04/16/2004 01:20 PM House JUD
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ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
April 16, 2004
1:20 p.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative Jim Holm
Representative Dan Ogg
Representative Ralph Samuels
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
Representative Tom Anderson, Vice Chair
COMMITTEE CALENDAR
SENATE BILL NO. 344
"An Act relating to the Uniform Probate Code and trusts,
including pleadings, orders, nonprobate assets, estates of
decedents, minors, protected persons, incapacitated persons,
guardians, conservators, trustees, foreign trusts, principal and
income, and transfer restrictions; relating to corporate voting
trusts; and providing for an effective date."
- MOVED HCS SB 344(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 546
"An Act relating to regulation of the discharge of pollutants
from timber-related activities under the National Pollutant
Discharge Elimination System; relating to waste treatment and
disposal permits; making conforming amendments; and providing
for an effective date."
- MOVED CSHB 546(JUD) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 300(FIN)
"An Act relating to an attorney's lien, to court actions, and to
other proceedings where attorneys are employed; and providing
for an effective date."
- MOVED HCS CSSB 300(JUD) OUT OF COMMITTEE
HOUSE BILL NO. 309
"An Act prohibiting the release of nonindigenous predatory fish
into public water."
- HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE
CS FOR SENATE BILL NO. 276(FIN)
"An Act relating to the Alaska Insurance Guaranty Association;
relating to the powers of the Alaska Industrial Development and
Export Authority concerning the association; and providing for
an effective date."
- HEARD AND HELD
CS FOR SENATE BILL NO. 269(CRA)
"An Act relating to access to library records, including access
to the library records of a child by a parent or guardian."
- BILL HEARING POSTPONED TO 04/19/04
CS FOR SENATE BILL NO. 288(JUD)
"An Act relating to temporary custody hearings, and to certain
determinations concerning placement of a child in child-in-need-
of-aid proceedings; and providing for an effective date."
- BILL HEARING POSTPONED TO 04/19/04
PREVIOUS COMMITTEE ACTION
BILL: SB 344
SHORT TITLE: TRUSTS/ESTATES/PROPERTY TRANSFERS
SPONSOR(S): SENATOR(S) SEEKINS
02/16/04 (S) READ THE FIRST TIME - REFERRALS
02/16/04 (S) L&C, JUD
03/11/04 (S) L&C AT 1:30 PM BELTZ 211
03/11/04 (S) Moved SB 344 Out of Committee
03/11/04 (S) MINUTE(L&C)
03/12/04 (S) L&C RPT 3DP 1NR
03/12/04 (S) DP: BUNDE, DAVIS, SEEKINS; NR: FRENCH
03/17/04 (S) JUD RPT 2DP 2NR
03/17/04 (S) DP: SEEKINS, THERRIAULT; NR: FRENCH,
03/17/04 (S) OGAN
03/17/04 (S) JUD AT 8:00 AM BUTROVICH 205
03/17/04 (S) Moved SB 344 Out of Committee
03/17/04 (S) MINUTE(JUD)
03/26/04 (S) TRANSMITTED TO (H)
03/26/04 (S) VERSION: SB 344
03/26/04 (H) JUD AT 1:00 PM CAPITOL 120
03/26/04 (H) <Bill Hearing Postponed to 3/29/04>
03/29/04 (H) READ THE FIRST TIME - REFERRALS
03/29/04 (H) JUD
03/29/04 (H) JUD AT 1:00 PM CAPITOL 120
03/29/04 (H) Bill Postponed To 3/30/04
03/30/04 (H) JUD AT 1:00 PM CAPITOL 120
03/30/04 (H) Scheduled But Not Heard
04/14/04 (H) JUD AT 1:00 PM CAPITOL 120
04/14/04 (H) Heard & Held
04/14/04 (H) MINUTE(JUD)
04/16/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 546
SHORT TITLE: POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
03/25/04 (H) READ THE FIRST TIME - REFERRALS
03/25/04 (H) RES, JUD
04/05/04 (H) RES AT 1:00 PM CAPITOL 124
04/05/04 (H) Moved Out of Committee
04/05/04 (H) MINUTE(RES)
04/06/04 (H) RES RPT 6DP 3NR
04/06/04 (H) DP: STEPOVICH, GATTO, LYNN, HEINZE,
04/06/04 (H) MASEK, DAHLSTROM; NR: GUTTENBERG,
04/06/04 (H) KERTTULA, WOLF
04/07/04 (H) FIN REFERRAL ADDED AFTER JUD
04/14/04 (H) JUD AT 1:00 PM CAPITOL 120
04/14/04 (H) Scheduled But Not Heard
04/16/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: SB 300
SHORT TITLE: ATTORNEY'S LIEN
SPONSOR(S): SENATOR(S) STEDMAN
02/06/04 (S) READ THE FIRST TIME - REFERRALS
02/06/04 (S) JUD, FIN
02/09/04 (S) JUD AT 8:00 AM BUTROVICH 205
02/09/04 (S) Heard & Held
02/09/04 (S) MINUTE(JUD)
02/20/04 (S) JUD AT 8:00 AM BUTROVICH 205
02/20/04 (S) Moved SB 300 Out of Committee
02/20/04 (S) MINUTE(JUD)
02/20/04 (S) JUD RPT 3DP 2NR
02/20/04 (S) DP: SEEKINS, THERRIAULT, OGAN;
02/20/04 (S) NR: ELLIS, FRENCH
03/11/04 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/11/04 (S) -- Meeting Canceled --
03/23/04 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/23/04 (S) Moved SB 300 Out of Committee
03/23/04 (S) MINUTE(FIN)
03/24/04 (S) FIN RPT CS 6DP 1NR NEW TITLE
03/24/04 (S) DP: GREEN, WILKEN, DYSON, HOFFMAN,
03/24/04 (S) BUNDE, STEVENS B; NR: OLSON
03/29/04 (S) TRANSMITTED TO (H)
03/29/04 (S) VERSION: CSSB 300(FIN)
03/31/04 (H) READ THE FIRST TIME - REFERRALS
03/31/04 (H) JUD, FIN
04/16/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 309
SHORT TITLE: PROHIBIT RELEASE OF PREDATORY FISH
SPONSOR(S): REPRESENTATIVE(S) WOLF
05/08/03 (H) READ THE FIRST TIME - REFERRALS
05/08/03 (H) FSH, RES
05/16/03 (H) FSH AT 7:30 AM CAPITOL 124
05/16/03 (H) Heard & Held
05/16/03 (H) MINUTE(FSH)
03/22/04 (H) FSH AT 9:00 AM CAPITOL 124
03/22/04 (H) Moved CSHB 309(FSH) Out of Committee
03/22/04 (H) MINUTE(FSH)
03/24/04 (H) FSH RPT CS(FSH) NT 3DP 2NR
03/24/04 (H) DP: GARA, WILSON, SEATON; NR: OGG,
03/24/04 (H) GUTTENBERG
03/31/04 (H) RES AT 1:00 PM CAPITOL 124
03/31/04 (H) Heard & Held
03/31/04 (H) MINUTE(RES)
04/01/04 (H) JUD REFERRAL ADDED AFTER RES
04/05/04 (H) RES AT 1:00 PM CAPITOL 124
04/05/04 (H) Heard & Held
04/05/04 (H) MINUTE(RES)
04/07/04 (H) RES AT 1:00 PM CAPITOL 124
04/07/04 (H) Moved CSHB 309(RES) Out of Committee
04/07/04 (H) MINUTE(RES)
04/08/04 (H) RES RPT CS(RES) NT 1DP 3NR 5AM
04/08/04 (H) DP: WOLF; NR: LYNN, GUTTENBERG,
04/08/04 (H) DAHLSTROM; AM: HEINZE, STEPOVICH,
04/08/04 (H) GATTO, KERTTULA, MASEK
04/16/04 (H) JUD AT 1:00 PM CAPITOL 120
BILL: SB 276
SHORT TITLE: ALASKA INSURANCE GUARANTY ASSOCIATION
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
01/23/04 (S) READ THE FIRST TIME - REFERRALS
01/23/04 (S) L&C, FIN
02/03/04 (S) L&C AT 1:30 PM BELTZ 211
02/03/04 (S) Heard & Held
02/03/04 (S) MINUTE(L&C)
02/10/04 (S) L&C AT 1:30 PM BELTZ 211
02/10/04 (S) Heard & Held
02/10/04 (S) MINUTE(L&C)
02/17/04 (S) L&C AT 1:30 PM BELTZ 211
02/17/04 (S) Moved CSSB 276(L&C) Out of Committee
02/17/04 (S) MINUTE(L&C)
02/18/04 (S) L&C RPT CS 3DP 1DNP NEW TITLE
02/18/04 (S) LETTER OF INTENT WITH L&C REPORT
02/18/04 (S) DP: BUNDE, SEEKINS, STEVENS G;
02/18/04 (S) DNP: FRENCH
02/27/04 (S) FIN AT 9:00 AM SENATE FINANCE 532
02/27/04 (S) Heard & Held
02/27/04 (S) MINUTE(FIN)
03/22/04 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/22/04 (S) Moved CSSB 276(FIN) Out of Committee
03/22/04 (S) MINUTE(FIN)
03/22/04 (S) FIN RPT CS 3DP 4NR NEW TITLE
03/22/04 (S) DP: GREEN, WILKEN, STEVENS B;
03/22/04 (S) NR: DYSON, HOFFMAN, BUNDE, OLSON
04/02/04 (S) TRANSMITTED TO (H)
04/02/04 (S) VERSION: CSSB 276(FIN)
04/05/04 (H) READ THE FIRST TIME - REFERRALS
04/05/04 (H) L&C, JUD, FIN
04/07/04 (H) L&C REFERRAL WAIVED
04/16/04 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
BRIAN HOVE, Staff
to Senator Ralph Seekins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Responded to questions during discussion of
SB 344 on behalf of the sponsor, Senator Seekins.
DAVID G. SHAFTEL, Attorney at Law
Law Offices of David G. Shaftel, PC
Anchorage, Alaska
POSITION STATEMENT: Responded to questions during discussion of
SB 344.
ERNESTA BALLARD, Commissioner
Department of Environmental Conservation (DEC)
Juneau, Alaska
POSITION STATEMENT: Presented HB 546 on behalf of the
administration.
JONATHAN TILLINGHAST, Lobbyist
for Sealaska Corporation ("Sealaska")
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 546 and
responded to questions.
TERRY THURBON, Assistant Attorney General
Environmental Section
Civil Division (Juneau)
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Responded to questions during discussion of
HB 546.
DAN EASTON, Director
Division of Water
Division of Environmental Health
Department of Environmental Conservation (DEC)
Juneau, Alaska
POSITION STATEMENT: Responded to questions during discussion of
HB 546.
MILES BAKER, Staff
to Senator Bert Stedman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 300 on behalf of the sponsor,
Senator Stedman.
DAVID S. CASE, Attorney at Law
Landye Bennett Blumstein LLP
Anchorage, Alaska
POSITION STATEMENT: During discussion of SB 300, expressed a
concern, suggested an amendment, and responded to questions.
JO A. KUCHLE, Attorney at Law
Cook Schuhmann & Groseclose, Inc.
Fairbanks, Alaska
POSITION STATEMENT: Assisted with the presentation of SB 300
and responded to questions and comments.
REPRESENTATIVE KELLY WOLF
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 309.
ROB BENTZ, Deputy Director
Division of Sport Fish
Alaska Department of Fish & Game (ADF&G)
Juneau, Alaska
POSITION STATEMENT: Responded to comments and questions during
discussion of HB 309.
LINDA HALL, Director
Division of Insurance
Department of Community & Economic Development (DCED)
Anchorage, Alaska
POSITION STATEMENT: Presented HB SB 276 on behalf of the
administration.
MARTIN PIHL, Chairman
Board of Governors
Alaska Timber Insurance Exchange (ATIE)
Ketchikan, Alaska
POSITION STATEMENT: During discussion of SB 276, provided
comments and suggested changes to the workers' compensation
insurance system in Alaska.
ACTION NARRATIVE
TAPE 04-67, SIDE A
Number 0001
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at 1:20 p.m. Representatives
McGuire, Holm, Ogg, and Gara were present at the call to order.
Representatives Samuels and Gruenberg arrived as the meeting was
in progress.
SB 344 - TRUSTS/ESTATES/PROPERTY TRANSFERS
Number 0033
CHAIR McGUIRE announced that the first order of business would
be SENATE BILL NO. 344, "An Act relating to the Uniform Probate
Code and trusts, including pleadings, orders, nonprobate assets,
estates of decedents, minors, protected persons, incapacitated
persons, guardians, conservators, trustees, foreign trusts,
principal and income, and transfer restrictions; relating to
corporate voting trusts; and providing for an effective date."
Number 0073
REPRESENTATIVE OGG moved to adopt the proposed House committee
substitute (HCS) for SB 344, Version 23-LS1694\H, Bannister,
4/16/04, as the work draft. There being no objection, Version H
was before the committee.
Number 0094
BRIAN HOVE, Staff to Senator Ralph Seekins, Alaska State
Legislature, sponsor, on behalf of Senator Seekins, relayed that
members of the group that created the bill were on line to
answer questions.
REPRESENTATIVE GARA directed attention to page 5, lines 5-10,
subsection (b), which read:
(b) If a trustee petitions a court for an order
approving a report that adequately discloses the
existence of a potential claim, serves the report on
all beneficiaries to be bound by the report, and gives
the beneficiaries at least 90 days' notice of the
court proceeding, all potential claims of the
beneficiaries against the trustee are barred unless
the claims are served on the trustee and filed with
the court within 60 days after the beneficiaries
receive the report.
REPRESENTATIVE GARA asked whether the beneficiaries could still
bring up a claim during the proceeding mentioned in subsection
(b) if the 60-day deadline has passed.
Number 0270
DAVID G. SHAFTEL, Attorney at Law, Law Offices of David G.
Shaftel, PC, replied that according to his understanding of
subsection (b), the claim would have to be asserted during the
60-day period; that claim could then be resolved in that
proceeding or in a separate proceeding. He surmised that if
there are amendments to the claim or matters that a court would
consider to be associated with the claim, the court could
consider those even if the 60-day deadline has passed. In
response to a further question, he said:
If you're having a formal court proceeding and you
have notified the beneficiary that that is occurring,
... they would need to bring those claims within 60
days. ... But certainly I would expect that courts
would allow for a broad variety of amendments to
refine the claim. If the claim was, for example, ...
a matter relating to a certain asset or ... [the fact]
that there's an asset missing or these numbers don't
look right on this account, then that could well be
refined after the 60-day period, but they [would] have
brought the general essence of the claim within the
60-day period.
REPRESENTATIVE GARA asked Mr. Shaftel whether it would be
alright to add language at the end of proposed subsection (b) to
indicate that a claim could also be brought during the
proceeding even if the proceeding occurred after the 60-day
period.
MR. SHAFTEL replied:
In our discussions about this procedure we felt that
for there to be a meaningful court proceeding, that
both sides would need to know what the claims are
before the proceeding began so that they could respond
to them and hopefully resolve them at that point. So
that's why we put in that prior to the actual date of
the proceeding, there'd be a cutoff, and that's why
it's 90 days with a 60-day cutoff, so that the trustee
would know, generally, what claims are being brought,
so the trustee could respond to them at that hearing.
REPRESENTATIVE GRUENBERG directed attention to Section 7 of
Version H and asked Mr. Shaftel whether it meets his needs.
MR. SHAFTEL said yes.
Number 0688
REPRESENTATIVE GARA made a motion to adopt Amendment 1, on page
5, line 14, replace "12 months" with "two years". He indicated
that this change was amenable to those who brought the concept
of the bill forth.
MR. HOVE said if the experts in the industry are amenable to
Amendment 1, so is the sponsor.
MR. SHAFTEL said that his group discussed this proposed change
at length and decided that as long as it wouldn't delay passage
of the bill, they were amenable to it.
Number 0811
REPRESENTATIVE OGG objected to Amendment 1.
CHAIR McGUIRE clarified that Amendment 1 would change "12
months" to "24 months".
Number 0837
A roll call vote was taken. Representatives Gara, Gruenberg,
and McGuire voted in favor of Amendment 1. Representatives Ogg
and Holm voted against it. Therefore, Amendment 1 was adopted
by a vote of 3-2.
Number 0846
REPRESENTATIVE HOLM moved to report the proposed HCS for SB 344,
Version 23-LS1694\H, Bannister, 4/16/04, as amended, out of
committee with individual recommendations and the accompanying
[zero] fiscal notes. There being no objection, HCS SB 344(JUD)
was reported from the House Judiciary Standing Committee.
HB 546 - POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL
Number 0883
CHAIR McGUIRE announced that the next order of business would be
HOUSE BILL NO. 546, "An Act relating to regulation of the
discharge of pollutants from timber-related activities under the
National Pollutant Discharge Elimination System; relating to
waste treatment and disposal permits; making conforming
amendments; and providing for an effective date."
Number 0906
ERNESTA BALLARD, Commissioner, Department of Environmental
Conservation (DEC), said that HB 546 will allow the department,
and therefore the state, to achieve its environmental goals
while streamlining its permitting process. She went on to say:
House Bill 546 has to do with state primacy for a
portion of the Clean Water Act. The Clean Water Act
was designed by the United States Congress for
implementation by the states. Forty-five states fully
implement the permitting section of the Clean Water
Act, only five do not; we are one of the five states
that do not fully implement the provisions the Clean
Water Act designed for implementation at the state
level. There are two key sections that I want to call
your attention to today so I can explain to you how it
is that [HB 546] will allow us to continue to achieve
our environmental goals while streamlining our permit
process, and those two sections are Sections 402 and
401 of the Clean Water Act.
Section 402 is the section of the Act which charges
the permitting agency, currently the [U.S.]
Environmental Protection Agency [EPA], ... with
permitting discharges to the nation's water. Section
401 is the section of the Act which requires the state
to [ensure] ... that a permit written under the Clean
Water Act will achieve and maintain state water
quality standards. The way this is presently
organized in the five states, including Alaska, in
which there is not state primacy, [is that] the
federal government, through [the] EPA, writes the
discharge permit, and the State of Alaska certifies
that it will achieve state water quality standards.
In other words, it is the state water quality
standards which support both the federal permit and
the state certification. It is the state which
[ensures] ... that its waters will be free from
pollution. The permitting applicant has to deal with
a federal agency and a state agency in order to
[assure] that their discharge will achieve state water
quality standards. This is duplicative, it's an
unnecessary burden on the applicant, [and] it does not
do anything to achieve water quality protection that
the state cannot achieve by itself. Primacy is a
complicated process of negotiation between the state
and [the] EPA. ...
Number 1080
COMMISSIONER BALLARD continued:
The administration had hoped to ask the legislature's
permission to (indisc.) primacy for all industry
segments. House Bill 546 is a pilot case for us - it
asks for permission to achieve primacy just for the
timber industry. And you might [ask] ..., "Why the
timber industry?" And the reason is that the timber
industry ... [is] the industry segment in Alaska in
which the State of Alaska, through the DEC, clearly
has the best expertise between the two agencies - the
federal and the state agency. That reason being that
timber ... used to be a major business for us.
Sadly, it's not so much anymore, but over the course
of the last three years there's been a ... major
administrative proceeding challenging the federal
timber-related permit, and the state has taken the
labor (indisc.) to do the clarifying work and the
analysis necessary to bring that matter to conclusion.
So the timber industry and the state agreed, and the
other industry sectors - the seafood, the mining, the
oil and gas, and the municipal discharge, which are
the major other industry sectors - have all agreed
that this is a good test pilot for us to see how
primacy will work with [the] DEC assuming that
responsibility under the Clean Water Act.
That's what [HB 546] is all about. It does, in
summary, then, two things: it ... partially fulfills
the state's responsibility, under the Clean Water Act,
to assume primacy; and, more importantly, it directly
addresses the state's responsibility, articulated by
the legislature in Title 46, that we will maintain our
natural resources safe from pollution for the social
and economic wellbeing of our own people. I'd be
happy to answer questions ....
Number 1170
REPRESENTATIVE HOLM asked for clarification regarding the fiscal
note.
COMMISSIONER BALLARD said:
In my remarks I pointed out that ... Section 402 of
the Clean Water Act is intended for state
implementation. In order to achieve primacy, even for
one industry sector, we need to work out with [the]
EPA all of the regulatory structure that would be
necessary to achieve primacy for all industry sectors.
[With regard to] the two-year fiscal note, for fiscal
years '05 and '06, in which you see operating expenses
of roughly $400,000 each year - ... half of which will
be offset by an EPA grant - those expenses are
regulatory expenses to write the regulations.
We need to work through, in specific detail with [the]
EPA, what our regulatory structure will be for
enforcement, for inspection, for fines, for compliance
- what the regulations will actually look like. So
there's a labor-intensive, upfront cost to put the
regulations in place, and then the ongoing operating
costs, which ... [are] referred to in the out years,
of ... [$132,000] is simply the cost of a single
employee running the program and the associated
overhead with that employee. So that would be an
addition of one to our staff of roughly 24-25 people
that we have in our water program already.
COMMISSIONER BALLARD, in response to questions on an unrelated
topic, mentioned that under certain circumstances,
municipalities can seek a "301 H Waiver" from treatment
provisions of the Clean Water Act; that municipalities
throughout Southeast Alaska have such a waiver; and that small
boats are required by the U.S. Coast Guard to have marine
toilets and are prohibited from discharging them into Alaska
waters.
Number 1498
COMMISSIONER BALLARD, in response to another question about the
fiscal note, relayed that the federal receipts for fiscal years
'05 and '04 are only available for developing regulations to
achieve primacy. On the issue of why the state should seek to
take over administration of the permitting program, she said:
The federal government is not set up to run a
permitting program for any state, much less a state as
large and complex as the state of Alaska. We were
called on not too long ago by ... a state industry
that asked whether we could help them (indisc) NPDES
[National Pollutant Discharge Elimination System]
discharge permit, ... [when the] EPA told them they'd
have to wait three years before even the file could be
opened. [The] EPA is not staffed to accommodate
running a program that is designed to [be run] by
states; they do it by default because the five states
that haven't asked for primacy haven't done so, but
the EPA program is a very process-driven, inflexible
program. The state uses risk-based tools. ...
Through its certification that a discharge will meet
water quality standards, the state uses a number of
site-specific, risk-based tools such as a mixing zone,
sight specific criteria, naturally occurring
conditions - any number of similar modifications to
permit conditions. ... Because it's a state program,
we are able to use state authorities to make those
kinds of risk-based decisions about a discharge.
[With the] EPA (indisc. - coughing) at the end of the
pipe, you have to meet our numeric standards or you
don't get a discharge. ... There'd be no ability in
this state at all for seafood processors, for
municipal treatment plants, for any of the permit
holders to discharge if the state were not able,
through the 401 part of the permit process, to use
those site-specific and risk-based tools.
So our permit applicants are now, basically, needing
two permits - they need to get a federal permit and a
state permit; it's the state permit which gives them
the tools that they need to operate, [and] it's the
state permit that protects state water quality
standards. The federal permit is simply a placeholder
until the state is able to take responsibility for
this program.
Number 1601
REPRESENTATIVE GARA asked what the state will get in return for
the money it spends in developing this program.
REPRESENTATIVE OGG opined that that is a question that should be
asked in the House Finance Committee, not the House Judiciary
Standing Committee.
REPRESENTATIVE GARA disagreed.
COMMISSIONER BALLARD, in response to questions regarding the
notice provision of Section 5, said:
We've attempted, in this administration, to get all of
our notice procedures to conform to the ...
Administrative Procedure Act (APA), so ... this was a
conforming change that attempted to do that. As a
practical matter, the department generally has more
notice than less notice; our permits tend to be
controversial and they also tend to be interesting to
many stakeholders. The only comment I guess I would
have for the committee about any proposed amendment
here is, if you do change the language here, perhaps
you could at least change it to be consistent with the
other language which went through our other water
bill, which has already gone through the House, so
that at least we'd have consistent public notice
requirements within the department.
CHAIR McGUIRE observed that in many small towns there may only
be one publication.
REPRESENTATIVE GRUENBERG clarified that he wants the notice to
be published twice, that it must appear in two different
publications.
MS. BALLARD suggested changing "one publication" on page 3,
lines 26-27, to "two publications".
Number 1836
REPRESENTATIVE GRUENBERG made a motion to adopt the foregoing
suggestion as Amendment 1. There being no objection, Amendment
1 was adopted.
Number 1873
JONATHAN TILLINGHAST, Lobbyist for Sealaska Corporation
("Sealaska"), said Sealaska supports HB 546, and offered to
answer questions from a regulated industry's perspective.
REPRESENTATIVE GARA asked what activity the state will get via
passage of HB 546.
MR. TILLINGHAST replied that the existing process costs Sealaska
a great deal of money that it shouldn't need to spend because it
has to get two permits for a single activity.
CHAIR McGUIRE surmised that Representative Gara's question is,
what can Sealaska do better or differently if HB 546 is passed.
MR. TILLINGHAST replied: "We will have more money available to
spend on productive economic activity in the state of Alaska if
this bill passes, because we won't have to spend it in Seattle
chasing EPA bureaucrats."
REPRESENTATIVE GARA, expressing a desire to understand the bill
before moving it from committee, relayed that his concern is
whether passing HB 546 constitutes good policy.
REPRESENTATIVE GRUENBERG turned attention to page 5, lines 8 and
12, and pointed out that the language in essence reads in part:
"(b) The department may modify a permit ... for a permit issued
under a federally approved program". He suggested that "for a
permit" should be deleted so that the language would then read
in part: "(b) The department may modify a permit ... issued
under a federally approved program".
Number 2074
TERRY THURBON, Assistant Attorney General, Environmental
Section, Civil Division (Juneau), Department of Law (DOL),
replied:
The purpose for the modifier for a permit is to limit
this particular cause for modification to just these
federal Clean Water Act permits.
REPRESENTATIVE GRUENBERG said he understood that concept, but
reiterated his belief that as currently written the language
appears to be duplicative.
CHAIR McGUIRE agreed.
MS. THURBON indicated agreement as well, and surmised that the
error might have occurred because of the use of residual
language from when the [DEC] was doing much more with this
section of law.
Number 2138
CHAIR McGUIRE made a motion to adopt Amendment 2, to delete "for
a permit" from page 5, line 12. There being no objection,
Amendment 2 was adopted.
REPRESENTATIVE GRUENBERG directed attention to Section 3 on page
3, lines 4-10, and opined that a reading of the proposed new
paragraph does not indicate what it modifies. He suggested that
they make a technical amendment for the purpose of having the
forthcoming CS contain that information.
MS. THURBON said she had no objection to that, adding that the
statute being amended by Section 3 is merely a list of powers
and duties the DEC has and starts with the phrase, "The
department may".
CHAIR McGUIRE surmised that an amendment would not be needed;
rather, committee staff could simply ask the drafter to include
that information in the forthcoming CS.
REPRESENTATIVE GARA asked whether the DEC will be able to pass
on the costs for implementing the program onto those that will
be getting the permits.
MS. THURBON said they are anticipating user fees from the
industry, since the bill contains a provision that says the
department's authority to collect user fees would apply to this
program.
Number 2246
DAN EASTON, Director, Division of Water, Division of
Environmental Health, Department of Environmental Conservation
(DEC), explained that the DEC charges an annual fee associated
with log transfer facility permits, and that of the
approximately $130,000 annual cost of implementing the primacy
program, the DEC anticipates recovering about $30,000.
REPRESENTATIVE GRUENBERG directed attention to Section 4, and
asked why they were eliminating the 60-day period referenced
therein.
MR. EASTON replied:
This is a conforming amendment. ... In order to
qualify for primacy, we would have to use the EPA
regulations. The EPA regulations, instead of 60 days,
require 180 days notice prior to commencement, so ...
this would go out of state statute and would be
replaced in regulation ... with a regulation that
conforms to federal regulation that requires 180-day
prior [notice].
REPRESENTATIVE GRUENBERG asked about emergency situations in
which an entity claims it needs to discharge immediately.
MR. EASTON opined that such would not arise because entities
that seek permits to discharge can plan ahead and, thus, would
be capable of complying with the 180-day requirement.
REPRESENTATIVE GRUENBERG asked whether it would be a good idea
to reference, in Section 4, either the 180-day requirement or
the federal regulations, because, as written, Section 4 appears
to take away all time-period requirements.
TAPE 04-67, SIDE B
Number 2374
MS. THURBON said the purpose of striking out the 60-day advanced
filing deadline rather than substituting 180 or a range of
different dates for different programs is to allow the DEC to
use its regulations to set deadlines for advanced filing of
[permits] according to the nature of the program. She added
that AS 46.03.110(a), which is being altered via Section 4,
applies to a broad universe of waste disposal permits including
those in which the department might need only a 30-day advanced
filing deadline. Deleting the language specifying the 60-day
advanced filing deadline would allow the DEC regulatory
flexibility. In response to another question, she explained
that Section 3 would grant the DEC the authority to promulgate
regulations for this particular program.
REPRESENTATIVE GARA, regarding Mr. Tillinghast's comments about
the extra expense of the current permitting procedure, asked
whether the current procedure also results in substantial delay
[of projects].
MR. TILLINGHAST said it can involve substantial delay. He
elaborated:
At the present time, our primary facilities that we
get permits for have a general permit. But it's also
possible in the future, and has been true in the past,
that we have to get individual permits. And [the] EPA
has, at times, just refused to issue them because they
don't have the staff to process them, which leaves the
industry, particularly if it's an existing facility,
in [the] difficult situation of deciding whether to
continue operations unlawfully - because they don't
have a permit - or whether to shut down. It puts the
discharger in a difficult situation, and that's not
something unique to the timber industry; [the] EPA has
its priorities in the state, and naturally their major
facilities - primarily oil and gas and mining
facilities - is where they put their resources first.
CHAIR McGUIRE, after ascertaining that no one else wished to
testify, closed public testimony on HB 546.
Number 2269
REPRESENTATIVE OGG moved to report HB 546, as amended, out of
committee with individual recommendations and the accompanying
fiscal note. There being no objection, CSHB 546(JUD) was
reported from the House Judiciary Standing Committee.
SB 300 - ATTORNEY'S LIEN
Number 2257
CHAIR McGUIRE announced that the next order of business would be
CS FOR SENATE BILL NO. 300(FIN), "An Act relating to an
attorney's lien, to court actions, and to other proceedings
where attorneys are employed; and providing for an effective
date."
Number 2224
MILES BAKER, Staff to Senator Bert Stedman, Alaska State
Legislature, sponsor, presented SB 300 on behalf of Senator
Stedman. He said that SB 300 is a simple bill but one that has
pretty significant benefits for Alaskan taxpayers. Under
current law, Alaskans who win in civil court are taxed on the
gross award including any attorney fees that may be awarded and
which are subsequently passed on to plaintiffs' attorneys. The
Internal Revenue Service (IRS), in effect, is taxing that money
twice, once as income to the plaintiff and again as income to
his/her attorney. For plaintiffs who are private citizens,
there are no federal tax deductions to offset incorporation of
attorney fees into the plaintiff's income, though a corporation
is allowed to take a tax deduction on any attorney fees it
receives as part of its award.
MR. BAKER said that many of the cases in question involve civil
rights issues or employee grievance issues and have zero or very
low monetary damage awards. For example a plaintiff might be
successful in court in a wrongful termination case and get an
award of $5,000 for back pay but have $100,000 in legal fees.
Under current law, such a plaintiff would be taxed on the gross
award of $105,000 even though $100,000 is being passed through
to the plaintiff's attorney. The current law has the effect, he
opined, of penalizing victims who seek redress through the
courts in an effort to change illegal or inappropriate behavior.
MR. BAKER relayed that SB 300 would allow Alaskans to be treated
similar to residents of Oregon with regard to federal taxes.
The bill will clarify that the federal tax on court-awarded
attorney fees are the responsibility of the attorney and not the
plaintiff, and will bring Alaska lien law in line with the
Oregon law, which the 9th Circuit Court of Appeals has held is
effective in eliminating double taxation on attorney fees. He
noted that members' packets contain an article from The Wall
Street Journal that proposes that this is really an issue that
should be addressed by the U.S. Congress but, for a variety of
reasons, it has not yet done so. Senate Bill 300 will make a
minor change in Alaska law that will correct the problem of
double taxation on attorney fee awards.
Number 2090
CHAIR McGUIRE characterized SB 300 as a great bill.
REPRESENTATIVE OGG declared a potential conflict, remarking that
he could be someone who might benefit from not having to pay
taxes on an award of attorney fees. He offered his belief that
because of the Exxon Valdez oil spill, SB 300 could be of great
benefit to a lot of people from coastal Alaska. He commended
the sponsor for coming up with a solution to the problem of
double taxation on awards of attorney fees.
MR. BAKER, in response to a question, explained that SB 300 will
not change an attorney's tax status at all; currently, both
plaintiffs and attorneys are paying taxes on the same money, and
SB 300 will ensure that only the attorneys will be responsible
for paying taxes on the money that's awarded to them as fees.
REPRESENTATIVE OGG concurred with Mr. Baker's statement that
businesses are treated differently than individuals with regard
to taxation of awards for attorney fees.
Number 1969
DAVID S. CASE, Attorney at Law, Landye Bennett Blumstein LLP,
shared his concern that SB 300 could have the unintended
consequence of giving lawyers an ironclad guarantee for their
liens on, among other things, the records of the clients they
may have. He gave an example of an attorney with a conflict of
interest who'd held on to a former client's records while
attempting to enforce a lien. He mentioned that the Alaska
Supreme Court, in the Miller v. Paul case, laid out the factors
it considered to be important in determining whether a lien [by]
an attorney should be allowed. He opined that although the
language in SB 300 is necessary to clarify that an attorney has
a property interest and a firm claim to proceeds of a
settlement, it will also have the unintended consequence of
foreclosing any kind of argument a former client of an attorney
might have that the attorney is not entitled to keep the
client's records.
MR. CASE suggested adding to page 1, line 9, after "action",
language that said: ";provided that, nothing herein precludes a
party from contesting an attorney's lien under applicable law.".
REPRESENTATIVE GRUENBERG indicated that he would be offering
such language as a conceptual amendment later in the meeting.
Number 1842
JO A. KUCHLE, Attorney at Law, Cook Schuhmann & Groseclose,
Inc., offered the following comments:
[Mr. Baker] did a good job laying out why [SB 300 is]
very important from a tax point of view. We have
hoped for many years that Congress would fix this
problem, [but] they haven't. There is a split among
the various ... federal court circuits throughout the
country, and there's actually a split within the 9th
Circuit [Court of Appeals], which is our own circuit.
As [Mr. Baker relayed] ... Oregon's lien [statute is]
different than Alaska's, so an Oregon taxpayer gets a
very different tax result than an Alaskan taxpayer ...
[or] a Californian taxpayer.
And we don't have any hope that the [U.S.] Supreme
Court's going to hear it. The ... U.S. Supreme Court,
even though there's been a split among the circuits,
has turned down this issue for years, and we don't
really hold out much hope that that's going to happen
anytime in the near future, and it does create very
inequitable results because individuals ... can't
deduct the attorney fees ..., particularly where
there's the implication of the alternative minimum
tax. So it's a very important change to the attorney
lien law, and I would encourage the committee to pass
the bill as written.
I'm interested in Mr. Case's technical amendment,
[but] my only concern would be ..., because ... [I
haven't had a] chance to compare it to the Oregon law,
I would hate to have gutted this bill by adding
something that the IRS could hang its hat on in some
way and say, "Oh, well, it's different", [and] so we'd
still get the same tax result because it's not like
Oregon's [law]. ... At first glance, I don't think
[the suggested amendment] really changes any rights
that an Alaskan already has.
You can fight [about your attorney fees] ... with your
attorney, there are grievance procedures through the
Alaska Bar [Association] ..., [and] there is an ethics
opinion ... that an attorney may not hold the records
of a client if that would preclude the client's
ability to pursue their case. So if records are the
issue, I think that's already covered as far as an
attorney's ability to keep those records because you
can't, ethically, if it's going to impair the client's
ability to pursue [his/her] case. ...
Number 1629
REPRESENTATIVE GRUENBERG offered his belief that Mr. Case's
suggested language would be helpful, and suggested that they
also add an intent section to the bill.
MS. KUCHLE surmised that adding an intent section would not be
harmful in and of itself, but cautioned against changing the
bill such that it becomes too different from Oregon law, which
is very specific and has been shown to work, in a variety of
cases, before the 9th Circuit Court of Appeals.
MR. BAKER noted that a significant amount of work went into the
creation of SB 300 so as to ensure that Alaska's law regarding
this issue would be just like Oregon's law. He reiterated that
the language of Oregon's law, which is contained in the bill as
written, has worked in cases before the 9th Circuit Court of
Appeals. He shared his concern that changing the language could
negate the purpose of the bill.
CHAIR McGUIRE remarked that the bill addresses a very complex
area of law.
REPRESENTATIVE GRUENBERG reiterated his belief that they should
add an intent section to the bill.
MR. CASE said he is not trying to derail SB 300, but reiterated
his aforementioned concern that the bill, as currently written,
could have the result of foreclosing any kind of argument a
former client of an attorney might have that the attorney is not
entitled to keep the client's records.
CHAIR McGUIRE indicated agreement with Mr. Case's point, and
suggested that the committee adopt the suggested language and
research the issues raised, between now and when the bill goes
to the House floor; if the committee subsequently discovers that
something in the bill needs to be fixed, a floor amendment can
be offered to address the problem.
MS. KUCHLE reiterated her concern about changing the language
such that it varies too greatly from Oregon's language. The
intent of bill, she pointed out, is to create a significant-
enough property interest in the lawyer so that [the award of
attorney fees] is just taxed to the lawyer.
Number 1180
REPRESENTATIVE GRUENBERG asked Ms. Kuchle to research the effect
an intent section might have on the bill with regard to how the
IRS might interpret it.
MS. KUCHLE agreed to do so.
MR. BAKER offered his understanding that currently, an attorney
has a right to a lien for compensation regardless of the change
proposed via SB 300, and that the court currently has the
ability to award attorney fees across a broad [spectrum] of
civil lawsuits.
REPRESENTATIVE GRUENBERG offered his belief that state law
provides that if one is foreclosing on any kind of a lien, one
can get actual attorney fees.
CHAIR McGUIRE noted that a memorandum from Legislative Legal and
Research Services highlights a possible conflict with the bill:
The new language prohibits parties from extinguishing
or affecting an attorney's lien, including by
settlement. However, AS 34.35.430(a)(4) allows a
special agreement to change the amount of costs that
constitute a lien. Is AS 34.35.430(a)(4) consistent
with your intent? If not, do you want to delete the
special agreement language from AS 34.35.430(a)(4)?
CHAIR McGUIRE remarked that the memorandum helps to highlight
that there are other statutory mechanisms that allow discussion
of the lien itself and other issues such as those raised by Mr.
Case, and that it also raises the question of whether the
language in AS 34.35.430(a)(4) does anything to undermine the
intent of creating a real and distinct property interest for the
lawyer.
MS. KUCHLE said she agrees that there are alternative ways for
lawyers deal with getting paid, but does not believe that AS
34.35.430(a)(4) creates any kind of problem as far creating a
property right in the view of the IRS.
REPRESENTATIVE GRUENBERG indicated agreement with Ms. Kuchle.
CHAIR McGUIRE posited that the memorandum also somewhat
addresses Mr. Case's concern.
MR. CASE relayed that he still has concerns with the bill as
written.
CHAIR McGUIRE ascertained that no one else wished to testify on
SB 300.
Number 0748
REPRESENTATIVE GRUENBERG made a motion to adopt Conceptual
Amendment 1, to add to page 1, line 9, after "action", language
that said: "; provided that nothing herein precludes a party
from contesting an attorney's lien under applicable law.".
CHAIR McGUIRE noted that the drafter would have the leeway to
use whatever punctuation is appropriate.
Number 0674
REPRESENTATIVE OGG objected to Conceptual Amendment 1. He said
he would prefer that this amendment be made on the House floor
so as to allow some research into the issues raised.
REPRESENTATIVE GRUENBERG indicated a preference for adopting
Conceptual Amendment 1 now, and said that if someone finds a
problem with it after it's adopted, he would be willing to make
an amendment, either in the House Finance Committee or on the
House floor, to cure it.
REPRESENTATIVE HOLM relayed that he objected to adopting
Conceptual Amendment 1, and indicated a preference for allowing
the House Finance Committee to address the issue of whether to
adopt the language proposed by Conceptual Amendment 1.
Number 0474
A roll call vote was taken. Representatives Gara - with the
caveat of committing to change it later should a problem arise -
Gruenberg, Samuels, and McGuire - with the caveat of committing
to change it later should a problem arise - voted in favor of
Conceptual Amendment 1. Representatives Ogg and Holm voted
against it. Therefore, Conceptual Amendment 1 was adopted by a
vote of 4-2.
Number 0441
REPRESENTATIVE GRUENBERG moved to report CSSB 300(FIN), as
amended, out of committee with individual recommendations and
the accompanying zero fiscal notes. There being no objection,
HCS CSSB 300(JUD) was reported from the House Judiciary Standing
Committee.
HB 309 - PROHIBIT RELEASE OF PREDATORY FISH
Number 0418
CHAIR McGUIRE announced that the next order of business would be
HOUSE BILL NO. 309, "An Act prohibiting the release of
nonindigenous predatory fish into public water." [Before the
committee was CSHB 309(RES).]
Number 0402
REPRESENTATIVE KELLY WOLF, Alaska State Legislature, sponsor,
relayed that HB 309 "ran into a glitch" in the House Resources
Standing Committee and was therefore referred to the House
Judiciary Standing Committee. House Bill 309 addresses the
issues of knowingly transporting predatory fish from one body of
water in the state to another and of importing predatory fish
into the state. Using the Kenai Peninsula as an example, he
relayed that within the last two years, the Alaska Department of
Fish & Game (ADF&G) spent nearly $40,000 poisoning a lake that
had had "yellow perch" - a predatory fish - introduced into it.
REPRESENTATIVE WOLF noted that it is currently against state law
to transport fish without a permit, but pointed out that in the
past, people have transported northern pike into places on the
Kenai Peninsula and in "the valley," though that type of fish is
nonindigenous to those areas. Such behavior can cause huge
impacts on local economies, he remarked, adding that this year,
the ADF&G, through a grant from the U.S. Department of Fish and
Wildlife, used hoop nets to catch and dispose of northern pike
from two lakes on the Kenai Peninsula. He suggested that having
an invasion of northern pike on Alaska's natural salmon runs
would be devastating to Alaska's economy.
REPRESENTATIVE WOLF posited that the question before the
committee is, does the legislature want to hold people
accountable when they choose to transport and release
nonindigenous predatory fish into Alaska's waters simply because
they have a desire to catch northern pike, for example, "in
their back yard."
CHAIR McGUIRE indicated that she likes the inclusion of a
definition section in the bill. Directing attention to page 1,
line 13, she asked what is meant by the phrase, "generally
accepted conduct in relation to permitted commercial fishing".
REPRESENTATIVE WOLF explained that it is common practice for
commercial fisherman to transport live crab in their holds, and
he did not want to interfere in that practice; therefore, the
aforementioned language was included in the bill as an exemption
for permitted commercial fishing activities.
TAPE 04-68, SIDE A
Number 0092
REPRESENTATIVE OGG added that in the crabbing industry it is
possible to get crab from one location, transport it live to
another location, and in the process release eggs and undersized
crabs in an area in which that type of crab is not normally
found.
REPRESENTATIVE GARA offered his belief that in the sport fishing
industry, it is not really possible to accidentally drop a live
fish from one drainage into another drainage.
CHAIR McGUIRE pointed out, however, that in at-sea sport fishing
vessels, there are live holding tanks, and so it might be
possible to accidentally infest a particular area with fish that
do not normally occupy that area.
Number 0310
ROB BENTZ, Deputy Director, Division of Sport Fish, Alaska
Department of Fish & Game (ADF&G), concurred that it is possible
for commercial crab fishermen to transport one type of crab to
an area in which it wouldn't ordinarily be found. He remarked
that although the same may be true to some extent for sport
fishing, the transported fish/crab would not be transported
hundreds of miles such as might be possible in the case of
commercial crab fishing.
CHAIR McGUIRE, raised the issue of transporting live bait, and
indicated that she did not want to make criminals out of people
who are simply engaging in common practice, whether it be
commercial fishing or sport fishing.
MR. BENTZ offered his belief that such would not happen under
the bill, adding that the Board of Fisheries recently adopted a
statewide regulation that specifically allows sport anglers to
use, possess, hold, and transport live fish as bait in salt
waters.
CHAIR McGUIRE asked whether there would be any harm in amending
page 1, lines 13-14, to say, "generally accepted conduct in
relation to permitted commercial fishing and sport fishing
activities."
MR. BENTZ said he wouldn't have a problem that language so long
as the word "saltwater" was added between "permitted" and
"commercial"; such would ensure that if an aquatic organism is
caught in the Pacific Ocean, it would only be released in the
Pacific Ocean, and would preclude someone from making the
argument regarding freshwater sport fishing that it is a
generally accepted practice to take pike from the Susitna River
and release them in the Kenai River.
CHAIR McGUIRE, in response to a question, clarified that her
suggestion, then, would be to change page 1, lines 13-14, to
say, "(3) generally accepted conduct in relation to saltwater
permitted commercial fishing or sport fishing activities."
Number 0524
CHAIR McGUIRE, in response to a question, indicated that that
language would be considered Amendment 1, and that the question
of whether to adopt Amendment 1 was before the committee.
REPRESENTATIVE GARA indicated that he had alternative language.
Number 0581
CHAIR McGUIRE withdrew Amendment 1.
Number 0599
REPRESENTATIVE GARA made a motion to adopt Amendment 2, to
insert "saltwater" between "permitted" and "commercial", and to
insert "or sport" after "commercial" on page 1, line 13. The
effect of Amendment 2 would be to make page 1, lines 13-14,
read: (3) generally accepted conduct in relation to permitted
saltwater commercial or sport fishing.". There being no
objection, Amendment 2 was adopted.
REPRESENTATIVE HOLM - directing attention to subsection (b),
which pertains to ornamental fish - relayed that he'd been in
the pet store business for many years. He said he could
envision the language in subsection (b) making a felon out of
someone who dumps the wastewater from his/her fish tank into a
septic system, since the water in a septic system goes into an
aquifer and ultimately ends up in "the waters of the state". He
then went on to detail the process that some commercial pet
stores use with regard to their ornamental fish tanks. He
expressed the concern that [subsection (b)], as written, is too
broad and may produce unintended consequences.
REPRESENTATIVE WOLF suggested, on page 2, on both lines 1 and 2,
changing "the water of the state" to "a water body of the
state". He posited that such a change would address
Representative Holm's concern.
CHAIR McGUIRE mentioned the term "navigable waters".
REPRESENTATIVE GARA noted that there is already a definition of
"waters of the state" [in subsection (d)(4) of the bill], and it
does not include aquifers. He suggested changing page 2, line
1, to simply say: "ornamental fish into the water of the
state." He indicated his belief that this simplified language
coupled with the definition in subsection (d)(4) should be
sufficient.
REPRESENTATIVE GRUENBERG, noting that the original version of
the bill pertained to predatory fish, asked why the bill should
now pertain to ornamental fish as well as predatory fish.
REPRESENTATIVE WOLF said his intent with HB 309 was to focus on
predatory fish such as northern pike, but through the committee
process the bill has metamorphosed into something far different.
REPRESENTATIVE GRUENBERG asked how members felt about including
the term "predatory" in the bill.
REPRESENTATIVE GARA recalled one instance of an ornamental fish
living in Campbell Creek.
CHAIR McGUIRE reminded the committee of need to be clear about
what kind of conduct it is that leads up to the penalty
currently outlined in the bill - a class C felony. She asked
Mr. Bentz to comment on why the bill no longer says "predatory
nonindigenous fish".
Number 1202
MR. BENTZ pointed out that all aquatic organisms are predatory.
Therefore, a list would be needed to clarify what species the
bill is intended to apply to.
REPRESENTATIVE GRUENBERG opined that they ought to be able to
define, at least generally, the term "predatory fish"; the
department could then establish regulations further listing the
exact species.
MR. BENTZ remarked that although such could be done, two species
that have the potential to cause the greatest harm to Alaska
probably wouldn't be included in a list of "predatory fish" -
one being the "green crab," which is slowly making its way up
the northwest coast and which can cause massive ecological
dislocations; and the other being "zebra mussels."
REPRESENTATIVE GRUENBERG said he was thinking along the lines of
giving the department the flexibility to create a list of
whatever species - be it fish or other organisms - that it
determines could be harmful to Alaska's ecosystems.
REPRESENTATIVE BENTZ mentioned that such a list might be quite
lengthy.
CHAIR McGUIRE remarked: "If you want to make it a serious crime
because of the impacts, which I think we all agree there are, we
should know what type of fish we're talking about so that folks
can avoid that criminal conduct."
REPRESENTATIVE GARA surmised that there are really two problems,
one related to predatory fish and the other related to non-
predatory fish that are diseased. Regarding the latter problem,
it is not possible to anticipate every scenario that might
develop. Therefore, the message the bill sends should be, "You
don't put fish into our wild waters that don't belong there."
Number 1462
CHAIR McGUIRE announced that she is assigning HB 309 to a
subcommittee consisting of Representative Holm, chair;
Representative Gara; and Representative Samuels. She asked the
members of the subcommittee to meet soon and consider the issues
of appropriate penalties and specificity of species for the sake
of clarity.
REPRESENTATIVE SAMUELS asked Mr. Bentz whether the department
has caught anyone releasing pike into streams for malicious
reasons.
MR. BENTZ said they have not apprehended anyone doing it for
malicious reasons; in almost every case, persons have introduced
nonindigenous species so as to have the opportunity to fish for
a species they are familiar with.
REPRESENTATIVE WOLF said that according to conversations he's
had with ADF&G and U.S. Department Fish and Wildlife personnel,
there have been several instances wherein they suspected
individuals transported northern pike to specific bodies of
water within the state, but without being able to actually catch
these individuals releasing fish, the prospects of conviction
are not good.
CHAIR McGUIRE, addressing members of the subcommittee, mentioned
that perhaps staggered penalties might be in order.
REPRESENTATIVE GRUENBERG concurred, suggesting that if someone
intentionally introduces a species into a body of water for the
purpose of fishing a familiar species, that should have a higher
penalty.
MR. BENTZ mentioned that currently, unless specified as
misdemeanors, behavior prohibited by ADF&G regulations results
in violations.
REPRESENTATIVE HOLM, as chair of the subcommittee, asked Mr.
Bentz to provide him with a copy of the current penalties.
REPRESENTATIVE GRUENBERG noted that CSHB 309(RES) contains a
minimum fine of $1,500, and suggested that the subcommittee
consider this issue as well.
Number 1719
CHAIR McGUIRE relayed that HB 309 [CSHB 309(RES), as amended]
would be held over for the purpose of allowing the subcommittee
to meet and discuss the issues raised.
The committee took an at-ease from 3:25 p.m. to 3:35 p.m.
SB 276 - ALASKA INSURANCE GUARANTY ASSOCIATION
[Contains mention that HB 403, companion bill to SB 276, has
been heard briefly by the committee; contains mention of support
for HB 540.]
Number 1739
CHAIR McGUIRE announced that the final order of business would
be CS FOR SENATE BILL NO. 276(FIN), "An Act relating to the
Alaska Insurance Guaranty Association; relating to the powers of
the Alaska Industrial Development and Export Authority
concerning the association; and providing for an effective
date."
CHAIR McGUIRE reminded members that the committee briefly heard
the companion bill, HB 403, at a prior meeting.
Number 1758
LINDA HALL, Director, Division of Insurance, Department of
Community & Economic Development (DCED), in presenting SB 276,
relayed:
The [Alaska Insurance Guaranty Association] has a
purpose to minimize financial loss to claimants and
policyholders. The [Alaska Insurance Guaranty
Association Fund], due to the insolvency of four
workers' compensation [insurance] carriers, has run
out of ... money. ... The next step, when there are no
funds available, is to prorate claims, and in that
process we would see lost wages and medical benefits
to injured workers prorated. ... Workers' compensation
is an obligation of the employer; [when the Alaska
Insurance Guaranty Association runs out of money], the
employer would then inherit the financial obligations
for workers' compensation benefits.
I put in your packet a ... spreadsheet ... [that]
shows a projection of the monies needed to fund the
[Alaska Insurance Guaranty Association]. The most
controversial provision of this bill has been the
assessment on other lines. [The] first provision of
the bill would be to increase the assessment on the
line in which the insolvency occurred, which, in this
case, is workers' compensation. That would raise,
from 2 percent that [is the] current statutory cap, to
4 [percent] in times of need. These assessments are
only made when there is a need for cash; they do not
accumulate money, they do not keep balances.
Number 1839
[For] the year 2004, the assessment on the other lines
of business would be [.19 percent] .... To put that
into some perspective, on a $650 premium, ... that
[.19 percent] ... would generate [a] $1.24 assessment.
So we're talking, really, a fairly minimal amount of
money and impact. In 2005, because there's no carry-
forward money, that assessment on the other lines
would be .47 percent - less than half a percent; [the]
same policy premium of $650 would generate a $3.06
assessment. At that point, that assessment on the
other lines would go away, as you can see, when you go
down to 2006. There would no longer be a need for
that assessment. In fact, in 2006, the assessment on
the workers' compensation account would begin to drop
to 3.37 [percent], [to] 2.48 [percent in 2007], and
ultimately that will also go back down.
MS. HALL continued:
And I would emphasize again that there are no
assessments unless there is an analysis by an actuary
determining there is a cash need projected for the
upcoming year. The only other thing I'd like to show
you, and it's not something I can pass out because
it's quite confidential, ... is this list. I have
eight pages here, double columns, of employers who
will get back $20 million in [workers' compensation]
benefit obligations.
... We have a wide range of employers who will, if we
don't do something to fund this, get this obligation
back. I think this could put people out of business.
I think the financial obligation will be overwhelming
to Alaskan businesses. Today there are ... 370
[businesses] and 579 injured workers who have claims
.... Some of these employers no longer exist; there
will be no place for those employees to go for their
benefits. But I think when we have 370 employers who
do not anticipate getting back a $20 million
[obligation], we need to look at that. ... The bill in
front of you is the identical bill that you saw in HB
403 ....
Number 1985
CHAIR McGUIRE surmised that SB 276 attempts to address a current
crises, and that in subsequent years, it is anticipated that the
assessment on other lines will not be necessary though would
still be available.
MS. HALL concurred, adding that statute requires an actuarial
analysis and determination of the projected cash needs of the
upcoming year before an assessment is allowed. On the bill's
proposed statutory increase of the workers' compensation line
assessment to 4 percent, she said that it would provide a
mechanism by which to deal with future similar crises should any
arise. She predicted that there will be insolvencies in the
future, though hopefully not of the magnitude of the current
four insurance carriers' insolvencies. She detailed the present
market share and aspects of some companies currently writing
workers' compensation insurance policies in Alaska, and said she
has no reason to believe that they face insolvency in the
future. Nonetheless, she remarked, she is hesitant to say that
those companies would never become insolvent, and SB 276 will
provide the tools to ensure that claims are paid under the
mission of the Alaska Insurance Guaranty Association.
REPRESENTATIVE OGG asked Ms. Hall to elaborate on the list she
referred to.
MS. HALL said:
These are people who, in good faith, purchased an
insurance policy from a carrier who's now insolvent.
The [Alaska Insurance Guaranty Association] steps in,
in the case of an insolvency - it's the safety net;
that safety net has now also failed and, while there
would likely be an interruption of benefits to injured
workers, the financial responsibility will go back to
these 370 employers who may or may not ... have a lot
of extra money laying around to take on that
obligation.
Number 2150
MS. HALL, in response to question, said she didn't know how many
of the companies on the list are no longer in business nor how
many of their employees are now left without benefits. In
response to further questions, she said that the "assigned risk
pool" is considered the market of last resort; that there are
two servicing carriers who handle the claims in this pool just
as if those claims came from their regular clients; that there
is a direct obligation, in this pool, that insurance companies
pay loses; and that this pool is totally separate from the
Alaska Insurance Guaranty Association, which comes into play
only in the case of insolvencies of an admitted insurance
company. She went on to say:
We have today, in the workers' compensation arena,
four insolvent insurers; we have in ... one of the
other accounts a company who wrote predominantly
medical practice who's insolvent. So when there's an
insolvency, then the [Alaska Insurance Guaranty
Association] steps in and stands in the place of that
insolvent carrier to pay claims.
REPRESENTATIVE HOLM asked what happens in situations where a
business buys its own insurance policy that has nothing to do
with "the pool."
MS. HALL pointed out that the pool is not an entity of the State
of Alaska, and that there are 200 insurance companies listed
that write workers' compensation, though 6 or 8 of those are
active in the state and are called voluntary companies. She
noted that sometimes a group of businesses in a similar industry
will join together and purchase an association policy that will
ultimately pay dividends; in such instances, the rates are set,
and any deviation from those rates has to be filed with the
Division of Insurance, which must approve that rate to ensure it
is actuarially sound. The assigned risk pool, however, has a
surcharge rate for people who, typically, either because of size
of loss experience, are unable to obtain insurance in the
voluntary market whether its an association plan or through
another company that writes workers' compensation insurance
policies. Regardless, there will be base rates and the Division
of Insurance approves all of those rates.
MS. HALL, in response to further questions, relayed that
Alaska's workers' compensation statutes make the responsibility
for workers' compensation benefits the obligation of the
employer. This is normally satisfied via purchase of a workers'
compensation insurance policy, though when the insurance company
becomes insolvent, the Alaska Insurance Guaranty Association
becomes the safety net; however, if the Alaska Insurance
Guaranty Association fails, the obligation of paying workers'
compensation benefits comes back to the employer who would be
contacted by [the state].
TAPE 04-68, SIDE B
Number 2354
MS. HALL, in response to questions regarding the accounts that
would be assessed under SB 276, explained that there are three
accounts in the Alaska Insurance Guaranty Association Fund:
workers' compensation; auto, both personal and commercial; and
"other." She relayed that 18 states have a single account and
so any assessments in those states automatically come from all
types of insurance. In Alaska, the "other" account - which is
currently being assessed at about .5 percent predominately for
the failure of a medical malpractice insurance carrier -
includes homeowners' insurance, commercial property insurance,
liability insurance, and medical malpractice insurance. Under
SB 276, the assessment would be done through the insurer, and
the insurer may pass the assessment on to the policyholder but
is not required to do so.
MS. HALL, in response to a request, reiterated the information
she provided earlier regarding the current and anticipated
future assessments to each account. She noted that if claims
are settled for amounts less than what is currently anticipated,
it will change the percentage that might be assessed. She
offered her hope that the crises which SB 276 addresses will be
temporary, and reiterated her comments regarding the likelihood
of having to address a similar situation again.
CHAIR McGUIRE surmised that everyone will end up paying, one way
or another, for the insolvencies of workers' compensation
insurance carriers, and raised the issue of perhaps including a
sunset provision in SB 276 in order to give the legislature the
opportunity to see whether the solution proposed by SB 276 is
actually working and whether the higher assessments are still
needed.
MS. HALL relayed that a sunset provision has not yet been
discussed within the administration, but agreed to give it
consideration. She reiterated that there are safeguards in the
Alaska Insurance Guaranty Association Fund statutes that require
an actuarial analysis to determine need before any assessment
can be done. Because the Alaska Insurance Guaranty Association
does not do assessments for the purpose of keeping a pot of
money, the assessments are called post-loss assessments. If
there is an insolvency, the Alaska Insurance Guaranty
Association Fund board meets, receives actuarial analysis,
determines it needs "X" amount of money for the upcoming year,
and the assessments are then based on "a percentage of premium."
Number 2073
MS. HALL noted that one of the reasons the workers' compensation
account generates the smallest amount of premiums is because it
is the smallest line, generating approximately $4.3 million to
$4.5 million. The auto line and the "other" line, by
comparison, generate approximately $7.5 million each. This is
why the Alaska Insurance Guaranty Association cannot make up its
anticipated shortfall solely through the workers' compensation
line unless it were to assess a much larger percentage.
REPRESENTATIVE GRUENBERG said he'd received a letter dated
3/1/04 from Eden Larson, President and Chief Executive Officer,
Associated Builders and Contractors, Inc., wherein Ms. Larson
says in part: "The simple way to avoid this impact is to ensure
that the change to the workers' compensation fee structure is a
'new and renewal change' rather than an 'in force' change. If
increases are incorporated in workers' compensation fees at
renewal, the contractor is already looking ahead to increases or
adjustments in that expense as he or she is bidding."
MS. HALL relayed that such is what will already occur, noting
that she has seen that letter and has reviewed it with the
actuary that approves filings. She offered her understanding
that the incident that prompted that letter was one in which,
approximately three years ago, there was a change in workers'
compensation benefits with the effective date being July 1; when
a change in benefits is effective, there is also a change in
premium, and the premium also became effective July 1, which was
in the middle of construction season, and so contractors were
not prepared for what turned out to be about a 7 percent
increase.
MS. HALL relayed that this instance has since made everyone very
careful to ensure that rates become effective January 1 and that
changes only take place on brand new policies or upon renewal of
existing policies. For example, if an assessment is done in
January, but a workers' compensation policy renews in September,
the policy owner will not get the January assessment until
September. She noted that she responded to Ms. Larson's letter,
but is not sure whether the general business community is aware
that a cure for what happened three years ago is now in effect.
Number 1887
MARTIN PIHL, Chairman, Board of Governors, Alaska Timber
Insurance Exchange (ATIE), after mentioning that the ATIE does
not wish to block passage of SB 276 or HB 403, relayed that the
ATIE was formed in 1980 as a reciprocal workers' compensation
company, is owned by its policy holders, specializes in logging
and other higher-risk "coverages," has been very successful in
promoting workplace safety, and returns yearly profit to policy
holders in the form of dividends. He said that the ATIE sets it
rates conservatively high in order to protect its policyholders'
surplus balances, knowing that the dividend reduces the net cost
to the policyholders. Over the last ten years, the ATIE's
dividend has averaged 66 percent of premium; however, for 2003,
the ATIE's profit was wiped out by an assessment of $800,000 for
a reallocation of insolvent companies' share of the assigned
risk pool loses. This was a severe blow to the ATIE's policy
holders, he remarked, particularly given that 2003 was one of
the ATIE's best years in terms of accident frequency and
severity.
MR. PIHL said that the ATIE has other legitimate and serious
concerns - which, he posited, are shared by all other insurance
companies - regarding fixes that are needed by the workers'
compensation insurance system in order to bring fairness to all
parties and secure and protect coverage to injured workers. He
elaborated:
We feel we must find the right bill or platform to
advance these needed improvements, and we're trying to
work with the director and administration. The
[workers' compensation] system has been a shipwreck
situation, floundering and awash in losses for a great
number of years; [Ms. Hall] inherited a very bad
situation. The assigned risk pool has operated at
very substantial losses for the last seven consecutive
years, aggregating about $60 million. As you know,
this loss gets allocated or assessed back against the
surviving insurance companies. This has resulted in
assessments against our member policyholders of $2.8
million - we're fairly small. Continuation of these
hits will impair our capital, and threatens our own
solvency. There is another major insolvency pending,
and we believe it's fairly near upon us; [Ms. Hall]
can advise you.
Number 1736
In addition to the funding needs which [SB 276]
addresses, the other amendments we feel essential are,
number one, to improve the lost cost filing process in
rate setting. Rates have been terribly inadequate ...
particularly in the assigned risk pool. Insurance
companies have been forced to decline coverage in the
open commercial market, forcing insurers and people
seeking insurers to the assigned risk pool, resulting
in a massive expansion of the pool and its huge
losses. Fixing the rate structure is addressed by
House Bill 540, which we support. There should be a
statutory mandate that the assigned risk pool operate
on a break-even basis.
[The] second amendment we would seek is to require
collateralization of assigned risk pool [loss]
reserves to protect against an insurers insolvency.
This can simply be done by requiring the high-grade
investments that are controlled by current statute by
the director's (indisc.) to be required beyond
(indisc.) with a custodian in Alaska, available to the
director and (indisc.) insolvency. California and
Oregon require collateralization, and if we in Alaska
don't, we're accepting the last position in securing
protection for the injured worker and the employer.
MR. PIHL continued:
The third amendment we seek is that since all
policies, including the assigned risk pool policies,
pay what has been the 2 percent assessment to the ...
[Alaska Insurance Guaranty Association] Fund, we feel
that ... an insolvent insurer's share of assigned risk
pool losses should travel as a part of that insolvent
insurers bankruptcy to the [Alaska Insurance Guaranty
Association] fund, rather than ... get reassessed to
the remaining insurance companies. This has all
occurred out of our control, and it's just very
unfair.
Number 1641
We really look for fairness from the ... government,
[but] essentially the insurance companies have been
treated as a deep pocket, there to be assessed to
cover all losses from (indisc.) mismanagement of the
system by the state, and we believe it's time to
address it [with] all the needed fixes. These points
that I'm outlining are covered by a three-page
discussion outline we would be happy to provide to the
committee. ...
Again, we're not interested in blocking [SB 276], we
believe it's part of the fix, but there's a whole lot
more. And when it comes to funding, even [SB 276]
isn't the preference of anybody, insurance companies
or employers; employers are going to pay the increased
assessment, and it's been out of the control of
insurance companies, at least those that have been
operated on [a] sound basis, such as ours. So I thank
you for the opportunity to testify; I'd be willing
[and] happy to answer any questions.
MS. HALL mentioned that she has Mr. Pihl's points, and would be
happy to share her thoughts regarding those points at the bill's
next hearing. For the most part, though not in total, she
remarked, she strongly supports the ideas that Mr. Pihl has put
forward, one of which is in another bill.
MR. PIHL expressed concern that some of the other bills
pertaining to insurance may not pass, and urged that needed
changes be brought forth via a vehicle or platform that has a
chance of succeeding.
CHAIR McGUIRE expressed agreement, and asked Ms. Hall to
consider incorporating some of Mr. Pihl's suggestions into SB
276.
Number 1494
MS. HALL said she will consider doing so, but feels very
strongly about ensuring that SB 276 is kept clean and addresses
a single, nonpartisan issue. Currently, SB 276 has strong
bipartisan support; therefore, she remarked, she is very
hesitant to make changes to SB 276 that could create problems
for it as it moves through the process.
CHAIR McGUIRE reiterated her suggestion to include a sunset
provision in the bill, and relayed that she understands Mr.
Pihl's frustration with the current system, particularly in
light of all that has been done and proposed thus far to make it
better.
REPRESENTATIVE HOLM relayed that as an employer, he is very
disturbed by the workers' compensation program. He went on to
say:
It is one of the most frustrating parts of business
because it's a ... piece of net profit. When [the
terrorist attacks of September 11, 2001] occurred, all
of the industry nailed us for it. [It] wasn't
something we were charged with, not something we did,
not something we caused, not anything, and yet my
workers' [compensation insurance] policy went up
$16,000 net ... in one year. How does industry
recover that?
REPRESENTATIVE HOLM expressed frustration with the current
workers' compensation system as it relates to what he perceives
to be false claims, opining that employers don't get an
opportunity to rebut any of those claims. He also expressed
dissatisfaction with the cost of workers' compensation insurance
premiums for small business in Alaska.
MS. HALL said she understands Representative Holm's concerns,
and acknowledged that there are some serious problems [with the
workers' compensation insurance system], but noted that problems
cannot be fixed overnight. She indicated that Alaska businesses
should be paying the same workers' compensation rate, and that
the state does investigate workers' compensation fraud.
Therefore, if members become aware of possible instances of
workers' compensation fraud, they should let the department know
so that an investigation can be started. "It is a huge problem;
it's a huge problem nationally, and I would like very much to
work towards solutions ....
REPRESENTATIVE HOLM expressed hope that solutions can be found,
and made comments regarding the classification of workers.
MS. HALL noted that classification of workers must follow the
rules pertaining to classification; if such is not done, it
constitutes premium fraud.
[SB 276 was held over.]
ADJOURNMENT
Number 1076
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 4:25 p.m.
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