Legislature(1995 - 1996)

02/01/1995 01:05 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
               HOUSE JUDICIARY STANDING COMMITTEE                              
                        February 1, 1995                                       
                           1:05 p.m.                                           
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Brian Porter, Chairman                                         
 Representative Con Bunde                                                      
 Representative Bettye Davis                                                   
 Representative Al Vezey                                                       
 Representative Cynthia Toohey                                                 
 Representative David Finkelstein                                              
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 Representative Joe Green, Vice Chairman                                       
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 * HB 19:"An Act relating to the definition of `fault' as                    
 that term is used for the purposes of determining                             
 the liabilities of parties in civil actions,                                  
 setting limitations on civil liability, and                                   
 authorizing the award, in conformance with                                    
 applicable court rule, of attorney fees in civil                              
 actions."                                                                     
                                                                               
 HEARD AND HELD                                                             
                                                                               
 * HB 103:"An Act relating to the sale of correctional                       
 industries products and services."                                            
                                                                               
 HEARD AND HELD                                                             
                                                                               
 (* First public hearing)                                                      
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 REPRESENTATIVE GENE THERRIAULT                                                
 Alaska State Legislature                                                      
 State Capitol, Room 421                                                       
 Juneau, AK 99801-1182                                                         
 Telephone:  (907)  465-4797                                                   
 POSITION STATEMENT:  Sponsor of HB 19                                         
                                                                               
 SHELDON WINTERS, Attorney                                                     
 One Sealaska Plaza, Suite 303                                                 
 Juneau, AK 99801                                                              
 Telephone:  (907)  586-5912                                                   
 POSITION STATEMENT:  Provided information regarding HB 19                     
                                                                               
 SUSAN COX, Assistant Attorney General                                         
 Civil Division, Special Litigation Section                                    
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau, AK 99811-0300                                                         
 Telephone:  (907)  465-3603                                                   
 POSITION STATEMENT:  Provided information regarding HB 19                     
                                                                               
 ROD MOURANT, Legislative Aide to Representative Pete Kott                     
 Alaska State Legislature                                                      
 State Capitol, Room 432                                                       
 Juneau, AK 99811-1182                                                         
 Telephone:  (907)  465-3777                                                   
 POSITION STATEMENT:  Testified in favor of HB 103                             
                                                                               
 WALLY ROMAN, Correctional Industries Program Manager                          
 Department of Corrections                                                     
 P.O. Box 112000                                                               
 Juneau, AK 99811-2000                                                         
 Telephone:  (907)  465-3309                                                   
 POSITION STATEMENT:  Testified in favor of HB 103                             
                                                                               
 HERB SIMON                                                                    
 Little Nelchina Farm, Mile 135                                                
 Glenn Highway, HC03                                                           
 P.O. Box 8591                                                                 
 Palmer, AK 99645                                                              
 Telephone:  (907)  822-3059                                                   
 POSITION STATEMENT:  Testified against HB 103                                 
                                                                               
 PREVIOUS ACTION                                                               
                                                                              
 BILL:  HB  19                                                                
 SHORT TITLE: DEFINITION OF "FAULT" FOR CIVIL LIABILITY                        
 SPONSOR(S): REPRESENTATIVE(S) THERRIAULT                                      
                                                                               
 JRN-DATE     JRN-PG               ACTION                                      
 01/06/95        25    (H)   PREFILE RELEASED                                  
 01/16/95        25    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/16/95        25    (H)   JUD, FIN                                          
 01/30/95              (H)   JUD AT 01:00 PM CAPITOL 120                       
 02/01/95              (H)   JUD AT 01:00 PM CAPITOL 120                       
                                                                              
 BILL:  HB 103                                                                
 SHORT TITLE: COMPETITION W/ PVT SECTOR:CORRECTION IND.                        
 SPONSOR(S): REPRESENTATIVE(S) KOTT,Bunde                                      
                                                                               
 JRN-DATE     JRN-PG               ACTION                                      
 01/20/95       101    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/20/95       101    (H)   JUD, FIN                                          
 01/30/95              (H)   JUD AT 01:00 PM CAPITOL 120                       
 02/01/95              (H)   JUD AT 01:00 PM CAPITOL 120                       
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 95-6, SIDE A                                                             
 Number 000                                                                    
                                                                               
 The House Judiciary Standing Committee was called to order at 1:05            
 p.m. on Wednesday, February 1, 1995.  A quorum was present.                   
 CHAIRMAN BRIAN PORTER noted all members were present, with the                
 exception of Representative Green, who was on his way to                      
 Washington, D.C.  He stated the following bills would be heard:  HB           
 19, and HB 103, via teleconference.  He called Representative Gene            
 Therriault to come forward and introduce HB 19.                               
 HJUD-02/01/95                                                                 
 HB 19 - DEFINITION OF "FAULT" FOR CIVIL LIABILITIES                          
                                                                            
 REPRESENTATIVE GENE THERRIAULT, Sponsor, described HB 19 as                   
 intending to clarify a gray area of state liability law, which                
 allows defendants to argue that they are not liable for offenses              
 they have committed intentionally.  Defendants have argued that               
 because the law refers only to acts that are negligent or reckless,           
 and not specifically to acts that are intentional, it does not                
 allow for a portion of a fault to go to those who have committed              
 offenses intentionally.  In cases where more than one person                  
 contributed to the injuries, or could be sued, the law is unclear             
 as to whether or not a person who committed an offense                        
 intentionally can be held responsible for any portion of the fault.           
 In the cases that have been heard so far, the judges have found the           
 argument to be without merit.  Tightening the law would eliminate             
 the need for these costly court proceedings.                                  
                                                                               
 REPRESENTATIVE THERRIAULT said he introduced this bill after a                
 scenario that arose out of a mail bombing case.  He understood that           
 in the civil action, the mail bombers were trying to make the case            
 that because they intentionally meant to injure somebody by sending           
 the bomb, they would not be covered by this definition, and                   
 therefore no portion of the fault could be attached to their                  
 actions.  The courts have turned that argument down so far, but               
 clarifying that language would close the potential loophole that              
 somebody may be able to take advantage of in the future.  This                
 would also avoid some abuse of court time.                                    
                                                                               
 Number 075                                                                    
                                                                               
 REPRESENTATIVE AL VEZEY supported the philosophy of this change,              
 but also expressed concerns as to how it may increase insurance               
 premiums.  Insurance policies cover accidental acts, but if they              
 were to cover intentional offenses, rates would rise.                         
                                                                               
 Number 120                                                                    
                                                                               
 REPRESENTATIVE THERRIAULT noted that up to now, the courts have               
 turned down that argument.  The intentional acts are excluded by              
 the current definition of fault.  We are basically clarifying and             
 codifying what the courts have said up to this point.                         
                                                                               
 REPRESENTATIVE CON BUNDE thought that broadening the definition of            
 "fault" may affect other areas of tort reform.                                
                                                                               
 Number 150                                                                    
                                                                               
 REPRESENTATIVE THERRIAULT believed most insurance policies exclude            
 acts committed intentionally.                                                 
                                                                               
 Number 160                                                                    
                                                                               
 CHAIRMAN PORTER called both Susan Cox and Sheldon Winters forward             
 to testify and answer questions.                                              
                                                                               
 Number 185                                                                    
                                                                               
 SHELDON WINTERS, Attorney representing State Farm Insurance                   
 Company, stated their main concerns were about how the language               
 change may affect the liability aspects in our tort system.  This             
 statute does not address when you may be liable, but when you may             
 apportion liability.  The general rule is that the intentional                
 tortfeasor is always liable for all the damages.  You completely              
 ignore apportionment.  An intentional tortfeasor cannot recover, in           
 a lawsuit, for his own damages.  There is not a realistic chance of           
 the courts varying from their theme.  He felt what Representative             
 Therriault was proposing would create the ability of an intentional           
 tortfeasor to avoid some of his responsibility, when he should be             
 responsible for the whole portion.                                            
                                                                               
 Number 260                                                                    
                                                                               
 SUSAN COX, Assistant Attorney General, spoke about the problem she            
 encounters when defending the state.  A victim may choose not to              
 sue her rapist, because the accused has no money; and instead sues            
 only the property owner.  We have a problem of whether the property           
 owner is going to be stuck holding the liability for the entire               
 event, when there is the conduct, arguably intentional, of another            
 party who is not named in the lawsuit.  This problem occurs in a              
 number of scenarios.  It is not a situation where the truly                   
 culpable party is sued at all.  It arises in a situation where the            
 defendants who are sued, were allegedly negligent, want to bring              
 the most culpable party to the lawsuit, and that is the intentional           
 tortfeasor, or the arguably intentional tortfeasor.                           
                                                                               
 MS. COX continued, saying the tort reform legislation we have in              
 Alaska has attempted to deal with fault, so every defendant bears             
 only their portion of the fault; and so we have had several                   
 liabilities since March of 1989, when the most recent enactment               
 became effective.  The problem is that juries are told to apportion           
 fault among all people who are parties to the litigation, who were            
 in any way negligent, grossly negligent, or even wilfully and                 
 wantonly conducted themselves.  When you have multiple defendants,            
 the jury apportions fault among all of them to the extent of the              
 liability.  Then those defendants pay only the portion of their               
 personal fault.  They are not paying for the fault of someone else            
 who is a defendant who may have no money.  That is a policy                   
 decision that has been made in this state.  The plaintiff may walk            
 away not recovering from those who have no resources to pay a                 
 judgment against them.  We have decided to abandon the system of              
 joint and several liability where one defendant is responsible for            
 the whole group, and seeks contribution from other defendants if              
 they have any resources to chip in to the final outcome.  We have             
 a situation where plaintiffs have chosen not to go after the                  
 intentional or arguably intentional tortfeasor because that person            
 has no money.  They, instead, go only after one or more possibly              
 negligent parties, and those defendants want to bring a third party           
 into the arguably intentional act.                                            
                                                                               
 MS. COX continued, saying it has arisen in the mail bombing case              
 Representative Therriault mentioned, where in all but one of the              
 decisions, the courts have said if they are going to apportion                
 fault and make it fair, so that no defendant is paying more than              
 their fair share of fault, we have to allow the defendants who are            
 allegedly negligent to bring in the allegedly intentional actor. It           
 has been in the context where those negligent tortfeasors wanted              
 the intentional tortfeasor in the case, because they were being               
 left out.  One case where it has not happened, raises something of            
 an anomaly.  We have a ruling from one judge that involves sexual             
 abuse by uncles of a victim.  The state has been sued from failing            
 to prevent the abuse to these young victims, and the uncles who               
 committed the sexual abuse were not originally parties.  The state            
 sought to bring them in as parties, because they perpetrated the              
 act that is the subject of the lawsuit.  The judge says that                  
 arguably, they did not act intentionally to cause the resultant               
 harm.  They acted intentionally in doing the act, but did not                 
 necessarily intend the harm, so it was going to be a question for             
 the jury.  If the jury decides that the uncles committed the abuse,           
 but did not intend to hurt the girls, then they were unintentional            
 acts, in the allocation of fault.  However, if they intended the              
 harm, then they were intentional actors; and because that is not              
 included in the definition of `fault' in AS 09.17.900, that fault             
 will not be considered or apportioned by the jury.  It seems                  
 something of an anomaly.                                                      
                                                                               
 MS. COX said there is a problem in making things fair to the                  
 defendants who are brought into the litigation by the plaintiff.              
 The proposal here before you in HB 19 would do what at least                  
 several courts have implied should be done in terms of fault among            
 all parties.  Tortfeasors should not be allowed to be absolved                
 altogether from allocation of fault when under AS 09.17.080.                  
                                                                               
 Number 400                                                                    
                                                                               
 CHAIRMAN PORTER noted they intended to file a bill to address and             
 solve that problem soon.  There was a big hole in passing the                 
 elimination of joint and several liability, because we stated that            
 any party to the suit would be involved.  Immediately, those                  
 involved on one side of these kinds of issues took that to the                
 court and argued that, by definition, it is only the parties to the           
 suit; those named, as opposed to those unnamed, but still shared in           
 the responsibility.  The tort reform bill that will hopefully be              
 going through this legislature should correct that problem.                   
                                                                               
 Number 425                                                                    
                                                                               
 MS. COX did not object to the provision in this bill.  It would be            
 helpful to the attorneys defending the state because the fact is,             
 the state has the deep pocket and is the one being sued, and there            
 are circumstances in which the culpable party is not there.  It               
 does raise an awkward situation when someone is trying to decide              
 how to apportion fault between someone who has acted intentionally            
 in doing something, which is often criminal conduct, and there is             
 no question about it, versus the state for failing to prevent the             
 criminal from doing whatever it was they did.  It would be a hard             
 thing for a jury to do.  The bottom line is, if they are not there            
 at all, the existing defendants in the case would bear 100 percent            
 of it.  This is better than what we have now.  She mentioned                  
 another better way to go at this is where we included something               
 else in the existing tort reform law that spells out exactly what             
 happens when you have an intentional tortfeasor and specifies that            
 other people, allegedly negligently involved, do not have any                 
 responsibility; and if you determine that someone has acted                   
 intentionally and caused any of these damages, you go no further in           
 allocating any fault.  There are other possibilities, but                     
 certainly, as far as this bill is concerned and what it does, Ms.             
 Cox did not have any problem with it.                                         
                                                                               
 Number 460                                                                    
                                                                               
 REPRESENTATIVE VEZEY asked where the issue of double jeopardy comes           
 in, if it does.                                                               
                                                                               
 Number 470                                                                    
                                                                               
 MS. COX said it does not come in if they are sued civilly.  That is           
 not precluded by double jeopardy.  There is nothing to prevent                
 someone from suing a criminal who has victimized them.  They can              
 definitely sue an intentional tortfeasor.  The situation we are               
 confronting is a case where they choose not to because that person            
 has no money, so they have nothing to gain by suing the intentional           
 actor, and instead try to go after the resources of someone else              
 who arguably failed to prevent the intentional actor from doing               
 what they did.                                                                
                                                                               
 Number 495                                                                    
                                                                               
 REPRESENTATIVE VEZEY asked if bringing the party in who has no                
 money, would actually decrease the state or other deep pocketed               
 defendant's liability.  Would there be a hole in the award?                   
                                                                               
 Number 502                                                                    
                                                                               
 MS. COX said yes.  If the person is a party, under the tort reform            
 system, when we have gone from joint and several liability to                 
 several liability, it means that each party pays only their share.            
 A jury goes through a verdict form and says, "How much is the                 
 plaintiff responsible for whatever happened, if at all?," and for             
 each defendant, "What percentage of the harm was caused by them to            
 the plaintiff?"  The plaintiff will not recover for whatever amount           
 is awarded as to the defendant.                                               
                                                                               
 Number 525                                                                    
                                                                               
 REPRESENTATIVE DAVID FINKELSTEIN was afraid of including                      
 "intentional" in this.  There is a chance it may be interpreted as            
 removing it from the category it is in now, which is taking                   
 complete fault, in some cases.                                                
                                                                               
 Number 530                                                                    
                                                                               
 MR. WINTERS felt the issue Ms. Cox had discussed can be addressed             
 by the bill that will be filed shortly.  That is, saying if you               
 want to apportion fault, you can, even of non-parties.                        
                                                                               
 Number 540                                                                    
                                                                               
 CHAIRMAN PORTER noted the courts have impled that "intentional" is            
 in this statute.                                                              
                                                                               
 Number 545                                                                    
                                                                               
 MR. WINTERS knew of no case where they have apportioned intentional           
 conduct with negligent conduct for an allocation of fault.  It has            
 basically held that if your act was intentional, you are liable for           
 the whole ball of wax.                                                        
                                                                               
 Number 550                                                                    
                                                                               
 MS. COX clarified that.  In Benner v. Whitman, the Supreme Court            
 said in order to allocate fault among parties, they all really have           
 to be parties in the case.  Defendants who are not satisfied that             
 everyone who could be responsible is in the case, have brought in             
 any of the defendants who should be part of the litigation in order           
 to get that allocation done.  When we have tried to bring in third            
 parties to part of the case, we have had plaintiffs object, saying            
 you cannot do that because they are criminals and they have                   
 committed intentional acts, and they cannot be in this lawsuit.               
 The courts have, in a number of situations, let them be in this               
 lawsuit, even recognizing that the word intentional is not in the             
 definition of "fault" in this statute.                                        
                                                                               
 Number 575                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN felt it was unclear that we would be               
 putting "intentional" into a new category, where it would be                  
 apportioned out, versus its current category, where it is not                 
 apportioned out.  If we are doing that, do we know why we are doing           
 it?  Are we intending to change this case law conclusion that                 
 intentional acts have no sharing, that they are completely liable,            
 and if we are changing that, why?                                             
                                                                               
 Number 590                                                                    
                                                                               
 MS. COX noted that if you look at AS 09.17.080, it does refer to              
 allocation of fault among the parties, so when you look at fault,             
 it does mean if we include intentional in the definition of fault,            
 those parties that are in there, whether intentional or otherwise,            
 are going to be included in the allocations, so there will be an              
 allocation.  The people who are arguing that this party acted                 
 intentionally, will argue that, if so, they should bear 100 percent           
 of the liability, and then all the rest of the defendants in there            
 would get a zero for their allocation of fault if the jury is                 
 convinced of that.  If the jury is not convinced that they acted              
 intentionally, but only negligently, or somewhere else on the                 
 scale, they will be in for whatever percentage the jury gives them.           
 One thing that could be done would be to express in some kind of              
 legislative intent, that is not the committee's intention to change           
 the law with respect to the extent of the liability of the                    
 intentional actors.  This is to make clear that you are not trying            
 to change the common law with respect to intentional fault, only to           
 include allegedly intentionally acting parties in the litigation.             
 Another way to achieve this would be not to change the definition             
 of fault, but to create another section in the tort reform statute            
 that enables the defendant in this situation to bring allegedly               
 intentional tortfeasors into litigation and let the consequences              
 flow from that.                                                               
                                                                               
 Number 625                                                                    
                                                                               
 CHAIRMAN PORTER summed up that this bill would not do anything more           
 than make sure that someone is not excluded from consideration                
 because of an intentional act.  It would not affect case law as               
 relates to a case where there are negligent and intentional actors,           
 in a single act; that the intentional actor is going to be                    
 apportioned 100 percent of the take.                                          
                                                                               
 Number 633                                                                    
                                                                               
 MR. WINTERS felt it would, because in layman's terms, the jury                
 shall apportion all fault, and in this amendment, we are redefining           
 "fault" as "negligence, recklessness, and intentional conduct."  So           
 the jury is going to be instructed that you shall apportion                   
 negligent tortfeasor fault with intentional tortfeasor fault.                 
                                                                               
 Number 640                                                                    
                                                                               
 CHAIRMAN PORTER found it hard to believe legislation would                    
 supersede case law.  He asked Susan Cox to work on a committee                
 substitute or a letter of intent with Anne Carpeneti.  The bill               
 would be held until Monday, and then heard again.                             
 HJUD - 02/01/95                                                               
 HB 103 - COMPETITION W/PVT SECTOR:  CORRECTION IND.                         
                                                                               
 Number 685                                                                    
                                                                               
 ROD MOURANT, Aide to Representative Kott, sponsor of HB 103, stated           
 Representative Kott is a strong endorser of the correctional                  
 industries program.  Current statute allows correctional industries           
 to enter into a competitive environment with previously existing              
 private industry operations.  This legislation attempts not to                
 force the correctional industry to back out of those circumstances,           
 but merely to charge their prices competitively in those                      
 circumstance; thereby not defeating the purpose of the correctional           
 industries program, but rather protecting a circumstance where a              
 government subsidized operation at a correctional industry is                 
 competitive with the private sector.  Its investments are therefore           
 protected.  Specifically, there are letters from different meat               
 packing industries, both of whom are affected by the current                  
 circumstances described.  In a slaughterhouse/meatpacking                     
 operation, which is actually under state control, there is no                 
 requirement to charge competitive overhead and wage expenses.  They           
 are able to price their product at a considerably less than market            
 value price.  That adversely affects these companies in the private           
 sector.  In those circumstances where competition exists with the             
 private sector, this bill calls for the correctional industries'              
 workers to be paid a competitive wage for the service.  Those wages           
 would be paid over to the Commissioner of Corrections; for paying             
 both to the inmate and for deposit into the state general fund.  A            
 negative fiscal note accompanies the bill, indicating if they had             
 to charge higher prices for their services, they would lose                   
 business.                                                                     
                                                                               
 Number 750                                                                    
                                                                               
 REPRESENTATIVE CYNTHIA TOOHEY asked if the Palmer facility was the            
 only registered slaughterhouse in Alaska.                                     
                                                                               
 Number 760                                                                    
                                                                               
 MR. MOURANT thought there were two slaughterhouses, but there is no           
 competition in the slaughterhouse industry.  Therefore the                    
 slaughterhouse operation is not affected by this legislation at               
 all.  The two slaughterhouses are in two different environments.              
 One is a federally inspected slaughterhouse and the other is a                
 state licensed and inspected facility; two different categories,              
 and there is no competition within the state in that regard.                  
                                                                               
 Number 764                                                                    
                                                                               
 REPRESENTATIVE TOOHEY was confused by the letters from Mikes'                 
 Quality Meats and Indian Valley Meats, complaining about the                  
 competitiveness of the Palmer slaughterhouse.  Are we not talking             
 about apples and oranges?                                                     
                                                                               
 MR. MOURANT said there is no competition in regards to slaughter              
 operations.  The competition is within the cutting, packaging and             
 marketing of products.  The slaughterhouse provides both functions.           
                                                                               
 Number 781                                                                    
                                                                               
 REPRESENTATIVE BUNDE asked if the meat was currently on the market            
 at below market prices.                                                       
                                                                               
 Number 785                                                                    
                                                                               
 MR. MOURANT thought that the wholesale purchase price for the                 
 finished product was considerably lower than the fair market rate.            
                                                                               
 Number 795                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN asked why the existing system was not              
 working and what the negative impact was.                                     
                                                                               
 Number 800                                                                    
                                                                               
 MR. MOURANT understood that it falls through the cracks in the                
 existing statutes because it is not privately owned, and that is,             
 in fact, what the current legislation speaks to, in regard to the             
 commission not entering into competition with a privately owned               
 facility.  The facility we are dealing with is one that used to               
 have a loan through the Agricultural Revolving Loan Fund.  That               
 loan was foreclosed on in 1986.  The state now owns that Mt.                  
 McKinley operation.                                                           
                                                                               
 Number 825                                                                    
                                                                               
 REPRESENTATIVE FINKELSTEIN understood the statute to mean that                
 within the system, they are supposed to look at the impact of these           
 activities on private industry;  that private industry being other            
 folks who might want to do it.  If the correction industries is               
 involved with it, they have to make the determination that it will            
 not adversely impact other companies out there who are offering the           
 same services.  He thought there was a system in place to handle              
 these types of conflicts - a commission to make these                         
 determinations.  He was confused as to why that did not work.                 
                                                                               
 TAPE 95-6, SIDE B                                                             
 Number 000                                                                    
                                                                               
 WALLY ROMAN, Corrections Industries Program (CIP) Manager,                    
 Department of Corrections, gave a little background about CIP to              
 bring the committee up to date.  The purpose of the CIP is to                 
 reduce idleness and to employ prisoners in realistic work                     
 experiences.  Recently, they have developed two cooperative                   
 ventures with the private sector.  The part of the statute being              
 talked about is the part that allows them to do that.  During                 
 hearings four years ago, the legislature clearly defined more                 
 requirements on establishing new markets and new industries to                
 minimize the impact on the private sector.  Since 1992, CIP has               
 striven to communicate all of its activities to the public sector             
 through advanced advertising, citizens advisory groups, chamber of            
 commerce presentations, and more hearings to receive public                   
 comment.  The program has been very conservative in ensuring that             
 all proposed ventures are scheduled for discussion before the CIP             
 implements any operations.  In addition, the program has promoted             
 cooperative ventures with the private sector that would control the           
 possibility of competition.  Of the total $2,000,000 in gross                 
 sales, approximately 20 percent have been sales to nonprofit                  
 organizations, private individuals, and wholesale to the private              
 sector businesses.                                                            
                                                                               
 MR. ROMAN said the department does have several concerns with the             
 provision of HB 103.  It is anticipated that the proposed                     
 provisions may be difficult to define and implement, and in                   
 addition, there are existing statutes that already provide for the            
 defined process we are talking about, and can be addressed under              
 the Correctional Industries Commission.  We believe they should               
 evaluate and regulate the potential competition of the private                
 sector.  He said their primary concerns were that the statute                 
 establishing free venture businesses has been utilized to implement           
 several different models of correctional industries operations in             
 conjunction with the private sector.  This section of the bill was            
 put in there in 1986 to allow them to take advantage of a program             
 called the Prison Industry Enhancement Act, which was under the               
 United States Department of Justice.  It was specifically put in              
 there to design a level playing field with the private sector.                
 They have had operations under that program and are in the process            
 of implementing a couple more.  They are concerned that adjusting             
 the provisions of 43.32.017 may affect future implementations of              
 cooperative ventures with the private sector.                                 
                                                                               
 MR. ROMAN explained the difficulty that would result from trying to           
 pay comparable wages to workers, since their workers are completely           
 untrained inmates.  If actual costs reflected training hours, the             
 prevailing rate would be so much higher, they would place                     
 themselves out of the market.  Another aspect that keeps them                 
 noncompetitive with the other slaughterhouses is that they are only           
 allowed to cut and wrap one animal per customer per year.  They are           
 unlimited in the number of animals they can slaughter for wholesale           
 distribution purposes.                                                        
                                                                               
 Number 330                                                                    
                                                                               
 REPRESENTATIVE BUNDE asked if the Department of Corrections' meat             
 prices in the stores are comparable to meat purchased from private            
 meat packing operations.                                                      
                                                                               
 MR. ROMAN explained that their meats would not be found in stores,            
 because they cannot keep up with the demand for volume.  They sell            
 to private restaurants.                                                       
                                                                               
 REPRESENTATIVE TOOHEY stated she was opposed to the state competing           
 at all with the private sector, if the playing field is not totally           
 level at all perceptions.                                                     
                                                                               
 Number 415                                                                    
                                                                               
 REPRESENTATIVE VEZEY commented that we have a large societal                  
 problem in incarcerating people.  He supported anything they could            
 do to make this cost of incarceration less of a burden to society.            
 He did not know of anything constructive that could be done that              
 does not, conceivably, compete with private sector.  He felt there            
 needs to be a balance between the need to have an affordable system           
 of incarceration and maintaining a healthy private sector.  He felt           
 the commission that is in place would be a much better forum to               
 address the fairness of this type of competition than a statute or            
 legislative committee.  If there is a problem, maybe the makeup of            
 the commission should be looked at, rather than trying to codify              
 what competition is.                                                          
                                                                               
 Number 450                                                                    
                                                                               
 HERB SIMON, resident of Nelchina, explained his frustrations with             
 the complications involved in conveying his public opinion to the             
 committee members in time for the meeting.  He then explained in              
 full detail, the slaughter process and how that relates to their              
 pricing formula.  He felt the Mt. McKinley facility to be unique in           
 its services due to the equipment used, quality of inspections, and           
 capacity for processing.  Also, it is the only facility that                  
 slaughters animals grown exclusively in Alaska.  He said it would             
 be hard for the Department of Corrections' operations to compete              
 with private sector wages.  He also thought the industry should be            
 deregulated.                                                                  
                                                                               
 Number 660                                                                    
                                                                               
 CHAIRMAN PORTER felt that if the committee were to consider this              
 bill, it would be more to the point to recognize that there is                
 already a system in place to deal with these issues.  He asked the            
 bill sponsor to meet with the Department of Corrections to see if             
 the constituent concerns could be addressed through another avenue.           
                                                                               
 REPRESENTATIVE DAVIS agreed with Chairman Porter.  She felt that              
 maybe the two private industries who expressed concern, do not                
 fully understand what Mt. McKinley does, exactly.  They need to be            
 educated and included in the discussion.  She felt there was a                
 difference between what is going on at the private meat packing               
 plants and the Mt. McKinley slaughterhouse.                                   
                                                                               
 Number 711                                                                    
                                                                               
 CHAIRMAN PORTER noted the statute provides a mechanism to deal with           
 the problem they are expressing, which is unfair competition.  The            
 competition comes in the sale, not what goes into the costs; and so           
 the sale price mechanism is there.                                            
                                                                               
 REPRESENTATIVE BUNDE observed that the competition question could             
 be answered by having comparable prices placed on the finished                
 product.                                                                      
                                                                               
 Number 730                                                                    
                                                                               
 REPRESENTATIVE DAVIS asked about the pricing on products going to             
 the wholesalers.                                                              
                                                                               
 Number 735                                                                    
                                                                               
 MR. ROMAN explained that their prices are based on an agricultural            
 index and the restaurant index.                                               
                                                                               
 MR. SIMON mentioned that Alaska is known as a dumping ground for              
 the lower 48, for products they do not want; so the fresher                   
 products coming from Mt. McKinley are higher in quality.                      
                                                                               
 Number 750                                                                    
                                                                               
 REPRESENTATIVE BUNDE felt maybe Mt. McKinley's prices were too low            
 for what the product is.                                                      
                                                                               
 Number 825                                                                    
                                                                               
 CHAIRMAN PORTER asked what happens if there are no competitors when           
 starting a new business, and one pops up two years later.  Are you            
 then required to adjust, based on what that business does?                    
                                                                               
 Number 840                                                                    
                                                                               
 MR. ROMAN said that has happened, and what they did is stayed in              
 the business and tried to meet the prevailing market rate created             
 within the business.  The free venture statute allows for somebody            
 to come in and run a business inside the prison with their managers           
 completely.  It also allows them to sell to a private company at              
 wholesale, according to their specifications.  That is what they              
 are doing with Aurora Caskets right now.  It allows them to come in           
 and purchase a block of hours from the inmate work force.  It also            
 allows them to do some business with the public.  For all of those,           
 they have to go out and receive special certifications, and if it             
 is interstate commerce, they have to meet certain federal                     
 guidelines before they can do business.                                       
                                                                               
 CHAIRMAN PORTER announced the bill would be held.                             
                                                                               
 ADJOURNMENT                                                                   
                                                                               
 The House Judiciary Committee adjourned at 2:45 p.m.                          
                                                                               

Document Name Date/Time Subjects