Legislature(2005 - 2006)HOUSE FINANCE 519
04/15/2005 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB71 | |
| HB33 | |
| HB147 | |
| HB71 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 147 | TELECONFERENCED | |
| + | HB 144 | TELECONFERENCED | |
| + | HB 33 | TELECONFERENCED | |
| += | HB 71 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 15, 2005
1:46 p.m.
CALL TO ORDER
Co-Chair Meyer called the House Finance Committee meeting to
order at 1:46:45 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Jim Holm
Representative Mike Kelly
Representative Carl Moses
Representative Bruce Weyhrauch
MEMBERS ABSENT
Representative Reggie Joule
ALSO PRESENT
Mike Pawlowski, Staff, Representative Meyer; Sally Saddler,
Legislative Liaison, Office of the Commissioner, Department
of Commerce, Community and Economic Development; Linda Hall,
Division of Insurance, Department of Commerce, Community and
Economic Development; Suzanne Cunningham, Staff, Co-Chair
Meyer; Jerry Burnett, Legislative Liaison, Department of
Revenue; Steve Porter, Deputy Commissioner, Department of
Revenue; Wayne Stevens, President, Alaska State Chamber of
Commerce; Kristin Ryan, Director, Division of Environmental
Health, Department of Environmental Conservation; Joel
Gilbertson, Commissioner, Department of Health & Social
Services; Tom Brice, Council of Laborers 942 & 341, Local
71
PRESENT VIA TELECONFERENCE
Dan Dickinson, Director, Tax Division, Department of
Revenue, Anchorage; Chris Kennedy, Assistant Attorney
General, Department of Law; Connie Marshall, Small Business
Advocate, Office of Advocacy, US Small Business
Administration
SUMMARY
HB 71 "An Act relating to a credit for certain
exploration expenses against oil and gas
properties production taxes on oil and gas
produced from a lease or property in the state;
relating to the deadline for certain exploration
expenditures used as credits against production
tax on oil and gas produced from a lease or
property in the Alaska Peninsula competitive oil
and gas area wide lease sale area after July 1,
2004; and providing for an effective date."
CSHB 71 (FIN) was REPORTED out of Committee with a
"do pass" recommendation and with a zero fiscal
impact note by the Department of Revenue and with
a new indeterminate fiscal impact note by the
Department of Natural Resources.
HB 33 "An Act relating to the effect of regulations on
small businesses; and providing for an effective
date."
CSHB 33 (FIN) was REPORTED out of Committee with a
"no recommendation" recommendation and with the
following new fiscal impact notes: an
indeterminate note by the Department of Law, a
zero note prepared by the House Finance Committee
for the Department of Environmental Conservation,
a fiscal note by the Department of Commerce,
Community and Economic Development, a zero note
prepared by the House Finance Committee for the
Department of Health and Social Services, and zero
note by the Department of Labor and Workforce
Development.
HB 147 "An Act relating to the regulation of insurance,
insurance licensing, surplus lines, insurer
deposits, motor vehicle service contracts,
guaranteed automobile protection products, health
discount plans, third-party administrators, self-
funded multiple employer welfare arrangements, and
self-funded governmental plans; and providing for
an effective date."
CSHB 147 (FIN) was REPORTED out of Committee with
a "no recommendation" recommendation and with a
zero fiscal impact note by the Department of
Commerce, Community and Economic Development.
1:47:29 PM
HOUSE BILL NO. 71
"An Act relating to a credit for certain exploration
expenses against oil and gas properties production
taxes on oil and gas produced from a lease or property
in the state; relating to the deadline for certain
exploration expenditures used as credits against
production tax on oil and gas produced from a lease or
property in the Alaska Peninsula competitive oil and
gas area wide lease sale area after July 1, 2004; and
providing for an effective date."
SUZANNE CUNNINGHAM, STAFF, CO-CHAIR MEYER, explained that
the new CS, version P addresses concerns about the ability
to potentially collect 80 percent of incentives. The new CS
clarifies incentives in Section 1, page 1, where it
discusses 20 percent of the total exploration expenditures
that qualify only under (c) of this section. Subparagraph
(2) deals with 20 percent of the total exploration
expenditures that qualify only under (d) of this section.
Subparagraph (3) addressed 40 percent of the total
exploration expenditures that qualify under both (c) and
(d) of this section.
Co-Chair Chenault MOVED to adopt the work draft to HB 71,
version 24-GH1040\P, Chenoweth, 4/15/05. There being NO
OBJECTION, it was so ordered.
1:49:31 PM
Ms. Cunningham continued to explain that subparagraph (4)
deals with 40 percent of the total exploration expenditures
that qualify only under (e) of this section and pertain to
seismic exploration. This prohibits layering and reaching
80 percent. The new CS also incorporates the Cook Inlet
area for work performed on or after July 1, 2005, and before
July 1, 2010. The House Resources version of the bill added
Nenana Basin, and there was discussion about adding the
Healy and Red Dog areas. Areas south of 68 degrees, 15
minutes are eligible for incentives for exploration and
production, which takes the North Slope and ANWR off the
table.
Co-Chair Meyer clarified that it includes the Red Dog area.
1:51:37 PM
STEVE PORTER, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
addressed principles of the tax credit. Tax credits look at
reservoirs that need assistance. For those that are not
getting good exploration in a particular area, but there are
decent prospects, an incentive may be appropriate. That
decision should happen in the Department of Natural
Resources. Once that discussion occurs, then the Department
of Revenue determines the level of incentive to provide. It
is designed to benefit the taxpayer. There is currently a
discussion as to whether or not to incentivize new areas in
the North Slope. He suggested working with the Department
of Revenue to decide, and he encouraged exploration there.
He also suggested that the committee get an exploration
manager to tell them what kind of benefit those incentives
are to exploration programs.
1:54:58 PM
Co-Chair Meyer expressed confusion because HB 71 was the
governor's bill and it dealt with the Bristol Bay area. Now
other areas have been added. From a policy standpoint the
committee wants to encourage exploration and production. He
related that he does not know what areas to add to the bill
and has to rely on the department and the governor's office
for advice.
Mr. Porter responded that from Department of Revenue's point
of view, the expansion is a policy call based on
conversations with the Department of Natural Resources. He
agreed if incentives are needed, then it is fine to go ahead
with the expansion.
1:56:58 PM
JERRY BURNETT, LEGISLATIVE LIAISON, DEPARTMENT OF REVENUE,
clarified that Section 8 in the new CS says that provisions
of this section do not apply to taxes applicable under this
chapter, attributable to production from oil and gas
produced from an oil and gas lease, or gas produced from a
gas only lease, located north of 68 degrees, 15 minutes,
North latitude, or on the ANWR. He asked if the intent for
this section is to take away credit immediately, or if the
credit is meant to be for exploration or production. This a
major change in how the tax incentive works.
Co-Chair Chenault replied that it is not the intent to take
away from any tax credit currently available. The intent is
to provide for credit in a specific area.
1:59:08 PM
Ms. Cunningham said that is correct. The intent is not to
adversely impact areas that would have incentives expire in
2007. It is to extend the areas south of 68 degrees, 15
minutes, to 2010. She suggested that a conceptual amendment
would be in order.
2:00:05 PM
DAN DICKINSON, DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE, ANCHORAGE, (via teleconference) said the point
raised is correct. It will not apply to north of 68
degrees. He agreed that a conceptual amendment is in order.
He asked if the discussion is about exploration or
production in this area.
2:01:19 PM
Representative Croft requested clarification from Mr.
Dickinson regarding Section 8. He inquired if anything
North of 68 degrees, 15 minutes expires in 2007. Mr.
Dickinson replied yes and suggested that there needn't be
any limitation on exploration. The only way the credit can
be modified is by selling to someone who does not pay
production tax. He stressed focusing on exploration.
Co-Chair Meyer asked how it impacts the production side.
Mr. Dickinson replied that it does not need to impact the
production side. He explained that the credit could be
taken by someone who has production tax and is producing, or
by someone who is not producing or lacks sufficient
production tax. There is no intent to restrict the market
for selling the credit.
2:04:26 PM
Co-Chair Meyer noted that the committee would return to
Section 8 to make the necessary amendments.
Co-Chair Chenault informed the committee about provisions in
the new CS for Cook Inlet oil and gas credit. The dates for
the Cook Inlet Basin incentive credits would be extended
from 2003 until 2010. It provides language that allows
exploration wells in the Cook Inlet to be within the 3-mile
limit, subject to review and approval by the commissioner.
That would provide a 20 percent credit. It provides
language that decreases the 25-mile boundary limit to 10
miles, which also provides a 20 percent credit.
2:06:15 PM
Mr. Dickinson added that there is a $20 million limit for
the amount of credits granted in the Cook Inlet under these
rules.
Co-Chair Meyer set HB 71 aside.
Representative Kelly asked how requirements in Cook Inlet
were lessened. Co-Chair Chenault responded that the 3-mile
limit is one area that the commissioner would look at, and
the 10-mile limit would be statutory.
2:08:38 PM
HOUSE BILL NO. 33
"An Act relating to the effect of regulations on small
businesses; and providing for an effective date."
Co-Chair Meyer gave a brief history of the bill. In 1980
Congress passed the Regulatory Flexibility Act (RFA), which
mandated that agencies consider the impact of their
regulations on small businesses. Based on the success of
that federal program, the Office of Advocacy has drafted
legislation for states to follow. Over 37 states have found
success with this program. This bill would require state
regulatory agencies to consider the impact of regulation on
small businesses and have the freedom to examine alternative
methods. More expense would not be added to the agencies.
2:11:00 PM
MIKE PAWLOWSKI, STAFF, CO-CHAIR MEYER, referred to a flow
chart "Steps in the Regulation Adoption Process Under HB 33"
(copy on file.) He proceeded to inform the committee about
the various steps that would be taken under this bill to
change the regulatory process. He related the history of
regulation, including checks and balances.
Co-Chair Meyer noted that most of the other 37 states did
not need a fiscal impact note attached to their legislation.
Mr. Pawlowski concurred. He described the office of the
small business advocate.
2:16:30 PM
Co-Chair Meyer asked if Amendment 1 would zero out all
fiscal notes. Mr. Pawlowski replied that it would.
2:16:57 PM
CONNIE MARSHALL, SMALL BUSINESS ADVOCACY, U.S. SMALL
BUSINESS ADMINISTRATION, (via teleconference) read portions
from her written testimony:
As the Regional Advocate for Region X, my job is to be
the direct link between state and local governments,
small business groups and small business owners and
employees and the Office of Advocacy, based in
Washington, DC. My chief concern is to help identify
regulatory concerns of small business by monitoring the
impact of federal and state policies at the grassroots
level. It is my goal to see that programs and policies
that encourage fair regulatory treatment of small
business are developed and implemented to ensure future
growth and prosperity. This is why I am testifying in
support of proposed legislation, which will strengthen
small business regulatory flexibility in Alaska.
The Office of Advocacy enforces the Regulatory
Flexibility Act (RFA) on the federal level in order to
lessen the regulatory burden on small business. More
than 93 percent of businesses in every state are small
businesses. As you may know, small businesses with
less than 20 employees spend $6,975 each year per
employee to comply with federal regulations-that is 60
percent more per employee than large firms with more
than 500 employees spend. And that is just the cost of
federal regulations. Small business owners also have
to shoulder the cost of state regulations.
Under the RFA, Advocacy has shown time and again that
regulations can be reduced and the economy improved
without sacrificing such important goals as
environmental quality, travel safety, and workplace
safety. By working with federal agencies to implement
the RFA, in 2004 the Office of Advocacy saved small
businesses nationwide over $17 billion in foregone
regulatory costs that can now be used to create jobs,
buy equipment and expand access to health care for
millions of Americans, or simply maintain
competitiveness in the marketplace.
While some states have state regulatory flexibility
legislation that mandates state agencies to perform
economic impact analysis before they regulate, many do
not. For that reason, in December of 2002 the Office
of Advocacy drafted model legislation patterned after
the federal Regulatory Flexibility Act and presented it
in a report titled, Small Business Friendly Regulation:
Model Legislation, which can be found on our website at
www.sba.gov.advo.
There are five critical elements contained in the
Regulatory Flexibility Act model bill. Successful
state-level regulatory flexibility laws should have:
(1) a small business definition that includes most
small businesses, (2) a requirement that state agencies
perform an economic impact analysis before they
regulate, (3) a requirement that state agencies
consider less burdensome alternatives that still meet
regulatory goals, (4) judicial review so that the law
has teeth, and (5) a provision for state government to
periodically review all its regulations. To be
effective, there should be few, if any exemptions from
the law. Even the best regulatory flexibility
initiative has little value if the majority of state
agencies are exempted from it. In order for regulatory
flexibility to work, there is a need for the Governor's
leadership, trained and educated state agencies that
understand their responsibilities, and the continued
involvement of the small business community.
During this time of tight state budgets, you may be
wondering how much it costs a state to implement
regulatory flexibility for small business. The answer
is that implementing a regulatory flexibility system
can be done at little to no additional cost to the
state. Let me share information from three states that
have recently implemented regulatory flexibility
provisions.
In North Dakota, agencies were granted no additional
funds to carry out their duties under the new RFA
legislation. The state legislative review committee is
responsible for reviewing the regulations that their
state agencies, using economic impact analysis, have
determined might be overly burdensome to small
business. So other than additional regulations for the
committee to review, North Dakota has simply absorbed
the new duties into their already existing system.
Similarly, in Colorado, agencies were granted no
additional funds to carry out their duties under the
new RFA legislation. The Office of Policy Research and
Regulatory Review in Colorado's Department of
Regulatory Agencies was given responsibility for
implementing the new law. To meet the new obligations,
they shifted personnel in their office and dedicated
part of an IT person to implement their e-rulemaking
notification system. Like North Dakota, Colorado
simply absorbed the new responsibilities into their
current structure.
In Oklahoma, the fiscal note estimated that it would
cost $ 75,000 per year to support the Small Business
Regulatory Review Committee in the Department of
Commerce and to implement the regulatory flexibility
law. Since implementation began in 2002, the
Department of Commerce has not exceeded the $ 75,000
budget. Expenditures have been for printing marketing
materials, travel compensation for the review committee
members and compensation for the committee
coordinator's time.
The benefits of implementing a regulatory flexibility
system truly outweigh the costs. Let me give you an
example of how regulatory flexibility works from a
state that has had an active regulatory flexibility
program for nearly ten years. In October 2004, New
York State adopted an emergency regulation to prevent
prescription fraud by requiring the use of an official
State prescription form for all prescribing done in New
York. The official prescription forms utilize security
features that will curtail alterations and forgeries
that divert drugs to black market sale to unsuspecting
patients and cost New York's Medicaid program and
private insurers tens of millions of dollars annually
in fraudulent claims.
Under New York's State Administrative Procedure Act and
an Executive Order signed by Governor Pataki, the
Department of Health was required to perform a
regulatory flexibility analysis for small business
(RFASB). It was found that the proposed regulation
would affect small businesses such as practitioners,
pharmacists, retail pharmacies, hospitals and nursing
homes.
Therefore, in drafting the regulation, the Department
of Health met with and considered comments from the
affected small businesses. By consulting with small
business throughout the rule writing process, the New
York Department of Health was able to craft a
regulation that met its goals without unduly burdening
small entities. For example, the regulation includes
the following flexibilities for small business:
· Establishes a grant administered by the Department of
Health to defray costs for software adjustments faced
by pharmacies;
· Eliminates the official prescription fee for
practitioners and institutions; and
· Allows practitioners, pharmacists, retail pharmacies,
hospitals and nursing homes 18 months to transition
to the new prescription form system.
As a result of the Serialized Official New York State
Prescription Form regulation, private insurers and the
Medicaid program are expected to save millions of
dollars by reducing fraudulent prescription claims
while at the same time benefiting the state, its
citizens, and private insurers.
Since December of 2002, my fellow Regional Advocates
and I have been working with state legislators across
the country to make regulatory flexibility for small
business a legislative priority. In 2003, twelve
states introduced regulatory flexibility legislation.
Governors in North Dakota and Colorado signed
regulatory flexibility legislation into law, while
Massachusetts Governor Mitt Romney and West Virginia
Governor Bob Wise signed Executive Orders to implement
regulatory flexibility. In 2004, 17 states
(California, Connecticut, Georgia, Idaho, Illinois,
Kansas, Kentucky, Missouri, Nebraska, New Jersey,
Pennsylvania, Rhode Island, South Carolina, South
Dakota, Tennessee, Washington, and Wisconsin)
introduced regulatory flexibility legislation and seven
states have signed it into law (Connecticut, Kentucky,
Missouri, Rhode Island, South Carolina, South Dakota,
and Wisconsin).
To date in 2005, eighteen states have introduced
regulatory flexibility legislation (Alaska, Alabama,
Hawaii, Indiana, Iowa, Mississippi, Missouri, Montana,
New Jersey, New Mexico, North Carolina, Ohio, Oregon,
Pennsylvania, Tennessee, Utah, Virginia, and
Washington). Virginia Governor Mark Warner and New
Mexico Governor Bill Richardson recently signed
regulatory flexibility legislation into law. Also this
year, Arkansas Governor Mike Huckabee signed an
Executive Order to implement regulatory flexibility.
One of the many reasons, I believe, this legislation
has been so successful over the last two years is
because policy makers across the country are realizing
that regulatory flexibility is as an economic
development tool. There are over 23.7 million small
businesses in the United States and they are the job
creators: small firms create between 60 and 80 percent
of the net new jobs in our economy.
There is no question that small business is the
backbone of the economy here in Alaska just as it is
throughout the country. According to the federal
definition of small business (500 employees or less),
96.9 percent (15,485) of Alaska's employers are
considered small and employ over 59.6 percent (127,757)
of Alaska's non-farm sector employees.
Sometimes, because of their size, the aggregate
importance of small businesses to the economy is
overlooked. Because of this, it is very easy to fail
to notice the negative impact of regulatory activities
on them. The intent of HB 33 is to require regulatory
agencies to consider small businesses when regulations
are developed and particularly to consider whether
there are alternative regulatory solutions that do not
unduly burden small business but still accomplish the
agency goal. Giving small employers a voice early in
the process is a key to reducing the negative impact of
regulations on small businesses, increasing the level
of regulatory compliance and passing on cost savings to
state economies.
This legislation is good for small business in Alaska
and the Office of Advocacy commends you for bringing
House Bill 33 forward.
2:23:39 PM
WAYNE STEVENS, PRESIDENT, ALASKA STATE CHAMBER OF COMMERCE,
testified in support of HB 33. He asked the legislature to
create and maintain an efficient, expedient regulatory
environment, which is supportive of business investment and
development, and encourages businesses to locate and grow in
Alaska. He spoke in favor of having an effective oversight
mechanism, simplified regulations, and a reduction in
administrative costs.
2:24:59 PM
KRISTIN RYAN, DIRECTOR, DIVISION OF ENVIRONMENTAL HEALTH,
DEPARTMENT OF ENVIRONMENTAL CONSERVATION, suggested that the
fiscal note for the department be zeroed out.
Representative Kelly requested that exceptions to the law be
addressed.
2:27:18 PM
Mr. Pawlowski replied that the bill has gone through a long
process. He shared some of the reasons for going to a
limited application. Some troubling issues were raised.
Questions about the Natural Resources sector and allocation
decisions by the Boards of Fish and Game were taken off the
table.
Representative Kelly asked, of the 37 states, how many did
the same thing. Mr. Pawlowski replied that several did,
especially those with heavy resource development. He
referred to a map showing the states that have adopted
regulatory flexibility (copy on file.) It varies among
states, but most have exceptions. He offered to provide
more details.
2:30:08 PM
Representative Kelly asked if this bill captures "90
percent". Co-Chair Meyer replied yes.
2:30:31 PM
Co-Chair Meyer MOVED to ADOPT Amendment 1:
Page 1, line 14:
Delete "(c)"
Insert "(d)"
Page 2, line 2:
Delete "(e)"
Insert "(f)"
Page 2, line 4:
Delete "The economic effect"
Page 2, line 5:
Delete "statement must provide"
Insert "(c) The economic effect statement required by
(a) of this section must provide, if available from
information gathered under (b) of this section,"
Page 2, line 18:
Delete "(c)"
Insert "(d)"
Page 2, line 25:
Delete "(d)"
Insert "(e)"
Delete "(c)"
Insert "(d)"
Page 3, line 6:
Delete "(e)"
Insert "(f)"
Page 3, line 8:
Delete "(f)"
Insert "(g)"
Page 3, line 15:
Delete "or"
Page 3, line 18:
Delete "."
Insert ";"
Page 3, following line 18:
Insert the following new material:
"(6) that address standards, requirements, or
conditions for reimbursement by the designated state
agency for services to be rendered on behalf of the
designated state agency, that address amounts or rates
of that reimbursement, or that adjust those amounts or
rates to contain costs within the amount of
appropriations from the legislature for a state fiscal
year; or
(7) that establish standards, requirements,
or conditions for the eligibility of an individual for
assistance under AS 18 or AS 47, or that establish
standards for determining the amount of assistance that
an eligible person is entitled to receive."
Page 3, line 19:
Delete "(g)"
Insert "(h)"
Page 3, line 24:
Delete "(h)"
Insert "(i)"
Co-Chair Chenault OBJECTED.
Mr. Pawlowski noted that most of the amendment is conforming
language. The primary purpose of the amendment is a
clarification in Section 1 of the proposed legislation. It
brings the economic effect statement out of subsection (b)
to subsection (c), a clarification which gives the agencies
better direction. The second major change is on page 3,
following line 18. This addresses Health and Social
Services regulation such as reimbursement, cost containment,
and eligibility standards. He explained that this section
clarifies that cost reimbursement is off the table.
2:33:24 PM
CHRIS KENNEDY, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW, (via teleconference) explained that he does not have
more to add to the discussion of Amendment 1. The solution
is satisfactory to everyone concerned. He offered to answer
questions.
2:34:30 PM
Representative Croft related that the first part of the
amendment makes a lot of sense by not requiring businesses
to seek extra, independent analysis. He spoke of a concern
on the second page of the amendment regarding reimbursement
rates for services provided by small businesses. The effect
on small businesses by the Department of Health and Social
Services is so pervasive that it would take too much time to
consider. It goes from being a burden to defining the
business. He opined that it seems to be vital and should
not be shied away from.
Co-Chair Meyer noted that this was discussed with the
Commissioner.
2:37:08 PM
Representative Hawker related that the Commissioner was in
agreement with the amendment. He referred to Representative
Croft's comment and opined that there is a differentiation
between a small, private business and outsourcing a
necessary state service. He spoke in strong support of the
amendment.
2:39:01 PM
Mr. Pawlowski added that regulations have to be drafted to
achieve cost containment. Policy calls need to consider
whether this is an effective use of state resources and
whether there is a benefit to the private sector. The
application to this from a public policy statement is that
consideration needs to be done at the finance level during
the approval of the budget, and perhaps not in the
implementation of the regulations. It happens at the
regulatory review committee level and during finance
committee meetings.
Representative Croft related that when Department of Health
and Social Services establishes a new Medicaid rate, if that
rate is lowered, it is viewed as cost containment. If by
lowering that rate, more services are provided to more
people, it is viewed as a benefit. What is not adequately
considered is the effect on the people trying to provide the
services. This needs to be looked in terms of impacts on
small businesses and alternative means sought.
2:43:23 PM
Co-Chair Meyer said the argument is that it should be done
when the budget is set, rather than by regulation.
Mr. Pawlowski offered a point of clarification about cost
containment and reimbursement in eligibility regulation
exemptions. He referred to the Department of Health and
Social Services proposed regulations to Title VII, which
govern the conduct of small business.
Representative Croft commented that it does not make sense
to not discuss how daily rates affect small businesses. Co-
Chair Meyer argued that the daily rate is set up by the
budget process rather than by regulation.
2:45:49 PM
JOEL GILBERTSON, COMMISSIONER, DEPARTMENT OF HEALTH & SOCIAL
SERVICES, related that the department has concerns about
regulations causing reductions to programs. He gave an
example of a Medicaid program appropriation reduction of
services. The concern is if there are delays in
implementing regulations because every day of delay costs
the state. The department requested Amendment 1 to deal
with reimbursement regulations. Other regulations would
remain under this legislation.
2:49:13 PM
Representative Croft inquired about rate reductions and
changes in the methods of reimbursements to lessen the
effects on providers. Commissioner Gilbertson responded
that it is a continuous balancing act regarding that issue.
He offered the Medicaid program as an example. Federal law
does not allow for different payment policies.
2:52:13 PM
Mr. Pawlowski added that if benefits and costs are reduced
on the "govern the conduct side", the amount required for
reimbursement goes down. He implied that there is still a
benefit to the business by addressing other regulations that
are not exempt.
Co-Chair Chenault WITHDREW his OBJECTION.
There being NO OBJECTION, Amendment 1 was adopted.
2:53:32 PM
Co-Chair Meyer MOVED to ADOPT Conceptual Amendment 2:
Page 1, lines 1-2 [Delete all material]
Page 1, line 1 - Insert:
"An Act relating to requiring notification to the
Department of Commerce, Community and Economic
Development, economic effect statements, regulatory
flexibility analyses; a private cause of action
relating to the required economic effect statements or
regulatory flexibility analyses; and providing for an
effective date."
Co-Chair Chenault OBJECTED for discussion purposes.
Co-Chair Chenault withdrew his OBJECTION to adopt Conceptual
Amendment 2. There being NO OBJECTION, Conceptual Amendment
2 was adopted.
2:55:20 PM
GUY BELL, ASSISTANT COMMISSIONER, OFFICE OF THE
COMMISSIONER, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT,
reported that he is relieved at the relative lack of burden
to the department. He noted that the department would
review this legislation and is not bound by a positive
fiscal note.
2:56:12 PM
Co-Chair Meyer noted Department of Health and Social
Services is ok with a new zero fiscal note. The Department
of Environmental Conservation agrees with a new zero fiscal
note. The Department of Law has an indeterminate fiscal
note. The Department of Labor and Workforce Development
will have a zero fiscal note. Department of Commerce,
Community and Economic Development would like assistance in
developing a new fiscal note.
2:58:01 PM
Representative Weyhrauch asked if boards and commissions are
subject to this bill. Mr. Pawlowski replied that boards and
commissions confirmed by the legislature are subject to a
public confirmation process, and are made up of
representatives from the industry that are already aware of
the needs of the industry. When a board or commissions
promulgates a regulation, the costs of that process are
borne by fees, which are returned to small businesses.
Representative Weyhrauch asked if that applies to Fish and
Game. Mr. Pawlowski replied that was a separate issue
regarding emergency allocations. Representative Weyhrauch
asked what happens if the agency does not comply with this
statute. Mr. Pawlowski said that the judicial review was
discussed in the House Judiciary Committee. He explained
the history of the judicial review.
3:00:44 PM
Representative Weyhrauch related a problem he has with the
bill. Representative Weyhrauch expressed his concerns
regarding federal regulations and small businesses having no
power to affect regulation. Mr. Pawlowski agreed that was
a valid concern. He explained that the agency would
consider public commentary and the review committee could
discuss the regulation.
3:02:26 PM
Representative Foster MOVED to report CSHB 33 out of
Committee with individual recommendations and the
accompanying revised fiscal notes. There being NO
OBJECTION, it was so ordered.
CSHB 33 (FIN) was REPORTED out of Committee with a "no
recommendation" recommendation and with the following new
fiscal impact notes: an indeterminate note by the Department
of Law, a zero note prepared by the House Finance Committee
for the Department of Environmental Conservation, a fiscal
note by the Department of Commerce, Community and Economic
Development, a zero note prepared by the House Finance
Committee for the Department of Health and Social Services,
and zero note by the Department of Labor and Workforce
Development.
3:03:09 PM
HOUSE BILL NO. 147
"An Act relating to the regulation of insurance,
insurance licensing, surplus lines, insurer deposits,
motor vehicle service contracts, guaranteed automobile
protection products, health discount plans, third-party
administrators, self-funded multiple employer welfare
arrangements, and self-funded governmental plans; and
providing for an effective date."
LINDA HALL, DIVISION OF INSURANCE, DEPARTMENT OF COMMUNITY
AND ECONOMIC DEVELOPMENT, related that HB 147 proposes
statutory changes that would make the regulation of
insurance more efficient for the division, more uniform for
industry, and provide protection to consumers. The first
area of change is statutory changes in the licensing area of
individual agents and brokers. The proposed changes are to
streamline the licensing process and to conform to national
standards.
Ms. Hall explained that the second area of change deals with
surplus lines insurance, insurers who do not file to operate
in Alaska. A couple sections deal with insurance company
deposits: one removes the ability to use safety deposit
boxes, one permits the director to transfer and insure
deposit to the guarantee fund if that is assigned through
insolvency procedures. Several sections deal with a
commodity called Help Discount Plans, which look like
insurance but are not. From 2000-2002, nationally, over
200,000 of these plans were sold, which resulted in $252
million worth of unpaid claims. The bill seeks specific
authority to regulate these discount plans.
Ms. Hall related that there are a number of sections that
deal with third-party administrators, someone who provides
administrative services for health insurance plans. There
is language dealing with an owner-contractor insurance
program, written for large construction projects. Some of
the rules would be codified in statute in this bill.
3:10:07 PM
Ms. Hall noted that in Section 26, standards for ratemaking
in health insurance lines have been added. She spoke to
discrimination and financial statements. She offered to
answer questions from the committee.
3:10:52 PM
Representative Hawker suggested that this is an "esoteric"
bill.
3:11:34 PM
Co-Chair Meyer MOVED to ADOPT Amendment 1:
Page 15, line 25, following "whether":
Delete "an"
Page 15, line 26:
Delete "insurer"
Insert ","
Co-Chair Chenault OBJECTED for discussion purposes.
Ms. Hall stated that the amendment provides technical
changes and would require the use of a licensed third-party
administrator.
Co-Chair Chenault WITHDREW his OBJECTION adopt Amendment 1.
There being NO OBJECTION, Amendment 1 was adopted.
3:12:42 PM
Co-Chair Meyer MOVED to ADOPT Amendment 2:
Page 11, lines 28 - 29:
Delete "a self-funded multiple employer welfare
arrangement regulated under AS 21.85"
Insert "any person issued or required to obtain a
certificate of authority under this title to transact
life insurance, annuities, and health insurance or to
provide coverage for the cost of medical care"
Page 17, line 2, following "annuities,":
Delete "or"
Page 17, lines 2 - 5:
Delete "offered or provided by an insurer, or in
connection with coverage offered or provided by a self-
funded multiple employer welfare arrangement regulated
under AS 21.85 or the Comprehensive Health Insurance
Association created under AS 21.55"
Insert ", or the provision of coverage for the cost of
medical care"
Co-Chair Chenault OBJECTED.
Representative Weyhrauch suggested in Amendment 1, on page
15, line 25, to delete "and". Ms. Hall clarified that
Representative Weyhrauch was referring to Amendment 3.
Ms. Hall stated that Amendment 2 is a restatement of Section
3 in the current CS, version G, which was put in error in
Chapter 12. She said it was a technical amendment because
of an incorrect placement of the language. Co-Chair Meyer
pointed out that Ms. Hall was referring to Amendment 3.
Co-Chair Meyer clarified that the committee was talking
about page 11, lines 28-29. Ms. Hall noted that language
was removed on page 11 and new language was inserted.
Co-Chair Chenault WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 2 was adopted.
3:15:45 PM
Co-Chair Meyer MOVED to ADOPT Amendment 3:
Page 2, line 8, through page 3, line 21:
Delete all material.
Renumber the following bill sections accordingly.
Page 14, following line 31:
Insert a new bill section to read:
"* Sec. 22. AS 21.36 is amended by adding a new
section to read:
Sec. 21.36.065. Limitation on owner controlled
and contractor controlled insurance programs. (a) An
owner controlled insurance program or a contractor
controlled insurance program is subject to both
AS 21.39 and AS 21.42, must be approved by the
director, and shall be allowed only for a major
construction project. Owner controlled and contractor
controlled insurance programs are limited to property
insurance as defined in AS 21.12.060 and casualty
insurance as defined in AS 21.12.070.
(b) In this section, an owner controlled or
contractor controlled insured program does not include
(1) builder's risk or course of construction
insurance;
(2) insurance relating to the transportation
of cargo or other property;
(3) insurance covering one or more
affiliates, subsidiaries, partners, or joint venture
partners of a person; or
(4) insurance policies endorsed to name one
or more persons as additional insureds.
(c) In this section,
(1) "contractor" means a person who meets
the definition of "contractor" in AS 08.18.171 and who
undertakes the performance of a construction project
for a project owner, its agent, or its representative;
(2) "contractor controlled insurance
program" means an insurance program where one or more
insurance policies are procured on behalf of a
contractor, its agent, or its representative, by its
insurance producer, as defined in AS 21.27.900, for the
purpose of insuring the contractor and one or more of
the following:
(A) the project owner;
(B) a subcontractor;
(C) an architect;
(D) an engineer; or
(E) a person performing professional
services;
(3) "major construction project" means the
process of constructing a structure, building,
facility, or roadway or major renovation of more than
50 percent of an existing structure, building,
facility, or roadway having a contract cost of more
than $50,000,000 of a definite term at a geographically
defined project site;
(4) "owner controlled insurance program"
means an insurance program where one or more insurance
policies are procured on behalf of a project owner, its
agent, or its representative, by its insurance
producer, as defined in AS 21.27.900, for the purpose
of insuring the project owner and one or more of the
following:
(A) the contractor;
(B) a subcontractor;
(C) an architect;
(D) an engineer; or
(E) a person performing professional
services;
(5) "project owner" means a person who, in
the course of the person's business, engages the
service of a contractor for the purpose of working on a
construction project;
(6) "subcontractor" means a person to whom a
contractor sublets all or part of a contractor's
initial undertaking."
Renumber the following bill sections accordingly.
Page 15, line 25:
Delete "AS 21.12.140"
Insert "AS 21.36.065"
Page 15, line 29:
Delete "AS 21.12.140"
Insert "AS 21.36.065"
Page 17, line 26:
Delete "22"
Insert "21"
Page 17, line 28:
Delete "22"
Insert "21"
Page 17, line 29:
Delete "22"
Insert "21"
Co-Chair Chenault OBJECTED for discussion purposes.
3:16:33 PM
TOM BRICE, COUNCIL OF LABORERS 942 & 341, LOCAL 71, reported
that the unions have been tracking the legislation. He
stated that there was not an objection to the (L&C) version.
He indicated that there could be concerns with Amendment #2.
Representative Weyhrauch asked if Mr. Brice has seen the
amendments. Mr. Brice said he had.
Representative Weyhrauch asked if the portion of Amendment
2, lines 5-6, regarding the cost of medical care, affects
the medical trust administered by the union. Mr. Brice
thought that question would be better directed to Ms. Hall.
He wondered if "to provide coverage for the cost of medical
care" is incorporated under individuals that are required to
receive a certificate of authority to participate, or
whether that is a separate section. If it is a separate
section, that is redefining the public health trust.
Ms. Hall agreed with Mr. Brice's statement that the pieces
that are controversial regarding the health trust should be
removed. She added that there is no intent to require a
person to obtain a certificate of authority. It was
directed to self-funded multiple employer welfare
arrangements, which are currently required to have a
certificate of authority.
3:19:58 PM
Ms. Hall addressed Amendment 3, which limits owner
controlled insurance programs. She related that these
programs would not change within the current bill, but move
to AS 21.36. She offered to answer questions from the
committee.
Representative Hawker referenced to Section 24, "except as
provided in AS 21.12.140, an insurer, whether an authorized
or unauthorized insurer may not underwrite an owner
controlled insurance program or contractor controlled
insurance program." He requested clarification. Ms. Hall
responded that these programs are designed for major
construction projects. It is not something that does not
already occur. Currently, the rules and definitions are in
the Worker's Compensation manuals. It is not a change in
how these programs are used, but it is a prohibition against
expanding them into things other than large construction
projects. Typically, these do not happen.
Co-Chair Chenault WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 3 was adopted.
Representative Foster MOVED to report CSHB 147 out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 147 (FIN) was REPORTED out of Committee with a "no
recommendation" recommendation and with a zero fiscal impact
note by the Department of Commerce, Community and Economic
Development.
3:24:28 PM
HOUSE BILL NO. 71
"An Act relating to a credit for certain exploration
expenses against oil and gas properties production
taxes on oil and gas produced from a lease or property
in the state; relating to the deadline for certain
exploration expenditures used as credits against
production tax on oil and gas produced from a lease or
property in the Alaska Peninsula competitive oil and
gas area wide lease sale area after July 1, 2004; and
providing for an effective date."
SUZANNE CUNNINGHAM, STAFF, REPRESENTATIVE KEVIN MEYER, noted
that two amendments have been drafted to HB 71. Amendment 1
is to page 2, Lines 13-17.
Co-Chair Meyer MOVED to ADOPT Amendment 1:
Page 2, lines 13-17
Delete All Material
Insert New Material
(b) To qualify for the production tax credit under (a)
of this section, an exploration expenditure must be
incurred for work performed on or after July 1, 2003,
and before July 1, 2007, except that an exploration
expenditure, in whole or in part, south of 68 degrees,
15 minutes, North latitude must be incurred for work
performed before July 1, 2010, and except that an
exploration expenditure for a Cook Inlet prospect must
be incurred for work performed on or after July 1,
2005, and before July 1, 2010, and
Page 6, line 12
Following: "do not apply to"
Delete: "taxes applicable under this chapter
attributable to production from oil and gas produced
from an oil and gas lease, or to gas produced from a
gas only lease, located north of 68 degrees, 15
minutes, North latitude or on"
Representative Hawker OBJECTED.
Ms. Cunningham explained the two parts of Amendment 1.
Co-Chair Meyer inquired about the reference to 68 degrees,
15 minutes. Ms. Cunningham clarified that it is south of
the Brooks Range.
3:27:28 PM
Representative Hawker questioned the wording on page 6, line
12 "the provisions of this section do not apply to". Ms.
Cunningham clarified that the language is correct.
Co-Chair Chenault referenced lines 13-17 on page 2, the new
language in Amendment 1. He voiced concerned that the added
language would allow credits for work from 2003
retroactively. He questioned if that would change the
legislation from the 25-mile to the 10-mile, and also
possibly within the 3-mile, with the commissioner's
approval. He emphasized that it was not the original intent
for work already performed to be included.
3:30:08 PM
Ms. Cunningham replied that there would need to be an
exemption for Cook Inlet for July 1, 2005 to 2010.
DAN DICKINSON, DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE, ANCHORAGE, (via teleconference) spoke to the
proposed change. The current language existing on page 2,
after the 2010 date, should be there. The new language
should only change lines 13-15. Ms. Cunningham responded
that on line 15, 2010 should be deleted because the current
program goes until 2007.
Mr. Dickinson explained that if the amendment were used to
replace all the language, through and including 2010, then
the clause that starts with "except" would accomplish the
intent.
Representative Croft asked what would happen on page 6 if
the provisions do not apply. He suggested eliminating
Section 8. Ms. Cunningham replied that the rewrite on page
6, would not apply to ANWR. Representative Croft
acknowledged his mistake.
3:34:16 PM
Co-Chair Chenault restated the potential conceptual
amendment. Representative Kelly noted that the termination
date would change.
3:35:00 PM
Co-Chair Chenault MOVED to ADOPT a Conceptual Amendment to
Amendment 1 that adds back the language that expiration
expenditures for Cook Inlet prospect must be incurred for
work performed on or after July 1, 2005, and before July 1,
2010.
Representative Hawker WITHDREW his OBJECTION to adopt
Amendment 1, as amended. There being no further OBJECTION,
Amendment 1 was adopted.
3:35:54 PM
Co-Chair Meyer MOVED to ADOPT Amendment 2:
Page 2, lines 1, 3, and 9
Following: "under"
Delete" [(b) AND]
Insert: (b) and
Page 2, line 7
Following: "under"
Insert: (b),
Representative Hawker OBJECTED for discussion purposes.
Ms. Cunningham explained that the amendment reinserts
subsections (b) and (c) and clarifies that in order to get
the credit, a company has to meet the qualifications under
(b) which sets out the timeframes that exploration work
occurs and (c), which is the 3-mile limit.
Representative Croft noted that it is not the 40/80 issue;
it is a timing issue. Ms. Cunningham replied that is
correct. She elaborated on the timeframe.
3:38:21 PM
Representative Hawker WITHDREW his OBJECTION to adopt
Amendment 2. There being NO OBJECTION, Amendment 2 was
adopted.
3:39:13 PM
Representative Kelly asked for an opinion from Department of
Revenue.
3:39:40 PM
JERRY BURNETT, LEGISLATIVE LIAISON, DEPARTMENT OF REVENUE,
stated that the bill preserves the intent of the statute.
Co-Chair Meyer declared a potential conflict of interest.
Representatives Kelly and Hawker objected.
3:41:25 PM
Representative Hawker also declared a conflict of interest.
Representative Kelly objected.
3:42:05 PM
Representative Foster MOVED to report CSHB 71 out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 71 (FIN) was REPORTED out of Committee with a "do pass"
recommendation and with a zero fiscal impact note by the
Department of Revenue and with a new indeterminate fiscal
impact note by the Department of Natural Resources.
3:44:19 PM
ADJOURNMENT
The meeting was adjourned at 3:44 PM.
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