Legislature(1995 - 1996)

01/19/1996 01:05 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               HOUSE JUDICIARY STANDING COMMITTEE                              
                        January 19, 1996                                       
                           1:05 P.M.                                           
 MEMBERS PRESENT                                                               
 Representative Brian Porter, Chairman                                         
 Representative Joe Green, Vice Chairman                                       
 Representative Con Bunde                                                      
 Representative Bettye Davis                                                   
 Representative Al Vezey                                                       
 Representative Cynthia Toohey                                                 
 Representative David Finkelstein                                              
 MEMBERS ABSENT                                                                
 All members present                                                           
 COMMITTEE CALENDAR                                                            
 HOUSE BILL NO. 379                                                            
 "An Act authorizing establishment of alternative dispute resolution           
 centers to foster the resolution of disputes between juvenile                 
 offenders and their victims."                                                 
  - MOVED CSHB 379(JUD) OUT OF COMMITTEE                                       
 HOUSE BILL NO. 308                                                            
 "An Act relating to the Uniform Probate Code, including non-probate           
 transfers, guardianships, trusts, and multiple-party accounts;                
 relating to the Uniform Simultaneous Death Act; amending Alaska               
 Rule of Probate Procedure 5; and providing for an effective date."            
  - MOVED CSHB 308(JUD) OUT OF COMMITTEE                                       
 HOUSE BILL NO. 154                                                            
 "An Act requiring the Department of Law to provide guidelines                 
 regarding unconstitutional state and municipal takings of private             
 real property; relating to the taxation of private real property              
 taken unconstitutionally by state or municipal action; establishing           
 a time limit for bringing an action for an unconstitutional state             
 or municipal taking of private real property; and providing for an            
 effective date."                                                              
  - HEARD AND HELD                                                             
 PREVIOUS ACTION                                                               
 BILL:  HB 379                                                               
 SPONSOR(S): REPRESENTATIVE(S) PORTER, Green, Kelly                            
 JRN-DATE     JRN-PG             ACTION                                        
 12/29/95      2365    (H)   PREFILE RELEASED                                  
 01/08/96      2365    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/08/96      2365    (H)   JUDICIARY, FINANCE                                
 01/17/96              (H)   JUD AT 01:00 PM CAPITOL 120                       
 01/17/96              (H)   MINUTE(JUD)                                       
 01/19/96              (H)   JUD AT 01:00 PM CAPITOL 120                       
 BILL:  HB 308                                                               
 SHORT TITLE: UNIFORM PROBATE CODE REVISIONS                                   
 SPONSOR(S): REPRESENTATIVE(S) PARNELL                                         
 JRN-DATE     JRN-PG             ACTION                                        
 04/13/95      1318    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 04/13/95      1318    (H)   JUDICIARY                                         
 10/16/95              (H)   JUD AT 09:00 AM JUNEAU LIO                        
 01/19/96              (H)   JUD AT 01:00 PM CAPITOL 120                       
 BILL:  HB 154                                                               
 SPONSOR(S): REPRESENTATIVE(S) KOHRING, Rokeberg, Kott, Kelly,                 
 Vezey, Martin, Barnes Ogan, G.Davis, James, Mulder                            
 JRN-DATE     JRN-PG             ACTION                                        
 02/03/95       237    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/03/95       237    (H)   CRA, JUD, FIN                                     
 02/16/95              (H)   CRA AT  1:00 PM CAPITOL 124                       
 02/16/95              (H)   MINUTE(CRA)                                       
 02/21/95              (H)   CRA AT  1:00 PM CAPITOL 124                       
 02/21/95              (H)   MINUTE(CRA)                                       
 03/01/95       550    (H)   COSPONSOR(S): ROKEBERG                            
 03/09/95              (H)   CRA AT  1:00 PM CAPITOL 124                       
 03/09/95              (H)   MINUTE(CRA)                                       
 03/16/95              (H)   CRA AT  1:00 PM CAPITOL 124                       
 03/16/95              (H)   MINUTE(CRA)                                       
 03/24/95       919    (H)   COSPONSOR(S): KOTT                                
 03/25/95              (H)   CRA AT  1:00 PM CAPITOL 124                       
 03/25/95              (H)   MINUTE(CRA)                                       
 04/20/95              (H)   CRA AT  1:00 PM CAPITOL 124                       
 04/20/95              (H)   MINUTE(CRA)                                       
 04/21/95      1421    (H)   CRA RPT  CS(CRA) NT 1DP 1DNP 2NR 1AM              
 04/21/95      1421    (H)   DP: VEZEY                                         
 04/21/95      1422    (H)   DNP: ELTON                                        
 04/21/95      1422    (H)   NR: AUSTERMAN, IVAN                               
 04/21/95      1422    (H)   AM: KOTT                                          
 04/21/95      1422    (H)   INDETERMINATE FISCAL NOTE (LAW)                   
 04/21/95      1422    (H)   2 FISCAL NOTES (DCRA, DNR)                        
 11/21/95              (H)   JUD AT 10:00 AM JUNEAU LIO                        
 01/08/96      2382    (H)   COSPONSOR(S): KELLY, VEZEY, MARTIN                
 01/09/96      2396    (H)   COSPONSOR(S): BARNES                              
 01/10/96      2404    (H)   COSPONSOR(S): OGAN, G.DAVIS                       
 01/11/96      2418    (H)   COSPONSOR(S): JAMES, MULDER                       
 01/19/96              (H)   JUD AT  1:00 PM CAPITOL 120                       
 01/19/96              (H)   MINUTE(JUD)                                       
 WITNESS REGISTER                                                              
 BOB MANLY, Esq.                                                               
 324 East Cook                                                                 
 Anchorage, Alaska  99501                                                      
 Telephone:  (907) 263-8251                                                    
 POSITION STATEMENT:  Testified on HB 308.                                     
 BRUCE MOORE, Broker; and                                                      
    Second Vice President of the State of                                      
    Alaska Association of Life Underwriters                                    
 2242 Arcadia                                                                  
 Anchorage, Alaska  99517                                                      
 Telephone:  (907) 279-9952                                                    
 POSITION STATEMENT:  Testified on HB 308.                                     
 PETER BRAUTIGAN, Esq.                                                         
 2170 Belmont                                                                  
 Anchorage, Alaska  99517                                                      
 Telephone:  (907) 276-1592                                                    
 POSITION STATEMENT:  Testified on HB 308.                                     
 NANCY WALLACE                                                                 
 New York Life Insurance                                                       
 51 Madison Avenue, Room 910                                                   
 New York City, NY  10010                                                      
 Telephone:  (212) 576-4473                                                    
 POSITION STATEMENT:  Opposed HB 308.                                          
 RICHARD V. WELLMAN, Executive Director                                        
 Editorial Board                                                               
 Uniform Probate Code                                                          
 Athens, Georgia  (ZIP)                                                        
 Telephone:  (706) 549-1718                                                    
 POSITION STATEMENT:  Testified on HB 308.                                     
 L.S. (JERRY) KURTZ, JR., Esq.                                                 
 Alaska Commissioner                                                           
   National Conference of Commissioners                                        
   on Uniform State Laws                                                       
 1050 Beech Lane                                                               
 Anchorage, Alaska  99501                                                      
 Telephone:  (907) 258-6051                                                    
 POSITION STATEMENT:  Testified on HB 308                                      
 TODD THACKER, Vice President                                                  
    Governmental Affairs                                                       
 Prudential Insurance Companies of America                                     
 P.O. Box 9220                                                                 
 Van Nuyes, California  91409                                                  
 Telephone:  (916) 447-8229                                                    
 POSITION STATEMENT:  Opposed HB 308                                           
 DAVID LIFER, Counsel                                                          
 American Counsel of Life Insurance                                            
 1001 Pennsylvania Avenue, N.W.                                                
 WASHINGTON, D.C.  20004                                                       
 Telephone:  (202) 624-2017                                                    
 POSITION STATEMENT:  Opposed HB 308                                           
 DEBORAH RANDALL, Esq.                                                         
   Alaska Bar Association                                                      
   Probate & Estate Planning                                                   
 8601 Pioneer Drive                                                            
 Anchorage, Alaska  99504                                                      
 Telephone:  (907) 561-4420                                                    
 POSITION STATEMENT:  Testified on HB 308                                      
 ART PETERSON, Esq.                                                            
 Alaska Uniform Law Commissioner                                               
    National Conference of Commissioners                                       
    on Uniform State Laws                                                      
 Dillon & Findley, P.C.                                                        
 350 North Franklin Street                                                     
 Juneau, Alaska  99801                                                         
 (907) 586-4000                                                                
 POSITION STATEMENT:  Testified on HB 308                                      
 REPRESENTATIVE VIC KOHRING                                                    
 Alaska State Legislature                                                      
 Capitol Building, Room 428                                                    
 Juneau, Alaska  99801-1182                                                    
 Telephone:  (907) 465-2186                                                    
 POSITION STATEMENT:  Sponsor of HB 154                                        
 CRAIG TILLERY                                                                 
 Assistant Attorney General                                                    
 Department of Law                                                             
 1031 W 4th Avenue, Suite 200                                                  
 Anchorage, Alaska  99501-1994                                                 
 Telephone:  (907) 269-5100                                                    
 POSITION STATEMENT:  Testified on HB 154                                      
 ACTION NARRATIVE                                                              
 TAPE 96-3, SIDE A                                                             
 Number 000                                                                    
 The House Judiciary Standing Committee was called to order at 1:05            
 p.m.  Members present were Chairman Porter, Representatives B.                
 Davis, Vezey, Green, Bunde, and Toohey.  Representative Finkelstein           
 was absent.                                                                   
 HB 379 - VICTIM/JUVENILE OFFENDER MEDIATION                               
 The first order of business to come before the House Judiciary                
 Committee was HB 379.                                                         
 CHAIRMAN BRIAN PORTER recognized the arrival of Representative                
 David Finkelstein.                                                            
 CHAIRMAN PORTER recalled the dilemma in the confidentiality                   
 mediation process and reporting results to various agencies such as           
 the Division of Family and Youth Services (DFYS).  He referred the            
 committee to CS, version "k", page 5, number 7 which read, "For               
 communicating to the agency making the referral under this act or             
 the court making the referral under the act as appropriate the                
 following:  (A)  notice that the minor and victim have been unable            
 to enter into a written agreement....".  He continued that (B)                
 addresses notice that the minor and victim have entered into a                
 written agreement; (C) speaks to notice that the minor has failed             
 to perform the obligations; and (D) is notice that it has been                
 successfully completed.  That is the dispositional information that           
 DFYS was requesting.  He stated DFYS was satisfied with the CS.               
 Number 259                                                                    
 REPRESENTATIVE JOE GREEN moved that version "k" of CSHB 379, dated            
 1/18/96 be adopted as the working document.  There being no                   
 objection, it was so ordered.                                                 
 REPRESENTATIVE GREEN made a motion that CSHB 379(JUD) move from               
 committee.  Hearing no objection, CSHB 379(JUD) was moved out of              
 the House Judiciary Committee with the attached fiscal note and               
 individual recommendations.                                                   
 HB 308 - UNIFORM PROBATE CODE REVISIONS                                     
 Number 312                                                                    
 The next order of business to come before the House Judiciary                 
 Committee was HB 308.                                                         
 CHAIRMAN PORTER said HB 308 was discussed during the interim with             
 another bill.  Chairman Porter recognized Representative Sean                 
 Number 453                                                                    
 REPRESENTATIVE SEAN PARNELL introduced Bob Manly via teleconference           
 in Anchorage to present information on HB 308.                                
 Number 579                                                                    
 CHAIRMAN PORTER announced there were no attorneys by profession on            
 the House Judiciary Committee.  Therefore, he asked Mr. Manly to              
 clarify terms such as "augmented estates."                                    
 Number 610                                                                    
 BOB MANLY said Alaska has had the Uniform Probate Code since about            
 1976.  Alaska adopted the 1969 version of the Uniform Act.  He                
 pointed out the legislation before the committee was the first                
 major update to the Probate Code.  Mostly, it decodifies (indisc.)            
 the Probate Code.  There are some policy changes.                             
 MR. MANLY explained the Uniform Law Commissioners promulgate                  
 uniform laws, and every one of those uniform laws has policy                  
 modifications.  He thought it was important for the legislature in            
 each state to look at those policy modifications.  (Indisc.) has              
 been endorsed by the American Association of Retired Persons,                 
 specifically addressing the inclusion of life insurance.  Other               
 groups involved with this legislation are, the American Bar                   
 Association, the American College of Trusts and Estate Council;               
 basically those groups involved with and concerned with the field.            
 An area of dispute arises as to whether or not life insurance                 
 should be included in what is known as the spouses's elective share           
 or the augmented estate.  Mr. Manly commented that since the middle           
 ages, governing bodies have recognized that a person shouldn't be             
 able to totally disinherit a spouse.  The public policy attitude is           
 either  divorce your spouse and sell off while you're alive, but a            
 person can't just die and leave a surviving spouse (indisc.).                 
 Number 730                                                                    
 MR. MANLY explained the current law in Alaska provides that a                 
 surviving spouse must get at least one-third of the augmented                 
 estate.  In short form, the augmented estate is everything you own            
 and everything you control, including things governed by your will,           
 joint bank accounts, IRAs, et cetera.  He said one thing the                  
 augmented estate doesn't include under current Alaska law, is life            
 insurance which the holder can designate someone other than their             
 spouse as the beneficiary.                                                    
 MR. MANLY further explained that life insurance to the surviving              
 spouse is included in the calculation of the augmented estate.  But           
 life insurance to a third party is not.  When the Uniform Law                 
 Commissioners passed the current version of the Uniform Probate               
 Code used in Alaska, they specifically addressed that issue, and              
 did not include it because in their opinion it is not very often              
 that people try to disinherit their spouse by buying life insurance           
 and naming someone else as beneficiary.  But, the natural outgrowth           
 to that is to set up a barrier to disinherit your spouse by leaving           
 a loophole.  Anyone who wants to disinherit their spouse is                   
 inclined to gravitate toward that loophole.                                   
 MR. MANLY stated the issue before the legislature now is whether or           
 not this loophole be left open.  He said he has discussed this                
 issue with members of the insurance industry and there have been              
 some questions and concerns raised.  He thought these could be                
 rectified by proper drafting.  He used banks as an example.  How do           
 you protect the interest of the bank who makes a client buy a life            
 insurance policy.  To put it simply, the bank either takes over               
 ownership of the policy or the bank establishes a security interest           
 in the proceeds.  Mr. Manly said he has the greatest respect for              
 banks and for their ability to adjust their form to make sure they            
 are adequately protected.  He didn't think the legislature needed             
 to worry about those kinds of concerns.                                       
 Number 968                                                                    
 MR. MANLY added there is now a uniform 120-hour survival                      
 requirement to determine a beneficiary.  Mr. Manly said right now,            
 if he had a joint bank account with his wife or a life insurance              
 policy designating his wife as the beneficiary, if she survived him           
 by a tenth of a mili-second, she would take that property.  The new           
 law imposes a 120-hour requirement.  This falls under a near-                 
 simultaneous death situation.                                                 
 MR. MANLY gave an illustration of two people, husband and wife,               
 with children on both sides of their own, but no shared children.             
 There is a plane crash.  Who survives who?  Did the husband die               
 first of impact injuries and the wife died subsequently of bleeding           
 to death or vice a versa?  Why should we care?   Because these                
 people owned a house on the hill worth a half million dollars and             
 a $100,000 life insurance policy.  If the wife died first, then it            
 all goes to the husband's kids of his prior marriage.  If the                 
 husband died first, it all goes to the wife's family by a prior               
 relationship.  He explained this legislation eliminates those near-           
 simultaneous death calls; you have to survive 120 hours to take               
 under a life insurance policy unless the person who bought the life           
 insurance policy does otherwise.  A person is certainly free to               
 change those rules in anything they write down on the beneficiary             
 MR. MANLY outlined another way life insurance has changed under the           
 concept of anti-lapse, which he stated was most easily illustrated            
 by an example.  A father had a life insurance policy and he named             
 his three children as beneficiaries.  One of those children died              
 before the father died, but the child that died left a couple of              
 children of his own.  Currently under Alaska law, unless the life             
 insurance policy has a beneficiary designation that says otherwise,           
 the two surviving kids take and the grandchildren of the pre-                 
 deceased child get nothing.  The new law would change the default             
 rule; it would change the rule applicable if nobody says otherwise            
 and would instead send the deceased child's share to the deceased             
 child's children.  It wouldn't go to the spouse, just to the actual           
 dependents.  Mr. Manly said he didn't think there was any                     
 legitimate justification, at this point, for excluding life                   
 insurance from the application of any of these provisions.  He said           
 he was focusing on life insurance because that seemed to be the hot           
 topic at the moment.                                                          
 Number 1147                                                                   
   REPRESENTATIVE AL VEZEY questioned why it took 93 pages of statutes         
 to accomplish this.                                                           
 Number 1169                                                                   
 MR. MANLY responded it was due to the requirements of the Internal            
 Revenue Service (IRS), families fighting after a death, and to                
 avoid litigation.                                                             
 Number 1196                                                                   
 REPRESENTATIVE VEZEY asked if there really were 93 pages of changes           
 in existing probate statutes.                                                 
 MR. MANLY said a lot of it was simply renumbering of existing code            
 Number 1210                                                                   
 REPRESENTATIVE VEZEY said it was a voluminous work and he had no              
 intention of reading it.                                                      
 Number 1210                                                                   
 REPRESENTATIVE JOE GREEN asked if a person had a large life                   
 insurance policy, stocks and a house on the hill, would the spouse            
 get one-third of the total assets or one-third of the individual              
 Number 1242                                                                   
 MR. MANLY said the spouse would get the value of the total assets             
 unless it was specified otherwise in a will.  However, if a will              
 specified less than one-third, the spouse would have the right to             
 fight for the remaining excluded value.                                       
 Number 1279                                                                   
 REPRESENTATIVE CYNTHIA TOOHEY asked if wills, trusts and annuities            
 were grandfathered in.                                                        
 Number 1300                                                                   
 MR. MANLY responded there was no grandfathering in unless a person            
 dies before the effective date of the act (indisc.) the 120 hour              
 survival requirement.  For example, a joint bank account set up               
 before the effective date of the act for somebody who died after              
 the effective date of the act, would still be subject the new 120             
 hour survival requirement.                                                    
 Number 1334                                                                   
 REPRESENTATIVE TOOHEY asked if life insurance was lumped into the             
 augmented estate, did it become subject to federal taxes.                     
 Number 1350                                                                   
 MR. MANLY replied no, it would not change it a bit.  He stated that           
 in fact, it might actually reduce the overall tax burden if the               
 wife were getting more, because of the unlimited marital deduction.           
 It certainly would not increase the tax, and might decrease it.               
 Number 1375                                                                   
 CHAIRMAN PORTER asked if there were a representative of the                   
 American Council of Life Insurance who could testify.                         
 Number 1395                                                                   
 BRUCE MOORE, Broker, and Second Vice President of the State of                
 Alaska Association of Life Underwriters, testified via                        
 teleconference from Anchorage.  He noted that he was not a member             
 of the American Council of Life Insurance.  He said he had some               
 concerns and questions, some of which Mr. Manly had addressed.                
 However, he said, there were other issues of concern.  He explained           
 that the purchase of life insurance was a result of a plan that an            
 individual put into play.  The beneficiary designation allowed the            
 individual to direct large sums of money to those designated.                 
 Removing the life insurance exemption in an augmented estate raised           
 a number of issues.  For example, there could be an unintentional             
 deletion of a spouse, who still had care of the children, as                  
 beneficiary upon divorce.                                                     
 MR. MOORE cited a further concern that although no one wanted to              
 disinherit their spouse, by including life insurance, the spouse              
 was entitled to one-third of a person's estate.  He added that in             
 many cases, life insurance was the biggest asset in an estate, no             
 matter how long a couple had been married.  A spouse superseded any           
 type of beneficiary designation made in the past.  Mr. Moore asked            
 the committee to give his organization more time to address these             
 Number 1597                                                                   
 REPRESENTATIVE DAVID FINKELSTEIN questioned Mr. Moore's emphasis.             
 Representative Finkelstein expressed that other assets were often             
 the largest part of a person's estate, including retirement funds.            
 He said the only argument he had heard was that in cases of divorce           
 many participants forgot to change their beneficiary designations.            
 However, he said, the potential to forget to make changes existed             
 with retirement and other assets as well.  He asked why this one              
 asset should be exempted from the rules for other assets.                     
 Number 1687                                                                   
 MR. MOORE replied that life insurance was a unique asset.  The                
 other assets Representative Finkelstein had mentioned, such as                
 retirement funds, accumulated during a marriage should be                     
 protected.  Life insurance however, could be changed or purchased             
 at any time.                                                                  
 Number 1729                                                                   
 REPRESENTATIVE FINKELSTEIN said he understood Mr. Moore's argument            
 was that it accumulated during a lifetime and was directed as a               
 person pleased.  Representative Finkelstein asserted that was true            
 for retirement funds as well, and he could not see the difference.            
 Number 1744                                                                   
 CHAIRMAN PORTER commented that he believed there was federal case             
 law involving distribution of retirement income to spouses in the             
 case of divorce.                                                              
 Number 1757                                                                   
 REPRESENTATIVE FINKELSTEIN replied that he understood the money was           
 paid into a pool based on the one-third determination.  If the                
 criteria was met, it did not matter where the money came from.  He            
 explained he had chosen retirement as an example, but that other              
 investments used to achieve retirement would have the same factors            
 described by Mr. Moore.  They accumulated over time; they could be            
 invested in over time or all at once; and there was a beneficiary             
 designated.  He said he still did not see the difference.                     
 Number 1790                                                                   
 REPRESENTATIVE GREEN offered an example for clarification, citing             
 a hypothetical divorce scenario where the wife got a settlement               
 which she gambled away.  The husband died, leaving the wife as sole           
 custodian of their children, and perhaps of other children as well.           
 He asked how the settlement would be divided, as she was no longer            
 the spouse.                                                                   
 Number 1842                                                                   
 PETER BRAUTIGAN, Attorney, asked if a will existed.  He asserted              
 that would determine the outcome.                                             
 Number 1865                                                                   
 MR. MANLY said a new spouse was entitled to a minimum of one-third            
 of the estate, to the exclusion of the children of the former                 
 marriage.  Beyond that one-third, the estate could be distributed             
 any way the man desired.                                                      
 Number 1884                                                                   
 REPRESENTATIVE GREEN modified his cited example to include a                  
 $100,000 life insurance policy, only $20,000 of other collateral,             
 and no second wife.                                                           
 Number 1909                                                                   
 MR. MANLY clarified that only a current wife, not a former wife,              
 had the right to claim the one-third share.  He added that a person           
 could disinherit his children or ex-spouse freely.                            
 Number 1939                                                                   
 NANCY WALLACE, NEW YORK LIFE INSURANCE, testified via                         
 teleconference from New York City.  The following text is a                   
 verbatim version of Ms. Wallace's written testimony.                          
 "New York Life opposed House Bill 308's adoption of this amendment            
 to the UPC because it reflects a complete reversal of the Code's              
 original philosophy of the relationship between non-testamentary              
 devises and the augmented estate and more specifically because it             
 fails to recognize the role of insurance in helping individuals to            
 address valid estate planning concern which the insured is best               
 suited to evaluate.                                                           
 "Including insurance in the augmented estate undermines the very              
 nature of the business of insurance which is to provide insurers              
 with a means to contract specific insurance benefits to designated            
 individuals.  For many, insurance provides a much needed tool to              
 address specific individual life situations which the insured is in           
 the best position to evaluate.  A number of specific scenarios our            
 agents have encountered may elucidate this concern.  Insurers                 
 frequently purchase policies for a number of reasons which Bill 308           
 would undermine.  For example:                                                
 "an insured might purchase a policy to ensure funding for his                 
 children's education, housing or welfare which is particularly                
 a concern for children from previous marriages;                               
 "or an insured might purchase a policy to secure payment for                  
 the care of his aging parents or a handicapped child, who will                
 need to be cared for for the rest of their natural lives;                     
 "an insured might also purchase insurance to provide liquidity                
 for an estate so probate costs, estate taxes, etc. can be paid                
 for from the proceeds of the policy rather than from a forced                 
 liquidation of real estate at an inopportune time such as when                
 real estate values are low, or in situations where the family                 
 does not want to sell family property, such as in family                      
 "These examples demonstrate just a few of the many reasons an                 
 insured might consider in planning his estate.  These situations              
 are unique to the individual.  Consequently, that individual is the           
 person most capable of assessing and providing for those needs.               
 Insurance is an invaluable tool for such individuals to prepare to            
 address their unique needs.  The individual's wishes in providing             
 this protection to their family and loved ones should not be                  
 overridden by a probate court's application of a uniform                      
 distribution of part of those proceeds.  Those who advocate                   
 inclusion of insurance proceeds in the augmented estate contend               
 that this bill is necessary to protect surviving spouses.  Their              
 concern is that unscrupulous individuals will purchase insurance as           
 a means of defrauding their spouses of their elective share in an             
 estate.  However, these advocates have never advanced any evidence            
 that insurers are actually using insurance in this manner.                    
 "Given that there is no real world harm that this change would                
 address, and given the plethora of legitimate estate planning                 
 concerns that individuals currently use insurance to address, the             
 most prudent policy decision seems to be to leave the choice of an            
 insurance policy's beneficiary up to the person most capable of               
 assessing the insured's specific family needs--that person is the             
 insured.  For these reasons I hope you will oppose this amendment             
 to the UPC."                                                                  
 CHAIRMAN PORTER informed Ms. Wallace that she, or anyone else on              
 teleconference, could send written testimony by facsimile at (907)            
 Number 2133                                                                   
 REPRESENTATIVE FINKELSTEIN asked whether in cases where there was             
 a dependent or family member needing long-term care, with one                 
 spouse attempting to direct all the life insurance there, why they            
 could not just get the consent of the other spouse ahead of time.             
 Number 2158                                                                   
 MS. WALLACE responded that in some cases involving children of                
 prior marriages, there could be a difficulty.  There might be                 
 different opinions as to the actual amounts required to support a             
 child with special needs.  However, that should not preclude an               
 individual from purchasing future assets for a child, which should            
 not diminish assets available to the spouse.                                  
 Number 2185                                                                   
 REPRESENTATIVE FINKELSTEIN replied that of course that would                  
 diminish assets available to the spouse.  Policies cost money, and            
 some of them require regular payout over a long period of time.  He           
 asked how Ms. Wallace could say it did not diminish the holdings.             
 MS. WALLACE responded that while it may diminish the holdings, it             
 did not diminish the extent of the assets in the longer term.  For            
 $1 million in life insurance, one did not pay $1 million in                   
 premiums.  It was not removing $1 million from the spouse's estate.           
 Number 2217                                                                   
 RICHARD V. WELLMAN, Executive Director, Editorial Board, Uniform              
 Probate Code, testified via teleconference from Athens, Georgia.              
 He said the board was of the view, shared by Representative                   
 Finkelstein, that insurance was an investment.  He said there was             
 no just economic reason for singling out life insurance and making            
 it a way to avoid marital property obligations to a spouse, leaving           
 that spouse without adequate participation in family economics.               
 He said the insurance industry is seeking an exemption with the               
 claim that there is something unique about life insurance.  Mr.               
 Wellman asserted there was nothing unique about life insurance; it            
 was another form of investment or death benefit contract.  He said            
 they find no reason for an exemption; they feared that if there was           
 an exemption, it would merely create a new marketing device for               
 life insurance to make it attractive to those rare people who are             
 determined to stay married but nonetheless defeat their spouses'              
 expectations of sharing in the estate.  He said that needs to                 
 support dependents are met by one form of investment or another;              
 life insurance should not be distinguished as unique.                         
 Number 2387                                                                   
 REPRESENTATIVE VEZEY asked Mr. Wellman if there was anything in HB            
 308 precluding a spouse from waiving their rights.                            
 MR. WELLMAN replied there was nothing whatsoever.  He added there             
 was no probate court order addressed, but rather an option to the             
 surviving spouse of obtaining the guaranteed minimum.                         
 Number 2417                                                                   
 REPRESENTATIVE VEZEY asked how it would impact the use of life                
 insurance for guaranteeing the financial stability and continuity             
 of small businesses, for example, where there were partners or                
 associates with life insurance policies on each other.                        
 MR. WELLMAN replied that excluded from any death benefit was that             
 for which the deceased paid fair consideration.  Where business               
 contracts and agreements between partners existed, the survivor               
 would have insurance.  He said those instances would not be                   
 included in the augmented estate to the extent they had been bought           
 and paid for by the deceased.                                                 
 REPRESENTATIVE VEZEY said he had not realized it would be normal              
 for the deceased to buy it; he had thought the partnership or                 
 business entity (portion missing--end of tape).                               
 TAPE 96-3, SIDE B                                                             
 Number 000                                                                    
 REPRESENTATIVE VEZEY asked if it was Mr. Wellman's opinion that the           
 proposed changes in the probate law would affect the ability of               
 small businesses to use insurance to provide for the fiscal                   
 stability and continuity of a business?                                       
 Number 072                                                                    
 MR. WELLMAN answered no, none whatsoever.                                     
 REPRESENTATIVE CON BUNDE set up a hypothetical situation regarding            
 a business partnership between a person and the chairman of the               
 board of a sparkplug company.  This person wants to invest with               
 this company, but wants to make sure that the chairman will be                
 around for a while.  The partner asks that the chairman take out a            
 million dollar insurance policy, naming the partner as the                    
 beneficiary.  If the chairman dies, the million dollars would not             
 go into the augmented estate, but would go to the partner directly            
 and not impact the survivors of this chairman's family?                       
 MR. WELLMAN answered that's correct.  This would be true under a              
 policy purchased by the beneficiary in an arms length arrangement             
 and the insured person is willing to go along with a gain such as             
 this one.  These types of factors would be considered equivalents             
 by the bargainers.  This is a death benefit where consideration has           
 been paid by the beneficiary.                                                 
 Number 033                                                                    
 ALASKA, testified by teleconference from Anchorage and responded to           
 Representative Vezey's question regarding the length of the probate           
 code.  He pointed out that probate law has its roots in 15th                  
 century England and the uniform code has attempted to refine and              
 condense this history.                                                        
 MR. KURTZ has practiced law since 1961.  He spoke specifically to             
 the insurance issue.  As a bank attorney he sees no problem with              
 the change in the law regarding banks securing loans with small and           
 large businesses.  He added there had been no discussion about                
 single premium life insurance, used more by persons who attempt to            
 get money out of their augmented estates in places where the                  
 probate code exists.  Most life insurance is bought with                      
 installment payments, but he pointed out there's nothing to prevent           
 someone from buying a million dollar insurance policy for $800,000            
 presently because their life expectancy is short.  This loophole              
 will be closed by the proposed change before the committee.                   
 Number 181                                                                    
 TODD THACKER, PRUDENTIAL INSURANCE, testified by teleconference and           
 said he wished to echo the comments made by Nancy Wallace.                    
 Number 200                                                                    
 by teleconference from Washington, D.C. and he also echoed what Ms.           
 Wallace said.  He doesn't view this issue as a loophole.  The key             
 thing to remember is that people should be allowed to purchase                
 insurance for all the reasons Ms. Wallace outlined.  No one has               
 come forward with horror stories of abuse.  He recalled no single             
 example of someone using this so-called loophole to defraud their             
 spouse.  He added that there's good reason why life insurance is              
 not part of an augmented estate and absent any evidence that it's             
 causing harm, he urged the committee to leave things the way they             
 are.  Mr. Lifer's business associate, Alicia Cordova, had nothing             
 to add.                                                                       
 DEBORAH RANDALL, testified by teleconference from Anchorage.  Ms.             
 Randall commented that these code revisions before the committee              
 are extremely complicated.  She suggested that the insurance                  
 community review them very carefully.  The only time insurance will           
 be brought back into the augmented estate, is if the insurance is             
 owned by (indisc.)  The examples the insurance companies used in              
 non-support of HB 308 can be easily rectified by transferring the             
 ownership of an insurance policy to a trust created for children,             
 say for an education fund for example.  The objective of including            
 life insurance into the code is because of the perceived loophole.            
 If there are individuals taking advantage of this situation, then             
 these revisions will prevent that from happening.                             
 MS. RANDALL said there are two places in the statute which                    
 specifically grants a spouse the right to waive their claim to the            
 elective share.  They can waive it totally, along with their other            
 rights and they can also agree to the purchase of a life insurance            
 Number 384                                                                    
 testified by teleconference from Anchorage and wished to echo what            
 Ms. Randall had said.  As past chairman of the probate section for            
 the Alaska Bar Association, they have reviewed the code on numerous           
 occasions, which has resulted in many revisions.  He had not heard            
 of any horror stories related to this life insurance loophole, but            
 was exposed to a circumstance which came very close to this                   
 situation.  Mr. Brautigan wholeheartedly supported this bill and              
 encouraged passage of it.                                                     
 Number 441                                                                    
 testified that this bill was a product of the uniform laws                    
 conference based on three decades of work.  Alaska enacted this               
 original probate code bill in 1972.  Alaska has 25 years of                   
 experience with the original version.  The bill before the                    
 committee attempts to incorporate the current recommendations of              
 the uniform laws conference to address all the questions that have            
 arisen over the years and to avoid litigation, and to generally               
 simplify probate.  He briefly outlined the proposed amendments to             
 this bill.                                                                    
 MR. PETERSON pointed out as an aside that Mr. Wellman, who                    
 testified, was also a Uniform Law Commissioner and was generally              
 considered the father of the probate code.  He is the leading                 
 expert on the subject.                                                        
 MR. PETERSON then referred to his letter of September 5, 1995,                
 which summarized his position.  There was one issue of dispute                
 between the Alaska attorneys in Anchorage and the Uniform Law                 
 Commissioners regarding the elective share and whether to use the             
 version in the bill, which essentially continues Alaska's current             
 one-third provision for the surviving spouse or to use the Uniform            
 Law Commissioner's recommendation to use a phase-in approach.  They           
 all agreed on the life insurance issue.  The phase-in approach                
 would recognize that a late in life marriage does not provide the             
 surviving spouse the opportunity to participate in the development            
 of the martial estate the same as the long term marriage does.  Is            
 it fair to provide the late in life spouse with as much of a share            
 in the estate as the long term marriage spouse?  This goes to the             
 heart of the matter.                                                          
 MR. PETERSON further outlined that the elective share cuts into               
 what the testator might have granted to the children of the former            
 marriage.  Should the one year spouse be able to take the same                
 amount as the 30 year spouse?  The Uniform Law Commissioners have             
 said no and have developed a phase-in approach for this.  He                  
 understood that Representative Finkelstein had some materials on              
 this issue, but he didn't know if these would be presented.  Mr.              
 Peterson recommended this issue be presented in a separate bill.              
 Number 663                                                                    
 REPRESENTATIVE TOOHEY asked about a first marriage situation that             
 produces three children and only lasts three years.  The husband              
 remarries and this relation lasts a long time.  How does this work?           
 MR. PETERSON responded that the second wife, if she's the surviving           
 spouse, will get 50 percent of the estate instead of the 33                   
 percent.  The length of the marriage is the common denominator of             
 the phase-in approach.                                                        
 REPRESENTATIVE TOOHEY then asked about this situation under the               
 existing law.                                                                 
 MR. PETERSON said that if the first wife stayed with the husband              
 for a long time, but ended in divorce and the second wife stays               
 with this person for a very short time, then the second wife gets             
 the full third.  The surviving spouse is the common denominator in            
 this situation.                                                               
 Number 720                                                                    
 REPRESENTATIVE BUNDE had some concerns about the phase-in concept.            
 He pointed out that a very good wife who was only married for two             
 years before her husband died, could have intended to stay in the             
 marriage a long time.  If the intent is to address a late in life             
 marriage, then maybe an age qualification should be applied.                  
 MR. PETERSON summed up this related conversation by stating that if           
 a late in life marriage is amicable then there's a good chance this           
 woman will be provided for in a will.  Again, he spoke to the life            
 insurance issue.  He said that it's such a small provision of the             
 overall legislation that to vote down the entire revised code is              
 Number 817                                                                    
 REPRESENTATIVE FINKELSTEIN referred to the life insurance issue.              
 He asked if there was a unanimous agreement within the Uniform                
 Probate Committee regarding the life insurance clause.                        
 MR. PETERSON said that was correct.                                           
 REPRESENTATIVE FINKELSTEIN then asked about the amendment regarding           
 the 30 percent in relation to the Uniform Probate Code.  He said he           
 believed in the uniform code, as an attempt to make these probate             
 issues around the country consistent.   He did not intend for this            
 phase-in amendment to totally change the direction of this probate            
 MR. PETERSON assured him that the amendment would serve to further            
 standardize the code.  There were seven deviations from the                   
 national version proposed by the group of attorneys in Anchorage.             
 The Uniform Law Commissioners of Alaska agreed to six of them.  The           
 seventh related to this phase-in concept of the elective share.               
 They have not reached agreement on this issue.  The phase-in                  
 amendment is the version recommended by the national conference, it           
 is the version endorsed nationally, and he urged for the sake of              
 uniformity to have this separate amendment adopted.                           
 REPRESENTATIVE FINKELSTEIN asked Mr. Peterson if he had any                   
 opposition to present a phase-in amendment at this time.  He                  
 pointed out that if this amendment is already in the uniform code,            
 then it would be illogical to pass it as separate legislation.                
 MR. PETERSON said the proposed amendment would be in reference to             
 Section 202 now contained in the bill.  He suggested they draft               
 this phase-in concept into a separate bill with a concurrent                  
 effective date, the same as HB 308.  His only concern is that they            
 don't burden a bill for which there is virtual unanimity on                   
 everything in it except this phase-in provision.                              
 REPRESENTATIVE FINKELSTEIN offered that this issue of graduated               
 percentages versus the 30 percent would probably move with the bill           
 through committees.                                                           
 Number 983                                                                    
 REPRESENTATIVE GREEN asked if the graduated appropriation would be            
 in effect when a husband marries his wife and subsequently buys a             
 life insurance policy.  Would the graduated proposal allowed to the           
 first wife of longer duration end up with the majority of the                 
 MR. PETERSON answered no, only the surviving spouse.  The prior               
 wife is out of the picture.  If the decedent had purchased a life             
 insurance policy for the first wife, then the current surviving               
 wife will have under this bill the elective right to take a                   
 percentage of this policy under the augmented estate.                         
 Number 1053                                                                   
 REPRESENTATIVE BETTYE DAVIS asked for clarification about the                 
 dissemination of the estate based on the one-third concept.                   
 Chairman Porter explained that if the surviving wife received more            
 than one-third of the estate, the insurance policy payment would go           
 to the named beneficiary on the policy.  Representative Davis                 
 questioned why this division of the estate issue was in question              
 when this insurance benefit would go to the named beneficiary                 
 CHAIRMAN PORTER answered that the insurance company's concerns were           
 based on the possibility that the insurance policy could make up              
 the lion's share of the estate.                                               
 MR. PETERSON referred to the December 6, 1994, letter from Jerry              
 O'Leary, former chief counsel for the Life Insurance Association,             
 which indicates a confusion about life insurance provisions in the            
 probate estate versus the augmented estate.  The augmented estate             
 is affected only in these rare instances.  The probate estate can             
 include items which are considered non-probate transfers.  The bill           
 does not make life insurance part of a probate estate.                        
 REPRESENTATIVE DAVIS asked how many other states have adopted this            
 same code?                                                                    
 MR. PETERSON could not answer exactly, but thought around seven.              
 REPRESENTATIVE DAVIS asked why Mr. Peterson recommended the 30                
 percent rather than 50 percent?  Why can't a provision be made for            
 50 percent right away?                                                        
 MR. PETERSON answered that the 30 percent was the basic provision             
 in current Alaska law.  The idea was to stay with the current                 
 Number 1268                                                                   
 REPRESENTATIVE VEZEY asked about how this bill would affect a                 
 prenuptial agreement?                                                         
 MR. PETERSON thought the prenuptial agreement would be enforceable            
 and would govern if the wife in the prenuptial agreed not to pursue           
 the elective share.  If she agreed not to go after more than one-             
 third of the estate, the prenuptial agreement would hold.  Mr.                
 Wellman agreed with this analysis.                                            
 REPRESENTATIVE VEZEY asked what happened to people who die without            
 estate provisions?                                                            
 MR. PETERSON responded that the spouse's benefits in this instance            
 would be improved, regardless of the makeup of the surviving family           
 members.  This bill improves the percentage for the surviving                 
 spouse to help clarify how the statute should deal with the variety           
 of situations presented.                                                      
 REPRESENTATIVE VEZEY understood that the spouse of someone who died           
 intestate would get 100 percent of so much of the first part of the           
 MR. WELLMAN added that the surviving spouse would get 100 percent             
 of the first $50,000, which would apply to most average estates.              
 The augmented estate takes into account and builds onto what the              
 spouse already receives through testate succession, which could               
 include a will, probate transfers, et cetera.  All of this would              
 add up.  The spouse's position is accessed.  The improved position            
 for intestate succession of the spouse is built in and reflected              
 when deliberating the assets.  There's less likelihood of a                   
 foreswore if the spouse is taken care of through the probate estate           
 and the intestacy laws.                                                       
 REPRESENTATIVE VEZEY was still confused about existing law where              
 the wife would receive 100 percent of the first $50,000 of an                 
 intestate estate.                                                             
 MR. WELLMAN answered that the current law provides for the                    
 intestate share of the spouse as $50,000 off the top.                         
 REPRESENTATIVE VEZEY asked if these amounts shouldn't be adjusted             
 to allow for inflation, cost of living, et cetera.                            
 MR. WELLMAN pointed out that these numbers had been built into the            
 Number 1609                                                                   
 REPRESENTATIVE BUNDE referred back to the earlier discussion about            
 the life insurance partnership relationship.  He asked again if               
 this life insurance arrangement would not fall into part of the               
 augmented estate.                                                             
 MR. PETERSON said yes, if the policy is owned by the partnership it           
 would not become part of the descendent's estate.                             
 MR. WELLMAN also reiterated that if the decedent was the insured              
 and the insured controlled the policy, the insurance is subjected             
 to the augmented estate, unless that insurance is part of a                   
 partnership agreement that provided to pay the partners of the                
 Number 1736                                                                   
 MR. MANLY spoke to this issue.  The durable way this situation                
 could be set up is with the insurance in a trust, owned by the                
 trust with a cross purchase arrangement where the other partner               
 owns the policy or the company owns the policy.  In all these                 
 cases, someone other than the insured owns the policy, which takes            
 it outside of the augmented estate.  What happens if the descendent           
 owns the policy?  In this instance this policy is subjected to the            
 augmented estate.  If this was not the intent of the company,                 
 somebody is going to get sued because this arrangement was set up             
 MR. MANLY also suggested strongly that the committee adopt Mr.                
 Peterson's suggestion that a phase-in amendment be drafted.                   
 Number 1912                                                                   
 REPRESENTATIVE TOOHEY moved to adopt Amendment 1, Title C.2 1996              
 for discussion purposes.                                                      
 REPRESENTATIVE SEAN PARNELL, Sponsor, stated the amendment has                
 already been described by Mr. Peterson.  He felt the first half of            
 the first page is self-explanatory.  There was just a technical               
 change to the section of the bill regarding safekeeping of the will           
 by the court during the testator's lifetime.  He asked Mr. Manly to           
 address the second half of the first page.                                    
 MR. MANLY explained the language on page 78, following line 30,               
 would insert a new subsection (b) that is simply a clarification to           
 avoid confusion indicating that someone can name the trustee on a             
 testamentary trust as a beneficiary of a life insurance policy.  A            
 testamentary trust is one created under a will.  A will has no                
 force or effect until a person dies.  If a trust is set up under a            
 will this trust does not go into effect until a person dies.  In              
 some court cases a concern has been raised as to whether someone              
 can name as a beneficiary of a life insurance policy, a trustee of            
 a testamentary trust under a will.  This language simply clarifies            
 that someone is able to do this.                                              
 REPRESENTATIVE PARNELL clarified that the rest of the amendment is            
 fairly self-explanatory except for the deletion of the material               
 regarding amending Alaska Rule of Probate Procedure 5 which is part           
 of the title, and the last section of the amendment.  Mr. Manly was           
 asked to address why this material was being deleted.                         
 MR. MANLY pointed out that both sections provide for the                      
 safekeeping of wills by the court before someone passes away,                 
 rather than keeping a will in a safe deposit box, et cetera.  A               
 person can deposit the will with the court for safekeeping.  Under            
 the rules it is kept confidential until a person passes away.  This           
 part of the amendment simply modifies the bill so it comes into               
 compliance with Section 5.                                                    
 Number 2290                                                                   
 REPRESENTATIVE TOOHEY made a motion to adopt Amendment 1, C.2.                
 There being no objection, Amendment 1 was adopted.                            
 REPRESENTATIVE FINKELSTEIN said the reasoning behind Amendment 2,             
 C.1 is that first it is part of the uniform code and second, the              
 concept of the marital contract and how it splits up the assets.              
 While he agreed with the concepts of the bill, he thought this                
 better reflects the actual situation.  He explained that anyone who           
 wants to can give 100 percent of their assets to their spouse.                
 This amendment addresses the case where there isn't such an                   
 allocation or the allocation is less than the minimum.                        
 TAPE 96-4, SIDE A                                                             
 Number 000                                                                    
 REPRESENTATIVE FINKELSTEIN cited the example of monetary and non-             
 monetary assets as contributions are built over time and are much             
 greater in a 20-year marriage versus a 5-year marriage.  There is             
 more invested the longer people stay together.  One of the effects            
 of this amendment is to reach the 50 percent.  If someone stays               
 married 15 years, the 50 percent level has been reached.  It's a              
 big investment and that person deserves at least half of the assets           
 of the estate.   Representative Finkelstein withdrew the amendment.           
 He commented he had been convinced by the sponsor and others that             
 the amendment would not be in the best interest of the legislation.           
 He wanted to at least get onto the record the amendment itself so             
 the split in concepts was reflected.                                          
 Number 103                                                                    
 CHAIRMAN PORTER recognized the withdrawal of Amendment 2.                     
 REPRESENTATIVE TOOHEY made a motion to move HB 308 from the House             
 Judiciary Committee with individual recommendations and zero fiscal           
 notes.  There being no objection, it was so ordered.                          
 HB 154 - REGULATORY TAKING OF PRIVATE PROPERTY                            
 Number 270                                                                    
 CHAIRMAN PORTER announced the next order of business would be HB              
 154 regarding the regulatory taking of private property.  He                  
 commented this bill had received interim consideration and hearing.           
 He asked Representative Vezey, chairman of the subcommittee to give           
 a report of the subcommittee hearings.                                        
 REPRESENTATIVE VEZEY said subcommittee hearings were held in                  
 Fairbanks and Wasilla with teleconference testimony from around the           
 state.  The result of the testimony was incorporated into a                   
 committee substitute prepared by the sponsor.  He added that the              
 subcommittee had received some real quality testimony from people             
 with a lot of background, both from an administrative and legal               
 Number 409                                                                    
 REPRESENTATIVE VIC KOHRING, sponsor of HB 154, said he was pleased            
 that so many people have testified on this bill; most of them                 
 testified in support, which indicated to him that a major problem             
 did indeed exist.  The major problem that he saw and which prompted           
 him to introduce this legislation was the issue of excessive                  
 regulation in society which prevents an individual from being able            
 to use their private property and better their lives through                  
 economic gain.  He referred to the constitution, Article 8, Section           
 16, which states,  "No person shall be involuntarily divested of              
 his right to the use of waters, his interest in lands or                      
 improvements affecting either, except for a superior beneficial use           
 of public purpose and then only with just compensation by the                 
 operation of law."  He interpreted this to mean that if a                     
 governmental entity were to take a person's private property                  
 through restriction of its use, then there should be compensation             
 for any loss in economic value that results.                                  
 REPRESENTATIVE KOHRING said this legislation provides a person an             
 opportunity to seek recourse by exercising their constitutional               
 right.  He said those of us in the legislature are here on behalf             
 of constituents, who have said enough is enough to big government             
 and excessive regulation.  This hinders a person's ability to                 
 better his or her life and hinders the growth of Alaska's economy.            
 He pointed out that regulation in society on a national level is              
 estimated at a cost of $640 billion a year.  He coined the term               
 that this legislation is the "private property owner's bill of                
 REPRESENTATIVE KOHRING referred to the intent of the bill and said            
 it had to do with providing an opportunity to seek compensation in            
 the event there's an economic loss to a person's property.  When he           
 referred to a taking it was not in the context of eminent domain,             
 but a taking in the sense of economic value.  The reason for filing           
 this legislation was because Representative Kohring felt there was            
 a need for regulatory reform in society as a whole, and there was             
 a need for protecting the property rights for Alaska's citizens.              
 REPRESENTATIVE KOHRING stated he has been informed of numerous                
 cases in which property rights were taken away from people.  He               
 cited the retiree in Wasilla who was forced to quit building his              
 home on a lake in the middle of the project due to new setback                
 restrictions, the gold miner in Fairbanks who was forced to pay               
 hundreds of thousands of dollars to keep up with the water quality            
 requirements, to the subdivider on the Kenai Peninsula who went               
 bankrupt because of unreasonable sewer and water regulations,  to             
 the homeowner in Willow whose property was rendered worthless                 
 because of wetlands designation.  As elected officials,                       
 Representative Kohring felt it was incumbent upon them to go to bat           
 for these people.                                                             
 REPRESENTATIVE KOHRING added that in regards to a governmental                
 entity paying for the loss of economic value, they can withdraw at            
 any time.  If there's a claim that's filed and a loss of economic             
 value is proven, then the regulation can be withdrawn, instead of             
 the claim being paid out.  Representative Kohring said the net                
 effect of this legislation would be a blunting of the impact of               
 regulation in the state of Alaska.  It would also make a                      
 governmental entity think twice before a regulation is implemented.           
 He thought there would be a lot more careful thought  going into              
 deciding if regulations should be imposed or if there should be               
 restrictions on the use of property.  It will also force a                    
 government entity to think of alternative ways to achieve their               
 objective and to what extent should they take a piece of property;            
 should it just be a certain portion,  et cetera.                              
 REPRESENTATIVE KOHRING stressed he was not saying that regulations            
 are bad per se and recognized the basic intent of a regulation is             
 to protect the health and well being of society.   For example, if            
 there was a factory on a river which was polluting the air and                
 causing potential illnesses to the public, or polluting a waterway            
 and damaging a fish resource, this would be a justifiable taking if           
 the government came in and shut that factory down.  However, if an            
 unjustified, unreasonable regulation was to be implemented where a            
 person was financially devastated, government just simply can't               
 walk away void of responsibility in regards to compensation.                  
 Number 882                                                                    
 REPRESENTATIVE KOHRING addressed the issue of paying out for a                
 claim.  When it comes to imposition of a regulatory restriction,              
 there is going to be a cost incurred.  The question is who is going           
 to pay that cost?  If there is a regulation that is imposed and a             
 government entity has to bear that cost as a result of the                    
 implementation of this legislation, assuming it did become law,               
 that government agency would pay that cost.  Without this law, it             
 would be the little guy, the property owner, who would have to pay            
 that cost.                                                                    
 REPRESENTATIVE KOHRING commented that this takings concept is not             
 a quirk, but rather a concept that is sweeping the nation.  As a              
 matter of fact, 47 out of 50 states have filed regulatory takings             
 bills in their legislatures.  In addition, Congress has a similar             
 bill as an element to their Contract for America.  Our own                    
 legislative leadership has made this bill a part of their                     
 commitment to Alaska.  He pointed out this was not an unfunded                
 mandate; it would not be a cost to society to the tune of many                
 millions of dollars, as people believe.   It would be up to the               
 regulatory agency to decide if they're going to impose a                      
 restriction that will cost them money.                                        
 REPRESENTATIVE KOHRING said he wanted to be perfectly up-front with           
 the committee with regard to supporters and opposition to the bill.           
 As he stated previously, this legislation is widely supported but,            
 certainly not by government, environmental groups, or the Alaska              
 Municipal League.   Those that do support the bill are basically              
 the little guy; the average hard-working person.  There are                   
 numerous documented cases of takings throughout the state of                  
 Alaska.  He added this bill has generated a lot of support among              
 their colleagues; there are 10 members on the House side that have            
 co-sponsored and added their name to this bill.  Additionally, they           
 have received support from members of the Alaska State Chamber of             
 Commerce, the Alaska State Home Builders Association and the                  
 National Federation of Business.  He referred to a survey that was            
 recently conducted by the latter agency.  Two questions were asked            
 in the survey.  The first was, should private property owners be              
 compensated for the reduction in value of their property by state             
 or municipal action.  The response was 91 percent yes, 3 percent              
 no, and 5 percent undecided.  The second question was, should a               
 state agency proposing or modifying a rule or regulation complete             
 an analysis prior to adoption to determine if the action                      
 constitutes a taking and if so, the value involved.  The response             
 was 88 percent yes, 3 percent no, and 8 percent undecided.                    
 In conclusion, REPRESENTATIVE KOHRING said our freedoms and rights            
 as individuals have gradually eroded over the years and that                  
 America and Alaska is not what it used to be.  He pointed out that            
 this can change by passage of HB 154 which will send a message to             
 their constituents that the legislature is serious about taking a             
 strong stand against over-zealous government.  He pointed out the             
 private property owner in the state of Alaska owns one-half of 1              
 percent of the land in Alaska.                                                
 Number 1181                                                                   
 REPRESENTATIVE FINKELSTEIN said he has often heard reference made             
 to 1 million acres of private land; the figure is actually 46                 
 million acres of private land in the state of Alaska.  Also, many             
 of the Native corporation lands, which make up the bulk of it, are            
 moving into various private uses through leases and outright sales.           
 He said he had a hard time understanding this issue.  He presented            
 a hypothetical situation where there are a bunch of people in a               
 borough, city or state who are living on a stream or a river.                 
 Everyone puts all their stuff out on the shore and then it turns              
 out these activities are impacting the salmon.  These folks,                  
 through the laws they've passed or the people they've elected, have           
 set up agencies to help figure out these issues for the use of all.           
 He said the Kenai River is regulated for the good of all and many             
 people lose uses.  On the Kenai River and other places, the issue             
 is what to do with the riverfront land.  It was his understanding             
 that under this bill they can still regulate it, but if they lose             
 30 percent of land value, the agency has to pay that somehow.                 
 REPRESENTATIVE KOHRING answered that was correct.                             
 REPRESENTATIVE FINKELSTEIN continued that now everyone gets paid              
 off, now the salmon do better, the habitat is restored, recreation            
 use increases, and property values goes up.  He asked if the                  
 property owners have to pay back the state?  The common good is               
 what has gained that public benefit.                                          
 REPRESENTATIVE KOHRING answered no, and added government is here              
 for the people, not the other way around.  He referenced the issue            
 of property owners impacting habitat along stream negatively, and             
 said if a governmental entity decides that it is important to                 
 preserve that habitat, who should be responsible to pay for this              
 property loss?  In his view the governmental agency representing              
 the community should pay that so in a sense the cost is spread                
 among a lot of people, instead of financially ruining one person              
 Number 1390                                                                   
 CHAIRMAN PORTER announced that it is the intent of the sponsor to             
 amend the retroactive portion of the bill.  In other words, there             
 is within the bill, a provision that states if any of these                   
 unlawful takings have occurred, they would be assessed                        
 retroactively.  This has caused some concern for a number of people           
 and it is the intent of the sponsor to offer an amendment to remove           
 this provision.  It would then become a proactive piece of                    
 legislation, rather than retroactive.                                         
 Number 1470                                                                   
 REPRESENTATIVE GREEN referred to the fiscal note and said it is               
 quite substantial, and even more so upon reviewing the background             
 materials which speak to hundreds of millions of dollars of                   
 potential costs.  He asked Representative Kohring if that seemed              
 reasonable and if so, would that represent the amount of loss from            
 private property owners undergoing these takings.                             
 REPRESENTATIVE KOHRING answered he was not sure how those numbers             
 were calculated.  He was fairly confident however that those                  
 numbers represent the value of the loss that the private property             
 owner would incur.  He pointed out the numbers do reflect the                 
 retroactive provision of the bill; in his view the numbers would be           
 zero if the retroactive provision is taken out, which is what he              
 Number 1555                                                                   
 testified on CSHB 154.  Mr. Tillery initially wanted to clarify               
 that he had been working from version (M) and had also seen a                 
 version (R) of CSHB 154.  He asked which version was before the               
 Number 1583                                                                   
 REPRESENTATIVE GREEN moved to adopt version 9-LS0602\R dated                  
 1/17/96, as the working document.                                             
 Number 1600                                                                   
 CHAIRMAN PORTER asked if there was any objection.  Hearing no                 
 objection, version 9-LS0602\R was before the committee.                       
 Number 1615                                                                   
 MR. TILLERY clarified what he understood to be a "taking" under the           
 constitution versus what this bill before the committee would                 
 provide.  Under the statute, any restraint on the use of property             
 by an agency, municipality, or other entity, would be a per se                
 taking and it would be compensable.  Under the constitution, only             
 if there is a physical invasion of the property or in the                     
 regulatory standard, if you deprive somebody of all the use of                
 their property, this is considered a per se taking and damages                
 would be allowed.  If there was only a partial deprivation of                 
 property then an analysis is applied, such as what the nature of              
 the governmental action was, the economic impact and whether or not           
 there was some kind of interference with a reasonable business                
 expectation of the use of the property.  Mr. Tillery pointed out              
 that this latter factor was fairly important, since this concept of           
 business expectation was alluded to in the CS version before the              
 committee.  It is an important concept to note because it prevents            
 MR. TILLERY continued the second difference here in relation to a             
 "taking" is that the statute covers the repeal of statutes and                
 regulations.  It appears this CS does not provide for repeals.                
 Section 110 of the CS would suggest that it does cover repeals, but           
 the related definition section of CSHB 154 is ambiguous, in that it           
 doesn't include the discontinuation of government programs.  Mr.              
 Tillery said he didn't understand what this meant, but he believed            
 that it would not cover say, the repeal of an individual zoning               
 ordinance, for instance.                                                      
 MR. TILLERY stated thirdly, the constitution provides exceptions              
 for public and private nuisances.  The statute only provides an               
 exception for a public nuisance and that is only as to one version            
 of the taking, subsection (a) under the definition of a taking.               
 Subsections (b) and (c) together essentially encompass anything               
 that's in (a).  In the department's view, private and public                  
 nuisances are not excepted and even though someone might be abating           
 a public or private nuisance, it would still be a taking under this           
 Number 1736                                                                   
 MR. TILLERY outlined his understanding of how this law would work             
 in specific exemplary instances and the potential economic impacts            
 it could have.  He proposed to review specific sections of the CS             
 to point out situations the Department of Law felt were contrary to           
 the constitution, are internally contradictory or sections they               
 seem to have some particular problem with.                                    
 MR. TILLERY began his review of the CS by referring to section 130,           
 page 4, line 30, which provides that full compensation will be                
 required.  A governmental entity may not engage in a action which             
 constitutes a taking of private property unless they pay full                 
 compensation to the property owner.   Mr. Tillery alluded to the              
 state law requirement for buffers along water bodies in timber                
 operations.  These buffer zones are mandated by statute.  After               
 review of this CS by DNR (Department of Natural Resources) they               
 felt the ramifications under this proposed definition of a taking             
 could mean approximately 200 million dollars paid the first year to           
 property owners, with approximately 40 million dollars paid each              
 year thereafter.                                                              
 MR. TILLERY added that the Department of Law (DOL) believes the               
 bill provides a revolving payment on the amounts as listed                    
 previously.  Again, the example of the buffer zones was used.  If             
 an entity makes a taking claim, was paid for those buffers and then           
 subsequently sells the property to another entity, is this new                
 owner compensated as well?  This was ambiguous.  There are other              
 sections of this legislation which relate to this concept of                  
 retroactivity as well.                                                        
 MR. TILLERY said another way this legislation could affect DNR                
 would be if the department wanted to lease oil and gas in Katchemak           
 Bay or Cook Inlet for example, or land leases for minerals.  This             
 leasing would be considered a governmental action.  This action               
 under the statute would in some instances have an affect on                   
 adjacent land owners.  These owners could then submit compensation            
 claims, since DNR would have lowered their property values by                 
 granting leases to a business entity.                                         
 MR. TILLERY added that with respect to the Department of Fish and             
 Game (ADF&G), Mr. Tillery cited the example of fish allocation when           
 applied to this new legislation, such as fisherman harvesting fish            
 at False Pass versus fish caught at the Yukon Kuskokwim Delta.  Mr.           
 Tillery argued that he was of the opinion that fish are a common              
 resource for everyone and the lack of a catch should not be                   
 compensated against the value of a fisherman's permit.  He did note           
 though that in the present CSHB 154 the definition of real property           
 reads, "resources capable of being harvested or extracted."   He              
 also used the example of the state allocating more fish to the                
 sport fisherman on the Kenai River and how that would impact say,             
 a setnetter.  Because of the decreased property value, i.e. the               
 fishing site, nets, etcetera, should the state be liable under the            
 "resources" definition to pay compensation?                                   
 MR. TILLERY also used the example of the Exxon Valdez Oil Spill               
 when the ADF&G, after the spill, closed specific fisheries because            
 of a zero tolerance policy.  The state legitimately wished to                 
 prevent any taint on the reputation of their salmon.  Under this              
 bill this closure would have been a governmental action, it                   
 decreases the value of boats, etcetera.  The state, rather than               
 Exxon could have faced these claims.                                          
 Number 1999                                                                   
 MR. TILLERY stated that the Department of Environmental                       
 Conservation (DEC) has a number of regulatory functions.  For                 
 instance, this department is responsible to carry out emission                
 inspections.  There is a federal mandate that requires this.  If              
 these inspections are not instituted, Alaska would loose highway              
 funds, which Mr. Tillery roughly stated as being 900 million                  
 dollars.  If requiring these emission tests is a governmental                 
 action, it would appear that the state would likely be responsible            
 to pay for these tests.  It could be that emission tests would be             
 illegal under this bill because under section 34.50.160, page five,           
 line 30, "A governmental entity may not require an owner of private           
 property, (for instance a car) to provide or pay for studies, maps,           
 plans, reports, (again, an emission report) or other information              
 used ...to impose a restraint on private property use."  Mr.                  
 Tillery pointed out that this is precisely the function of an                 
 emissions test.  It imposes a restraint.                                      
 MR. TILLERY added that these concerns are not fully explained in              
 this bill.  He's particularly concerned about matters related to              
 the Alaska Oil and Gas Commission.  This commission deals with                
 maximizing oil and gas resources and enforcing safety standards in            
 the course of extractions, such as blow-out prevention, well casing           
 requirements, prohibition of co-mingling of reservoirs, injection             
 of wastes into the ground and possibly the formation of exploratory           
 units, etcetera.  These may be considered compensable takings under           
 the terms of this bill.   To not do these things, compromises                 
 safety and the royalty interests of the State of Alaska in oil and            
 gas.  He also used the example of flaring.  He was not sure if                
 flaring could be prohibited under the bill without paying for it.             
 Number 2114                                                                   
 MR. TILLERY outlined how this legislation affects the Commercial              
 Fisheries Entry Commission (CFEC) would be in this entity's                   
 regulation of the issuance of limited entry permits.  It is                   
 anticipated in the future that there will be only so many permits             
 made available for fishermen and it is a legitimate concern under             
 this legislation that the state would be forced to compensate those           
 fishermen who did not make the final cut for acquiring permits.               
 This is especially true if it is determined that these permits are            
 considered a property interest loss.                                          
 MR. TILLERY also added that it would appear zoning under this                 
 legislation would no longer be permissible, unless the regulating             
 entity would be willing to pay for exclusion.  This bill provides             
 that zoning would be allowed if health and safety are at risk, but            
 then under the takings section of this legislation compensation               
 would be forthcoming.  For example, if someone wanted to put a                
 seafood processing plant next to a beach house in a neighborhood              
 zoned residential, the seafood processing company would have to be            
 compensated for the loss of expectation in this property interest             
 if they were unable to place their company there.  On the other               
 hand, if the local governmental entity gives them a variance and              
 allows this company in, the beach house owner could put a claim in            
 for his loss of real estate value.                                            
 Number 2205                                                                   
 MR. TILLERY then testified to the retroactive clause of this new              
 version of legislation, located on page 8, line 29.  Initially he             
 understood that this legislation would not be retroactive, even               
 though it clearly stated in the present legislation that it is not            
 retroactive.  Clearly this would not apply to someone who wasn't              
 able to log last year in the buffer zone, for example. If so, this            
 same person could file a logging plan again in the buffer zone and            
 get compensated for a foreseeable season.  The statute, even though           
 it is an ambiguous, seems to allow this.  Under full compensation             
 this would mean a reduction in monetary value, but would it be                
 reduced from where it was at a particular date and reduced from               
 what?  Would it be reduced from what the regulation said, the                 
 statute, or from what is constitutionally permissible?                        
 MR. TILLERY stressed that all these questions come back to the                
 business expectations of the owner.  When this person buys timber             
 for example, knowing that these laws are in place, he'll hopefully            
 buy it at a lower price.  He shouldn't have a business expectation            
 for a higher price, because this would be foolish, although this              
 notion is not included in the pending legislation.  On the other              
 hand, if this law was in effect now or constitutionally                       
 permissible, this person would have a right to ask for a variance             
 in this buffer zone.  DNR could give him a variance for every tree            
 in that buffer zone if ADF&G went along with it.  By not giving him           
 a variance, would that be a compensable action?  If you're required           
 to give them a variance, this person would stand to make a lot of             
 Number 2316                                                                   
 MR. TILLERY then highlighted those areas which were not as                    
 ambiguous in the CS, but ones he also had problems with.  If an               
 agency established a particular restriction then they can either              
 choose to get rid of a restriction or pay for it's enforcement out            
 of it's budget.  Clearly the attorney fees would come out of this             
 bill, but this is ambiguous.  If in fact, it is the intent of the             
 CS delegate funds, then without question Mr. Tillery stated that              
 this was an unconstitutional delegation of the legislature's                  
 authority over appropriations.  The legislature in any given year             
 can reduce an agency's budget to reflect the need to pay off it's             
 judgments.  Mr. Tillery was referring to section 34.50.100 on page            
 four, line 13.  In addition, on the bottom of page 4, section                 
 34.50.120, Mr. Tillery made a reference to the ambiguity of what              
 governmental agency specifically would be required to compensate a            
 party.  He also cited on page 6, line 22, section 34.50.200 as a              
 reference to the agency responsible for compensation.                         
 Number 2386                                                                   
 REPRESENTATIVE GREEN asked if it was possible where the state is              
 admonished to do something by the federal government, would an                
 impasse be created when a question of compensation was at issue?              
 Number 2407                                                                   
 MR. TILLERY understood that no, this would not be an issue.  The              
 federal government rarely makes the state do something by force.              
 The federal government usually sets up a program with funding                 
 incentives attached, such as highway speeds.  If a state doesn't              
 enforce these speed limits, then they will not get any federal                
 funds to help with highways, for example.                                     
 Mr. Tillery referred to section 150, page 5, line 24, which speaks            
 to access.  In addition to full compensation, if a regulation is              
 adopted and it restrains or deprives the owner of access to their             
 property, the owner must also be provided an alternative access.              
 Mr. Tillery wanted to make two points about this.  First, this                
 section is ambiguous whether it means deprivation of the owner to             
 all access of the property or some access.  But, more importantly             
 the provision requires full compensation.  Full compensation                  
 includes loss of access.  To then require the agency to revisit               
 this issue and require the remedy of access is double recovery.  A            
 deduction would need to be made to allow for this additional                  
 recovery, which would be very difficult to do.                                
 TAPE 96-4, SIDE B                                                             
 Number 000                                                                    
 MR. TILLERY made some reference to attorney's fees, but because of            
 the break in the tape, his comments were incomplete.                          
 MR. TILLERY referred to section 160, page 5, line 30 regarding the            
 prohibition against imposing costs.  This section does not require            
 a property owner to provide information related to an entity which            
 is attempting to formulate a regulation or ordinance attached to a            
 particular parcel of land.  This clause would force the agency to             
 pay for this investigative information.  He used this law in                  
 relation to polluting a salmon stream, but it was unclear as to               
 what conclusions he was attempting to reach with this particular              
 MR. TILLERY then moved to section 110, page 4, which prohibits the            
 adoption of regulations to private property unless it has a least             
 possible effect on the property.  Under section (b) this must be              
 supported by a full analysis of the total economic effect.  As an             
 editorial note, Mr. Tillery pointed out that section (a), line 18,            
 refers to private property and in section (b) there is reference to           
 private real property.                                                        
 MR. TILLERY further added that it seemed this section was                     
 essentially requiring a NEPA (National Environmental Impact Act)              
 statement.  This section would probably be used by people opposed             
 to development or in support of development to thwart the opposing            
 view point.  This would result in agencies going through a lot of             
 expense to compile hugh records of analysis or simply not doing an            
 action.  One concern he has heard from the Alaska Oil & Gas                   
 Conservation Commission (AOGCC) is that they're currently working             
 with the oil companies to come up with a modern set of regulations            
 to governor oil exploration and development.  Because of the                  
 nuances outlined in this legislation, ones which would be                     
 impossible to comply with, they could potentially thwart the entire           
 process.  Mr. Tillery said this appeared to be adding a layer of              
 government, not reducing it, as well as, adding a layer of expense.           
 Number 136                                                                    
 MR. TILLERY moved on to section 190, page 6, line 11 which                    
 concerned the adjustment of value for property tax.  If a taking              
 has been instigated the municipality is required to reduce the                
 property's value.  In part (b), line 17 of this CS, if the owner              
 contests this valuation, the owner can secure an independent                  
 appraiser and apply this value instead.  The State Appraiser after            
 consultation with various municipalities was adamantly opposed to             
 this.  Mr. Tillery stressed that this practice was unprecedented              
 and it was contrary to good appraisal practices.                              
 Number 181                                                                    
 NATURAL RESOURCES testified to the large fiscal note attached to              
 this legislation and cited this as his reasons for being present at           
 the meeting.  This fiscal note was very large, but is accurate as             
 to the buffer zone issue as outlined by Mr. Tillery.  This buffer             
 zone is required by statute and there are hundreds and millions of            
 dollars of trees left standing in these buffers.  As far as                   
 retroactivity, forestry areas are quite often submitted for re-               
 logging as the market changes.                                                
 Number 235                                                                    
 CHAIRMAN PORTER acknowledged that Mr. Tillery had raised a plethora           
 of issues and stated that it would be a great benefit to the                  
 committee and sponsor if he could put his concerns on paper in                
 order that the committee could pour over it.  He stated this                  
 legislation would be rescheduled with full notice requirements.               
 Number 350                                                                    
 CHAIRMAN PORTER asked Mr. Tillery about the title to this                     
 legislation having been shortened to "regulatory taking."  Would he           
 be correct in assuming that an agency enforcing a statute under one           
 of these categories of diminishing property values, in dealing with           
 someone that fell within the purviews of this scenario, demanding             
 compensation; could they prevail, notwithstanding a regulation?               
 He referred to page 4, line 15, which read, "A governmental entity            
 may not adopt, amend, or repeal a regulation or ordinance relating            
 to private property, or impose..."  He pointed out there was no               
 mention of a statute.                                                         
 Number 405                                                                    
 MR. TILLERY stated that the legislature could not be bound to not             
 adopt, amend or repeal a statute.  These can always be changed, but           
 he pointed out that this section wasn't the takings clause.  This             
 one particular clause related to adopting a regulation.  In no way            
 can a legislature be bound from changing the timber buffer law, for           
 Number 418                                                                    
 CHAIRMAN PORTER stated that if for some reason the timber buffer              
 law were revisited and revised, say for example, to 100 feet from             
 60 feet, hence reducing the property value.  If there were no                 
 regulation that applied under this scenario, but a clause in the              
 statute needed to be enforced.  Does the statute then result in a             
 taking that would fall into the compensation requirement?                     
 Number 450                                                                    
 MR. TILLERY said the statute would not result in a taking, but the            
 executive branch's implementation would result in a taking that               
 would require compensation.                                                   
 Number 465                                                                    
 CHAIRMAN PORTER responded that in other words they were not talking           
 here about regulations that seem to exceed a statute, but about               
 regulations that implement the intent of the statute.                         
 Number 474                                                                    
 MR. TILLERY said that was correct.  Theoretically regulations are             
 not really the issue here because a regulation can't exist outside            
 of a statute.  A regulation has to be empowered by a statute.  Even           
 if all the regulations were done away with, the bureaucracy                   
 implementing the statute would still be in effect.                            
 Number 489                                                                    
 REPRESENTATIVE FINKELSTEIN pointed out that all existing property             
 that anyone owns in Alaska was bought with existing regulations as            
 a constraint on price.  If he was to predict this bill's passage              
 and purchase land along a stream with timber, the state might be              
 required to pay for every tree within his buffer zones, and he                
 would become a millionaire.  The only other option would be to log            
 the land right down to the stream.                                            
 Number 604                                                                    
 CHAIRMAN PORTER adjourned the House Judiciary Committee meeting at            
 3:40 p.m.                                                                     

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