Legislature(2017 - 2018)HOUSE FINANCE 519
03/06/2017 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB106 | |
| HB56 | |
| HB81 | |
| HB49 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 49 | TELECONFERENCED | |
| + | HB 56 | TELECONFERENCED | |
| + | HB 81 | TELECONFERENCED | |
| + | HB 106 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 6, 2017
1:33 p.m.
1:33:10 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:33 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Les Gara, Vice-Chair
Representative Jason Grenn
Representative David Guttenberg
Representative Scott Kawasaki
Representative Dan Ortiz
Representative Lance Pruitt
Representative Steve Thompson
Representative Cathy Tilton
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Representative Zach Fansler, Sponsor; Nikole Nelson,
Executive Director, Alaska Legal Services; Mary Schlosser,
Staff, Representative Zach Fansler; Representative Dan
Ortiz, Sponsor; Britteny Cioni-Haywood, Director, Division
of Economic Development, Department of Commerce, Community
and Economic Development; Jerry McCunf, United Fishermen of
Alaska, Juneau; Representative Jonathan Kreiss-Tomkins,
Sponsor; Berett Wilber, Staff, Representative Jonathan
Kreiss-Tomkins; Representative Sam Kito, Sponsor; Crystal
Koeneman, Staff, Representative Sam Kito; Kris Curtis,
Legislative Auditor, Alaska Division of Legislative Audit;
Janey Hovenden, Director, Division of Corporations,
Business and Professional Licensing, Department of
Commerce, Community and Economic Development; Johanna
Crosset, Certified Direct-Entry Midwife, Juneau.
PRESENT VIA TELECONFERENCE
Stacey Schubert, Director, Governmental Affairs and Public
Relations, Alaska Housing Finance Corporation, Anchorage;
Michael Strand, CFO, Alaska Housing Finance Corporation,
Anchorage; Susan Terwilliger, President, Midwives
Association, Anchorage; Deborah Schneider, Chair, Board of
Certified Direct Entry Midwives, Anchorage.
SUMMARY
HB 49 EXTEND BOARD OF DIRECT-ENTRY MIDWIVES
HB 49 was HEARD and HELD in committee for further
consideration.
HB 56 COMMERCIAL FISHING LOANS
HB 56 was HEARD and HELD in committee for further
consideration.
HB 81 AK ENERGY EFFICIENCY LOANS: ELIGIBILITY
HB 81 was HEARD and HELD in committee for further
consideration.
HB 106 CIVIL LEGAL SERVICES FUND
HB 106 was HEARD and HELD in committee for
further consideration.
Co-Chair Foster discussed housekeeping.
HOUSE BILL NO. 106
"An Act allowing appropriations to the civil legal
services fund from court filing fees."
1:34:20 PM
REPRESENTATIVE ZACH FANSLER, SPONSOR, introduced himself
and provided a description of the bill from the sponsor
statement (copy on file).:
This bill will safeguard Alaskans' access to the civil
justice system by creating a stable and sustainable
mechanism for funding the Alaska Legal Services
Corporation, protecting those who cannot afford to
hire an attorney of their own. It allows the
Legislature to appropriate up to 25 percent of filing
fees paid to the Alaska Court System during the
previous fiscal year into the already existing Civil
Legal Services Fund.
The Alaska Legal Services Corporation-established in
1967-is a nonprofit charitable 501(c)(3), whose
funding comes from a variety of state, federal, and
private sources.
Alaska Legal Services Corporation endeavors to serve a
growing number of eligible applicants. Since 1984, the
number of Alaskans who qualified for legal services
has more than doubled, from 41,000 to over 100,000.
Yet currently, the state's contribution to The Alaska
Legal Services Corporation is only a fraction of what
it was 30 years ago. House Bill 106 aims to stabilize
The Alaska Legal Services Corporation funding and help
ensure that civil legal aid is available to all
Alaskans, not just the few who can afford it.
The Need
In the past 30 years, the number of Alaskans eligible
for legal services-including Alaska Veterans-has more
than doubled, from 41,000 to more than 100,000.
However, state funding for Legal Services is a small
fraction of what it was decades ago.
Legal Services does significant work on behalf of
Alaska Veterans, protects Alaskans from domestic
violence, and also contributes to efforts to lower
recidivism rates through helping people bring
stability to their lives.
Access to civil justice should not be just for people
who can afford an attorney.
1:37:11 PM
Co-Chair Foster noted that Representative Wilson and
Representative Guttenberg had joined the meeting. He listed
individuals who were on hand to answer questions.
Co-Chair Seaton referred to military members served by the
agency. He asked whether the military members had civil
attorneys.
Representative Fansler could not speak to the legal
services provided by the military, but understood that many
of the cases handled by civil legal services involved
veterans.
Co-Chair Seaton requested differentiation between active
military and veterans, when discussing the program.
1:39:35 PM
NIKOLE NELSON, EXECUTIVE DIRECTOR, ALASKA LEGAL SERVICES,
shared that the agency represented veterans, as opposed to
active military members. She said that civil legal
assistance were provided military families. She expounded
that a military family could have a civil legal issue that
did not qualify for representation through the military,
but that the agency was not duplicating services.
Representative Wilson asked for a breakdown of federal and
private donations for services in the past year.
Representative Fansler deferred the question to the agency.
Ms. Nelson relayed that the agency had a wide range of
funding sources. She elaborated that the overall budget was
approximately $5 million, of which $450,000 was from a
state appropriation. She stated that $1.2 million was
received from the Federal Legal Services Corporation, and
the funding balance after that was received from a variety
of sources: private foundation grants, individual
donations, and competitive grants and contracts.
Representative Wilson asked whether there were legal
service benefits available for veterans.
Ms. Nelson answered in the affirmative. She furthered that
although the VA did provide services, legal representation
was not among them. She asserted that if a veteran had been
denied benefits, it was helpful to have legal
representation.
1:42:27 PM
Representative Grenn asked whether current funding levels
had resulted in applicants being denied services.
Ms. Nelson answered in the affirmative; they had turned
away over 850 cases in the past year because the agency did
not have the resources to serve them. She elaborated that
the cases that were turned away involved victims of
domestic violence, and exploited elderly and veterans, and
that all the cases were merited.
Representative Grenn asked about a normal course of action
for an individual who was denied service.
Ms. Nelson replied that other services available were
referred, but for most people the service was the last
resort, and without assistance the client would have to
self-represent.
Co-Chair Foster noted Representative Pruitt had joined the
meeting.
1:44:06 PM
Representative Kawasaki asked how the agency prioritized
the applicants.
Ms. Nelson responded that the cases were prioritized based
on the vulnerability of clients, the need (legally), and
staff availability. She said that cases were triaged in
order for the assessment to be made of the most vulnerable
would receive services first.
Representative Kawasaki asked what the poverty level was as
associated with the term "indigent" as defined in the bill.
Ms. Nelson replied that the services were generally limited
to those at 125 percent of the federal poverty guidelines,
as adjusted for Alaska. She added that there were several
specific funding sources that allowed for services for
those who did not meet the criteria.
1:45:41 PM
Representative Guttenberg assumed that the clientele that
the Alaska Legal Services Corporation (ALSC) catered to had
a higher percentage of being denied services from private
sector and government agencies.
Ms. Nelson agreed. She said that the agency had an 86
percent success rate in the cases it took on, and 80
percent of its cases settled out of court. She said that
simply letting the other side know that the validity of
their legal action was being contested was a huge help to
the more vulnerable clientele that had not had successful
service elsewhere.
Representative Guttenberg asked whether ALSC took a cut
from the money awarded to the client by the court.
Ms. Nelson clarified the agency did not take cases where
there was a large fee award or settlement - those cases
would be taken on by a private attorney.
1:48:34 PM
Representative Pruitt noted that filing fees went straight
to the General Fund.
Representative Fansler answered in the affirmative.
Representative Pruitt asked whether the court should be
decremented the difference if the original appropriation
and the $634,000, because they were bringing in fees with
the intent of applying them toward the services they
provide.
MARY SCHLOSSER, STAFF, REPRESENTATIVE ZACH FANSLER,
answered that the fund had originally been established in
2007 using fees from punitive damages, which were not as
stable as court fees. She detailed the legislation changed
it to more stable funding. She added that zero to 25
percent of the court fees could be appropriated to the
court, at the legislature's discretion. She said that the
bill would offer secondary funding when the financial
climate was more stable.
Representative Pruitt understood that the punitive damages
funds would be replaced by the filing fees, he asked where
the punitive damages funds would go.
Ms. Schlosser replied that due to the instability of
punitive awards in the past ten years, the court fees would
be used in addition punitive awards. She detailed that
$90,000 had brought forward in the past ten years, $20,000
in the past 4 years.
1:52:25 PM
Representative Wilson understood that the $450,000 that was
appropriated to the program, had not been based on the
punitive awards or court filing fees. She wondered what
percentage of the program's funding had to be authorized by
the legislature.
Representative Fansler replied that punitive damages were
currently in place, and the majority of the $450,000 came
from a direct legislative appropriation. He clarified that
the legislation would provide a mechanism that would allow
for a more stable funding source once the state's economy
recovered.
Representative Wilson assumed if the bill were to pass the
court would consider their fees when planning their overall
yearly budget.
Representative Fansler agreed. He said that it would yearly
be up to the legislature to determine what percentage of
the fees would be used. He believed that the bill would
allow for a multi-faceted approach that gave numerous
options for a secure and steady funding stream.
1:55:09 PM
Co-Chair Foster OPENED and CLOSED public testimony. He
informed committee members that amendments to the bill were
due by 5pm on Wednesday, March 8, 2017.
Co-Chair Seaton pointed out to the committee that the fees
that were collected by ALSC went into the general fund and
were subject to appropriation by the legislature.
HB 106 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 56
"An Act relating to limitations on certain commercial
fishing loans made by the Department of Commerce,
Community, and Economic Development."
1:57:21 PM
REPRESENTATIVE DAN ORTIZ, SPONSOR, introduced himself and
the bill. He spoke of comments made by Alaska U.S. Senator
Dan Sullivan during a joint floor session about the
importance and value of the fishing industry to the state.
He said that the $6 billion per year industry was critical
to the Alaska economy, and the fishing industry was the
largest private employer of the state's labor force. He
noted that the "greying of the fleet" was becoming an issue
for the industry; the age of the fleet was gradually
getting older. He believed that the legislation was a step
in helping with the issue by raising the loan limit amount
for fishermen to purchase gear, permits, and boats, form
$300,000 to $400,000. He stated that the funds would come
from the Department of Commerce, Community, and Economic
Development (DCCED) through a revolving loan program. He
offered additional sponsor statement language:
This bill increases the aggregate amount a borrower
may, in aggregate, hold unpaid from $300,000 to
$400,000. The amount of 300,000 was assigned in 1982.
Due to inflation and technological advances, this
$300,000 amount has become outdated. According to the
calculation method of the Consumer Price Index,
$300,000 in 1982 is equivalent to approximately
$746,136 today. This is why a $100,000 increase to the
aggregate limit of $300,000 to $400,000, is reasonable
and pertinent today. An aggregate limit of $400,000 is
a reasonable aggregate unpaid limit for Alaska's
commercial fishing businesses.
Representative Ortiz noted that member's packets contained
several letter of support for the legislation.
2:01:47 PM
Representative Kawasaki queried the solvency of the current
fund.
Co-Chair Foster noted individuals from the department were
also available for questions.
Representative Ortiz encouraged the department to address
the specific question. He added that there was initial seed
money established to start the fund; the fund had never
needed additional appropriation from the legislature. He
noted that the fund had an outstanding record of repayment.
Representative Kawasaki pointed to a sheet provided by the
department (copy on file) that addressed a statutory
interest rate provided by the fund. He asked whether the
statutory interest rate being higher than the industry
interest rate was a problem for the fund.
2:03:55 PM
BRITTENY CIONI-HAYWOOD, DIRECTOR, DIVISION OF ECONOMIC
DEVELOPMENT, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, explained that the department currently had
approximately $19 million in available lending funds. She
asserted that the fund was robust, and reiterated that the
fund had not used general fund dollars since 1985, but
lived off of interest and fees charges through the program.
Representative Kawasaki referred to industry and statutory
interest rates. He noted that in some cases it looked like
the industry rate was higher. He wondered why people would
lend at such high rates.
Ms. Cioni-Haywood answered that often the program lent to
people who could not secure financing elsewhere. She
relayed that the current interest rate was 5.5 percent. She
added that most recent borrowers were younger borrowers and
borrowers that did not have a credit history, who were
willing to take the higher interest rate.
Representative Wilson asked for the current default rate.
Ms. Cioni-Haywood responded that the current rate was 2.2
percent, which was below the industry standard of 5
percent.
Representative Wilson queried how much the fund currently
had on-loan.
Ms. Cioni-Haywood replied that there was approximately $90
million in outstanding loans.
Representative Wilson wondered whether the interest rate
could be lowered without a statute change. She thought that
the program could be taking advantage of those that could
not afford to take out a lower interest loan.
2:07:18 PM
Ms. Cioni-Haywood shared that the interest rate was deemed
in statute and that the program had a pay-on-time program,
in which people who paid on-time received a discounted
interest rate.
Representative Tilton referred to legislation from 2012,
regarding the loan fund. She noted the state's financial
crisis and wondered whether the timing of the legislation
was appropriate.
Representative Ortiz replied that he could not comment on
what was occurring in the legislature in 2012 when the
legislature had been considering the issue. He shared the
reason he had brought the legislation forward was that he
wanted to help young people have a better chance to get
involved in the industry. He said that the legislation
would be a no-cost item to the state that would allow the
state to assist young fishermen to enter into the industry.
Representative Tilton asserted that there was already a
disparity in loan amounts for the commercial and charter
loan funds.
Representative Ortiz replied that he was not looking to
increase the difference between the commercial and charter
industry loans. He suggested that someone could bring forth
a piece of legislation that would address that particular
problem.
2:10:57 PM
Representative Tilton understood that there was $19 million
currently available in the fund.
Ms. Cioni-Haywood answered in the affirmative.
Representative Tilton referred to a 2015 figure that showed
a $2 million balance.
Ms. Cioni-Haywood was surprised at the figure, she did not
think that the fund had been that low for approximately two
years.
Representative Tilton hoped to talk more in depth with Ms.
Cioni-Haywood about the issue.
2:12:10 PM
Representative Grenn spoke to the last paragraph of a
letter of support from the United Fishermen of Alaska:
The revolving loan program is one of very few tools
that the state has to give an advantage to Alaska
residents with a desire to become fishing skippers.
And, because a traditional bank lender must first
reject a borrower in order to qualify for the Loan
Program, we do not anticipate major negative effects
on private sector lenders.
Representative Grenn wondered what a person had to shoe
regarding being previously rejected by a bank. He asked
whether there had been opposition or support for the issue.
Representative Ortiz answered he had received some critical
feedback from the commercial lending community. He
elaborated that one of the reasons for the higher interest
rates could be a sensitivity to not wanting to see the
state directly compete with the commercial/private
industry. He furthered that there were people in the
private sector who viewed the program as competition, he
believed that the qualification of first being rejected by
a traditional bank showed good faith by the department.
2:14:37 PM
Co-Chair Seaton referred to a letter in the packet about
commercial hardship [handout titled "Division of Economic
Development Department of Commerce, Community and Economic
Development 2016 Annual Report of Fisheries Enhancement
Term Extensions per AS 16.10.510(11)" (copy on file)],
which discussed term extensions that could be granted in
times of financial hardship. He wondered whether the
document was informational as he had not seen it in the
bill.
Representative Ortiz replied that it was not a part of the
bill. He deferred further discussion to the department.
Ms. Cioni-Haywood answered that the program currently
provided extensions for economic hardships; it required a
separate application process.
2:16:03 PM
Representative Pruitt felt that the information provided on
the bill was lacking for him to determine the stability of
the fund. He thought that the program was a good program.
He agreed with the higher rate. He expressed concern that
doubling the loan amount would take away funding for other
applicants in other loan programs.
Representative Ortiz clarified that the maximum loan amount
would increase from $300,000 to $400,000, which was not a
doubling of the loan amount. He asserted that there had
been prior testimony concerning the solvency of the fund
and the excellent repayment rate.
2:18:50 PM
Representative Pruitt said that he was referring to the
$100,000 to $200,000 by vessel. He stressed that he wanted
to see the information in writing. He did not want to
jeopardize the fund.
Ms. Cioni-Haywood replied that she would submit the
information in writing. She shared that projections had
been done using the assumption of 21 new loans, with an
increased average loan amount over the next ten years, and
using a conservative repayment schedule, and had estimated
that the fund would still maintain over $12 million in the
fund balance.
Representative Thompson expressed appreciation for the loan
program. He queried whether any of the loans were awarded
out of state.
Ms. Cioni-Haywood confirmed that it was a resident-only
program; a person had to be a resident for two years to be
eligible for the loan.
2:21:18 PM
Co-Chair Foster OPENED public testimony.
JERRY MCCUNF, UNITED FISHERMEN OF ALASKA, JUNEAU, testified
in support of the legislation. He spoke of the complexity
of loan programs. He spoke of the doubling of vessel loans
from $100,000 to $200,000, and he noted that the number had
not increased since 1982. He felt that a $200,000 boat
would be safer than a $100,000, and that a proper fishing
vessel could cost several of hundreds of thousands of
dollars. He felt that the program was beneficial to younger
fishermen just starting out in the industry.
Co-Chair Foster CLOSED public testimony.
HB 56 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 81
"An Act making an entity that is exempt from federal
taxation under 26 U.S.C. 501(c)(3), (4), (6), (12), or
(19) (Internal Revenue Code) and a federally
recognized tribe eligible for a loan from the Alaska
energy efficiency revolving loan fund; relating to
loans from the Alaska energy efficiency revolving loan
fund; and relating to the annual report published by
the Alaska Housing Finance Corporation."
2:24:21 PM
REPRESENTATIVE JONATHAN KREISS-TOMKINS, SPONSOR, introduced
himself and provided information about the legislation. He
believed that most members of the committee had seen
previous iterations of the legislation over the years. He
offered a history of the topic of the bill:
This bill gives nonprofit organizations and federally-
recognized tribes the power to apply for loans from
the Alaska Energy Efficiency Revolving Loan Fund.
Because AEERLF is such a god awful acronym, we call
this bill the More Energy Efficient Buildings Act
("MEEBA").
The AEERLF was created by the Alaska Sustainable
Energy Act in 2010. It authorized the Alaska Housing
Finance Corporation to make $250 million in low
interest loans for energy efficiency improvements to
public entities, namely municipalities and school
districts. One loan has been closed since the
program's creation in 2010.
Especially given our new and more austere fiscal
climate in which legislative grants are going to be
rare to nonexistent, many nonprofits are interested in
becoming more self-sufficient and accessing loans from
the revolving loan fund to invest in energy
efficiency. Right now, nonprofits such as soup
kitchens, arts organizations, American Legion posts,
and churches are not eligible to apply to the
revolving loan fund.
The More Energy Efficient Buildings Act authorizes
Alaska Housing to accept applications from non-profits
and federally recognized tribes for energy efficiency
improvements to their buildings. The More Energy
Efficient Buildings Act improves energy efficiency in
Alaska. It helps Alaska nonprofits, churches, and
veteran's organizations become more self-sufficient.
And it helps create a public benefit for a State
program that's presently under-used.
Representative Kreiss-Tompkins lamented that his previous
attempts to pass similar legislation had been met with
apathy and disinterest. He felt that the apathy had been
nurtured by the legislature, which had offered school
districts and municipalities' legislative grants to finance
their energy expenses.
2:29:26 PM
Representative Kreiss-Tompkins continued to address the
reasoning for the development of the legislation. He felt
that the bonding authority had been underused, and
suggested that expanding the eligibility to the revolving
loan fund to non-profits and organizations that needed
access to capital in order to deliver services to Alaskans.
Co-Chair Foster relayed there were individuals available
for questions.
2:31:13 PM
Representative Grenn queried they type of non-profit
entities that would be eligible under the bill.
Representative Kreiss-Tompkins replied that the eligibility
would be expanded to the suite of Internal Revenue Service
(IRS) designated non-profit organizations. He thought that
the bottom line was that energy efficiency was good no
matter who was benefiting from it; the more people who were
able to make energy efficiency improvements, the better.
2:33:42 PM
Representative Kawasaki requested further description of
the IRS designated non-profit entities.
Representative Kreiss-Tompkins answered that 501c 4 related
to civic leagues, social welfare or local employee
associations, and 501c 6 related to business leagues,
chambers of commerce, and industry umbrella organizations.
He furthered that 501c 12 related to mutual and cooperative
associations, and 501c 19 related to post-organizations of
past and present members of the armed forces. He deferred
to staff for any further clarification.
Representative Kawasaki asked whether a political
organization such as the Alaska Democratic or Republican
Party Headquarters would qualify.
Representative Kreiss-Tompkins replied that he did not know
and relayed that he would follow up with an answer.
Representative Kawasaki expressed concern for fairness in
the decision making process of who would qualify for the
loans. He asked about the constitutionality of the
inclusion of churches and religious organizations.
BERETT WILBER, STAFF, REPRESENTATIVE JONATHAN KREISS-
TOMKINS, directed committee attention to the memo from the
Division Legislative Legal provided in member's packets and
dated January 23, 2017(copy on file). She explained that
legislative legal had determined that allowing churches to
apply for loan funding under the energy efficiency program
was constitutional.
Representative Kawasaki asked if it was because everyone
that applied had an equal chance of receiving the loan.
2:37:37 PM
Ms. Wilber replied she would need to reread the memo, but
she believed he was correct.
Representative Wilson asked about prioritizing schools
first as recipients.
Ms. Wilber cited Section 7 of the legislation:
* Sec. 7. AS 18.56.855 is amended by adding new
subsections to read:
(k) In considering applications and making loans
from the Alaska energy efficiency revolving loan
fund, the corporation shall give priority to
energy efficiency improvements to buildings owned
by a regional educational attendance area, the
University of Alaska, a municipality, or the
state over other applications and loans.
(l) Notwithstanding any provision of this
section, the recipient of a loan under 28 this
section may not be a for-profit business
enterprise.
Representative Wilson thought some loans required audits
first.
Ms. Wilber answered that the loan required a federal-grade
audit that would specify the areas a building would save
money with energy efficiency improvements.
Representative Wilson asked whether a non-profits monetary
holding would be taken into account when determining
interest and eligibility of the loans.
2:40:08 PM
Ms. Wilber answered that there would be no limit to which
non-profits could apply for the loans. She said that AHFC
would set the interest rate. She deferred further
explanation to AHFC.
STACEY SCHUBERT, DIRECTOR, GOVERNMENTAL AFFAIRS AND PUBLIC
RELATIONS, ALASKA HOUSING FINANCE CORPORATION, ANCHORAGE
(via teleconference), explained that the current interest
rate for a 15 year loan was 4.25 percent.
Representative Wilson asked whether the interest rate would
be the same for a bank loan to the same applicant.
Ms. Schubert replied that she did not know the current
interest rate for other institutions.
Representative Wilson asserted that she did not want to
compete with banks or to loan money at a lower interest
rate than financial institutions. She asked who paid the
bill if an organization defaulted on the loan.
Ms. Schubert deferred the question to a colleague.
MICHAEL STRAND, CFO, ALASKA HOUSING FINANCE CORPORATION,
ANCHORAGE (via teleconference), informed the committee that
the money would come from the AHFC internal resources. He
said that if the total loan amounts reached over $50
million then AHFC would have to go to bond, the costs of
which would be absorbed by the program cost. He relayed
that AHFC would be responsible for any defaults; there
would be no risk to the state in the event of a default on
the loan.
2:44:07 PM
Representative Guttenberg referred to the previously
mentioned legal memo. He believed that the memo succinctly
explained the entities that were eligible for the loan. He
believed that the memo addressed the issues raised
Representative Wilson. He believed that non-profits would
take advantage of bank loans if they could qualify for one,
regardless of interest rates.
Representative Kreiss-Tompkins responded to Representative
Wilson's questions. He understood that because of the way
the program was structured, savings had to be demonstrated
through an audit before an entity could qualify. He added
that the energy savings essentially financed the debt,
which was a unique approach that was not used by banks and
traditional lending institutions.
2:47:15 PM
Co-Chair Foster OPENED and CLOSED public testimony.
HB 81 was HEARD and HELD in committee for further
consideration.
HOUSE BILL NO. 49
"An Act extending the termination date of the Board of
Certified Direct-Entry Midwives; and providing for an
effective date."
2:48:05 PM
REPRESENTATIVE SAM KITO, SPONSOR, introduced himself and
the bill.
CRYSTAL KOENEMAN, STAFF, REPRESENTATIVE SAM KITO, shared
the sponsor's statement (copy on file):
House Bill 49 extends the termination date for the
Board of Certified Direct-Entry Midwives until June
30, 2021.
Legislative Audit conducted their review of this board
and determined that "The board is serving the public's
interest by effectively licensing and regulating
certified direct-entry midwives and apprentice
midwives. The board monitors licensees and works to
ensure only qualified individuals practice.
Furthermore, the board adopts regulations to improve
the practice of midwifery. In accordance with AS
08.03.010(c)(8), the board is scheduled to terminate
on June 30, 2017. We recommend that the legislature
extend the board's termination date to June 30, 2021."
The board currently oversees 52 active licensees and
is composed of five members: two certified direct-
entry midwives, one physician licensed by the State
Medical Board, one certified nurse midwife licensed by
the Board of Nursing, and one public member.
The continuation of the Board of Certified Direct-
Entry Midwives is important to the health and safety
of Alaska's women and children, as it serves an
important role in protecting the well-being of
Alaskans by identifying individuals who are willing to
pursue technical training and meet specified technical
qualifications necessary for license as midwives.
Thank you for your support of House Bill 49.
2:50:18 PM
Co-Chair Foster noted there were individuals available for
questions.
Representative Wilson queried the cost of the audit,
relative to the size of the group the board oversaw. She
wondered whether the board paid for the audit.
Representative Kito deferred the question to the division.
He answered that the four-year extension had been
recommended by the division.
Co-Chair Foster recognized that Vice-Chair Gara had joined
the meeting.
Co-Chair Seaton noted the fee increase of 169 percent and
the one-time surcharge of $2000.
Representative Kito explained that the audit recommended
that licensing fees should be increased to cover the cost
of board operations.
2:52:42 PM
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT, testified that the previous sunset audit
conducted on the board had been in 2014, and at that point
the division found that the Division of Corporations,
Businesses and Professional Licensing (DCBPL) investigative
staff had not been actively processing investigations that
posed a public safety risk. She said that at that point the
board was extended only 2 years; the division had conducted
a 2016 follow-up sunset review. The latest review found
that the board is serving in the public's interest by
effectively licensing and regulating certified direct-entry
midwives (CDM) and apprentice midwives. She stated that the
division recommended that the legislature extend the
board's termination date to June 30, 2021, provided the
board execute the following recommendations [from the
Performance Audit of the Department of Commerce, Community
and Economic Development, State Board of Certified Direct-
Entry Midwives (board) April 30, 2016(copy on file)]:
Recommendation 1: DCBPL management, in consultation
with the board, should increase licensing fees to
eliminate the board's operating deficit.
High regulatory costs relative to the low number of
licensees has led to high license fees. The board
primarily receives its revenue from license and
renewal fees. Renewals are conducted on a biennial
basis, creating a two-year cycle in board revenues.
Fee levels were increased in FY 15, but fees were not
high enough to cover operating costs. As shown in
Exhibit 3, the board's deficit grew to $183,081 as of
February 29, 2016, the second year of its biennial
licensing period (see Recommendation 1.)
Recommendation 2: The DCBPL director should take steps
to ensure license records are accurately recorded.
Audit test work identified two instances where DCBPL
staff provided insufficient support to the board. In
one instance, division staff noted the wrong license
as on probation in the online licensing database. In
another instance, a consent agreement approved by the
board had the wrong year. Both instances were due to
administrative error by DCBPL staff.
Recommendation 3: The legislature should consider
alternate forms of regulating the midwifery
profession.
In order to address the deficit, licensing fees would
need to be significantly increased. Fees are expected
to be upwards of $4,000 for CDMs and $2,000 for
apprentice permits by the year 2020. The high
licensing fees could limit entry into the profession.
Ms. Curtis noted the department's response on Page 21 of
the audit. She shared that the department concurred with
recommendation's 1 and 2, but did not respond to
recommendation 3, as it was not directed to the department.
However, the department acknowledged that merging the board
could result in economies of scale. She spoke to the
board's response on Page 23 of the audit. The board
concurred with recommendations 1 and 2, but strongly
disagreed with recommendation 3:
Midwifery is a unique profession that any other board
would have difficulty regulation. The suggestion of
the Board of Nursing and the Physician's Board would
be problematic on several different levels. These two
boards have historically been competitive to the CDM
profession and often oppose legislation that we have
introduced to improve the standard of care and safety
of our clients. I am concerned that we would be
regulated out of practice or to a very minimal
practice, which is what the majority of the Alaskan
population clearly does not want. Also, I believe that
the doctor's and nurse's board would not want CDMs
sitting on their Board (which we would need to do if
we were to have proper representation) and having a
voice in decisions regarding their regulations and
practices.
2:57:27 PM
Representative Wilson asked who decided which cases
warranted investigation.
Ms. Curtis responded that the division had an investigative
section that had the statutory responsibility to conduct
investigations. The board was removed from, but eventually
weighed in on, the decision.
Representative Wilson asked whether unlicensed midwives
were charged with reimbursing the board for any fines.
Ms. Curtis deferred to DCCED. She offered that there were
no dedication of fines to any particular board; any levied
fines went to the General Fund.
Representative Wilson thought that there should be a
mechanism that could protect midwives from having their
licensing fees increased because of acts of unlicensed
midwives.
Ms. Curtis asked whether Representative Wilson was asking
if the board's deficit was the result of investigations.
Representative Wilson replied in the affirmative.
Ms. Curtis stated that the schedule on Page 6 of the audit
highlighted the board's expenditures. She said that
historically the problem with deficit had stemmed from
investigations; however, not only unlicensed activity
generated investigations.
3:00:20 PM
Representative Wilson surmised that the board would have to
pay the fee even though the fee was already in the general
fund.
Ms. Curtis explained that the cost of regulating was borne
by licensees, and any fees that were collected went into
the general fund.
Representative Wilson asserted that any money collected,
based on an investigation, had to be paid by the board,
even if it went into the general fund.
Ms. Curtis answered that the revenues from the fines did
not offset the costs of investigations.
Representative Wilson felt that the fees should offset the
costs of investigations.
3:02:04 PM
Representative Kawasaki asked why there had been an
extension of 2 years had been recommended, rather than a 4
year, 6 year, or 8 year.
Ms. Curtis replied she had never seen a one-year extension.
They had received recommendations for termination. She
spoke to boards with significant deficit such as the Board
of Game with a $1 million deficit, which resulted in a
short recommendation for extension. She explained that
problems that posed a public safety risk could prompt a
short recommendation. She said that it was very unusual to
have 2 year recommendation for extension. She added that
the number and nature of the findings would be weighed when
considering the length of extension; housekeeping issues
would not impact the extension recommendation, but deficits
would reduce the number of years recommended.
Representative Kawasaki wondered whether the extension were
always even numbered years.
Ms. Curtis answered that extensions seemed to be made in
even numbers. She said that workload was a factor in
determining sunset timelines.
3:04:11 PM
Representative Kawasaki preferred longer sunset timelines
because it meant less work for auditors. He asked about the
long sheet (copy on file) in the packet, created by the
division and the board, related to ways in which the
deficit could be erased.
Ms. Curtis replied that she had not seen the document.
Representative Pruitt thought that the deficit was the crux
of the problem. He spoke of the differing views of all of
the involved parties. He wondered whether the board had
offered a proposal of how to eliminate the debt. He asked
when the legislature should expect action to be taken on
the third recommendation.
Ms. Curtis clarified that the intent of recommendation 3
had been to acknowledge that direct entry midwives had a
board that was serving the public's interest, and should
exist. She said that the division's concern was that the
number of midwives would decline because of barrier to
entry due to increased licensing fees. She stressed that
the recommendation had not been made to address the
deficit, but to ensure that the public's interest was being
served by the board. She felt that it was a management
decision as to how the deficit would be addressed, but the
increase in licensing fees had seemed extreme.
3:09:50 PM
Representative Pruitt requested to hear from the
department.
Vice-Chair Gara asked whether Ms. Curtis could speak to the
investigation costs for violations that had proved
unfounded.
Ms. Curtis answered in the negative.
Vice-Chair Gara worried about people being put out of
business for minor violations. He noted that often
traditional medical professionals and midwives disagreed
about each other's practices, and wondered if having them
share a board would be practical.
3:11:46 PM
Representative Wilson asked about the cost of the most
recent audit and how it was paid for.
Ms. Curtis thought the audit had taken about 450 hours
which was approximately $38,000. She said that a follow up
review had been conducted by the request of Legislative
Budget and Audit to look into the public safety risk of not
following up on the investigations.
Representative Wilson asked who paid for the audit.
Ms. Curtis answered the audit was part of the Division of
Audit's operating budget that was approved annually, and
was not paid for by the boards that were audited.
Representative Wilson thought the boards had to pay the
costs.
Ms. Curtis answered that the statute that dictated that the
boards would pay the operational costs was the operational
cost of regulation the board and not the legislative
oversight process of sunsets.
3:14:00 PM
Representative Thompson spoke to the investigation costs.
He lamented that investigators assigned to certain boards
may not understand certain aspects to the work the boards
oversee, adding to the investigating costs.
Ms. Curtis said that she did not know. She stated that
there were some boards that had dedicated investigators,
such as the medical board.
3:15:30 PM
JANEY HOVENDEN, DIRECTOR, DIVISION OF CORPORATIONS,
BUSINESS AND PROFESSIONAL LICENSING, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, introduced
herself.
Representative Pruitt asked about the denial of the board
to carry a surplus budget forward.
Ms. Hovenden answered that there had been concerns by the
Department of Law about incorporating the $2000 surcharge,
instead the $2000 had been incorporated into the licensing
fee, raising the fee to the current level of $3,800. She
said that she would not be able to speak to changes that
were made to the fees before she took her position.
Representative Pruitt asked how long it would take the
board to get to a place where the fees would cover the
debt.
Ms. Hovenden referred to a handout with an Excel
spreadsheet chart titled "Board of Direct-Entry Midwives"
dated September 7, 2016 (copy on file), which offered a fee
analysis. She noted where the board had recommended a one-
time surcharge of $2000, over to biennium. Due to the
concerns of the Department of Law, the fee of $3,800 was
recommended. She said that the fee increase would be
stretched out to 2021.
Representative Pruitt spoke to the challenge of the
continued cost of investigating unlicensed individuals. He
asked about the department's suggestion to make sure it did
not penalize individuals working within the proper confines
of the law. He felt that individuals who were properly
licensed should not be penalized.
3:20:57 PM
Ms. Hovenden answered that the department did not breakout
the information in investigations between licensed and
unlicensed individuals.
Representative Pruitt asked if a breakdown could be done.
Ms. Hovenden answered that it would not be that difficult,
but the department did not currently look at the
information down to that level.
Representative Pruitt recalled that the issue had been
brought up a couple of years earlier. He believed the issue
had been brought up by midwives a couple of years earlier.
3:22:58 PM
Ms. Koeneman relayed that civil penalties for licensed
midwives were set under Alaska Statute 08.08.075. She said
that there was another statute for unlicensed activity, AS
08.01.082, and did not delineate any civil penalty or any
monetary amount. She said that it would be a policy call by
the committee to open the unlicensed activity statutes to
modify the language. She noted there was another bill in
the finance committee that would address investigative
costs.
Representative Pruitt understood that currently there was
no penalty for being unlicensed.
Ms. Koeneman answered that under Title 8 there were no
fines other than the $5,000 civil penalty. She added that
criminal charges could be applied under Title 11.
Representative Pruitt asked how to discourage people from
practicing without a license.
Ms. Koeneman thought that the answer could be found by
reading the statute.
Representative Kawasaki referred to the fee proposals
intended to erase the deficit by 2021. He wondered whether
the timeline had been spurred by the audit.
3:25:38 PM
Ms. Hovenden answered in the affirmative. She stated that
the board had been active and engaged in increasing fees
for that particular reason.
Representative Kawasaki spoke to the conflicting nature of
recommendations one and three. He was supportive of
extending the board for a longer time period and did not
believe that the deficit had to be completely erased by
2021. He agreed with recommendation 3.
Ms. Koeneman answered that the statutory authority to
collect fees did not give the legislature or the board any
additional authority to collect outside of the annual
review. She said that stretching the payment out over 3 or
4 biennium would go against the statutory intent.
Representative Kawasaki referred to the Division of Audit's
recommendation to extend the board four years, and he
wondered whether the existing deficit, plus the high fees
would be problematic.
Ms. Koeneman understood that it the board did not have the
fees paid up within 4 years, legislative audit would have
no choice but to make another recommendation stating the
board and the department needed to modify the fees on order
to eliminate the deficit.
3:28:35 PM
Co-Chair Seaton thought payment of the deficit was tied to
the four-year sunset.
Ms. Curtis responded there was no term recommended by the
Division of Audit for fixing the issue. She stated that the
law specified the cost of regulation must be covered every
time rates were set. She said that the four year extension
was made in order to understand whether the number of
midwives in the state were serving the public's interest
and had nothing to do with the fee setting process.
Representative Kawasaki noted that the step-down
calculations that the division proposed would have the
board outside of the deficit by 2021, but a drop in the
deficit over the next four year could result in a cleaner
audit.
3:30:45 PM
Ms. Curtis replied that she would revisit the issue in four
years to provide an answer.
Representative Wilson requested the cost of investigations
in the past several years. She wondered whether the
legislature could be equally at fault for the deficit.
Ms. Koeneman answered that investigative costs for FY 16
was $31,000; FY 14 and FY 15, $41,522 total; FY 12 and FY
13, $45,457; FY 10 and FY 11, $8,034. She said that the
figures did not include some of the indirect costs
associated with the department's cost allocation plan. She
agreed the department was getting in the way of the board.
She said that in FY 09, licensing costs dropped from $2088,
down to $500, and rose as the investigative costs
increased.
Representative Wilson requested why the increase in
investigative costs had jumped significantly.
3:33:59 PM
Co-Chair Foster OPENED public testimony.
JOHANNA CROSSET, CERTIFIED DIRECT-ENTRY MIDWIFE, JUNEAU,
she expressed gratitude for the current conversation. She
hoped for a solution to prevent deficit in the future. She
explained it had been a surprise to hear of the proposal
for the fee increase. She asked the committee to continue
conversing. She directed a comment to Representative Wilson
about looking into the investigative costs, penalties, and
fees going to the general fund as opposed to the board.
SUSAN TERWILLIGER, PRESIDENT, MIDWIVES ASSOCIATION,
ANCHORAGE (via teleconference), spoke in support of the
legislation. She shared that each member of the association
had endured the large hit related to the increase in
licensing. The board wanted to pay down the deficit. She
said that HB 90 would deal with investigation costs to
correct the issue over time. She shared that midwives
provided high quality care to low-risk women for less cost
and were regulated by a board that was familiar with the
nature of their work. She referred to a handout in members'
packets that detailed the cost savings that resulted from
midwife assisted births. Many women and babies were
thankful for the extension of the board.
3:38:08 PM
DEBORAH SCHNEIDER, CHAIR, BOARD OF CERTIFIED DIRECT ENTRY
MIDWIVES, ANCHORAGE (via teleconference), urged the passage
of the bill. She had been involved crafting regulations to
protect mothers and babies. She was very appreciative of
the conversation supporting the continuation of the board's
cost-effectiveness. She referred to the issue related to
investigations, and the high cost of investigations covered
in the audit, and shared that there had been several cases
that had been under investigation for 4 to 6 years,
generating enormous cost. She stressed that the midwives
were committed to paying down the debt. She believed
midwifery could be expanded in Alaska if the issues were
addressed. She expressed appreciation for the work done by
the committee.
Co-Chair Foster CLOSED public testimony.
HB 49 was HEARD and HELD in committee for further
consideration.
Co-Chair Foster discussed housekeeping.
ADJOURNMENT
3:42:10 PM
The meeting was adjourned at 3:42 p.m.