                                                                                                   
Representative Guttenberg spoke to  the collateral aspect of                                                                    
Section  2.  He wondered  what  would  happen to  the  banks                                                                    
evaluation of the loan if  the collateral was unstable or in                                                                    
flux and was somehow devalued.                                                                                                  
10:02:10 AM                                                                                                                   
Mr. Paschall  understood that the  question was  whether the                                                                    
value of  the collateral would  be devalued during  the loan                                                                    
application  process if  the person  owned  a limited  entry                                                                    
permit that allowed them to fish  with the permit in a stock                                                                    
of concern.                                                                                                                     
Representative  Guttenberg  though  a better  definition  of                                                                    
stock of concern could offer clarity.                                                                                           
Mr. Paschall thought that the  value of the collateral would                                                                    
be influenced as well as the  ability to get a loan. He said                                                                    
that  having  a  limited  entry permit  in  that  particular                                                                    
fishery would  probably be  worth less  a collateral  than a                                                                    
limited entry permit in a different fishery.                                                                                    
Co-Chair Stoltze  said that commercial fishing  had received                                                                    
a  lot  of  protections  that  were  not  offered  to  other                                                                    
Representative Costello asked whether  the Board of Fish was                                                                    
unable to manage fisheries on behalf of the state.                                                                              
10:03:58 AM                                                                                                                   
Mr.  Paschall   deferred  the  question  to   the  Board  of                                                                    
10:04:15 AM                                                                                                                   
Co-Chair Austerman  did not  have a  problem with  change in                                                                    
general  and the  desire to  get things  done that  were not                                                                    
getting done  through the normal  process. He  asserted that                                                                    
fishermen in  his areas were affected  because fish traveled                                                                    
all over  the ocean  in a  life-cycle. He  said if  a Kodiak                                                                    
fisherman catches a fish in  Kodiak while the fish is headed                                                                    
to  the Mat-Su  into  a  fishery of  concern  there was  the                                                                    
potential that fisheries in his area could be closed down.                                                                      
Co-Chair Stoltze  said that the bill  was about out-of-state                                                                    
Co-Chair  Austerman disagreed.  He contested  that the  bill                                                                    
did not  speak to  out-of-state loans.  He asserted  that if                                                                    
the sponsor wanted to deny  loans to out-of-state commercial                                                                    
fishermen  then that  language should  be  written into  the                                                                    
bill. He said  that the bill was  about fisheries management                                                                    
in  the state.  He wondered  how the  bank's loan  portfolio                                                                    
would fare under the proposed legislation.                                                                                      
Co-Chair  Stoltze  interjected that  the  bank  was also  an                                                                    
agricultural loan bank.                                                                                                         
Co-Chair Austerman  stated that  if the committee  was going                                                                    
to "be biologists", and make  a determination about what was                                                                    
going on  with the  fisheries in the  state, then  it should                                                                    
discuss the agriculture industry in  the Mat-Su Valley  that                                                                    
put  salt into  rivers that  may  be killing  salmon in  the                                                                    
stocks of concern.  He argued that the bill  should say that                                                                    
no loans  could be given  for agriculture projects  if there                                                                    
was the potential of destroying a stock of concern.                                                                             
10:07:28 AM                                                                                                                   
Co-Chair  Stoltze  asked if  the  department  felt that  the                                                                    
issue was allocated.                                                                                                            
BEN  MULLIGAN,  DEPARTMENT OF  FISH  AND  GAME, JUNEAU  (via                                                                    
teleconference),  felt that  he should  research the  boards                                                                    
Mr.  Mulligan  replied  that  he  would  appreciate  further                                                                    
information from board members.                                                                                                 
Co-Chair Stoltze asked                                                                                                          
Mr.  Mulligan   replied  that  the  section   discussed  the                                                                    
issuance of loans. No knowing how many loans.                                                                                   
10:08:58 AM                                                                                                                   
LELA KLINGERT, CEO, CFAB (via teleconference),                                                                                  
Co-Chair Stoltze requested her opinion.                                                                                         
Ms.  Klingert replied  that the  previous  bill allowed  the                                                                    
lending powers  with regard  to commercial  fishing. Tourism                                                                    
and  resource base  industry.  Support  fishery. Enabling  a                                                                    
loan for sport fishers to  house residents. Expand into non-                                                                    
resident commercial fishing.                                                                                                    
Co-Chair Stoltze                                                                                                                
Ms. Klingert did not read the section to discuss non-                                                                           
Co-Chair  Stoltze discussion  for commercial  fishermen. Not                                                                    
the type of people.                                                                                                             
10:12:01 AM                                                                                                                   
Representative Costello clarified that                                                                                          
Ms. Klingert  yes. She stated  that the impact of  section 2                                                                    
addressed restrictions on any loans for Alaska  residents.                                                                      
Co-Chair Stoltze serious conservation concern.                                                                                  
Ms. Klingert  replied that loans  made were assessed  by the                                                                    
individuals ability to pay.                                                                                                     
Co-Chair Stoltze discussed section 2  and the project in the                                                                    
10:13:59 AM                                                                                                                   
Ms. Klingert replied that the bill tied the banks' hands.                                                                       
Co-Chair Stoltze                                                                                                                
Ms. Klingert                                                                                                                    
10:14:27 AM                                                                                                                   
Representative  Gara  understood   the  goal  of  protecting                                                                    
rebounding fisheries. He understood  that the loans were not                                                                    
denied to fishermen that would  accidentally catch the fish.                                                                    
He wished to ensure that fish would rebound.                                                                                    
Representative  Munoz asked  about  loans for  non-residents                                                                    
for permits as collateral.                                                                                                      
Ms. Klingert                                                                                                                    
Representative Munoz                                                                                                            
Ms. Klingert                                                                                                                    
Representative Munoz  asked Ms.  Klingert if  she considered                                                                    
the institution CFAB a quasi-public or a private bank.                                                                          
Ms.  Klingert replied  that the  institution  was a  private                                                                    
tax-paying entity functioning  as an agent of  the state and                                                                    
governed by  a statute under  the state law. She  was unsure                                                                    
of the legal definition as she was not an attorney.                                                                             
Representative Munoz  noted that  the institution  could use                                                                    
permits as collateral whereas a private bank could not.                                                                         
Ms. Klingert agreed that CFAB  enjoyed the special privilege                                                                    
as an agent of the state.                                                                                                       
10:17:07 AM                                                                                                                   
Ms. Klingert agent of the state. Not an attorney.                                                                               
Representative Munoz use permits as collateral.                                                                                 
10:18:07 AM                                                                                                                   
Co-Chair Austerman  asked about other  banking institutions.                                                                    
He wondered about other banks loaning to fisherman.                                                                             
Ms. Klingert replied yes.                                                                                                       
Co-Chair Austerman add all of the banks.                                                                                        
Co-Chair Stoltze                                                                                                                
10:19:10 AM                                                                                                                   
Vice-Chair Neuman asked about the limits on maximum loans.                                                                      
Ms. Klingert                                                                                                                    
Vice-Chair Neuman  loans for CFAB  maximum amount  of loans.                                                                    
How much for individual appropriations.                                                                                         
Ms. Klingert.                                                                                                                   
Vice-Chair  Neuman  banking  institutions stated  that  CFAB                                                                    
undercut. Because  the interest  rates charged was  less. He                                                                    
wondered about eh theme.                                                                                                        
10:21:20 AM                                                                                                                   
Ms.  Klingert  stated  that   the  Department  of  Commerce,                                                                    
Community and Economic Development.                                                                                             
Vice-Chair Neuman                                                                                                               
Co-Chair Austerman                                                                                                              
10:22:15 AM                                                                                                                   
Representative  Costello asked  about  reinsert portions  of                                                                    
the bill.                                                                                                                       
Co-Chair Stoltze voting                                                                                                         
Representative Holmes  agreed with  portions of the  CS. She                                                                    
agreed with the intent of section 2.                                                                                            
Co-Chair Stoltze                                                                                                                
Representative  Holmes would  like to  vote to  work on  the                                                                    
Representative Munoz  agreed that minor changes  adding non-                                                                    
resident to the language would better capture the intent.                                                                       
Representative Wilson                                                                                                           
Co-Chair Stoltze                                                                                                                
10:24:22 AM                                                                                                                   
Representative  Gara did  not  wish  for interpretation.  He                                                                    
commented  on   section  2  and  instate   folks  to  target                                                                    
fisheries of concern.                                                                                                           
10:25:08 AM                                                                                                                   
Representative Costello  asked does  the board of  fish have                                                                    
the tools necessary to. She  wanted to know from the banking                                                                    
industry, would the bank loan to the individuals.                                                                               
Co-Chair Stoltze 6 votes to get out of committee. He was                                                                        
committed to work with the members.                                                                                             
Co-Chair Austerman maintained his objection to the adoption                                                                     
of the CS.                                                                                                                      
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Holmes,    Munoz,    Neuman,    Thompson,    Gara,                                                                    
Guttenberg, Stoltze                                                                                                             
OPPOSED: Wilson, Costello, Austerman                                                                                            
The MOTION PASSED (7/3). There being NO further OBJECTION,                                                                      
CSHB 121 (FIN) was ADOPTED.                                                                                                     
10:29:14 AM                                                                                                                   
Representative Gara requested Black and Veatch. He wondered                                                                     
how the state ranked worldwide.                                                                                                 
Co-Chair Austerman                                                                                                              
CSHB 121 (FIN) was HEARD and HELD in committee for further                                                                      
10:30:04 AM                                                                                                                   
RECESSED TO THE CALL OF THE CHAIR                                                                                               
1:36:13 PM                                                                                                                    
The meeting was adjourned at 1:36 p.m.                                                                                          

Document Name Date/Time Subjects
HB 121 CS FIN Amendments 1-2 Gara.pdf HFIN 3/28/2014 8:30:00 AM
HB 121
HB 121 CS WORKDRAFT FIN version N.pdf HFIN 3/28/2014 8:30:00 AM
HB 121