Legislature(1995 - 1996)
04/03/1996 03:28 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 3, 1996
3:28 p.m.
MEMBERS PRESENT
Representative Pete Kott, Chairman
Representative Norman Rokeberg, Vice Chairman
Representative Jerry Sanders
Representative Brian Porter
Representative Kim Elton
Representative Gene Kubina
MEMBERS ABSENT
Representative Beverly Masek
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 197(L&C)
"An Act relating to insurance covering an insured who is a victim
of domestic violence and requiring certain disclosures by an
insurer."
- MOVED HCSCSSB 197(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 436
"An Act relating to purchase and sale of mobile homes by mobile
home dealers or agents; to mobile home titles; and providing for an
effective date."
- MOVED CSHB 437(TRA) OUT OF COMMITTEE
HOUSE BILL NO. 524
"An Act relating to insurance pooling."
- HEARD AND HELD
HOUSE BILL NO. 544
"An Act relating to the use of the terms `health' and `disability'
in the context of insurance coverage."
- MOVED HB 544 OUT OF COMMITTEE
SENATE BILL NO. 300
"An Act relating to the Uniform Commercial Code, primarily to
investment securities; amending Rule 8(d), Alaska Rules of Civil
Procedure; and providing for an effective date."
- MOVED SB 300 OUT OF COMMITTEE
SENATE BILL NO. 261
"An Act relating to the release of employment security records;
relating to an injunction or an employer's security for delinquent
unemployment insurance contributions; extending time periods for
redeterminations and appeals for unemployment insurance; relating
to the overpayment or the redetermination of unemployment insurance
benefits; relating to availability for work, seeking work, and the
calculation of wages for unemployment insurance purposes; relating
to voluntary federal tax withholding from unemployment insurance
benefits; relating to the binding effect of unemployment
compensation decisions; relating to the definition of `waiting
week' for employment security purposes; and providing for an
effective date."
- MOVED SB 261 OUT OF COMMITTEE
HOUSE BILL NO. 345
"An Act relating to the procurement of investment and brokerage
services by the Alaska State Pension Investment Board."
- HEARD AND HELD
CS FOR SENATE BILL NO. 305(L&C)
"An Act relating to the regulation of accountants; and amending the
effective date for sec. 6, ch. 62, SLA 1991."
- PASSED CSSB 305(L&C) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: SB 197
SHORT TITLE: INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES
SPONSOR(S): SENATOR(S) DONLEY, Ellis, Salo, Duncan, Pearce,
Zharoff, Lincoln;
REPRESENTATIVE(S) Davies, Robinson, Rokeberg
JRN-DATE JRN-PG ACTION
01/05/96 2058 (S) PREFILE RELEASED - 1/5/96
01/08/96 2058 (S) READ THE FIRST TIME - REFERRAL(S)
01/08/96 2058 (S) LABOR & COMMERCE
01/16/96 2144 (S) COSPONSOR(S): DUNCAN
02/15/96 (S) L&C AT 1:30 PM BELTZ ROOM 211
02/15/96 (S) MINUTE(L&C)
02/20/96 (S) MINUTE(L&C)
02/23/96 2512 (S) L&C RPT CS 5DP NEW TITLE
02/23/96 2513 (S) ZERO FISCAL NOTE TO SB & CS (DCED)
02/26/96 (S) RLS AT 12:45 PM FAHRENKAMP RM 203
02/26/96 (S) MINUTE(RLS)
02/28/96 2568 (S) RULES TO CALENDAR & 1NR 2/28/96
02/28/96 2571 (S) READ THE SECOND TIME
02/28/96 2572 (S) L&C CS ADOPTED UNAN CONSENT
02/28/96 2572 (S) COSPONSOR(S): PEARCE, ZHAROFF, LINCOLN
02/28/96 2572 (S) ADVANCED TO THIRD READING UNAN CONSENT
02/28/96 2572 (S) READ THE THIRD TIME CSSB 197(L&C)
02/28/96 2572 (S) PASSED Y18 N- E2
02/28/96 2579 (S) TRANSMITTED TO (H)
02/29/96 2955 (H) READ THE FIRST TIME - REFERRAL(S)
02/29/96 2956 (H) LABOR & COMMERCE, FINANCE
03/18/96 (H) L&C AT 3:00 PM CAPITOL 17
03/18/96 (H) MINUTE(L&C)
03/18/96 3186 (H) CROSS SPONSOR(S): DAVIES
03/20/96 (H) L&C AT 3:00 PM CAPITOL 17
03/20/96 (H) MINUTE(L&C)
03/22/96 (H) L&C AT 3:00 PM CAPITOL 17
03/22/96 (H) MINUTE(L&C)
03/27/96 (H) MINUTE(L&C)
04/01/96 3552 (H) CROSS SPONSOR(S): ROBINSON
04/03/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 436
SHORT TITLE: MOBILE HOME DEALERS & TITLES
SPONSOR(S): REPRESENTATIVE(S) MARTIN
JRN-DATE JRN-PG ACTION
01/19/96 2489 (H) READ THE FIRST TIME - REFERRAL(S)
01/19/96 2489 (H) TRANSPORTATION, L&C, FINANCE
03/20/96 (H) TRA AT 1:00 PM CAPITOL 17
03/20/96 (H) MINUTE(TRA)
03/27/96 (H) TRA AT 1:00 PM CAPITOL 17
03/27/96 (H) MINUTE(TRA)
04/01/96 (H) L&C AT 3:00 PM CAPITOL 17
04/01/96 (H) MINUTE(L&C)
04/02/96 3557 (H) TRA RPT CS(TRA) NT 1DP 5NR
04/02/96 3558 (H) DP: G.DAVIS
04/02/96 3558 (H) NR: MASEK, LONG, BRICE, SANDERS
04/02/96 3558 (H) NR: WILLIAMS
04/02/96 3558 (H) FISCAL NOTE (DCED)
04/02/96 3558 (H) ZERO FISCAL NOTE (DPS)
04/03/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 524
SHORT TITLE: INSURANCE POOLING BY EMPLOYER ASS'N.
SPONSOR(S): LABOR & COMMERCE BY REQUEST
JRN-DATE JRN-PG ACTION
02/21/96 2834 (H) READ THE FIRST TIME - REFERRAL(S)
02/21/96 2834 (H) LABOR & COMMERCE, FINANCE
03/13/96 (H) L&C AT 3:00 PM CAPITOL 17
03/13/96 (H) MINUTE(L&C)
04/03/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 544
SHORT TITLE: HEALTH INSURANCE NOMENCLATURE
SPONSOR(S): LABOR & COMMERCE
JRN-DATE JRN-PG ACTION
03/19/96 3197 (H) READ THE FIRST TIME - REFERRAL(S)
03/19/96 3197 (H) LABOR & COMMERCE, FINANCE
04/01/96 (H) L&C AT 3:00 PM CAPITOL 17
04/01/96 (H) MINUTE(L&C)
04/03/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: SB 300
SHORT TITLE: UNIFORM COMMERCIAL CODE:ART 8(SECURITIES)
SPONSOR(S): LABOR & COMMERCE
JRN-DATE JRN-PG ACTION
02/19/96 2470 (S) READ THE FIRST TIME - REFERRAL(S)
02/19/96 2470 (S) LABOR & COMMERCE
02/27/96 (S) L&C AT 1:30 PM FAHRENKAMP RM 203
02/27/96 (S) MINUTE(L&C)
02/29/96 (S) MINUTE(L&C)
03/08/96 2656 (S) L&C RPT 3DP 1NR
03/08/96 2656 (S) ZERO FISCAL NOTE (DCED)
03/13/96 (S) RLS AT 11:00 AM FAHRENKAMP RM 203
03/13/96 (S) MINUTE(RLS)
03/25/96 2865 (S) RULES TO CAL & 1 OTHER 3/25/96
03/25/96 2867 (S) READ THE SECOND TIME
03/25/96 2867 (S) ADVANCED TO THIRD READING UNAN CONSENT
03/25/96 2867 (S) READ THE THIRD TIME SB 300
03/25/96 2867 (S) PASSED Y19 N- A1
03/25/96 2868 (S) EFFECTIVE DATE(S) SAME AS PASSAGE
03/25/96 2868 (S) COURT RULE(S) SAME AS PASSAGE
03/25/96 2886 (S) TRANSMITTED TO (H)
03/26/96 3361 (H) READ THE FIRST TIME - REFERRAL(S)
03/26/96 3361 (H) LABOR AND COMMERCE
04/01/96 (H) L&C AT 3:00 PM CAPITOL 17
04/01/96 (H) MINUTE(L&C)
04/03/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: SB 261
SHORT TITLE: UNEMPLOYMENT COMPENSATION
SPONSOR(S): LABOR & COMMERCE BY REQUEST
JRN-DATE JRN-PG ACTION
02/02/96 2285 (S) READ THE FIRST TIME - REFERRAL(S)
02/02/96 2286 (S) L&C, JUD
02/13/96 (S) L&C AT 1:30 PM FAHRENKAMP RM 203
02/13/96 (S) MINUTE(L&C)
02/22/96 (S) L&C AT 1:30 PM FAHRENKAMP RM 203
02/22/96 (S) MINUTE(L&C)
03/07/96 (S) MINUTE(L&C)
03/08/96 2655 (S) L&C RPT 3DP
03/08/96 2655 (S) ZERO FISCAL NOTE (LABOR)
03/22/96 (S) JUD AT 9:00 AM BELTZ ROOM 211
03/22/96 (S) MINUTE(JUD)
03/25/96 (S) RLS AT 7:00 PM FAHRENKAMP RM 203
03/25/96 (S) MINUTE(RLS)
03/25/96 2862 (S) JUD RPT 3DP
03/25/96 2863 (S) PREVIOUS ZERO FN (LABOR)
03/26/96 2903 (S) RULES TO CALENDAR 3 1NR 3/26/96
03/26/96 2904 (S) READ THE SECOND TIME
03/26/96 2904 (S) ADVANCED TO THIRD READING UNAN CONSENT
03/26/96 2904 (S) READ THE THIRD TIME SB 261
03/26/96 2905 (S) PASSED Y20 N-
03/26/96 2905 (S) EFFECTIVE DATE(S) SAME AS PASSAGE
03/26/96 2913 (S) TRANSMITTED TO (H)
03/27/96 3387 (H) READ THE FIRST TIME - REFERRAL(S)
03/27/96 3388 (H) LABOR & COMMERCE
04/03/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 345
SHORT TITLE: PENSION INVESTMENT BOARD PROCUREMENTS
SPONSOR(S): REPRESENTATIVE(S) FOSTER, Ivan
JRN-DATE JRN-PG ACTION
05/10/95 2088 (H) READ THE FIRST TIME - REFERRAL(S)
05/10/95 2088 (H) STATE AFFAIRS, L&C, FINANCE
03/21/96 (H) STA AT 8:00 AM CAPITOL 102
03/21/96 (H) MINUTE(STA)
03/21/96 3259 (H) COSPONSOR(S): IVAN
03/26/96 (H) STA AT 8:00 AM CAPITOL 102
03/26/96 (H) MINUTE(STA)
03/27/96 3390 (H) STA RPT CS(STA) 2DNP 4NR
03/27/96 3391 (H) DNP: ROBINSON, WILLIS
03/27/96 3391 (H) NR: JAMES, PORTER, GREEN, OGAN
03/27/96 3391 (H) FISCAL NOTE (REV)
04/03/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: SB 305
SHORT TITLE: REGULATION OF ACCOUNTANTS
SPONSOR(S): LABOR & COMMERCE
JRN-DATE JRN-PG ACTION
03/08/96 2659 (S) READ THE FIRST TIME - REFERRAL(S)
03/08/96 2659 (S) LABOR AND COMMERCE
03/19/96 (S) L&C AT 1:30 PM FAHRENKAMP RM 203
03/25/96 (S) RLS AT 7:00 PM FAHRENKAMP RM 203
03/25/96 (S) MINUTE(RLS)
03/25/96 2863 (S) L&C RPT CS 4DP SAME TITLE
03/26/96 2901 (S) ZERO FISCAL NOTE (DCED)
03/26/96 2903 (S) RULES TO CALENDAR 3/26/96
03/26/96 2905 (S) READ THE SECOND TIME
03/26/96 2905 (S) L&C CS ADOPTED UNAN CONSENT
03/26/96 2905 (S) ADVANCED TO THIRD READING UNAN CONSENT
03/26/96 2905 (S) READ THE THIRD TIME CSSB 305(L&C)
03/26/96 2906 (S) PASSED Y20 N-
03/26/96 2906 (S) EFFECTIVE DATE(S) SAME AS PASSAGE
03/26/96 2913 (S) TRANSMITTED TO (H)
03/27/96 3388 (H) READ THE FIRST TIME - REFERRAL(S)
03/27/96 3388 (H) LABOR & COMMERCE
04/01/96 (H) L&C AT 3:00 PM CAPITOL 17
04/01/96 (H) MINUTE(L&C)
04/03/96 (H) L&C AT 3:00 PM CAPITOL 17
WITNESS REGISTER
SENATOR DAVE DONLEY
Alaska State Legislature
Capitol Building, Room 11
Juneau, Alaska 99801
Telephone: (907) 465-3892
POSITION STATEMENT: Sponsor of SB 197.
TOM ANDERSON, Legislative Assistant
to Representative Terry Martin
Alaska State Legislature
Capitol Building, Room 502
Juneau, Alaska 99801
Telephone: (907) 465-3783
POSITION STATEMENT: Gave sponsor statement for HB 436.
LEONARD GROSS, President
Alaska Manufactured Home Owners Association
9599 Brayton Drive, Number 68
Anchorage, Alaska 99507
Telephone: (907) 349-9599
POSITION STATEMENT: Testified on HB 436.
BEN MARSH, Executive Secretary
Alaska Manufactured Housing Association
2550 Denali Street, Suite 1310
Anchorage, Alaska 99503
Telephone: (907) 278-3615
POSITION STATEMENT: Testified on HB 436.
DAVE CAREY, Vice President
Carey Homes; Past President
Alaska Manufactured Housing Association
3317 Mountain View Drive
Anchorage, Alaska 99501
Telephone: (907) 337-9464
POSITION STATEMENT: Testified on HB 436.
TERRY DUSZYNSKI, President
Alaska State Homebuilders' Association
1464 Birchwood Drive
Fairbanks, Alaska
POSITION STATEMENT: Testified on HB 424.
KEN MITCHELL, Executive Vice President
North Carolina Homebuilders' Association
Address and telephone number not provided
POSITION STATEMENT: Testified on HB 424.
JOHN GEORGE
National Association of Independent Insurers
3328 Fritz Cove Road
Juneau, Alaska 99801
Telephone: (907) 789-0172
POSITION STATEMENT: Testified on HB 424.
MARIANNE BURKE, Director
Division of Insurance
Department of Commerce and
Economic Development
P.O. Box 110805
Juneau, Alaska 99811-0805
Telephone: (907) 465-2515
POSITION STATEMENT: Testified on HB 424 and HB 544.
PAUL GROSSI, Director
Division of Workers' Compensation
Department of Labor
P.O. Box 25512
Juneau, Alaska 99802-5512
Telephone: (907) 465-2790
POSITION STATEMENT: Testified on HB 424.
SHERMAN ERNOUF, Legislative Assistant
to the Senate Labor and Commerce Committee
Alaska State Legislature
Capitol Building, Room 101
Juneau, Alaska 99801
Telephone: (907) 465-3822
POSITION STATEMENT: Gave sponsor statement for SB 300, SB 261 and
CSSB 305(L&C).
ART PETERSON, Uniform Law Commissioner
National Conference of Commissioners
on Uniform State Laws
350 North Franklin Street
Juneau, Alaska 99801
Telephone: (907) 586-400
POSITION STATEMENT: Testified in support of SB 300.
L. S. (JERRY) KURTZ, JR., Member
Code Revision Commission
1050 Beech Lane
Anchorage, Alaska 99501
Telephone: (907) 258-6051
POSITION STATEMENT: Testified in support of SB 300.
WILLIS KIRKPATRICK, Director
Division of Banking Securities and Corporations
Department of Commerce and Economic Development
P.O. Box 110807
Juneau, Alaska 99811-0907
Telephone: (907) 465-2521
POSITION STATEMENT: Testified in support of SB 300.
DWIGHT PERKINS, Special Assistant
Office of the Commissioner
Department of Labor
P.O. Box 21149
Juneau, Alaska 99802-1149
Telephone: (907) 465-2700
POSITION STATEMENT: Testified in support of SB 261.
RON TORGERSON, Chief Hearing Officer
Division of Employment Security
Department of Labor
P.O. Box 25509
Juneau, Alaska 99801-5509
Telephone: (907) 465-2775
POSITION STATEMENT: Answered questions on SB 261.
CHRIS CHRISTENSEN, Staff Counsel
Office of the Administrative Director
Alaska Court System
303 "K" Street
Anchorage, Alaska 99501-2084
Telephone: (907) 264-8228
POSITION STATEMENT: Testified on SB 261.
JOHN WALSH, Legislative Assistant
to Representative Richard Foster
Alaska State Legislature
Capitol Building, Room 410
Juneau, Alaska 99801
Telephone: (907) 465-3789
POSITION STATEMENT: Gave sponsor statement on HB 345.
MICHAEL KIRK
P.O. Box 20844
Juneau, Alaska 99802
POSITION STATEMENT: Testified against HB 345.
TIM VOLWILER
8030 North Douglas Highway
Juneau, Alaska 99801
Telephone: Not provided
POSITION STATEMENT: Testified against HB 345.
MILT BARKER
206 Seventh Street
Juneau, Alaska 99801
Telephone: (907) 586-4301
POSITION STATEMENT: Testified against HB 345.
WILLIE ANDERSON
NEA-Alaska
114 Second Street
Juneau, Alaska 99801
Telephone: (907) 586-3090
POSITION STATEMENT: Testified against HB 345.
BOB STORER, Chief Investment Officer
Treasury Division
Department of Revenue
P.O. Box 110405
Juneau, Alaska 99811-0405
Telephone: (907) 465-4399
POSITION STATEMENT: Testified on HB 345
TOM BARTLETT, President
Alaska Society of Certified Public Accountants
1095 Bruhn Road
Fairbanks, Alaska 99709
Telephone: (907) 457-2495
POSITION STATEMENT: Testified in support of CSSB 305(L&C).
CHARLES "CHUCK" GRIFFIN, Certified Public Accountant
Box 670
Palmer, Alaska 99645
Telephone: (907) 745-3239
POSITION STATEMENT: Testified in Support of CSSB 305(L&C).
ACTION NARRATIVE
TAPE 96-32, SIDE A
Number 001
The House Labor and Commerce Standing Committee was called to order
by Chairman Pete Kott at 3:28 p.m. Members present at the call to
order were Representative Sanders, Kubina, Elton, Rokeberg and
Kott. Representative Kubina arrived at 3:40 p.m. and
Representative Porter arrived at 3:45 p.m.
SB 197 - INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES
Number 128
CHAIRMAN PETE KOTT announced the first order of business would be
CSSB 197(L&C), "An Act relating to insurance covering an insured
who is a victim of domestic violence and requiring certain
disclosures by an insurer." He said the bill had been heard at
least on three occasions. There is currently a committee
substitute that is before the committee. Chairman Kott explained
there was a proposed amendment before the committee.
REPRESENTATIVE NORMAN ROKEBERG made a motion to rescind the
amendment he had offered.
CHAIRMAN KOTT explained the amendment wasn't adopted and that
Representative Rokeberg should move to withdraw the amendment as it
wasn't adopted.
REPRESENTATIVE ROKEBERG moved to withdraw the amendment. Hearing
no objection, it was so ordered.
Number 205
REPRESENTATIVE ROKEBERG moved to adopt the new committee
substitute, Version R, dated 4/3/96, Ford.
CHAIRMAN KOTT asked if there was an objection to the adoption of
the new committee substitute. Hearing none, HCSCSSB 197(L&C) was
before the committee.
Number 250
REPRESENTATIVE ROKEBERG said, "In section - excuse me - subsections
(1) and (2) this was a area that we discussed in committee. I
think there was general concurrence, including with the sponsor and
industry that this would be acceptable because it required notice
to an applicant for insurance if they were turned down - the reason
they were being turned down, only upon written request. The
purpose of that particular revision was to provide -- to ease the
burden on industry and to make sure that any consumer that was
refused any insurance, and for the record, this include all
insurance, not just those related to domestic violence Mr.
Chairman, would be duly notified of the reason for the refusal to
write a policy of insurance. Then in addition, this Version R
deletes the provisions on confidentiality that were in the last
version of the bill, as provided by the sponsor of the bill,
related to records and so forth. We've heard testimony that this
would be a burden on industry and that the -- it really wasn't
necessary because of existing procedures. I would draw the
committee's attention to a letter from the law firm of Lessmeier
and Winters. It was distributed today and dated April 3. It
outlines some burdens that would be placed on industry if that
clause were to be left in. And a -- I'm sure the committee has had
an opportunity to read this. And I've talked to the sponsor of the
bill and he's agreed to accept that particular revision.
Basically, that is the gist of the changes. Mr. Chairman, we
should keep in mind the original concept of the bill, which was to
ensure that victims of domestic violence would not be refused
insurance or denied coverage or have any premium adjustments and so
forth. That language has been retained in the bill which is really
the heart of the legislation."
Number 436
CHAIRMAN KOTT informed the committee there is a proposed amendment
to the new committee substitute which will be labeled Amendment 1.
Chairman Kott moved the amendment be adopted.
REPRESENTATIVE KIM ELTON objected for the purpose of discussion.
CHAIRMAN KOTT explained Amendment 1 makes it clear that you can
adjust rates for a condition but not a cause.
Number 498
SENATOR DAVE DONLEY, sponsor of SB 197, said, "I'm concerned about
section (c) of this proposed amendment. It says the above section,
which is basically the guts of the bill I would think - since I
didn't draft this I'm not exactly sure, but the nondiscrimination
provision would only apply to an insured or an applicant for
insurance. That would allow discrimination against third party
beneficiaries of policies and I just don't that language is
necessary. Section (b), I don't think it's necessary but it
doesn't seem to be contrary to what the bill already says."
REPRESENTATIVE ROKEBERG said he thinks the provision was to allow
insurance companies to do their rating underwriting without regard
to the cause. They could do rating based on something like a
preexisting condition or another condition, notwithstanding the
fact that there was domestic violence.
SENATOR DONLEY said he doesn't think section (b) conflicts with the
bill as it is currently written. He said he doesn't think it is
necessary, but noted he doesn't think it is in conflict with what
the bill says. Senator Donley explained section (c) concerns him
because it narrows the scope of the bill to insure an applicant for
insurance and it would cut out any third party beneficiary or
anybody else that may be a beneficiary of an insurance policy. He
said he doesn't think those people should be discriminated against
either. Senator Donley said, "I think (c) is not wise, I think (b)
doesn't conflict with the existing bill." If that makes the
insurance industry happy, he doesn't think it is necessary. It
doesn't do violence to the bill.
Number 651
REPRESENTATIVE ROKEBERG said he didn't understand the point about
the third party beneficiary. He asked how it relates to the first
section.
SENATOR DONLEY said, "I think in the world of insurance, that could
be read to mean that just if your name is on the insurance policy,
do you have the protection against discrimination? If you're a
third party beneficiary of the benefits of a policy, rather than
being insured you would still be -- you could still legally
discriminate and I don't think that is what the committee really
wants. I mean I don't think that's good public policy. That's the
only reason I can see for having that language in there is to allow
discrimination against other beneficiaries of the insurance and I
don't think that's appropriate based only the fact that if they're
a victim of domestic violence.
Number 743
CHAIRMAN KOTT asked if it would be satisfactory to delete
subsection (c). He then made a motion to amend the amendment to
delete subsection (c) and number the sections accordingly.
CHAIRMAN KOTT asked if there was an objection to amend the
amendment. Hearing none, the amendment was before the committee.
Chairman Kott asked if there was an objection to the amendment.
Number 775
REPRESENTATIVE ROKEBERG objected. He said he wanted know if the
sponsor had a problem with the amendment.
SENATOR DONLEY said he doesn't think it harms the purpose of the
bill. He said he thinks it is consistent with what has been said
all along. Unless the specific reason was that they were a victim
of domestic violence rather than some other appropriate
underwriting criteria. He stated he doesn't think it is necessary,
but it doesn't harm the ultimate purpose of the bill.
CHAIRMAN KOTT asked if there was an objection to the amendment.
Hearing none, the amendment was adopted.
CHAIRMAN KOTT said the bill is an Act relating to insurance
covering an insured. He said through the committee process, we
have covered procedures within the bill dealing with an applicant
which is not an insured. Chairman Kott said in his opinion, the
title of the bill needs to be changed to reflect the contents.
SENATOR DONLEY said in working with the drafters in developing the
committee substitute currently before the committee, the drafters
are usually pretty good in pointing something like that out. He
said since the version that came over from the Senate also use the
word "applicants" at some point, he thinks it is O.K. because the
insured is also frequently an applicant.
Number 915
REPRESENTATIVE ROKEBERG said, "The whole provision about the reason
an applicant got turned down -- we're talking about applicants
here, it may not even be covered as an insured so..."
CHAIRMAN KOTT said that is something that could be checked on with
the drafters. If there is a problem, it can be adjusted.
Number 956
REPRESENTATIVE ROKEBERG made a motion to move HCSCSSB 197, as
amended, Version R, with the accompanying fiscal notes and
individual recommendations.
CHAIRMAN KOTT asked if there was an objection. Hearing none,
HCSCSSB 197(L&C), as amended, was moved out of the House Labor and
Commerce Committee
HB 436 - MOBILE HOME DEALERS & TITLES
Number 1000
CHAIRMAN KOTT announced the next order of business would be CSHB
436(TRA), "An Act relating to purchase and sale of mobile homes by
mobile home dealers; to mobile home titles; and providing for an
effective date," sponsored by Representative Martin
TOM ANDERSON, Legislative Assistant to Representative Terry Martin
Alaska State Legislature, came before the committee to address HB
436. He informed the committee the bill was introduced in response
to the Alaska Manufactured Housing Association to place into
statute licensing and regulation procedures for mobile home
dealers.
MR. ANDERSON said, "Currently, statutory provisions regulate, and
license and bond have a surety provision and offer Alaska Real
Estate Commissioner, for realtors, but mobile home dealers have no
regulation and are unbonded and unlicensed. So this would place
them under a new heading under Occupational Licensing. In
addition, the state does not require, it allows but does not
require the Division of Motor Vehicles (DMV) to title a mobile
home. And this bill would also require and authorize DMV to title
mobile homes."
MR. ANDERSON said this is in the best interest of the consumer. He
indicated there is a zero fiscal note. Mr. Anderson said there are
people connected via teleconference to speak on the measure.
Number 1116
REPRESENTATIVE ROKEBERG asked if there is a prohibition in the
legislation on the fact that a real estate broker couldn't also
sell a mobile home.
MR. ANDERSON said he didn't believe so.
REPRESENTATIVE ROKEBERG asked if this would be a new licensure set
up to provide for that.
MR. ANDERSON indicated it was.
Number 1154
REPRESENTATIVE ELTON said it is another rampant example of
Republicans wanting to add more regulations to statutes.
Number 1171
CHAIRMAN KOTT referred to page 2, line 8, "(6) a statement that the
applicant is a bona fide dealer or agent in mobile home sales with
a business at the location given;". He asked if there will be a
requirement to update with the department as the representatives in
sales change.
MR. ANDERSON said, "To be honest, Mr. Chairman, this was drafted
from Legal Services and we had them `wing it' and put in what they
thought would be good information." Mr. Anderson said in speaking
with the director of Occupational Licensing who has stated that
Section (b), line 1, page 2, to line 10, probably doesn't have to
be in the bill. Mr. Anderson said the committee is welcome to
amend the bill in regard to informational purposes as much of this
is already on record. He said they would have to notify the
department.
CHAIRMAN KOTT informed Mr. Anderson that subsection (b) is lines 1
through 16. He said subsection (b)(4) calls for the name and
address of sales representatives. Chairman Kott pointed out that
are some dealerships where there are a lot of people in sales. He
said you can go to Cal Worthington's one week and there are 50
sales representatives and you go down there two weeks later there
is almost a 50 percent turnover. He said he was wondering if the
intent to update that or if it is not too onerous.
MR. ANDERSON said he meant in terms of the occupational licensing
application, much of this information is already on the application
packet. He said we don't believe that it is necessary to maintain
this information. He referred to Chairman Kott's question and said
he doesn't think there is a need to continually update that. He
said he meant that if the committee members were looking at
subsection (b), further subsections (1), (2), (3) and (4), they do
not necessarily have to be in the bill. It was included for a
reaffirmation of who and what the business was and where the
address was. He said he doesn't know how to change that other than
to delete it.
Number 1347
CHAIRMAN KOTT said on page 4, language was added on line 8, "shall
issue a certificate of title to the owner of a mobile home upon
application," and then the new language is "display of evidence of
ownership." He asked if there was any testimony in the previous
committee from the department as to what kinds of evidence would be
required.
MR. ANDERSON indicated there wasn't testimony in the previous
committee. He said he believes they simply meant a certification
or a title, an actual piece of paper. He indicated he doesn't know
the answer.
CHAIRMAN KOTT said as in the case of registering or titling motor
vehicles, would the certificate of title also show lienholders.
MR. ANDERSON indicated that is the intent.
Number 1405
REPRESENTATIVE ELTON referred to page 4, line 8, and said DMV would
issue the title. He said they would issue that title, for example,
if somebody buys a mobile home outright that would go to the owner,
but it could also go to the bank and the bank would be required to
pay a fee of $100.
MR. ANDERSON said he isn't sure how that procedure works. He said
assumes it would be similar to a vehicle.
Number 1453
REPRESENTATIVE GENE KUBINA asked what has happened in the state
where it has become necessary to regulate another group of people.
MR. ANDERSON said in the committee packet, there is a letter from
the Alaska Housing Manufacture Association. They would be better
to respond with specific situations that have occurred that
infringed on their sales.
Number 1539
REPRESENTATIVE ELTON referred to page 2, lines 1 through 17 and
said the way he reads it the department prescribes and furnishes a
form of application and the application then must have this
information. He said he believes it would be discretionary on the
adoption of regulations which is talked about on the bottom of page
1, whether or not they would have to update that. Representative
Elton said he is assuming the license the license application would
be the same as for other occupational licensing - once every two
years.
MR. ANDERSON indicated that is correct.
Number 1589
LEONARD GROSS, President, Alaska Manufactured Home Owners
Association said he is also a dealer. Mr. Gross referred to HB 436
and said it is a consumer bill. He said it would be a little more
costly to him. He said manufactured homes with the former name
`mobile homes,' - the least expensive manufactured new homes coming
into Anchorage costs about $50,000. This represents probably the
largest investment of a home owner who lives in a manufactured home
or a mobile home, yet there is no central agency of mandatory
registration. Formally they were issued titles, all mobile homes
or manufactured homes had to be titled. Now it is arbitrary which
is kind of ridiculous to have two sets of registration. What has
happened over the last year when the DMV stopped handling titles
and wouldn't retitle for a year, from July of 1994 to August of
1995, there were instances of fraud where renters were selling
homes with a false bill of sale. Showing their ownership didn't
mean a thing. Mr. Gross said there are some manufactured home for
$100,000. It is evident that somebody needs protection. As a DMV
dealer, where it is mandatory to have a license, they have to be
bonded. The present bond is $10,000. He said currently, there
isn't no way to have the central regulation to see if the unit is
free and clear. Mr. Gross said an increase in the bonding would
cost him money, but it would still be for the protection of the
consumer.
MR. GROSS referred to the titling and said the consumer pays for
the title transfer in the (indisc.) application, one way or the
other. He said the only thing they can show is a clear title.
Most of the banks will not finance a home without a title. He
thanked the committee for listening.
Number 1706
BEN MARSH, Executive Secretary, Alaska Manufactured Housing
Association, testified via teleconference from Anchorage. He
explained he operates and manages the association. Mr. Marsh said
he hears about anecdotal stories about people who have been
handling sales of mobile homes without adequate titling and proof
of ownership. He said his association would like to see something
to protect the rights of people who buy mobile homes under those
conditions - used ones. Obviously, if a mobile home sold with a
lean from a bank or a loan from a lender, a problem won't arise
because there will be proof of title before a loan is issued. The
problem arises when you're conveying used models between
individuals and the seller is financing.
Number 1772
DAVE CAREY, Vice President Carey Homes; Past President, Alaska
Manufactured Housing Association, said he concurs with everything
Mr. Gross and Mr. Marsh stated. He referred to Wasilla and said a
few years ago, one gentleman sold the same mobile home four or five
times because he played on the fact that a bill of sale was the
only thing that was necessary. Had there been the requirement of
a title to be processed through the DMV, that would have been
detained. He said he hopes we can recover from the years that we
haven't had titling. He said he concurs with Mr. Gross on the
dealerships. Mr. Carey said their homes are built under federal
standards, yet there is nobody in Alaska who is actually inspecting
those homes to make sure they have the proper seals on them. He
said we just want to protect ourselves and our people.
CHAIRMAN KOTT noted Representatives Porter and Kubina had joined
the meeting.
Number 1867
CHAIRMAN KOTT referred to the application requirements that the
department will require and asked Mr. Carey if those conditions
were satisfactory.
MR. CAREY said they use the same forms for mobile homes and have in
the past. That form is completely acceptable.
CHAIRMAN KOTT asked what the wish of the committee was.
Number 1935
REPRESENTATIVE JERRY SANDERS moved and asked unanimous consent that
HB 436 be moved out of committee with accompanying fiscal notes and
individual recommendations.
CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB
436(TRA) was moved out of the House Labor and Commerce Committee.
HB 524 - INSURANCE POOLING BY EMPLOYER ASS'N.
Number 1983
CHAIRMAN KOTT announced the committee would hear HB 524, "An Act
relating to insurance pooling."
TERRY DUSZYNSKI, President , Alaska State Homebuilders'
Association, was first to come before the committee to testify in
support of HB 524. He pointed out that currently, they are
supporting the concept of the bill. After hearing testimony at the
last hearing on the bill by the Division of Insurance and the
Division of Workers' Compensation, he has met with Marianne Burke
and Paul Grossi. He said they spent time going over some of the
problems they have had with the current language in HB 524. He
said they decided to bring some amendments forward to make it
compatible or palatable between both of those people and groups.
He said he read a letter into the record:
Dear Representative Kott: The Alaska State Homebuilders'
Association met with the principal state regulators yesterday to
discuss House Bill 524. The meeting produced an agreement between
the homebuilders and the regulators that House Bill 524 should be
amended to include the following principles: Group self insurance
will be for workers' compensation purposes only; groups that self
insure must be shown to be solvent; groups that self insure must be
able to pay any potential claims; a plan for liquidation must be
included in the legislation; the guarantee fund must be included in
the legislation; all parties who may participate in the group must
be treated equally; and group self insurance plans will be
regulated by the state.
"If these principles are included in the bill, we believe the
regulators will support the bill. Such a bill will protect Alaska
workers while allowing groups to manage their own workers
compensation destinies and reduce their costs of doing business in
the state of Alaska."
MR. DUSZYNSKI informed the committee that Mr. Ken Mitchell was in
attendance with him. He is the executive officer of the North
Carolina Homebuilders' Association. Mr. Duszynski said they are
modeling everything they are bringing forward based on what they
have had in their success.
Number 2114
KEN MITCHELL, Executive Vice President, North Carolina
Homebuilders' Association, was next to address the committee. He
noted he also serves as the administrator for the North Carolina
Homebuilders' Set Insurers Fund. He explained this is a situation
they got into twelve years ago. Mr. Mitchell said they were in a
posture where insurance rates were going extremely high. Many of
their small builders weren't able to buy workers' compensation
insurance and many of the traditional markets had left the
marketplace. There is a provision in the North Carolina law that
groups that are homogeneous can form together and prove their risk
as far workers' compensation is concerned. There are requirements.
He said they are regulated by the North Carolina Department of
Insurance. They started their fund in May, 1984. The first year,
they had 400 member firms who participated in the plan. They had
about $840,000 of annual premium. During 1995, they have over
8,500 employers generating $65 million of annual premiums. Mr.
Mitchell said they have been able to reduce the cost of workers'
compensation by two or three different ways. Number one is they
make sure they have a good underwriting program so that they bring
desired firms into the plan. Secondly, they don't just pay claims,
they manage claims. He said he thinks this is where the real cost
savings are involved in workers' comp. If you, as an employer, can
become very involved in the claims and accidents that you have on
your workplace, then you can save dollars through lowering your
expense (indisc.), getting your people back to work as quickly as
possible.
MR. MITCHELL said they are no different than the builders in Alaska
in that they want to make sure that their employees that are
injured in the workplace receive every benefit that they're
entitled to. He said they want to make sure that happens anywhere
that does group self-insurance across the country. He said they
want to be able to control their destiny and costs so that they can
be in a situation where they can reduce the cost of workers' comp.
Every house that is built, a large portion of the expense of
building that house goes into the area of workers' compensation.
If they can reduce those costs, then they can make housing more
affordable to the citizens of North Carolina and Alaska. He said
he doesn't think it is the builders in Alaska or their intent to
circumvent any of the rules or regulations that are involved in
workers' compensation in the state of Alaska. They want to have
the opportunity to move forward and to do the things that currently
36 other states allow which is to allow individual firms to join a
group self-insurance program so that they can have some control as
far as their destiny is concerned.
MR. MITCHELL informed the committee that currently there are 14
homebuilders associations throughout the country and soon to be 15
that will offer to its employers and members the ability to join a
group self-insurance fund. He said he hopes that in the future
Alaska will be in that posture. Mr. Mitchell noted he is not a
paid consultant and that he isn't in attendance for a profit
motive. The only reason he is here is to work with the legislature
and the members of the Alaska Homebuilders to hopefully provide
them with a vehicle so that they can deliver their workers' comp to
their workers in a manner that will be cost effective and, in the
long run, that will save them money and it will help to reduce the
accidents and the cost of those accidents on the job site.
Number 2287
REPRESENTATIVE ELTON referred to Mr. Mitchell stating that they
started with 400 and have expanded to 8,500 and asked if there is
a minimum of the number of employees necessary to keep the risk
from being too concentrated.
MR. MITCHELL said he isn't sure that there is a certain number of
employers that Alaska should be interested in; it is the dollar
premium that is generated. He said that in North Carolina 12 years
ago, they had to have $750,000 in annual premiums to start their
program. Some states have $500,000, and it varies across the
board. He stated he doesn't think it is the number of firms you
have, but the premiums that they generate.
Number 2320
REPRESENTATIVE BRIAN PORTER asked Mr. Mitchell if his association
has joint and several liability.
MR. MITCHELL said, "Yes Sir. There are really a number of
safeguards we feel very strongly about and we want to make sure
there is protection for the worker. The main thing that we want to
make sure the end result is is that if anybody is hurt on that job
site, that there is money there to pay for those people. First of
all, there is premium collected that is exactly the same as the
premium that is prescribed they rate bureau. We don't try to get
around that. Secondly, the state of North Carolina requires us to
put up $600,000 in cash in a guarantee fund made payable to the
Department of Insurance in the event that we can't pay our claims.
We can either do that in the form of cash or in the form of a a
surety bond. Thirdly, we have joint and several liability in the
event that the process gets to the point where we can't pay our
claims, then we can go back and assess our people. But prior to
that, we're also required to buy reinsurance where we will take a
certain portion of the risk up front and then we will have
reinsurance that will cover that risk for catastrophic type losses.
And there are two types of reinsurance that we deal with. One is
for the specific claims that we have and the second is called an
`aggregate reinsurance' which is kind of like an umbrella coverage
in your general liability policy, it takes an overall look at where
we are. And then -- then the next area, which would be the
(indisc.) of protection is that we also have a guarantee fund in
the state of North Carolina where every individual self insurer and
every group self insurer contributes money into a guarantee fund.
And if we have one of those groups or individual firms that become
insolvent, after everything else is exhausted then the guarantee
fund will go in and pay the worker's claims that they have and then
we will go back and reassess everybody who is individually or group
self-insured in the state to recoup those losses and build the
guarantee fund back up. Fortunately or unfortunately, I've been on
the guarantee fund since the very start. The commissioner of
Insurance appointed the first guarantee fund and I was a part of
that and have served as the chairman of the guarantee fund for the
last two years. I probably told you more than you wanted to know
about it.
Number 2417
CHAIRMAN KOTT referred to the three areas underpinning the North
Carolina program - underwriting, pay and manage claims and
questioned what the third one was.
MR. MITCHELL responded, "Safety - loss control."
CHAIRMAN KOTT asked him to expand on the loss control aspect.
MR. MITCHELL explained they have safety engineers that are employed
by the third party administrator who oversees their program.
Safety engineers are professional people who go out to the job
sites and inspect. He noted some of the safety engineers on staff
and then they use some on a contract basis. Mr. Mitchell said,
"Lets say that you have a construction job and your experience mod
continues to rise and you have a frequency of accidents. Then our
safety engineers will go to your job site and say, `You must do the
following things because these are not right on your job site.'
Then we will write a letter to that individual employer saying,
`Here is the problems that you have on the job site, you've got 30
days to correct these,' and if they don't correct those then we
don't allow them to stay in the fund anymore. We have tried to
sell the concept to our people that this is your fund, you can do
with it whatever you see fit. If you work together and you prevent
accidents on the job site, then you're going to save money. And I
have people that builders that will call me and say, `Ken, you need
to go over and look at Terry Duszynski's job site, he's got some
people over there doing things that he's not supposed to do and
he's going to have an accident and when he does, it's going to cost
me money.' And that's the kind of concept that we've tried to
foster in North Carolina - that this is our member's fund and any
monies that they have that we can produce as a savings on the claim
side, then we give that money back to our participants." [END OF
TAPE....]
TAPE 96-32, SIDE B
Number 001
MR. MITCHELL continued, "Our safety dividends work in the following
manner: If you don't have a 70 percent loss ratio, then you don't
participate in the safety dividend because you didn't help create
the monies that are there that are leftover. For 1995 -- We have
to get this approved by the Department of Insurance to be able to
give this money back. For 1995, we have asked for and have been
approved to give back $5 million to our people. Those are the
kinds of things that we're able to do with the concepts that we
have. We want to get involved, and I hope I don't offend anybody
that's in the traditional insurance business, if I do I'm sorry but
that's the way it is. Most of the time what we've found in North
Carolina, it may be different in Alaska, is that they just pay the
claims that come in and what we want to do is manage those claims.
We want to make sure that we cut out fraud in the workplace. Our
statistics tell us that probably 25 percent of the claims that are
filed for workers' comp are fraudulent and we passed legislation in
North Carolina that makes that a felony and we send those people to
jail because it's steeling, and if it's not a real claim where
people are actually being hurt then we don't want to pay that and
we don't want our employers to have to pay that."
Number 058
CHAIRMAN KOTT questioned if a safety engineer's visit isn't
necessarily triggered by an event.
MR. MITCHELL said it could be for any reason. A safety engineer
could be driving by a job site and stop. He pointed out that if
there are people who are questionable as far as underwriting is
concerned, they will send a safety engineer out before they are
actually accepted into the plan.
CHAIRMAN KOTT asked how the safety engineers are funded.
MR. MITCHELL explained that it comes from the premium that is
generated through the group self insurance. Presently, they have
what is called a third party administrator who does all their
billing, collections, claims and safety engineering. He said all
of that will be in-house by July 1. Mr. Mitchell noted they are
going to have $2 million plus dollars, annually, in savings by
bringing this in-house.
CHAIRMAN KOTT thanked Mr. Mitchell for his testimony and introduced
Mr. George.
Number 221
JOHN GEORGE, National Association of Independent Insurers, was next
to address HB 524. He informed the committee his background is in
risk management and he has worked on forming (indisc.) insurance
companies for corporations. He said he thinks there are some
benefits in any group looking at themselves internally to find out
why they have losses, how they can improve that, whether they end
up in an insurance program, a self-insurance program or a pool. He
said he would like to reserve his comments until he can see what
the new proposal is.
CHAIRMAN KOTT invited Paul Grossi and Marianne Burke to come before
the committee. He explained Mr. Duszynski had indicated there had
been a meeting between Mr. Grossi, Ms. Burke and members of the
industry. Chairman Kott asked them to comment on what direction
we're taking.
Number 300
MARIANNE BURKE, Director, Division of Insurance, Department of
Commerce and Economic Development, was next to come before the
committee. She said she thinks we were all tremendously relieved
to realize that we're not talking about joint insurance
arrangements (JIAs). Once that issue was put aside, they then
discussed the considerations that they felt were essential to
protect the workers in the state of Alaska. She said, "Outlined
under Title 21, the insurance title, some options that are already
there in that we already have in statute provisions for reciprocal
arrangements. I'd suggested that they look to this -- the statute
to see if this met their needs. And we also discussed, under Title
23, the option of self-insurance was there but that in statute
there are very strict solvency requirements and very strict
requirements as the net worth of the company, et cetera, (indisc.)
that is already in statute. Our meeting I think was extremely
productive in that we had a opportunity to outline our concerns and
what we felt were necessary to protect the individuals in the state
of Alaska. As we pointed out to them, our concern is that someone
is there to pay the bills for the injured worker. The concept of
loss control, of course, is the key to keeping workers' comp costs
down. It is not that the premiums just go up, the claims go up,
and as the claims go up they cause more to get the insurance. So
we applaud their interesting concern in having a active safety
program. Loss control and managing of the claims is the secrete
and we have told them we would work with them and to make sure that
the concerns that we have are addressed. And again, I have
suggested that they look to statutes that are already on the books
that provide for similar type arranges. The timber exchange is a
perfect example. It has worked very well, very successful. It is
regulated. I have talked to the -- I have information from North
Carolina. From inception, all of their employer associations were
regulated and there were solvency requirements required from the
very beginning. And effective 1/1/96, basically their (indisc.)
they were an insurance company and that they're filing the required
statements, they have solvency requirements, reporting and they
also have the guarantee fund which has been set up. And again, I
think this is a wonderful concept that we would need if, in fact,
this sort of arrangement came into being in Alaska. Right now,
(indisc.--coughing) certain companies participate in the guarantee
fund. So we have the added assurance that the policy holders or
the beneficiaries of the policy will have a source to pave the
corners through the guarantee (indisc.--coughing) insurance
companies. If an association, such as this, had problems - if they
also have a guarantee association there is that extra safety.
Number 473
PAUL GROSSI, Director, Division of Workers' Compensation,
Department of Labor, said he didn't have much to add to Ms. Burke's
testimony. He said their main concern is to make sure that
workers' compensation liability is covered under anything that they
do relating to legislation that is passed. Mr. Grossi pointed out
one thing they did discover is that they wanted some sort of
workers' compensation coverage. He said he didn't know whether
they wanted to address this in Title 21 or Title 23, but it will
require a lot of work to change what they have.
CHAIRMAN KOTT said he has received a list of suggestions for
inclusion into some kind of statutory scheme. He said based on the
time left for the legislative session, he isn't sure we will be
able to pursue this to finality. He said he will take the ideas
that were a result of the meeting and have the drafters try and
incorporate those into some type of legislative scheme. Chairman
Kott said he will work with the departments as well as the industry
in ensuring that all the requirements have been met that need to be
met in keeping Alaska's work force safe. He said the bill would be
held.
HB 544 - HEALTH INSURANCE NOMENCLATURE
Number 590
CHAIRMAN KOTT announced the committee would hear HB 544, "An Act
relating to the use of the terms `health' and `disability' in the
context of insurance coverage," sponsored by the committee by
request. He said it makes some changes from a housekeeping
perspective where we have used disability and have confused that
with health insurance. It seems like we're conforming to make
disability an integral part of health insurance. We're basically
changing some various parts of the insurance statutes.
MARIANNE BURKE, Director, Division of Insurance, Department of
Commerce and Economic Development, came forward to testify on HB
544. She said this is a housekeeping bill where they are changing
the word "disability," which is an archaic term that went on the
books many years ago. Since that time, disability, income
protection insurance and other types of disability coverage have
come into being and it creates a great deal of confusion. Ms.
Burke explained she has been approached by legislators saying, "Why
is this bill addressing disability." She was also questioned why
the word "disability" was used in the domestic violence bill. It
is because it conforms with the Alaska statute's usage of that
term. She said "disability" is being changed to "health." This
will bring us into agreement with the usage of the term throughout
the industry throughout the United States. We would be catching
up with the rest of the country. Ms. Burke said it is user
friendly.
Number 692
REPRESENTATIVE ROKEBERG indicated he applauds the bill.
REPRESENTATIVE KUBINA noted it looks like the title is so tight
that you can't do anything else but deal with those two words.
Number 742
REPRESENTATIVE ROKEBERG made a motion to move HB 544 out of
committee with individual recommendations and the attached zero
fiscal note.
CHAIRMAN KOTT asked if there was an objection. Hearing none HB 544
was moved out of the House Labor and Commerce Committee.
SB 300 - UNIFORM COMMERCIAL CODE:ART 8(SECURITIES)
Number 866
CHAIRMAN KOTT announced the committee would address SB 300,
"An Act relating to the Uniform Commercial Code, primarily to
investment securities; amending Rule 8(d), Alaska Rules of Civil
Procedure; and providing for an effective date."
SHERMAN ERNOUF, Legislative Assistant to the Senate Labor and
Commerce Committee, informed the members that the bill is a
housekeeping bill. He said the committee introduced SB 300 by
request of the Uniform Law Commission. He said, "If I had to boil
this down to one main topic, which really is the full substance of
the bill, its one main theme is the recognition of current
practices in the handling of investment securities by electronic
means instead of paper and by the use of a lot clearinghouse
corporations and securities intermediaries have popped up. This
bill just updates the UCC code to recognize electronic handling of
securities. It passed the Senate 20 to 0. Really, there is no
opposition stated. Its been endorsed by quite a few people."
MR. ERNOUF indicated many states have adopted it and there are
currently a quite a few states that are going through this process
to get this on the books as fast as possible.
Number 965
REPRESENTATIVE PORTER asked if this is basically what was done to
the banking code as far as wire transfers.
ART PETERSON, Uniform Law Commissioner, National Conference of
Commissioners on Uniform State Laws, explained the bill is related
in that it uses modern technology, but it deals with a whole
different set of issues and circumstances. It is to address the
modern world. The current code was written several decades ago.
Number 1006
L. S. (JERRY) KURTZ, JR., Member, Code Revision Commission, said
the bill is an attempt to get the law to catch up with the
computers. He said he would point out that this is a 1994 proposal
by the Uniform Law Commission. As of last September 30, 13 states
had already adopted it, including several important commercial
states, namely Illinois and Texas. He noted Washington and Oregon
have recently adopted this and other states are currently in the
same process.
Number 1608
WILLIS KIRKPATRICK, Director, Division of Banking Securities and
Corporations, Department of Commerce and Economic Development, was
next to address SB 300. He informed the committee that SB 300 is
really not that much different if it is compared with AS 45.08.
There are some significant changes in it and those changes are
basically in the area of control and the action of intermediaries.
The action of the intermediaries takes place in the electronic
transfer of funds and in the electronic transfer of shares of
ownership. Those go to a clearinghouse or to an intermediary or a
third party who handles those types of transactions. Mr.
Kirkpatrick explained in the mid 1970s, this was handled by the
exchanges through a depository trust corporation that held in the
depository certificates and everybody would do a bookkeeping entry
as a debit of credit against those certificates. Today, with the
electronic age, electronic transfers and the activity that is
occurring, we are getting more and more into a "certificateless"
world. The law needs to be updated to protect those who have
certificates with the intermediaries and those who have liens and
actions against those certificates. He said it protects all
parties in relationship to those types of transactions. Mr.
Kirkpatrick said the bill is a good bill and he urged passage.
Number 1175
REPRESENTATIVE ROKEBERG referred to page 31, line 28, and said it
speaks to lost stock certificates. The words "bona fide purchaser"
were changed to "protected." He said he isn't sure he understands
that.
MR. KIRKPATRICK said he believes that protected is covered under
the definition of a protected certificate holder. He said it may
be explained in Section 113.
REPRESENTATIVE ROKEBERG said the reason he asked this question is
because about 25 years ago he bought his father one stock in Exxon
and a few other shares in other companies. He said he is looking
for one of the certificates because he wants to sell the stock.
MR. KIRKPATRICK said he may be able to get a replacement for the
certificate through the transfer or registered bank. He said he
doesn't believe that is the protected definition in this instance.
Number 1282
REPRESENTATIVE ROKEBERG referred to the state of New York not
adopting this. He said the security exchanges are in the state of
New York.
MR. PETERSON said he has called the Chicago office of the Uniform
Laws Conference and the reason it hasn't been enacted in New York
was that the New York Bar was studying it in great detail. He said
there was some segment of the bar that was causing some delay.
They have since come out with a report, which was favorable. It
was supposed to go to the New York legislature in March. It may be
currently pending in the New York. The plan was that it would be
introduced this spring and it is expected to pass in New York very
shortly.
MR. PETERSON explained that in the 1960s, there was a major
paperwork crises hitting the New York Stock Exchange and all the
security exchanges. Two things stemmed in response to that. One
was the developing concept of the uncertificated security. So if
General Motors wanted to issue Representative Elton a share of
stock, they don't send him a piece of paper saying, "Dear Kim, here
is your piece of paper." They would deal through a depository, an
intermediary that in fact is between the issuer, General Motors,
the stock broker and the ultimate purchaser, Kim Elton. Mr.
Peterson explained that because of that development to the point
where this clearing corporation system so dominates the scene now,
something like 80 percent of all shares are held through that
clearing corporation in New York which is called a depository trust
corporation, there are very few instances of pieces of paper flying
around through the mail back and forth, but there are still some.
So this bill retains some of the provisions of the old UCC to take
care of that situation, but it also adds a new group of sections
recognizing what is called the "Indirect Securities Holding
System." Representative Elton would have his account with his
broker, Merrill Lynch. Merrill Lynch, in turn, would have its
account with a depository clearing corporation in New York, and
that corporation would then be in touch with General Motors. He
said there are several intermediaries between the ultimate
purchaser, the ultimate holder who has the right to receive the
benefits of that share of stock, and the issuer of that stock, the
corporation that is doing the manufacturing, etc. Mr. Peterson
said because the law has failed to keep up with that, we need to
have this modernized version of the Uniform Commercial Code
enacted.
MR. PETERSON explained the second thing that developed was the use
of computers. This electronic technology that has mushroomed over
the last two decades. It is such a different scene now from the
way it was in the 1960s, and the law has not kept up with that.
This bill is supposed to try to do so. He said in a few years
there will be another bill that does whatever the advances are
then. Mr. Peterson said SB 300 is overwhelmingly supported by all
of the folks in the securities industry. He said he isn't sure
whether the committee members' files includes a series of letters
from people of the New York Stock Exchange, the American Stock
Exchange and the Depository Trust Company. The American Bar
Association supports the changes. He noted it was developed by the
National Conference of Commissioners in Uniform State Laws. Mr.
Peterson explained the National Conference of Commissioners put out
a section by section commentary if the committee wished to have a
copy. He urged the committee to pass the bill.
Number 1618
CHAIRMAN KOTT asked Mr. Peterson to make the section by section
analysis available.
Number 1655
REPRESENTATIVE PORTER made a motion to move SB 300 out of committee
with individual recommendations and a zero fiscal note.
CHAIRMAN KOTT asked if there was an objection, Hearing none, SB
300 was moved out of the House Labor and Commerce Committee.
SB 261 - UNEMPLOYMENT COMPENSATION
Number 1742
CHAIRMAN KOTT announced the next order of business would be SB 261
"An Act relating to the release of employment security records;
relating to an injunction or an employer's security for delinquent
unemployment insurance contributions; extending time periods for
redeterminations and appeals for unemployment insurance; relating
to the overpayment or the redetermination of unemployment insurance
benefits; relating to availability for work, seeking work, and the
calculation of wages for unemployment insurance purposes; relating
to voluntary federal tax withholding from unemployment insurance
benefits; relating to the binding effect of unemployment
compensation decisions; relating to the definition of `waiting
week' for employment security purposes; and providing for an
effective date," sponsored by the Senate Labor and Commerce
Committee.
SHERMAN ERNOUF, Legislative Assistant to the Senate Labor and
Commerce Committee, Alaska State Legislature, explained the SB 261
was introduced by request of the Department of Labor. He explained
it is a cleanup bill of the unemployment Security Code. Mr. Ernouf
then referred the committee to Dwight Perkins.
Number 1784
DWIGHT PERKINS, Special Assistant, Office of the Commissioner,
Department of Labor, read his statement into the record:
"The bill before the committee makes several changes to the
Employment Security Act in six major areas: Federal income tax
withholding; confidentiality of records; contributions and
collection; benefit overpayments; finality of determinations; and
appeals. In addition, the bill contains a few minor and technical
amendments.
"Regarding income tax withholding, one important change brings the
Employment Security Act into conformity with a new federal
provision that requires states to allow claimants to have income
withheld from their benefits to cover their federal income tax
liability.
"In the confidentiality of records section, proposed changes to AS
23.20.110 would allow the department to provide additional specific
unemployment insurance information to other entities under strict
disclosure guidelines. This information exchange will support and
enhance the department's own programs, as well as assisting other
state programs. The information would be used only to protect the
unemployment compensation fund; enhance employment, training, and
labor market information programs; and assist state eligibility
verification and collection functions. These changes do not
rescind the public disclosure prohibitions already in As 23.20.110.
They are intended only to increase efficiency of state government
while retaining current privacy safeguards.
"In the contributions and collection section, Mr. Chairman, two
provisions would provide important tools for collecting delinquent
contributions. First, the department would be authorized to
require a deposit or bond from an employer who is at least two
quarters delinquent in making contributions to the unemployment
compensation fund. The bill also allows the department to enjoin
a delinquent employer, who refuses to post a bond or pay
contributions, from operating as an employer. The department would
use these provisions only in situations where existing remedies in
the Employment Security Act are not effective, as for example,
where an employer operates without significant assets subject to
lien or seizure. These uncollectible accounts are currently being
subsidized by the rest of Alaska's employers who pay contributions
on a timely manner. An additional change allows the department to
notify employing units of their contractor's or subcontractor's
liability for contributions to the unemployment compensation fund.
This information will help employers to meet their obligation to
require contribution bonds of their subcontractors before making
contract payments.
"In the benefit overpayments section, the standard for waiving
unemployment insurance overpayments would be changed from `great
hardship' to `equity and good conscience.' The new standard would
allow the department to consider other factors, such as the degree
of good faith in claiming benefits and the claimant's detrimental
reliance on these benefits. The bill would also permit the
department to write off uncollectible overpayments after two years.
Practice has shown that most recoverable overpayments are collected
within two years.
"In the finality of determinations, the department would be given
clear authority to correct any determination during the benefit
year of an unemployment claim. This change will increase the
accuracy of claim adjudication.
"In our appeals section, a proposed amendment would provide a
uniform 30 day time period for filing appeals from any
determination made by the department. The current 15 day period
probably impacts rural parties unfairly and may not allow enough
time to review and consider an appeal. A longer period would still
allow for prompt disposition of claims and assessments.
"The bill would also clarify the legal effect of appealed
decisions. It would make it clear that findings of fact and
conclusions of law in unemployment hearings are not binding in
another proceeding. The purpose of this amendment is to prevent
parties from excessively litigating issues based on the effect the
department's rulings may have on later civil litigation. This
change will help keep unemployment hearings speedy, informal and
inexpensive.
"Both the 30 day appeal period and the provision restricting the
scope of department decisions address concerns of a recent
legislative audit of the unemployment insurance appeals process.
"Finally, Mr. Chairman and committee members, the minor and
technical changes that I spoke about earlier are additional
amendments would allow an insured worker to continue receiving
unemployment benefits while attending the funeral of an immediate
family member; require a worker to file a compensable claim for the
week immediately before jury duty or attendance at a funeral in
order to receive an eligibility exemption for those reasons; exempt
extended benefit claimants from the work search required while
attending an approved training course; correct the definition of
the `waiting week' in the Employment Security Act; and finally,
clarify the treatment of `cafeteria plan' payments under the wage
definition in the Act."
MR. PERKINS said that concludes his testimony.
Number 2222
REPRESENTATIVE ROKEBERG referred to page 8, line 14, Section 14,
where the bill lowers from six years to two years the period in
which the commissioner shall seek to make recovery for overpaid
benefits and said his first impression is it seems like we're not
being diligent enough to collect these overpayments.
MR. PERKINS said he would defer that question to Mr. Torgerson. He
said regarding the recoverable payments, he believes the department
is at 90 percent of payments that are overpaid.
Number 2332
RON TORGERSON, Chief Hearing Officer, Division of Employment
Security, Department of Labor, explained he worked on the drafting
of the bill. He said most of their overpayments are recovered. He
said their non-front recovery rate is better than 90 percent. Most
of them are recovered or offset from benefits within about two
years. Mr. Torgerson explained this won't cause the department to
walk away from the overpayments at all. It is not prescriptive and
doesn't require the department to write off the overpayment, it
just allows it. He explained there have been instances where
they've written off an overpayment and then determined somebody has
returned to Alaska and have reinstituted it and collected it. This
wouldn't significantly impact collection.
REPRESENTATIVE ROKEBERG asked why we are doing this.
MR. TORGERSON said he believes the department's point is just to
not carry uncollectible overpayments on the books. It does drag
down the recovery rate (indisc.). If they're uncollectible, it
seems expedient to write them off. He noted some stats don't ever
write them off, some states write them off after six months, two
years is sort of medium period to keep the overpayment on the books
[END OF TAPE....]
TAPE 96-33, SIDE A
Number 001
MR. TORGERSON continued, "It isn't a vital position, I don't
believe, it is simply that there is no reason for showing
overpayments on the books that are uncollectible."
REPRESENTATIVE ROKEBERG noted his concern that they aren't being
carried on the record. It says in the provision that a record
could also be thrown out. He pointed out that a six year holding
period for records is similar to the Internal Revenue Service's
standards for record keeping. Representative Rokeberg referred to
throwing the record out and questioned how would you collect on a
claim.
Number 081
MR. PERKINS said he believes that even after six years, if a person
returns to the state they would be able to collect those funds. He
stated it is not a complete deletion of the case file. It is a
measure of time in a window period that they can look back and see
what is outstanding or what is not outstanding after two years.
Mr. Perkins stated that in no way do they intend to delete the
file. If the person comes back to the state, the department plans
on diligently collecting those funds. He again pointed out that
they have had a 90 percent recovery rate.
CHAIRMAN KOTT asked if the 90 percent recovery rate fell within the
two year time period or over six years.
MR. TORGERSON explained most of the overpayments are collected
fairly quickly and usually by offsetting against benefits that the
person may be eligible for down the line. He said he can't
confirm, without more research, exactly how many overpayments are
recovered within two years. He noted they are working on a new
system which is called a "Bart System" which is being instituted
under a federal grant. It would allow the department to monitor
and discover overpayments much more quickly. It should increase
the department's collection rate even more.
REPRESENTATIVE ROKEBERG asked what a typical circumstance is that
creates an overpayment.
MR. TORGERSON said a majority of the overpayments are because of
misreported wages on claims. Wages and other income are deductible
from benefits and, in most instances, it is not fraudulent
misreporting, it is just incorrect answers on claim forms. He
informed the committee the average overpayment is about $216 which
is slightly over the maximum benefit amount for one week. The vast
majority of the overpayments are recollected very quickly by offset
from any future benefits.
REPRESENTATIVE ROKEBERG pointed out that in Alaska there is
seasonal work. He asked if the department carries the outstanding
balances to the following calendar year.
MR. TORGERSON said they do. The current system the department is
operating under, basically cross matches, every quarter, the claims
filed against the wage reports of every employer in the state. If
the program sees that an individual files a benefit claim in a
quarter in which the employer has reported wages for him, the
probability of a waited match is assigned to that and the case is
investigated. He noted the new system will do this more
efficiently.
Number 371
REPRESENTATIVE SANDERS said the file isn't being thrown away, it is
just being put into a file drawer somewhere. If something comes
up, they can go and get it back out of the drawer.
MR. TORGERSON said it gets cases out of the system that has a much
lower probability of collecting so that they can focus on the cases
that are collectable.
Number 412
REPRESENTATIVE PORTER asked what would trigger the ability to go
back to a case.
MR. TORGERSON said he wasn't sure exactly how long the computer
system keeps claims archived, but it is a good many years. He said
the department has had cases where the head of the benefit payment
control unit has reinstituted the overpayment and collected it
after it becomes obvious that, through a tip or any other
information, that the overpayment is collectable.
Number 458
MR. PERKINS said once there is a qualifying event by a claimant,
then that would raise a red flag, or possibly through employment
security taxes that the employer pays on an individual.
REPRESENTATIVE PORTER said if the file is purged, how would the red
flag get raised.
MR. TORGERSON said he can't say for sure. He said he wants to
emphasize that this particular section doesn't require the
department to write off anything. The department isn't required to
write off after six years.
Number 516
CHAIRMAN KOTT said in the provision, it indicates that the
commissioner may declare the sums uncollectible and cancel both the
resulting shortage and related records. It doesn't mean that the
commissioner will. Chairman Kott said he would suspect that in
some circumstances he won't.
MR. TORGERSON said that is correct. He said the commissioner would
like the discretion to be able to write off what appears to be
uncollectible overpayments quickly. The commissioner isn't
necessarily going to write those overpayments off.
REPRESENTATIVE ROKEBERG asked if this wouldn't have the net affect
of making the commissioner's record of collection look better.
MR. TORGERSON indicated it would. He pointed out Oklahoma has one
of the worst overpayment recovery records simply because they write
off nothing. They're still collecting on overpayments made after
World War II. He said the department is subject to a variety of
federal oversight and one of the components is overpayment recovery
rate. Mr. Torgerson said the commissioner is not extremely
interested in having the records burdened with uncollectible
accountants. He stated Alaska has been first in the nation in
overpayment recovery. In past years we were fourth or sixth.
Number 769
CHRIS CHRISTENSEN, Staff Counsel, Office of the Administrative
Director, Alaska Court System, was next to come before the
committee. He explained when a bill is labeled "housekeeping and
cleanup" sometimes it is easy for it to fall through the cracks.
He said there is one very substantial change to current law in
Section 3 which was added at the Court System's request by the
Department of Labor prior to introduction. Mr. Christensen said
both the state and federal constitutions provide that if a person
is charged with a crime and can't afford a lawyer, the state has to
provide one for free. The Court System has the prime
responsibility for determining indigency and does the best job they
can, but they are funded by the legislature with only four people
statewide, two in Anchorage and two in Fairbanks. Section 3
provides the Court System with a very important new tool to
determine indigency. It says the court system will have access to
the Department of Labor's employment security tax records for
purposes of determining indigency. Mr. Christensen said this will
make it much easier for the Court System to determine if a person
is truly eligible. He said they also requested that an additional
section be put into Section 3 which would give the Department of
Law's Finance Collection Unit access to the same data. He noted
the Finance Collection Unit is funded by program receipts. It has
responsibility for collecting criminal fines that are unpaid as
well as collecting the monies which the Court System orders
indigent defendants to pay for their public defender services once
they acquire money in the future. Mr. Christensen explained that
currently, the Finance Collection Unit primarily goes after
permanent fund dividends because there is no easy and inexpensive
way to do anything else. Once they have got access to these
records, they'll be able to garnish paychecks because they'll know
when somebody has gone back to work and is making money.
Number 800
There being no further witnesses, REPRESENTATIVE ROKEBERG made a
motion to move SB 261 out of committee with individual
recommendations and a zero fiscal note.
CHAIRMAN KOTT asked if there was an objection. Hearing none, SB
261 was moved out of the House Labor and Commerce Committee.
HB 345 - PENSION INVESTMENT BOARD PROCUREMENTS
Number 960
CHAIRMAN KOTT announced the committee would hear HB 345, "An Act
relating to the procurement of investment and brokerage services by
the Alaska State Pension Investment Board," sponsored by
Representative Foster.
JOHN WALSH, Legislative Assistant to Representative Richard Foster,
said HB 345 would require that the Alaska Pension Investment Trust
Board increase the utilization of brokerage and investment services
provided by persons located in the state to at least 7 percent.
Additionally, there is a provision to provide an option to take a
look in Alaska. If these services are not available or the quality
of service is not available, the board wouldn't be required to make
that local procurement. In support of the bill, he would reiterate
on behalf of the sponsor, that the findings section of the bill
where the case is made for a healthy competitive private sector is
of paramount importance to Representative Foster. He said he is
aware of the impending fiscal gap that is motivating much of the
fiscal restrictions in the House and Senate operating budget. The
opportunities before us are not limited to general fund only. We
think that use of the assets that the state has access to
including, the pension investment fund, could be used to circulate
somewhat through the state and thereby, enhance the economy in
support of the local firms that operate here. Mr. Walsh said they,
in no way, have any intentions to jeopardize the investments or the
integrity of the fund. That is not the objective of the sponsor.
He said there are attractive investments in the state and quality
firms that can handle some of the brokerage transactions and
investment counseling. He said it is incentive to take a look in
Alaska before going out of state. Currently, the board uses 100
percent out-of-state investment counseling.
CHAIRMAN KOTT noted there is a new committee substitute which
couldn't be adopted because of a lack of a quorum. He asked Mr.
Walsh to review the changes.
Number 1119
MR. WALSH said, "In the State Affairs hearings, there was some
confusion as to whether we were talking about actual investments or
investment services and we thought about that and took a look at
the statute for the permanent fund investment. This committee
substitute would incorporate Section 11, page 3, lines 7 through
13, -- would incorporate the same language that's currently in
statute for the permanent fund. And that would be to take a look
at investments for which the board is responsible in-house, to the
extent that state investments are available and if the in-state
investments have a risk level and expect to yield comparable to the
alternative investment that the board would be looking otherwise --
and are certainly consistent with the investment policies
established by the board. So the point here is an expansion to the
original intent. It goes from beyond the investment counseling and
brokerage services to actually requiring the board to take a look
at investments in the state that meet or exceed those which the
board would be looking for outside of the state. And we think if
it's suitable for the permanent fund, it certainly is worthy of
consideration in this legislation. And, again, the intent is to
not in any diminish or disrupt the critical analysis or integrity
that the board places on their current investments.
REPRESENTATIVE ROKEBERG questioned what the number is in terms of
the gross amount of pensions related to this area in terms of the
Pension Investment Board. He referred to it being multiplied by 7
percent and questioned the meaning.
MR. WALSH said, "I think I see members of the Department of Revenue
here - staff to the Department of Revenue. If I understand, I
think the actual transaction fees or investment fees by the Pension
Investment Board are in the neighborhood of $7.4 million for the
PERS (public employees retirement system). Well here, I have a
schedule investment management fees, year ended June 30, 95, that's
$7.4. I don't expect that those -- I guess -- I'm not sure how
often the contract is turned, but that appears to be - just for the
PERS - the amount of management fees for the fiscal year 94."
REPRESENTATIVE ROKEBERG asked if the 7 percent would be based on
the gross of the corpus of those funds.
MR. WALSH explained the corpus of the funds is approximately $7
billion combined.
Number 1338
MICHAEL KIRK came before the committee to testify against HB 345.
He said he is addressing the committee not merely as a pension
retiree, but as a fellow pension retiree as the committee members
will be. Mr. Kirk said, "The reason I'm here to testify against HB
345 is because I consider the need that you will be given as an arm
twister and maybe a little bit of a red herring, I've submitted
incidently testimony to you which is in your file. It is
unbelievable that presumably competent entrepreneurs, presumably
competent investment brokers, presumably competent investment
counselors would have to attempt to twist your arm to say that they
should have special privileges for being in this state at this
moment, they could have moved in any time as far as I'm concerned,
and trying to persuade you or stampede you into believing, first of
all, that the American free market economy has singled them out and
is unfair to them, that the U.S. pension funds, contrary to court
decisions, are the employer's property when the courts have ruled
constantly otherwise. They are the earned property of the retiree.
Number three, to have you believe that the epidemic in U.S. pension
trust looting, as reported in the New York Times repeatedly and as
reported in Business We repeatedly never happened." Mr. Kirk
continued to give testimony against HB 345 and noted he submitted
testimony which was included in the committee member's committee
file.
Number 1667
TIM VOLWILER was next to come before the committee to testify on HB
345. He informed the committee he has 16 years in the teacher's
retirement system, he hopes to retire in the next century and he
hopes there is money there for it. Mr. Volwiler said he believes
the pension investment board is a trust fund for the teachers and
the public employees. He said he thinks the pension investment
board is working well in its present format and he doesn't see any
reason to change the freedom of the board as it is. Mr. Volwiler
said he was distressed to see the work draft, Section 11, page 3,
lines 7 through 13. He noted he has sent letters to the committee
members against the original bill.
MR. VOLWILER said, "Number one, there doesn't seem to be any
percentages in the bill; and number two, to me this kind of puts a
burden of proof for consideration on to things which are not
provable. I mean you're looking at risk level and expected yield
and that is guess work. I mean you can have good analysis, but you
can have a difference of opinion and I don't believe that you
should tell the pension investment board that they are required to
look at someone in-state or look at, you know, a municipal bond in-
state that's AA rated is equivalent to a municipal bond AA rated
anywhere else. So there is different analysis and I don't think
you should put a burden of proof on the pension investment board to
justify why they're not using local people. I think there are
people in the state that have good ideas, but I don't think we
should make any recommendations towards the board as to who they
should hire.
MR. VOLWILER said, "The second comment I would have is there is a
difference between making your first investment in this state and
then making other investments. If you have a wide diversification
in your portfolio, all those risks balance out. If you concentrate
a lot of investments in the state, such as Alaska with relatively
few people, that concentrates your risk more. So each additional
investment unbalances your portfolio. My main point, though, is I
believe that `why fix what's not broken to start out with?' I
think the pension investment board is working well. I think if
they so choose to invest in-state, that's fine but the benefits
should be the retirees and, as I consider myself, an expected
retiree. When there is not a conflict here, I don't believe, I
mean the recipients want their money to be there, when it comes
they can spend it and that's how we can get economic development in
this state. I don't think we should mandate a certain percentage
or a certain broker that they have to go through. I think that the
retirees have earned their money and when they get it in the terms
of their retirement pay, they'll spend it in-state and that's the
way we see the economic benefit in the state. If they choose to do
so, I don't oppose that, but I don't think the legislature should
be tying their hands and saying, `You must invest in-state.'"
Number 1858
MILT BARKER came before the committee to testify on HB 345. He
informed the committee he is a PERS beneficiary, served the state
for eight years as deputy commissioner of Treasury. He said his
concern is both for the state and the beneficiaries and that mean
upholding the high standards we currently have in legislation the
legislature has passed. Mr. Barker said the defining principle of
the trust fund, as quoted in standard legal text, is the most
fundamental duty owed by the trustee to the beneficiaries of the
trust, which is the duty of loyalty and that duty is defined as, "A
trustee owes a duty to the beneficiaries to administer the affairs
of the trust in the interest of the beneficiaries alone and to
exclude from consideration the welfare of third persons." Mr.
Barker said HB 345 would be a retreat from these standards and
would be a costly one. The cost would come from higher trading
costs, poor investment performance, greater administrative costs
and potentially litigation. The board is currently obligated to
obtain the best performance and the lowest transaction costs that
it can. Even if Alaskan firms provided equal service, mandating
their use can increase costs by increasing the number of firms that
the board deals with. Mr. Barker said this could be increases in
administrative costs and managerial distractions from it pursuing
investment performance. It also can increase costs because typical
investment management contracts have graduated fee scales - the
more money under management, the lower the rate. You divide the
money between more firms and you'll raise your total fees.
MR. BARKER said when the permanent fund's adviser, Michael O'Leary
of Callen, Associates, was asked how many domestic fixed income
managers should be heard, he stated, "Any more than two and fees
would affect the return, if the board hired three to make room for
an Alaska based emerging manager." The trust fund standards that
we have are really global standards of excellence and this has paid
off. These funds are among the best funded pension funds in the
country. Their performance is better than the permanent fund even
though the permanent fund, as an endowment, has a longer investment
horizon.
MR. BARKER explained the cost of HB 345 would be born, not only by
employees, but by employers. Contribution rates can only go up.
He said for public employer higher costs, it means higher taxes or
fewer services. He questioned whether this is the time to be
subsidizing in-state business when the state faces a half a billion
deficit and is cutting education and other essential services.
MR. BARKER said by ignoring standards of fiduciary conduct, HB 345
could expose the state to risks of litigation. Plaintiffs might be
beneficiaries to PERS, TRS, SBS, deferred comp, etc. He said you
could also find that municipal or other employees besides the state
would possibly take the state to court. Mr. Barker said he thinks
the ordeal of the mental health trust law suit ought to give us
pause. In short, HB 345 can only exacerbate the state's budget
crises and cheapen the promises public employers have made to their
retirees. Mr. Barker pointed out there is no bar to in-state
businesses performing services to the state's trust funds, but it
should not be handed to them on a plate or given as a political
favor. He said like the commercial says, "Let them get the
business the old fashion way, earn it."
MR. BARKER said he would like to make a comment regarding the
additional language in the proposed committee substitute. He said
the goal, he believes, is to increase in-state investment and a lot
of that would be targeted through commercial mortgages, both multi-
family and business. The state already has major effort in that
regard, both AIDEA and now AHFC. He said just recently AHFC
announced a new financing program for market rent multi-family
housing and that should address a lot of the concern that is behind
some of this legislation.
Number 2112
WILLIE ANDERSON, NEA-Alaska, was next to address the committee. He
stated NEA-Alaska opposes HB 345, primarily for the reasons stated
previously by earlier speakers. He said their concern is that the
bill mandates that there is a percentage of the pension fund that
is required to be invested in-state. The pension board was elected
about four years ago, has been operating as an independent pension
investment board and has done a good job. The returns have
continued to increase since the board has been in place; the fund
is healthy; the unfunded liability has decreased over time; and
with the potential of this requirement, the unfunded liability
could very well increase and could cost the state additional funds
instead of increasing the revenue to the state. He said it could
impinge upon the state's liability to bail out yet another
investment system. Mr. Anderson referred to when the SBS situation
went sour in the late 1980s - early 1990s, there was a requirement
for the state to bail that fund out. They later sued and recovered
some of that money. The same potential exists for this situation.
He urged that the bill not move out of committee.
MR. ANDERSON referred to the new language in Section 11 and said it
causes additional concern to NEA-Alaska because it doesn't appear
to have a limit as to how much can be and should be invested. He
said there is a risk level and an expected yield. Currently, the
yield for the pension investment for Alaska is above average and is
well respected in the arena of state employee pension funds
throughout the nation. If this bill is passed, we cannot tell what
that performance will be. He urged the bill be held in committee.
Number 2211
REPRESENTATIVE SANDERS asked if the Alaska teacher's retirement
fund buy or carry mortgages in Alaska.
MR. ANDERSON said he doesn't think that is part of their portfolio
at this time. He said someone from the Department of Revenue could
better answer that question. Mr. Anderson noted there is nothing
to preclude them from doing so. If it is a worthy investment, they
can pursue it.
Number 2242
BOB STORER, Chief Investment Officer, Treasury Division, Department
of Revenue, was next to come before the committee. He pointed out
that the Department of Revenue provides staff to the Alaska State
Pension Investment Board. He said the intent and the benefits of
the legislation are fairly obvious, but he would like to speak to
a number of things for the committee's consideration as they
evaluate the merits of the legislation. Mr. Storer said AS
14.25.180 does name the Alaska State Pension Investment Board as
the fiduciary of the trust funds. In that context, they must
consider the funds investments and the liabilities. They must
determine the appropriate investment objectives and act only in
regard to the best interests of the system's plan and
beneficiaries.
MR. STORER explained that one of the things this legislation does
is, by statute, it creates policy and in the modern investment
world, it is changing and is very dynamic. These issues need to be
addressed on an ongoing basis throughout the world. Some of the
unintended consequences of the legislation is it could have the
effect of actually dictating the asset allocation of the retirement
system. If you have a limited universe in Alaska to choose from,
you select managers in Alaska that provide a certain investment
vehicle. Then by default, you have other asset allocation
questions to deal with externally. Mr. Storer referred to
testimony relating to fees and those statements are reasonably
accurate. He said they are always very aggressively trying to cut
management fees as much as possible. Over the last couple of
years, they have successfully cut about $2 million in management
fees. He said he believes PERS and TRS in the aggregate, are about
$13 million. The fees are published annually in the Retirement and
Benefit Annual Report.
MR. STORER said, "There is one thing, if I was an Alaskan manager
and I knew you had to come to me for investment services, basically
you've taken all my leverage - my negotiation leverage away from
me. Why would I acquiesce to lower fees, and again, we do this on
an ongoing basis if I know you must come to me. So I think there
are some implications there, not only in the number of managers,
but the ability to negotiate lower fees on an ongoing basis."
MR. STORER said, "In terms of brokerage, I'd like to come back to
that. I did so well at describing at the last committee, I decided
to draw pictures this time and so hopefully, it will be helpful for
the committee members. The new piece, in terms of investing in
Alaska -- this is sort of classic language, if you will, for
economically targeted investments. `Is that done out there
elsewhere?' -- And the answer is `Yes.' A study done in 1995, by
a firm named Grenich (ph) Associates indicated that public funds in
excess of $1 billion, about 17 percent of those public funds do
economically target investments. So if you want to look at it --
glass half full or half empty, 83 don't - 17 do, or however you
want to perceive that. I would revisit the question of risk and
yield and what I've known is that the farther away you get from
markets where (indisc.) reported trading, the greater the
difference on the perception between what is appropriate risk and
yield and it depends on whether you're the buyer or the seller.
And there can be distinct differences on that opinion as you move
forward."
MR. STORER said a distinction that one should consider versus the
permanent fund and the retirement system is that the retirement
system has a distinct liability stream - the beneficiaries. The
permanent fund doesn't have a liability stream and they do not have
to deal with that issue when they're evaluating investments.
MR. STORER said, "If I may, in talking about activity for a minute
I'd like to hand out these diagrams. And the answer on public
employees, in terms of in terms of asset management fees and
investment advisory counsel is $7.5 million and for TRS it's $4.3
million is what's paid for asset management - a substantial sum.
Trades are really divided into two groups. The brokerage firms,
when they deal with it, you have institutional level trading and
that's what the retirement system, the permanent fund, any public
fund - private entities use. And then you have retail which we at
this table probably use."
MR. STORER continued to explain the diagram he had given the
committee members. He said the manager makes the trade decision
and they make the decision to buy or sell the securities. Mr.
Storer said they are not just trading just on behalf of the Alaska
State Pension Investment Board. They have many other funds that
they deal with. [END OF TAPE....]
TAPE 96-33, SIDE B
Number 001
MR. STORER continued, "...They're trained to be execution. There
is quality execution. They're used to what we call `large blocks -
large trading.' And that's how you obtain the best execution.
And it goes through the institutional sales office and then on to
the institution trade desk, and we've heard about electronic
trading a bit earlier. It's done very quickly and that's important
because you want to get maximum execution. I should also note that
by contract, managers accept fiduciary responsibility and they have
held to a standard of best execution possible. Now what happens,
in terms of if we were trade through offices in Alaska, these would
go through a retail entity. What happens is the manager must
complete all trades (indisc.--coughing) and there is some level of
our market impact when that execution occurs. So if you can see,
if we were to be held back by the diagram, we would go after all
the other trades would be completed and then you would have to
execute the trades through the Alaskan desks, and typically but
this is not an absolute statement, major brokerage firms have an
intermediary between the retail and the institutional desk to get
the trading. So you must wait and complete the order before we can
do our trade. There are other delays, there is clearly market
impact. Under additional costs, what will be the market impact?
You cannot determine it until after the fact. So you could only
determine the (indisc.) costs by hiring an independent consulting
firm to evaluate the trading costs after the fact. And, of course,
hiring has some cost implications also. With that in mind, if I
may, I'd like to be available to answer any questions the members
of this committee might ask.
Number 079
REPRESENTATIVE ROKEBERG referred to when the department goes out
for management services contracts and asked if they go through the
procurement code. He also asked how contacts are worded.
MR. STORER said, "This process is unique. It's actually recognized
that it is exempt from the procurement process. Nevertheless, you
do have a process. You're obligated as a fiduciary. The board
will evaluate an array of asset classes, make the decision. And we
do have a consulting firm that assists the board in: (A) Those
decisions; and then (B) When we're looking for a specific type of
manager. The consulting firm essentially runs the RFP process in
concert with the board and members of an investment council also
assists the board. And I would suggest that to some degree it is
far more rigorous than the RFP process. These firms are constantly
appraising the investment community at large. I think the one we
use evaluates something like 1,200 management firms that provide
due diligence and they look at a lot of issues as you suggest - the
depth of an organization, the abilities. Yes, fees are some
distinction but they're not an absolute distinction. It is a
rather vigorous process and then the final component is bring some
element -- some group of finalists before the board for the final
selection process."
MR. STORER continued, "In answer to your question about Alaskan
money management firms, I think one of the things that is very
important is communication. I think that the investment board must
understand what investment options are available in Alaska. And I
think that the management firms must convey how they manage their
assets so that the board would be well educated when those
investments are appropriate. In fact, the board has invited, on
two occasions, money management firms in Alaska to make educational
presentations before the board. One was a fixed income manager and
another was one that proposed managing mortgages. From the
investment board side, this is important because the more we know
it'll assist us in evaluating these firms. And then as we evolve
our way through the asset allocation decisions, that could be
embedded in the process. So I do think it is important that the
communication be in place and that there be ongoing education in
terms where managers are in Alaska.
Number 211
REPRESENTATIVE PORTER asked Mr. Storer if he has had any experience
with in-state providers.
MR. STORER informed the committee that to date, the board has not
hired an investment manager to provide services in Alaska.
REPRESENTATIVE ROKEBERG asked if anybody in the state has made a
proposal to the board.
MR. STORER said they have always asked the consulting firm to take
a very long look at the management firms in Alaska. He said that
has always been his instructions as the chief investment officer to
the consulting firm.
REPRESENTATIVE ROKEBERG referred to when the permanent fund was
started there was a percentage of quota provision for investments
within financial institutions, specifically banks within the state.
MR. STORER said he helped develop that policy as he worked nine
years for the permanent fund. There was the Alaska Certificate
Deposit Program. He said they made up to $300 million available to
the institutions in Alaska. These were fully collateralized
certificates of deposit. Mr. Storer said, "We worked with the
banks, not always to their satisfaction because they like to pay a
little bit less and we'd like to get a little bit more. But we
developed a program that did make funds available in what we felt
was a market rate - a favorable market rate to both entities. The
most that I can remember that the banks availed themselves of was
about $200 of the $300 million and, while I have not been over in
the last four years, I think the average balance has been about $80
or $100 million the last four years. What that suggests is that
banks don't need capital because that was designed as a source of
capital for them.
CHAIRMAN KOTT thanked Mr. Storer for his testimony and said it is
not his intent to move HB 345. He asked the committee to review
the proposed committee substitute as it would be brought up at the
next meeting on the measure.
SB 305 - REGULATION OF ACCOUNTANTS
Number 379
CHAIRMAN KOTT announced the last order of business would be CS FOR
SB 305(L&C), "An Act relating to the regulation of accountants; and
amending the effective date for sec. 6, ch. 62, SLA 1991,"
sponsored by the Senate Labor and Commerce Committee
SHERMAN ERNOUF, Legislative Assistant to Senator Tim Kelly,
explained SB 305 was introduced at the request of several people.
It is the product of work between the Alaska State Board of Public
Accountancy, represented by Charles Griffin, the Alaska Society of
Certified Public Accountants and faculty from University of Alaska
- Anchorage (UAA) and University of Alaska - Fairbanks (UAF). Mr.
Ernouf explained the bill changes the educational requirement for
licensure as a certified public accountant (CPA). In 1991, the
accountancy statutes were amended to require completion of 150
semester credit hours for licensure as a CPA. Those changes had an
effective date of September 1, 1997. The proposed changes in the
bill would extend the effective date of that act to January 1,
2001. This change would alleviate a number of concerns. It
conforms Alaska's statute with the AICPA change that is going to
occur at that time and would allow UAA and UAF to gear up their
programs for the 150 hour requirement. Currently, there has been
friction with students and faculty over that change.
MR. ERNOUF informed the committee that in 1992, Alaska started
recognizing limited liability companies. Currently, without an
amendment to the statute, public accounting practice units can't
organize as limited liability companies. This bill would amend the
statute so that they could organize as limited liability companies.
MR. ERNOUF explained the third change the bill makes to the code is
it allows for reciprocity for CPAs moving to Alaska. Reciprocity
would be granted for an established CPA who has worked in public
accounting for five out of the last ten years. The CPA would be
granted a reciprocal certificate.
MR. ERNOUF noted the bill was worked on in the Senate Labor and
Commerce Committee and a couple of small changes were made. He
said all parties involved have worked together with each other and
it is pretty much a consensus piece of legislation.
Number 499
TOM BARTLETT, President, Alaska Society of Certified Public
Accountants, was next to address the committee via teleconference
from Fairbanks. He said he would reiterate that his organization
worked closely with the Alaska State Board of Accountancy and that
they support CSSB 305(L&C). He urged passage of the legislation.
Number 527
CHARLES "CHUCK" GRIFFIN, Certified Public Accountant, was next to
testify via teleconference from Mat-Su. He informed the committee
he served on the Board of Accountancy for six years and has chaired
it for the last five years. He said Mr. Ernouf has given the
proper background on the bill. Mr. Griffin informed the committee
that the board unanimously supported and endorsed the bill to meet
the transition and grandfather requirements of the current
university graduates and to comply with the counsel of their AAG
who indicates that they may not issue firm permits without the
statutory authority to recognize the LLC form of business and to
have a permissive provision to issue on the basis of reciprocity
licenses to CPAs from other states who moved to Alaska to practice,
primarily with the larger national firms. He thanked the committee
and urged support.
Number 590
REPRESENTATIVE ROKEBERG made a motion to move CSSB 305(L&C) out of
committee with individual recommendations and the accompanying zero
fiscal note.
CHAIRMAN KOTT asked if there was an objection. Hearing none, CSSB
305(L&C) was moved out of the House Labor and Commerce Committee.
ADJOURNMENT
CHAIRMAN KOTT adjourned the House Labor and Commerce Committee
meeting at 6:06 p.m.
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