Legislature(2011 - 2012)HOUSE FINANCE 519
04/06/2011 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB125 | |
| HB146 | |
| HB164 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 146 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 164 | TELECONFERENCED | |
| += | HB 125 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 6, 2011
1:42 p.m.
1:42:31 PM
CALL TO ORDER
Co-Chair Thomas called the House Finance Committee meeting
to order at 1:42 p.m.
MEMBERS PRESENT
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Co-Chair
Representative Anna Fairclough, Vice-Chair
Representative Mia Costello
Representative Mike Doogan
Representative Bryce Edgmon
Representative Les Gara
Representative David Guttenberg
Representative Mike Hawker (Alternate)
Representative Reggie Joule
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Representative Alan Austerman; Shirley Gifford, Director,
Alcohol Beverage Control Board, Department of Public
Safety; Sue Stancliff, Special Assistant, Office of the
Commissioner, Department of Public Safety; Wyn Menefee,
Acting Director, Division of Mining, Land and Water,
Department of Natural Resources; Linda Hall, Director,
Division of Insurance, Department of Commerce, Community
and Economic Development; Representative Kurt Olson,
Sponsor.
PRESENT VIA TELECONFERENCE
Dale Fox, President & CEO, Alaska Cabaret, Hotel,
Restaurant and Retailers Association (Alaska CHARR),
Anchorage; Belen Cook, Member, Alcohol Beverage Control
Board of Directors, Cordova; Elizabeth Ripley, Executive
Director, Mat-Su Health Foundation, and Chair, Mat-Su
Substance Abuse Prevention Coalition; Glen Brady,
President, Silver Gulch Brewing, and Member, CHARR; Jerry
McCutcheon, Anchorage; Bonnie Woldstad, North Pole; Richard
Bouhan, Executive Director, National Association of Surplus
Lines Offices, Ltd. (NAPSLO), Missouri.
SUMMARY
HB 125 ALCOHOLIC BEVERAGE CONTROL BOARD
HB 125 was HEARD and HELD in Committee for
further consideration.
HB 146 LAND TRANSFER FROM STATE AND ALASKA RR
CSHB 146(FIN) was REPORTED out of Committee with
a "do pass" recommendation and with previously
published fiscal notes: FN1 (CED); FN2 (DNR).
HB 164 INSURANCE: HEALTH CARE & OTHER
CSHB 164(FIN) was REPORTED out of Committee with
a "no recommendation" and with attached
previously published fiscal note: FN1 (CED).
HOUSE BILL NO. 125
"An Act moving the Alcoholic Beverage Control Board to
the Department of Commerce, Community, and Economic
Development and relating to duties of that department;
and providing for an effective date."
1:42:44 PM
Vice-chair Fairclough continued with public testimony
related to HB 125.
DALE FOX, PRESIDENT & CEO, ALASKA CABARET, HOTEL,
RESTAURANT AND RETAILERS ASSOCIATION (ALASKA CHARR),
ANCHORAGE (via teleconference), continued his testimony. He
commented that for many years significant cooperation
existed between local police, State Troopers and the
Alcoholic Beverage Control (ABC) Board. He believed that
cooperation between agencies was necessary to enforce Title
4 statutes appropriately. A board relocation would not
substantially affect enforcement. He referred to the
document, "ABC Board Audit Review Subcommittee of the
Legislative Budget and Audit Committee" (copy on file). The
subcommittee concluded that the legislation would not
significantly restrict or change the enforcement
responsibilities of the ABC or the Department of Public
Safety (DPS).
Mr. Fox concurred with the audit review. He informed the
committee that the board's enforcement positions required a
background in enforcement. Currently, two former police
chiefs and a former state trooper held seats. Grant money
for compliance checks must solely be used for that purpose.
He expected enforcement efforts to remain robust. He opined
that the Department of Commerce, Community and Economic
Development (DCCED) was better suited to help businesses
with the licensing process through education, training and
support. He admitted that there were underage drinking
problems. He asserted that youth did not obtain alcohol
from licensees. Alaska was the best in the nation at
refusing service to minors at licensed premises.
1:46:35 PM
Mr. Fox did not expect any adverse effects from the
legislation.
BELEN COOK, MEMBER, ABC BOARD OF DIRECTORS, CORDOVA (via
teleconference), testified in opposition to HB 125. She
shared positive experiences related to the board. During a
board meeting in Nome a restaurant owner thanked the board
for providing compliance checks and took pride in passing
her establishment's inspection. She relayed further
positive experiences. Community members in Kotzebu voiced
that the ABC was very accessible and supportive regarding
local licensing and enforcement issues. Community members
in Cordova and other parts of the state shared concerns
about moving the board out of DPS. The residents feared
underage drinking would increase.
1:51:14 PM
Ms. Cook declared that board inspections are not "sting
operations." She urged the use of "compliance checks" in
discussions.
Representative Gara stated concerns about the effective
placement of the ABC. He queried the practical problems of
a move to DCCED. Ms. Cook worried that moving the board to
DCCED could result in slower and less efficient board
operations. Representative Gara asked for specifics. Ms.
Cook could not provide anything more concrete.
ELIZABETH RIPLEY, EXECUTIVE DIRECTOR, MAT-SU HEALTH
FOUNDATION, AND CHAIR, MAT-SU SUBSTANCE ABUSE PREVENTION
COALITION (via teleconference), testified against HB 125.
She spoke in support of strong ABC enforcement. She
announced that the coalition's mission was the prevention
and reduction of youth substance abuse. She explained the
three objectives of the coalition:
· Data driven strategies and decision making
· Coordinating community response to alcohol abuse
· Strive to be a leader in the state on the issue
Ms. Ripley relayed that the coalition sought to address
substance abuse at the local level through changing
community culture to support healthy families via sound
public policy. She related "alarmingly" high statistics of
teen alcohol use in the Mat-Su attributed to a coalition
survey; 68 percent of eleventh grade students had used
alcohol. Youth risk behavior survey data for Alaska
determined that 77 percent of seniors had used alcohol. She
opined that alcohol use had become a rite of passage for
teens. Mat-Su teens reported that alcohol was readily
available to them.
1:56:35 PM
Ms. Ripley furthered that the most prevalent access to
alcohol for youth took place in the home. She offered that
7 percent of teen access came from licensed establishments
that did not check identification. According to the ABC
website, 15 percent of establishment compliance checks
failed. The non-compliant establishments became portals to
access. She alleged that the legislation was developed to
curtail enforcement. Compliance checks were a proven
strategy to reduce youth access and consumption.
Ms. Ripley declared that moving the board to DCCED would
undermine enforcement. She emphasized that the coalition
advocated for increased and more uniform enforcement. The
coalition stood in strong opposition to HB 125.
Representative Hawker asked for evidence that HB 125 would
curtail enforcement. Ms. Ripley acknowledged her statement
was fear-based. She attributed her belief to testimony from
Legislative Budget and Audit Committee (BUD) hearings and
surmised that diminished enforcement was the motivation for
the bill.
Representative Hawker did not believe her statement or
conclusion was accurate. Ms. Ripley admitted that her
remarks were founded on industry pushing hard for the bill.
2:00:08 PM
Representative Joule wondered whether Ms. Ripley had heard
earlier testimony from industry member Bob Winn endorsing a
"three-legged stool" approach. He relayed that Mr. Winn
felt enforcement was at a minimum. He advocated increased
enforcement with the additional licensing and commerce
support. Ms. Ripley answered that she had heard the
testimony.
GLEN BRADY, PRESIDENT, SILVER GULCH BREWING, AND MEMBER,
CHARR (via teleconference), spoke in support of HB 125. He
referred to earlier testimony that spoke to the negative
consequences of ABC relocation in other states. He offered
that Alaska was more proactive than other states. Alaska
was only one of six states with mandatory alcohol server
training.
Mr. Brady characterized a productive relationship between
ABC and industry that addressed irresponsible retailers. He
desired a more collaborative relationship. He reiterated
that he did not support diminished enforcement efforts. The
licensing and economic development aspect of the industry
was adequately recognized. He thought the legislation would
help move the industry forward with education and
responsible business practices.
2:04:17 PM
Representative Wilson asked what the positive effects of
switching the ABC Board to DCCED were. Mr. Brady discerned
that board relocation would positively alter the nature of
the relationship with industry and allow for a
collaborative and open dialogue to address the issues.
JERRY MCCUTCHEON, ANCHORAGE (via teleconference), spoke
against the legislation. He opined that weakening
enforcement could lead to corruption and selective
enforcement. He likened the situation to the adage, "Don't
fix it if it isn't broke." He speculated that mandatory
identification checks were on the way and industry feared
that would mean less business. Industry could gain by not
having enforcement function properly.
2:08:35 PM
Mr. McCutcheon concluded that HB 125 was about non-
enforcement.
SHIRLEY GIFFORD, DIRECTOR, ALCOHOL BEVERAGE CONTROL BOARD,
DEPARTMENT OF PUBLIC SAFETY, addressed the audit
recommendations by the Division of Legislative Audit. She
reported that the board developed and wrote policies and
procedures. New fee, revenue, and reconciliation procedures
were implemented. New manuals for fee, revenue, and
reconciliation and licensing were distributed for key
positions in the agency. She informed the committee that
the board developed a strategic enforcement plan that
involved an inspection tracking form to ensure regular
inspections.
2:12:36 PM
Ms. Gifford expounded that the compliance check program was
a significant piece of the strategic enforcement plan.
Under the plan the state was divided into eight regions
with separate goals. She added that FY 11 was the first
year all of the goals were met. The board would perform
compliance checks once each year per establishment. She
furthered that the board implemented other improvements.
She created a check-list for board meetings. She improved
board meeting notification. Meeting notices and public
testimony were posted on the board's website. She enhanced
quality control measures. She established recording
compliance checks to ensure professional behavior by the
ABC investigator.
2:17:02 PM
Ms. Gifford referred to age assessment. The board
researched and wrote a compliance and procedure manual. She
studied procedures of 26 other states and incorporated the
best practices into Alaska's compliance check program. For
example, one particular state employed a panel of judges,
teachers, and citizens to approve the participants involved
in age assessment. She implemented a similar procedure and
believed the process was fair and objective to the
industry.
Vice-chair Fairclough noted that Ms. Gifford was speaking
to HB 206 [Extend Alcoholic Beverage Control Board] and HB
125. She asked for Ms. Gifford's position on HB 125. Ms.
Gifford felt her testimony was relevant. She wanted to
illustrate ABC's efforts to achieve an objective and fair
agency that cooperated with industry. The board was
committed to the same level of professionalism in any
department they resided.
Ms. Gifford addressed the issue of access to law
enforcement. She informed that the Board has two
investigators (Juneau and Fairbanks) housed with the Alaska
State Troopers. The investigators travel with the troopers
to remote areas. She worried that contact would be lost if
the agency was moved.
2:21:44 PM
Ms. Gifford stated concerns about private membership clubs.
She explained that private clubs were licensees and had to
show compliance with state statute and regulations. She
recommended private clubs exemption from compliance checks;
industry protested. She related problems gaining entry into
private clubs for compliance checks and requested magnetic
key or identification cards for random entry. She noted
instances of cooperation with clubs that provided magnetic
cards to the ABC. The clubs were 76 percent compliant
compared to other establishments 85 percent compliance
rate. She wondered how provisions in CS HB 125(L&C) would
affect private club compliance checks.
Representative Hawker asked how the board would operate
differently if relocated to DCCED.
2:26:47 PM
Ms. Gifford did not anticipate a change. Representative
Hawker referred to concerns outlined in public testimony.
He asked whether relocation would curtail the board's
enforcement activities. Ms. Gifford responded that she
intended to carry out enforcement.
Representative Hawker asked if she felt coerced to curtail
enforcement. Ms. Gifford responded in the negative.
Representative Hawker cited the collaboration with state
troopers and asked whether change to DCCED would adversely
affect those relationships. Ms. Gifford worried that
physical removal from DPS could result in enforcement
delays. The move could jeopardize the board's ability to
communicate and share proprietary information with the
troopers on a daily basis.
2:29:20 PM
Representative Hawker offered that the legislation would
relocate the ABC Board to DCCED from an administrative
standpoint. He asked if she thought the legislation would
prohibit the ABC investigators from being housed with state
troopers. Ms. Gifford answered that she did not.
Representative Hawker suggested that the committee request
an affirmation from DPS that it would not abandon or
compromise its relationship with ABC's investigative and
enforcement personnel.
Representative Edgmon requested clarification of industry
compliance statistics. Ms. Gifford answered that the 85
percent success rate was based on compliance checks
conducted. She felt it was a fair representation of the
industry.
Representative Edgmon asked what relocation to DPS would
entail for the board. Ms. Gifford reported that she did not
discuss the logistics of the move with DPS. She noted that
the commissioner of DPS offered assurance that the board
could remain in its current office for the near future.
Representative Doogan asked for clarification on the
meanings of "age assessment," "compliance check," and
"sting." Ms. Gifford explained how age assessment was done.
The board chose candidates between the ages of 18 to 20.5
years of age to pose as underage buyers. The board
determines if the "buyer" looked their age. She defined
that a compliance check was the attempt of the underage
buyer to purchase alcohol in an establishment. Sting was
the slang terminology the industry liked to use for
compliance check.
2:34:28 PM
Representative Gara recapped that the board's physical
relocation could create inefficient, untimely communication
between the troopers and the board. Ms. Gifford agreed.
Vice-chair Fairclough clarified that Ms. Gifford stated
that the commissioner of DPS assured that ABC could remain
in its present office. She asked whether that was accurate.
Ms. Gifford answered in the affirmative. She added that
there was uncertainty about future relocation.
Representative Gara requested a commitment from DPS that
the board could stay in its present location and maintain a
close relationship with the troopers. He asked whether she
had other concerns. Ms. Gifford replied that physical
location was only one aspect of being a part of DPS. There
were additional benefits to the board's identification with
the agency.
Co-Chair Stoltze contended that the board considered itself
an enforcement agency rather than a regulatory agency. The
industry was mostly compliant and not a criminal class. He
did not want to diminish the state's enforcement of illegal
activities, but endorsed a focus on regulation.
2:38:43 PM
Co-Chair Stoltze continued to discuss compliance and club
licenses. He believed that an ABC industry board member
pressed for compliance checks for clubs because they are
competitors with business establishments. He related
concerns about the way industry directed the board's
treatment of military organizations, VFW Halls, Elks, and
other fraternal organizations. He expressed dissatisfaction
with the industry for its competitive treatment of clubs,
but he was also unhappy with the way DPS treated industry.
He divulged that he was torn on the issue. He advocated for
strong regulation, but felt the industry was policed and
not treated as a regulated form of commerce. Ms. Gifford
did not believe that the board's approach was to single out
and go after private clubs. The board reasoned that clubs
should be included if other licensees were subject to
compliance checks. Co-Chair Stoltze wondered whether the
board had been directed by an industry member of the board.
2:43:25 PM
Ms. Gifford refuted the claim that the board conspired
against private clubs. She reiterated that she initially
excluded clubs from compliance checks because of the
difficulty to gain entry by ABC investigators. She
reexamined the policy and included clubs for compliance
checks. Private clubs were licensees and subject to the
same laws and regulation.
Vice-chair Fairclough referred to testimony from a police
officer in Fairbanks who believed private clubs should not
be subject to compliance checks.
Representative Wilson was alarmed to learn that the state
was employing underage adults to perform compliance checks.
Ms. Gifford replied that using older people would defeat
the purpose of the inspection, since no illegal act
occurred. The participants understood the purpose of the
program. The activity was covered by statute. The underage
employee was supervised by law enforcement or ABC
investigators.
2:47:47 PM
Representative Costello wondered about the mission of the
ABC Board. Ms. Gifford replied that the board's mission was
to protect the safety of communities through enforcement of
statute. Representative Costello referred to testimony by
Bob Winn, who had discussed the three legged stool concept
of regulation. She asked whether the board devoted time to
other areas besides enforcement. Ms. Gifford explained that
the ABC administered enforcement and licensing. Licensing
was a huge responsibility for the board. Two board
examiners and a licensing supervisor worked with licensees
on a daily basis. She added that licensing consumed more of
its time than enforcement.
Representative Edgmon wondered whether the board worked
with the Division of Occupational Licensing. Ms. Gifford
replied that ABC did their licensing in-house. The board
worked with the Department of Environmental Conservation
(DEC), the Department of Revenue (DOR), and local governing
bodies.
Representative Edgmon wondered whether information
technology services and ABC's statewide database were
provided by DPS. Ms. Gifford responded that the database
was provided by the agency.
2:50:57 PM
Vice-chair Fairclough CLOSED public testimony.
Vice-chair Fairclough requested that DPS address the issue
of housing the ABC Board if the legislation was adopted.
SUE STANCLIFF, SPECIAL ASSISTANT, OFFICE OF THE
COMMISSIONER, DEPARTMENT OF PUBLIC SAFETY, shared that
there was much discussion within the department but no
decision was made.
2:54:03 PM
Representative Gara remarked that the governor's office did
not have a position on the bill. He asked if ABC relocation
would affect enforcement. Ms. Stancliff stated that the
governor welcomed the public debate and did not endorse a
position. She reported that DPS shared the concerns related
to board relocation. The department was committed to do
whatever it took to make enforcement work if relocation
occurred. Alcohol issues were a serious problem in the
state. She referred to comments made by Commissioner
Masters that the department's single focus was "public
policy protecting the public's best interest…and safety."
The department's concern was that moving the agency would
be contrary to the express recommendations of two studies:
The Alaska Plan to Reduce and Prevent Underage Drinking and
the Alaska Strategic Safety Plan. Both plans were developed
with extensive public input.
Representative Joule asked whether DPS intended to reach
out to ABC in the event of physical relocation. Ms.
Stancliff responded that the department did not intend to
abandon the board. The department would include the board's
enforcement personnel in strategic planning. The department
would not include Ms. Gifford in the department's internal
directors meetings. She characterized the department's fear
as, "Out of sight, out of mind." She reiterated that
Commissioner Masters would do everything possible; his
overall goal was public safety.
2:59:01 PM
Representative Joule asked whether staying connected to ABC
included reaching across departmental lines for meetings to
continue. Ms. Stancliff answered in the affirmative.
HB 125 was HEARD and HELD in committee for further
consideration.
2:59:32 PM
AT EASE
3:07:29 PM
RECONVENED
HOUSE BILL NO. 146
"An Act authorizing the transfer of land from the
State of Alaska and the Alaska Railroad Corporation to
property owners along the Eielson Spur Line; and
providing for an effective date."
3:07:34 PM
Vice-chair Fairclough MOVED to ADOPT CS Work Draft CSHB 146
(FIN) 27-LS0505\I (4/5/11 Kane) as a working document
before the committee.
Co-Chair Stoltze OJBECTED for discussion.
REPRESENTATIVE TAMMY WILSON, SPONSOR spoke to the title
change in the CS. She remarked that the title of the House
Resources Committee version was very specific. The
legislation was thoroughly vetted and discussed between all
parties and their attorneys before it was drafted. House
Bill 146 was a culmination of seven years of negotiation
and hard work between involved parties. She shared that her
constituent, Bonnie Wolstad was instrumental in the
process.
Representative Wilson explained that HB 146 restored a
reversionary property right taken away from property owners
along the Eielson Spur. In 2003, Congress repealed
reversionary sections of the Alaska Railroad Transfer Act
(ARTA) at the request of the Alaska Railroad Corporation
(ARC) to address title issues. In the process, the
landowner's reversionary rights were repealed. The bill
restored ownership of their property after the easement was
no longer used. She stressed that the legislation only
restored a right that was taken away and does not grant
anyone special privileges beyond the original rights
established in ARTA. In addition, all affected parties
agreed on the bill.
3:11:18 PM
Representative Wilson believed that the issue was simple.
The property owners granted the railroad easements to
enable railroad expansion. Subsequently, the federal
government changed the law. She emphasized that the
legislation restored property owner's rights. She confirmed
that the bill would not affect the military.
BONNIE WOLDSTAD, NORTH POLE (via teleconference), recapped
that HB 146 reinstated the original ARTA provisions
(Sections 1208-1209) that provided a mechanism to revert
property ownership back to the landowners if the ARC
abandons use of the property.
Co-Chair Stoltze reported that ARC retained many easements
in his district. He expressed disappointment that
legislation was required for the railroad to "do the right
thing." Representative Wilson assured that the attorneys
from all parties approved the language in the bill. She
cautioned that the CS title change could complicate passage
of the bill. Co-Chair Stoltze read the new title, "An Act
relating to the Alaska Railroad Corporation; and providing
for an effective date." He maintained that the substance of
the bill did not change. He remained committed to fixing
the problem.
3:16:00 PM
Co-Chair Stoltze asked whether the new CS would ensure
resolution of the issue between ARC and the landowners.
WYN MENEFEE, ACTING DIRECTOR, DIVISION OF MINING, LAND AND
WATER, DEPARTMENT OF NATURAL RESOURCES, responded that the
change would not affect the outcome.
Representative Gara asked if the landowners received
compensation in exchange for ARC easement. Representative
Wilson answered that compensation was not part of the
reversionary agreement.
Co-Chair Stoltze closed public testimony.
Vice-chair Fairclough MOVED to report CSHB 146(FIN) out of
Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 146(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with previously published fiscal
notes: FN1, CED; FN2, DNR.
HOUSE BILL NO. 164
"An Act relating to insurance; relating to health care
insurance, exemption of certain insurers, reporting,
notice, and record-keeping requirements for insurers,
biographical affidavits, qualifications of alien
insurers assuming ceded insurance, risk-based capital
for insurers, insurance holding companies, licensing,
federal requirements for nonadmitted insurers, surplus
lines insurance, insurance fraud, life insurance
policies and annuity contracts, rate filings by health
care insurers, long-term care insurance, automobile
service corporations, guaranty fund deposits of a
title insurer, joint title plants, delinquency
proceedings, fraternal benefit societies, multiple
employer welfare arrangements, hospital and medical
service corporations, and health maintenance
organizations; and providing for an effective date."
3:19:18 PM
LINDA HALL, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, addressed two
areas of major concern related to HB 164. She identified
page 50, Section 79, of the legislation. She explained that
Section 79 intended to act as a disincentive for employers
to drop their group health coverage. She read Section (a),
lines 6-7, "an insurer may not issue an individual health
care insurance policy to an employee of an employer." She
related that a group plan must adhere to specific statutory
requirements that protect consumers. Guarantee issue
insurance coverage for the small group market (2 to 50
employees) provided that an insurer could not deny coverage
to small employers. She furthered that Section (b) allowed
for two exceptions. An employee and insurer may provide an
individual health insurance policy with employer funds if
the employee was eligible as defined by statute. She listed
eligible employees: part-time, temporary, and seasonal
employees not eligible for a group plan. The second
exception exempted employers that did not provide health
insurance coverage and had not within the last six months.
She elaborated that individual coverage was more
restrictive than group coverage. For example, the
individual market excluded maternity coverage; small group
plans provided it. The Division of Insurance opted to help
people denied coverage due to existing conditions in
Section 79. Employees forced to purchase individual
policies due to a dropped group plan would be underwritten
for deniable health conditions. The section would not
protect the other employees that must wait six months or
more for other health coverage.
3:23:32 PM
Vice-chair Fairclough referred to testifiers concerns that
Section 79 would severely limit employer's flexibility. Her
interpretion was that the employee received the penalty in
the event an employer can only provide individual coverage,
not the employer. The employee was left at risk. She felt
the policy decision was left open for debate.
3:28:17 PM
Ms. Hall directed attention to Section 46 (line 16, page
27) t related to surplus lines.
REPRESENTATIVE KURT OLSON, SPONSOR, spoke in support of
Section 46. He explained that the National Conference of
Insurance Legislators (NCOIL) proposed model legislation, a
national tax and collection authority that relinquished the
authority from states Division of Insurance.
He reported a conflict of interest as a member of the
Executive Committee of NCOIL and member of the Interstate
Insurance Product Review Committee (IIPRC).
Representative Olson declared that he was in wholehearted
support of Section 46. He believed that the NCOIL model
legislation was hastily crafted and not fully developed. He
believed that Section 46 was thoughtfully fashioned by the
division and conformed to the federal mandate. He noted
that 20 other states proposed legislation similar to
Section 46. The Alaska Surplus Lines Association was the
main opposition to Section 46. He concluded that the
division had the existing structure and experience to carry
out the provisions of Section 46. Passage will save the
state money and lead to faster implementation.
Vice-chair Fairclough understood that existing state
statute granted the division tax-collecting authority. The
provisions of Section 46 would enable Alaska to benefit if
particular [insurance] products were sold.
Representative Gara read page 28, lines 3-4, Section 46:
"The tax paid by the insurer under this section is in lieu
of all insurer taxes…" He wondered how the section
influenced the amount of tax the state could collect from
insurance companies. Ms. Hall replied that HB 164 did not
change the amount of taxes owed. The bill defined the
surplus lines tax rate. The only change combined a 2.7
percent tax and a 1 percent stamping fee to a single 3.7
percent tax.
3:33:03 PM
Representative Gara asked for an explanation of surplus
lines. Ms. Hall explained that surplus lines were a type of
insurance written differently than admitted insurance.
Admitted insurers must file authorizations for form and
rate approval. A class of "other" insurers underwrote more
difficult lines of insurance such as earthquake or some
marine coverage. They did not file forms and rates for
approval. The taxes were paid by surplus lines brokers as
opposed to the actual insurance company.
Ms. Hall elaborated that Section 46 introduced a new "home
state" concept based on changes in the federal law that
preempted state statutes from the type of tax collection.
The state currently collected premium taxes only on the
portion of a multi-state surplus line insurance policy with
a risk located in the state of Alaska. In compliance with
the new federal law, the state would collect 100 percent of
the tax debt if Alaska was declared the home state of the
multi-state business owner.
Vice-chair Fairclough asked how many insurers sell multi-
state surplus lines. Ms. Hall identified approximately 900
surplus lines brokers; 100 were residents of Alaska. Vice-
chair Fairclough asked whether the state stood to benefit
from Section 49 if an Alaskan surplus lines broker sold
their product in another state. Ms. Hall replied that it
did not matter where the insurer selling a product was
located; what mattered was the location of the insured
property. Vice-chair Fairclough asked how Alaska would
benefit from the statute change. Ms. Hall informed that the
provision enabled the state to continue to collect taxes on
surplus lines risk. She contended that the division could
not collect taxes on multiple state risks, estimated at
$500 thousand, if the state failed to conform to the new
federal mandate.
3:37:58 PM
Representative Gara referred to Section 64 of the bill. He
inferred that long-term care insurance could not deny
coverage for a pre-existing condition. He noted the change
in the definition of "pre-existing". He asked whether the
statute made it easier or harder to deny coverage. Ms. Hall
responded that "the intent was to take away the
subjectivity of an ordinary prudent person and instead to
rely on medical advice or treatment as opposed to the
opinion of an ordinary prudent person."
Representative Gara asked whether HB 164 made it harder or
more expensive to procure insurance or reduced coverage.
Ms. Hall answered in the negative.
Representative Wilson asked whether HB 164 was written in
response to changes in federal law. Ms. Hall responded that
only Section 46 (the section on surplus lines) was included
due to federal law. She elaborated that the legislation was
influenced by the National Association of Insurance
Commissioners (NAIC), loosely described as a trade
association of all the insurance regulators in the country.
The Association attempted to implement self-imposed
uniformity of insurance laws. The division was accredited
by NAIC and many of the changes in HB 164 were included to
maintain accreditation standards. She noted that all 50
states were accredited, which ensured financial oversight
of insurance companies.
3:41:42 PM
Representative Wilson asked if a state board of insurance
existed. Ms. Hall replied in the negative.
RICHARD BOUHAN, EXECUTIVE DIRECTOR, NATIONAL ASSOCIATION OF
PROFESSIONAL SURPLUS LINES OFFICES, LTD. (NAPSLO), MISSOURI
(via teleconference), spoke in opposition to the surplus
lines and tax collection provisions in HB 164. He alleged
that the legislation would not conform to the new federal
law. The legislation required the establishment of an
allocation formula for surplus lines tax collection. The
formula proposed by NAIC in their "non-admitted insurance
multi-state agreement" was burdensome to brokers and did
not simplify the tax payment process as mandated by federal
law. He opposed paying taxes to a clearinghouse that
allowed states to distribute revenue from taxes collected
on multi-state surplus lines risk policies. He felt that
the tax rates established under the structure did not
comply with federal regulations. He added that only 5 to 15
percent of surplus lines were multi-state. He was uncertain
that any state would gain revenue by entering into a multi-
state compact.
Vice-chair Fairclough asked the witness if he had contacted
any Alaskan insurers on the issue. Mr. Bouhan answered that
he contacted insurance companies and brokers dealing in
Alaska.
Vice-chair Fairclough CLOSED public testimony.
Representative Wilson MOVED to report CS HB 164 (L&C) 27-
LS0444/B out of Committee with individual recommendations
and the accompanying fiscal note.
3:50:27 PM
AT EASE
3:51:04 PM
RECONVENED
Representative Wilson WITHDREW her motion.
Representative Wilson MOVED to Adopt CS HB 164 (FIN) (27-
LS0444\I, Bailey, 4/1/11) as a working document before the
committee.
Vice-chair Fairclough OBJECTED for discussion on the
difference between the versions.
Ms. Hall reported that the CS reflected minor corrections
or formatting changes and did not contain any substantive
changes. She listed the revisions. She referenced page 38,
line 13, the addition of three words "the sum of." She
identified that page 62, line 13, corrected a repealer. She
concluded that on line 15, page 62, the number 14 replaced
13 as the correct number.
Vice-chair Fairclough REMOVED her OBJECTION. There being NO
further OBJECTION, it was so ordered.
Representative Wilson MOVED to report CSHB 164(FIN) out of
Committee with individual recommendations and the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
CSHB 164(FIN) was REPORTED out of Committee with a "no
recommendation" and with attached previously published
fiscal note: FN1, CED.
3:54:06 PM
ADJOURNMENT
The meeting was adjourned at 3:54 PM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 146 Chronolgy Final.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |
| CSHB146 Sponsor Statement.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |
| Dec_17_RR_letter[1].pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |
| Corp_ARTA_2005_excerpt.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |
| HB 164 CS WORKDRAFT 27-LS0444-I.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 164 |
| HB 125 Kate Burkhart AMHB Testimony and responses 040611.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 125 |
| HB 125 ABC Mission.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 125 |
| HB 146 CS WORKDRAFT 27-LS0505-I.pdf |
HFIN 4/6/2011 1:30:00 PM |
HB 146 |