Legislature(1999 - 2000)
04/14/2000 03:33 PM House L&C
| Audio | Topic |
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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 14, 2000
3:33 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman
Representative Andrew Halcro, Vice Chairman
Representative Lisa Murkowski
Representative John Harris
Representative Tom Brice
Representative Sharon Cissna
MEMBERS ABSENT
Representative Jerry Sanders
COMMITTEE CALENDAR
HOUSE BILL NO. 440
"An Act relating to needle stick and sharps injury protections and
the use of safe needles by health care facilities and health care
professionals; relating to the vaccination of health care workers
against diseases transmitted by blood borne pathogens; and
providing for an effective date."
- MOVED CSHB 440(L&C) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 289(FIN) am
"An Act relating to technical and vocational education and to
employment assistance and training; and providing for an effective
date."
- MOVED CSSB 289(FIN) am OUT OF COMMITTEE
HOUSE BILL NO. 342
"An Act relating to the financing authority, payment in lieu of tax
agreements, and tax exemption for assets and projects of the Alaska
Industrial Development and Export Authority; relating to renaming
and contingently repealing the rural development initiative fund
within the Department of Community and Economic Development, and
establishing the rural development initiative fund within the
Alaska Industrial Development and Export Authority; and providing
for an effective date."
- MOVED CSHB 342(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 169
"An Act relating to including the costs of expansion activities and
political activities in rates of electric cooperatives."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 440
SHORT TITLE: PROTECTION FROM NEEDLE & SHARPS INJURIES
Jrn-Date Jrn-Page Action
3/29/00 2753 (H) READ THE FIRST TIME - REFERRALS
3/29/00 2754 (H) L&C, FIN
4/05/00 (H) L&C AT 3:15 PM CAPITOL 17
4/05/00 (H) Heard & Held
4/14/00 (H) L&C AT 3:15 PM CAPITOL 17
BILL: SB 289
SHORT TITLE: TECH & VOC EDUC/ EMPLOYMENT ASSISTANCE
Jrn-Date Jrn-Page Action
3/08/00 2566 (S) READ THE FIRST TIME - REFERRALS
3/08/00 2567 (S) L&C, FIN
3/23/00 (S) L&C AT 1:30 PM BELTZ 211
3/23/00 (S) -- Rescheduled to 3/28/00 --
3/28/00 (S) L&C AT 1:30 PM BELTZ 211
3/28/00 (S) Moved CS(L&C) Out of Committee
3/29/00 2775 (S) L&C RPT CS 1DP 3NR SAME TITLE
3/29/00 2775 (S) NR: MACKIE, LEMAN, HOFFMAN;
3/29/00 2775 (S) DP: TIM KELLY
3/29/00 2775 (S) FISCAL NOTES (DOE, DHSS, LABOR-2)
3/30/00 (S) FIN AT 6:00 PM SENATE FINANCE 532
3/31/00 (S) FIN AT 9:00 AM SENATE FINANCE 532
3/31/00 (S) Heard & Held
4/03/00 (S) FIN AT 9:00 AM SENATE FINANCE 532
4/03/00 (S) Heard & Held
4/04/00 (S) FIN AT 9:00 AM SENATE FINANCE 532
4/04/00 (S) Scheduled But Not Heard
4/05/00 (S) FIN AT 9:00 AM SENATE FINANCE 532
4/05/00 2870 (S) FIN RPT CS 5DP 2NR 2AM NEW TITLE
4/05/00 2871 (S) DP: TORGERSON, PARNELL, ADAMS,
WILKEN
4/05/00 2871 (S) PETE KELLY; NR: LEMAN, DONLEY;
4/05/00 2871 (S) AM: GREEN, PHILLIPS
4/05/00 2871 (S) FISCAL NOTES (S.FIN/UA, S.FIN/LABOR)
4/06/00 (S) RLS AT 11:45 AM FAHRENKAMP 203
4/06/00 (S) MINUTE(RLS)
4/07/00 2929 (S) RLS TO CALENDAR AND 3 OR 04/07/00
4/07/00 2931 (S) READ THE SECOND TIME
4/07/00 2931 (S) HELD IN SECOND READING TO 4/10/00 CAL
4/10/00 2952 (S) BEFORE THE SENATE IN SECOND READING
4/10/00 2952 (S) FIN CS ADOPTED UNAN CONSENT
4/10/00 2953 (S) AM NO 1 FAILED Y8 N11 E1
4/10/00 2953 (S) ADVANCED TO THIRD READING UNAN
CONSENT
4/10/00 2953 (S) READ THE THIRD TIME CSSB 289(FIN)
4/10/00 2954 (S) PASSED Y12 N7 E1
4/10/00 2954 (S) EFFECTIVE DATE(S) Y19 N- E1
4/10/00 2954 (S) LINCOLN NOTICE OF RECONSIDERATION
4/11/00 3007 (S) RECON TAKEN UP - IN THIRD READING
4/11/00 3007 (S) HELD ON RECON TO 4/12 CALENDAR
4/12/00 3034 (S) BEFORE THE SENATE IN 3RD RDG ON RECON
4/12/00 3035 (S) RETURN TO SECOND FOR AM 2 UNAN
CONSENT
4/12/00 3035 (S) AM NO 2 ADOPTED UNAN CONSENT
4/12/00 3035 (S) AUTOMATICALLY IN THIRD READING
4/12/00 3035 (S) PASSED Y13 N7
4/12/00 3035 (S) EFFECTIVE DATE(S) Y20 N-
4/12/00 3040 (S) TRANSMITTED TO (H)
4/13/00 3103 (H) READ THE FIRST TIME - REFERRALS
4/13/00 3103 (H) L&C, FIN
4/14/00 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 342
SHORT TITLE: AIDEA: BONDS & RURAL DEVELOPMENT
Jrn-Date Jrn-Page Action
2/07/00 2115 (H) READ THE FIRST TIME - REFERRALS
2/07/00 2115 (H) CRA, L&C, FIN
2/07/00 2115 (H) ZERO FISCAL NOTE (DCED)
2/07/00 2115 (H) GOVERNOR'S TRANSMITTAL LETTER
2/22/00 (H) CRA AT 8:00 AM CAPITOL 124
2/22/00 (H) Scheduled But Not Heard
4/13/00 (H) CRA AT 8:00 AM CAPITOL 124
4/13/00 (H) Moved Out of Committee
4/13/00 3104 (H) CRA RPT 4DP 2NR 1AM
4/13/00 3104 (H) DP: JOULE, HALCRO, MURKOWSKI, HARRIS;
4/13/00 3104 (H) NR: DYSON, KOOKESH; AM: MORGAN
4/13/00 3105 (H) ZERO FISCAL NOTE (DCED) 2/7/00
4/14/00 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 169
SHORT TITLE: ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY
Jrn-Date Jrn-Page Action
3/31/99 625 (H) READ THE FIRST TIME - REFERRAL(S)
3/31/99 625 (H) URS, L&C
4/28/99 (H) URS AT 8:00 AM CAPITOL 120
4/28/99 (H) SCHEDULED BUT NOT HEARD
5/05/99 (H) URS AT 8:00 AM CAPITOL 120
5/05/99 (H) SCHEDULED BUT NOT HEARD
3/15/00 (H) URS AT 8:00 AM CAPITOL 120
3/15/00 (H) -- Meeting Postponed to 3/22 --
3/22/00 (H) URS AT 8:00 AM CAPITOL 120
3/22/00 (H) Heard & Held
3/22/00 (H) MINUTE(URS)
3/29/00 (H) URS AT 8:00 AM CAPITOL 124
3/29/00 (H) Heard & Held
3/29/00 (H) MINUTE(URS)
3/31/00 (H) L&C AT 3:15 PM CAPITOL 17
3/31/00 (H) <Pending Referral>
4/05/00 (H) URS AT 8:00 AM CAPITOL 120
4/05/00 (H) <Bill Postponed To 4/12>
4/12/00 (H) URS AT 9:00 AM CAPITOL 120
4/12/00 (H) Moved CSHB 169(URS) Out of Committee
4/13/00 3111 (H) URS RPT CS(URS) 4DP 1NR
4/13/00 3111 (H) DP: HUDSON, ROKEBERG, GREEN, KOTT;
4/13/00 3111 (H) NR: COWDERY
4/13/00 3112 (H) ZERO FISCAL NOTE (DCED)
4/14/00 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
TIM BUNDY, Assistant Chief
Consultation and Training
Division of Labor Standards and Safety
Department of Labor and Workforce Development
3301 Eagle Street, Suite 305
Anchorage, Alaska 99510-7022
POSITION STATEMENT: Available to answer questions on HB 440,
Version H.
MANO FREY, President
Alaska American Federation of Labor and Congress of Industrial
Organizations (AFL-CIO)
2501 Commercial Drive
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 440, Version H and CSSB
289(FIN) am.
MARY JACKSON, Staff
to Senator Torgerson
Alaska State Legislature
Capitol Building, Room 516
Juneau, Alaska 99801
POSITION STATEMENT: Presented CSSB 289(FIN) am.
JOHN BROWN, Business Agent
Operating Engineers Union
President, Central Labor Council in Fairbanks
309 Juneau Avenue
Fairbanks, Alaska 99701
POSITION STATEMENT: Opposed CSSB 289(FIN) am.
TIM NAVARRE, Small Business Owner
Member, Kenai Peninsula Borough Assembly
PO Box 92
Kenai, Alaska 99611
POSITION STATEMENT: Supported CSSB 289(FIN) am.
MARIE NELSON, Small Business Owner
268 E Nelson
Wasilla, Alaska 99687
POSITION STATEMENT: Expressed concerns with CSSB 289(FIN) am.
SCOTT LOMELINO, Case Manager
Division of Public Assistance
PO Box 2464
Palmer, Alaska 99645
POSITION STATEMENT: Discussed his concerns with [the possibility]
of an increase in the unemployment insurance tax.
TONY DASSAW
PO Box 870382
Wasilla, Alaska 99687
POSITION STATEMENT: Expressed concerns with the [possible]
doubling of the unemployment insurance tax.
SHARON EILERS, Recipient
Statewide Employment Program
2200 Skwentna Bay
Wasilla, Alaska 99654
POSITION STATEMENT: Expressed concerns with giving the university
more money.
JAN TATLOW
Alaska Human Resource Investment Council
PO Box 1621
Palmer, Alaska 99645
POSITION STATEMENT: Expressed concern that people do not have
knowledge of this 100 percent increase in the unemployment tax.
PATRICK O'BRIEN, Member
Kenai Peninsula Borough Assembly
PO Box 2862
Valdez, Alaska 99686
POSITION STATEMENT: Testified in support of CSSB 289(FIN) am and
urged the committee to pass it out.
VINCE KELLY, Training Coordinator
Prince William Sound Community College
PO Box 2862
Valdez, Alaska 99686
POSITION STATEMENT: Testified in support of CSSB 289(FIN) am.
JEFF PRUSS, Business Representative
Carpenters Local 1243
1825 Esquire Avenue
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to CSSB 289(FIN) am.
ERNIE RUMP, President
Painters Local 1555
1589 Jamboree Drive
Fairbanks, Alaska 99709
POSITION STATEMENT: Testified in opposition to CSSB 289(FIN) am.
WENDY REDMAN, Vice President
Statewide University System
University of Alaska
PO Box 755000
Fairbanks, AK 99775
POSITION STATEMENT: Testified that the university supports CSSB
289(FIN) am.
DWIGHT PERKINS, Deputy Commissioner
Department of Labor and Workforce Development
PO Box 21149
Juneau, Alaska 99802-1149
POSITION STATEMENT: Testified on CSSB 289(FIN) am.
RON HULL, Deputy Director
Division of Employment Security
Department of Labor and Workforce Development
PO Box 25509
Juneau, Alaska 99802-5509
POSITION STATEMENT: Testified on CSSB 289(FIN) am.
TOM WILEY, Unemployment Insurance Actuary
Division of Administrative Services
Department of Labor and Workforce Development
PO Box 21149
Juneau, Alaska 99802-1149
POSITION STATEMENT: Answered questions on CSSB 289(FIN) am.
KEITH LAUFER, Financial and Legal Affairs Manager
Alaska Industrial Development and Export Authority (AIDEA)
480 West Tudor
Anchorage, Alaska 99503
POSITION STATEMENT: Testified in support of HB 342.
JEFF LOGAN, Legislative Aide
for Representative Joe Green
Alaska State Legislature
Capitol Building, Room 214
Juneau, Alaska 99801
POSITION STATEMENT: Introduced HB 169.
GEORGE KITCHENS, President
Golden Valley Electric Association (GVEA)
758 Illinois Street
Fairbanks, Alaska 99701
POSITION STATEMENT: Testified in opposition to HB 169.
BERNIE SMITH, Commissioner
Regulatory Commission of Alaska (RCA)
Department of Community and Economic Development
1016 West Sixth Avenue
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 169.
DON EDWARDS, General Counsel
Chugach Electric Association
5601 Minnesota Drive
Anchorage, Alaska 99519
POSITION STATEMENT: Testified on HB 169.
ACTION NARRATIVE
TAPE 00-49, SIDE A
Number 0001
CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce
Standing Committee meeting to order at 3:33 p.m. Members present
at the call to order were Representatives Rokeberg, Murkowski,
Harris, Brice and Cissna. Representative Halcro arrived as the
meeting was in progress.
HB 440-PROTECTION FROM NEEDLE & SHARPS INJURIES
CHAIRMAN ROKEBERG announced the first order of business is HOUSE
BILL NO. 440, "An Act relating to needle stick and sharps injury
protections and the use of safe needles by health care facilities
and health care professionals; relating to the vaccination of
health care workers against diseases transmitted by blood borne
pathogens; and providing for an effective date."
Number 0128
REPRESENTATIVE HARRIS made a motion to adopt the proposed committee
substitute for HB 440 (LS1580\H, Cramer, 4/13/00). There being no
objection, HB 440, Version H, was adopted.
CHAIRMAN ROKEBERG indicated there are several amendments to the
bill. He asked Representative Harris if he is aware of these
amendments.
REPRESENTATIVE HARRIS replied yes.
CHAIRMAN ROKEBERG wondered if the amendments "conform this bill
with the Senate version, which is moving along?"
REPRESENTATIVE HARRIS stated that is correct.
CHAIRMAN ROKEBERG asked, "Would that be your intention when we
offer those to conform to (indisc.)?"
REPRESENTATIVE HARRIS said, "Absolutely."
CHAIRMAN ROKEBERG commented that the committee would take brief
testimony on the bill. He asked Tim Bundy if he is available to
simply answer questions on the bill.
TIM BUNDY, Assistant Chief, Consultation and Training, Division of
Labor Standards and Safety, Department of Labor and Workforce
Development, testified via teleconference from Anchorage. He noted
that he is available to answer any questions on HB 440, Version H.
Number 0205
MANO FREY, President, Alaska American Federation of Labor and
Congress of Industrial Organizations (AFL-CIO), testified via
teleconference from Anchorage. He stated that the Laborers' Union
represents nearly 300 registered nurses and an additional 200 or
more health care workers at Alaska Regional Hospital. The
Laborers' Union supports the bill and thinks it would go a long way
in helping protect those involved in the medical industry.
CHAIRMAN ROKEBERG asked Mr. Frey if he has seen the Senate version
of this bill.
MR. FREY commented that he has the committee substitute for HB 440.
REPRESENTATIVE HARRIS made a motion for the adoption of Amendment
1 which reads:
Page 1, line 14:
Delete: "(h)"
Insert: "(g)"
Page 3, lines 19-22:
Delete subsection (f).
Reletter remaining subsections.
There being no objection, Amendment 1 was adopted.
REPRESENTATIVE HARRIS made a motion for the adoption of Amendment
2 which reads:
Delete: Page 2, line 19, from "engineering control"
through line 22 "procedure;".
Insert: "needleless systems and sharps with engineered
sharps injury protections are not required if:"
(A) the devices are not available in the
marketplace;
(B) the evaluation committee described in (g)
of this section determines by means of objective product
evaluation criteria that use of the devices may
jeopardize patient safety if use for
(i) a class or type of procedure; or
(ii) a class or type of procedure when
performed on a certain type of patient;
(C) a certified or licensed health care worker
directly involved in the patient's care determines, in
the reasonable exercise of clinical judgement, that use
of the devices will jeopardize the patient's safety or
the success of the particular medical procedure involving
the patient; a health care worker who makes this
determination shall file a report with the employer, in
writing, including the date, time, patient, and procedure
involved, and a statement of the reasons why the employee
failed to use an approved needless system or sharp with
engineered sharps injury protections;
(D) the employer can demonstrate by means of
objective product evaluation criteria that use of the
devices is not more effective in preventing exposure
incidents than the alternative used by the employer; or
(E) the employer can demonstrate, with respect
to an engineering control that has not been available in
the marketplace for at least 12 months, that reasonable
specific and reliable information is not available
regarding the safety performance of the engineering
control for the employer's procedures, and that the
employer is actively determining by means of objective
product evaluation criteria whether the use of the
engineering control will reduce the risk of exposure
incidents occurring in the employer's workplace;
There being no objection, Amendment 2 was adopted.
REPRESENTATIVE HARRIS made a motion for the adoption of Amendment
3 which reads:
Page 3, line 5, after "exposure incident"
Insert: "that must include"
(A) the job classification of the exposed
employee;
(B) the department or work area where the
exposure incident occurred;
(C) the procedure that the exposed employee was
performing at the time of the incident;
(D) how the incident occurred;
(E) the body part involved in the exposure
incident;
(F) if the sharp had engineered sharps injury
protections, whether the protective mechanism was
activated, and whether the injury occurred before the
protective mechanism was activated, during activation of
the mechanism, or after activation of the mechanism;
(G) if the sharp had no engineered sharps
injury protections, the injured employee's opinion as to
whether and how such a mechanism could have prevented the
injury, as well as the basis for the opinion; and
(H) whether an engineering, administrative, or
work practice control could have prevented the injury, as
well as the recorder's basis for the opinion.
There being no objection, Amendment 3 was adopted.
REPRESENTATIVE HARRIS made a motion for the adoption of Amendment
4 which reads:
Page 3, lines 27 - 31:
Delete current language.
Insert:
(g) An employer who employs 10 or more front-line
health care workers shall establish an evaluation
committee, at least half the members of which are
front-line health care workers. An employer who employs
fewer than 10 front-line health care workers shall
establish an evaluation committee with at least one
member who is a front-line health care worker. An
employer who has established a committee before the
effective date of this section that satisfies the
requirements of this subsection is not required to
establish an additional committee under this subsection.
There being no objection, Amendment 4 was adopted.
REPRESENTATIVE HARRIS made a motion for the adoption of Amendment
5 which reads:
Page 4, line 24, after "workplace;":
Insert:
(6) "front-line health care worker" means a
nonmanagerial employee responsible for direct patient
care with potential occupational exposure to
sharps-related injuries;
Renumber sections accordingly.
There being no objection, Amendment 5 was adopted.
REPRESENTATIVE HARRIS made a motion for the adoption of Amendment
6 which reads:
Page 5, line 7, after "18.60.880(c)"
Insert: ";"
(11) "work practice controls" are controls
that reduce the likelihood of exposure by altering the
manner in which a task is performed.
There being no objection, Amendment 6 was adopted.
Number 0365
REPRESENTATIVE HARRIS made a motion for the adoption of Amendment
7 which reads:
Page 5, line 8 after "2003":
Insert:
Section 3. The uncodified law of the State of
Alaska is amended by adding a new section to read:
EMPLOYERS WITH LESS THAN TWENTY-FIVE
FULL-TIME EQUIVALENT EMPLOYEES: Notwithstanding AS
18.60.880 and 18.60.890, enacted by section 1 of this
Act, an employer who has fewer than 25
full-time-equivalent employees is not required to comply
with AS 18.60.880 and 18.60.890.
Renumber sections accordingly.
CHAIRMAN ROKEBERG objected for the purpose of discussion. He
stated that the amendment is an uncodified exemption for businesses
of less than 25 people. He agrees with the amendment and removed
his objection. There being no further objection, Amendment 7 was
adopted.
Number 0421
REPRESENTATIVE HARRIS made a motion to move HB 440, Version H, as
amended, out of committee with individual recommendations and the
attached fiscal note. There being no objection, CSHB 440(L&C)
moved from the House Labor and Commerce Standing Committee.
SB 289-TECH & VOC EDUC/ EMPLOYMENT ASSISTANCE
CHAIRMAN ROKEBERG announced that the next order of business is CS
FOR SENATE BILL NO. 289(FIN) am, "An Act relating to technical and
vocational education and to employment assistance and training; and
providing for an effective date."
Number 0484
MARY JACKSON, Staff to Senator Torgerson, Alaska State Legislature,
pointed out that the bill packet should include a sponsor
statement, a sectional analysis, a question and answer sheet and
two attachments. She explained that this bill places a new
emphasis on technical and vocational information. She informed the
committee that almost 60 percent of Alaska's high school graduates
do not go through a four-year program. However, these high school
graduates need to be trained and need to work. This [legislation]
is one of the ways in which Alaska can better prepare its
workforce. This legislation proposes a new funding system which is
similar to the existing Statewide Employment Program (STEP). The
new system is a two-tenths of one percent diversion, which amounts
to $8.6 million annually. She pointed out that the first year
funds are directed to the public institutions in Alaska, which is
about $6.4 million. Funds [collected] after the first year would
be distributed by a grant process through guidelines that the
Alaska Human Resource Investment Council (AHRIC) will develop. The
bill requires that AHRIC review and report back to the legislature
on the following topics: the AHRIC guidelines, AHRIC's internal
review, and AHRIC's proposal to act as Alaska's lead agency for
vocational technical education for the next 10-20 years. Ms.
Jackson pointed out that this legislation also provides clarifying
legislation on three of the six program elements that are in STEP.
CHAIRMAN ROKEBERG expressed concern in regard to comments that he
has heard regarding SB 289 being a tax on business. He noted that
he has strong feelings about placing any further burden or tax on
business.
MS. JACKSON specified that the two-tenths of one percent is a
diversion from the trust fund. If an adjustment of the trust fund
is required, the employer would be required to make that up. She
noted that there are many external influences on the trust fund and
this would be one of them. The influence of this on the trust fund
is unknown. She informed the committee that the trust fund is
periodically balanced by the division.
CHAIRMAN ROKEBERG related his belief that his worst fears were
confirmed as he understood that an imbalance would result in
assessments.
MS. JACKSON responded, "That would go up." She pointed out that it
would be equally true that if it decreases the rate would decrease.
CHAIRMAN ROKEBERG asked if it is a specific amount of dollars or is
there a percentage (indisc.).
MS. JACKSON reiterated that it is two-tenths of one percent.
CHAIRMAN ROKEBERG remarked that it seems to be a burden on the
corpus of the [retained] earnings of [the trust fund].
MS. JACKSON agreed.
CHAIRMAN ROKEBERG inquired as to the current surpluses.
MS. JACKSON deferred to the department.
Number 0806
JOHN BROWN, Business Agent, Operating Engineers Union; President,
Central Labor Council in Fairbanks, testified via teleconference
from Fairbanks. He said that he strongly opposed SB 289 because it
is the wrong way to fund the university. Mr. Brown pointed out
that Alaska's unemployment benefit is currently thirty-second in
the nation. Alaska hasn't raised its unemployment levels in many
years, yet the state has a very large contingent of seasonal
workers who depend upon unemployment to get them through that
seasonal work. If funds are diverted to the trust fund, the state
risks its ability to provide unemployment. Furthermore, he had the
impression that if more money is necessary, business will have to
pay it. He disagreed with that philosophy as he believes funding
the university through the general fund is appropriate. He
reiterated his opposition to this legislation.
Number 0916
TIM NAVARRE, Small Business Owner; Member, Kenai Peninsula Borough
Assembly, testified via teleconference from Kenai. Mr. Navarre
expressed his strong support of SB 289 as he did not view this as
merely a funding mechanism for the university. From a borough
standpoint, Mr. Navarre stated, "If it hadn't been for the
cooperation of the local branch of the university ... along with
the private business with the modular project ... and the fast ...
time frame with our economic development to train some local
residents to work on and get jobs on those, they wouldn't have been
able to get seasonal [employment] .... He was sure that they were
happy to have a job first and then worry about whether they qualify
for unemployment benefits." From a business standpoint, Mr.
Navarre didn't have a problem paying additional taxes in some areas
so long as he receives a benefit from it. He explained that having
a better qualified and trained workforce to choose from is a
benefit to the employers. He noted that he has been a big
supporter of more vocational educational programs on the Kenai
Peninsula. He recalled hearing that about 70 percent of Alaska's
high school graduates do not continue to higher education. Mr.
Navarre applauded the Senate's effort as well as Senator
Torgerson's effort to get Alaska more involved in vocational
education.
Number 1074
MARIE NELSON, Small Business Owner, testified via teleconference
from Wasilla. She informed the committee that she owns a training
facility in Wasilla that is approved by the [Alaska Commission] on
Post-secondary Education. In June the facility will have been in
operation for three years at which time she will have trained 90
certified nurses aides and 12 pharmacy certified technicians. Ms.
Nelson stressed that she does not receive any state or federal
grants. Therefore, she inquired as to how this legislation would
affect a small training facility such as hers. She commented, "If
we get people here to Wasilla, we're doing great. Getting them to
Anchorage from here is going to be a very big problem." She also
inquired as to who determines who receives what grants and how
much.
CHAIRMAN ROKEBERG asked if Ms. Nelson was concerned about these
other programs competing with her business.
MS. NELSON replied no and clarified that she is concerned about
[the possibility] of all the money being funneled to Juneau,
Anchorage and Kotzebue, and she wondered where that would leave
those in the Mat-Su Valley.
CHAIRMAN ROKEBERG related his belief that this is new additional
money that is currently not being utilized. He asked if some of
Ms. Nelson's students receive other state grants or scholarships or
governmental funding in order to attend Ms. Nelson's training
facility.
MS. NELSON answered in the affirmative. She specified that her
students are funded by Veterans' Affairs, Vocational Rehabilitation
and the Job Training & Partnership Act (JTPA) as well as private
funds. She noted that she is also eligible for student loans.
However, she is concerned because some of the agencies sponsor the
tuition.
CHAIRMAN ROKEBERG related his understanding that [this program]
would not necessarily be a new program, but would be an additional
funding source, which also has a capital component. Chairman
Rokeberg requested that Ms. Jackson speak to Ms. Nelson's concern.
MS. JACKSON clarified that SB 289 would create a new program for
which there is new money for a new training and education program.
The first year of the program the monies would be directed
specifically out. After that first year, $8.6 million annually
would be made available to entities, and Ms. Nelson may qualify as
one of those entities, that would be subject to the criteria and
grant application process developed by AHRIC. She pointed out that
AHRIC currently develops the guidelines for the existing STEP.
CHAIRMAN ROKEBERG identified the negative aspect of this for Ms.
Nelson as a possible increase in her unemployment insurance
contribution.
MS. JACKSON replied, "That's fine." She then asked what she is
supposed to do during the year when the new money and this program
are being developed. She inquired as to how she would pay her
mortgage payments.
CHAIRMAN ROKEBERG clarified that this is additional money to
existing programs. He said, "This is new stuff; we're not taking
anything away."
Number 1309
SCOTT LOMELINO, Case Manager, Division of Public Assistance,
testified via teleconference from Wasilla. As an employee, Mr.
Lomelino understood that this is new money. He asked if, as an
employee that pays unemployment insurance taxes, he would be paying
more new taxes.
CHAIRMAN ROKEBERG stated that Ms. Jackson is shaking her head
indicating a no response. However, he believes Mr. Lomelino's
assessment to be correct.
MR. LOMELINO related his understanding that the one-tenth of one
percent is now going to be two-tenths of one percent. He asked if
that is a 100 percent increase. He also asked if this increase is
basically going to come from the pocket of everyone who is working.
CHAIRMAN ROKEBERG replied yes. He informed Mr. Lomelino that he
believes the ratio is 80:20 from the employer and employee,
respectively. Therefore, that assessment would be against the
corpus of the trust fund and would be on those tax collections.
MR. LOMELINO ascertained, then, that if SB 289 passes, his taxes
will increase and institutions such as the university will be given
money to do with what they will.
CHAIRMAN ROKEBERG remarked that Mr. Lomelino has a good point,
which Ms. Jackson can answer later.
Number 1413
TONY DASSAW testified via teleconference from the Mat-Su Valley.
He said that he would like to reiterate Mr. Lomelino's testimony.
Mr. Dassaw informed the committee that he is opposed to the
doubling of the unemployment insurance tax. He pointed out that
these funds can be used for anything, although the current
one-tenth of one percent has some restrictions. Therefore, he felt
that is misleading. He mentioned that he has heard that the
University of Alaska - Anchorage (UAA) employees do not pay
unemployment insurance taxes. Mr. Dassaw felt that this is sloppy
legislation and if the desire is to obtain UAA's money, it could be
achieved in a more straightforward manner.
Number 1467
SHARON EILERS, recipient of STEP, testified via teleconference from
the Mat-Su Valley. She informed the committee that she graduated
from JTPA last year and is employed by Human Resources
Incorporated. Ms. Eilers said that she is very concerned. She
related her understanding that UAA has already been appropriated a
certain amount of dollars and yet not much of that is realized at
the Mat-Su college. If that is case, why are "we" going to hit
someone working [at minimum wage] with a 100 percent increase to
their unemployment insurance benefit in order to provide the
university with more money, when the university has just increased
the credit rate. Ms. Eilers expressed her opposition to this
legislation.
CHAIRMAN ROKEBERG said that Ms. Eilers question would be noted and
answered after all the testimony was taken.
Number 1626
JAN TATLOW, Alaska Human Resource Investment Council, testified via
teleconference from the Mat-Su Valley. She expressed concern that
very few people [in the area] seem to know what is happening as no
one has been told that they will be paying 100 percent more
employment insurance. People don't realize that their personal
taxes are going to increase. Ms. Tatlow recalled that Ms. Eilers
was a recipient of unemployment insurance dollars for training;
however, should those dollars be shifted from their current use,
people will not have direct access [the funds]. She predicted that
people will be funneled into various programs. Ms. Tatlow informed
the committee that state employment training dollars are used to
purchase training from all entities in the state. Thousands of
dollars are spent at the university through this system as well as
at a number of prominent colleges and vocational training sites.
Often the purchase of training for such things as hazardous waste
materials training is not available through UA. These are the very
things that people need to [receive training for] and return to the
workforce in a matter of days. Ms. Tatlow stressed that it will be
a disservice to have a 100 percent increase in the unemployment
insurance tax to every worker in the state, [especially since] they
have no knowledge of this.
Number 1752
PATRICK O'BRIEN, Member, Kenai Peninsula Borough Assembly,
testified via teleconference from Seward. Mr. O'Brien testified in
favor of SB 289. In regard to earlier comments that unemployment
benefits would be affected by SB 289, Mr. O'Brien stated that if
these undertrained and under qualified individuals could receive
training through vocational education programs, these folks would
not have to avail themselves of these unemployment benefits. Mr.
O'Brien took issue with prior testimony that the funds can be used
for anything because SB 289 includes a grant approval process,
which provides for a screening process.
MR. O'BRIEN informed the committee that people in his area are
familiar with vocational education as there is a center, AVTEC, in
the area that offers such education. This area of the Kenai
Peninsula is very supportive of vocational education as many of the
young people do not have the wherewithal to obtain higher
education. Still, training opportunities for those individuals
should be available in order to put them in the workforce and take
them off the unemployment rolls. Mr. O'Brien said that he strongly
supported SB 289 and urged the committee to pass it out with "Do
Pass" recommendations.
Number 1830
VINCE KELLY, Training Coordinator, Prince William Sound Community
College, testified via teleconference from Valdez. Mr. Kelly noted
his support of SB 289. He informed the committee that he had been
with the Prince William Sound Community College for about nine
years doing vocational/technical training in education. During
that time, he has watched successful programs produce graduates in
this declining economic environment, specifically for the Prince
William Sound Community College. Furthermore, the oil
transportation industry, the main industry locally, is experiencing
an aging workforce from which many are retiring. Such a situation
will provide opportunities. However, if these opportunities are
not met with students that are trained by educational institutions
in Alaska, they will be met with individuals trained outside of
Alaska. Mr. Kelly said that he is very much in favor of the
opportunity to fund more vocational and technical training. He
pointed out that all of the funding is going into UAA the first
year and then some of it is directed to technical and vocational
schools in Seward and Kotzebue. He believed that in the succeeding
years, the funding will be available to any recognized
post-secondary training or education institution that qualifies for
the grants.
CHAIRMAN ROKEBERG inquired as to Mr. Kelly's thoughts regarding the
affects SB 289 would have on Prince William Sound Community
College.
MR. KELLY reiterated that Prince William Sound Community College
has been developing vocational programs in a declining funding
atmosphere. If funds were available to Prince William Sound
Community College to develop new programs in answer to industry,
"we" would put more graduates in the workforce. Opportunities are
being missed due to the level funding that has occurred.
Number 1964
JEFF PRUSS, Business Representative, Carpenters Local 1243,
testified via teleconference from Fairbanks. Mr. Pruss stated his
opposition to SB 289. He said that he would rather see these trust
funds used to benefit those that truly rely on the unemployment
benefits, the seasonal workers that constitute the majority of
[Alaska's] workforce. Mr. Pruss noted his support for the
university, which he believes should continue to be funded in the
traditional manner, through the general fund.
Number 1993
ERNIE RUMP, President, Painters Local 1555, testified via
teleconference from Fairbanks. Mr. Rump voiced his strong
opposition to SB 289. He noted his support of vocational training
at the university; however, he didn't believe "you could rob Peter
to pay Paul." Two good programs exist and there should be support
of both of them. Therefore, he indicated the appropriateness of
funding the university vocational training through the general
fund.
Number 2035
MANO FREY, President, Alaska American Federation of Labor and
Congress of Industrial Organizations (AFL-CIO), testified via
teleconference from Anchorage. Mr. Frey applauded the Majority as
this is the opportunity to discuss additional taxes for the people
of Alaska. He said, "Thank you, Mr. Chairman, for bringing this up
and just taking the bull by the horns, as far as trying to put
additional taxes on the employers and employees of the State of
Alaska." Mr. Frey related his belief that Chairman Rokeberg is on
the right track. He said, "If you increase by two-tenths of one
percent, what is probably ... pretty balanced as far as income and
expenses, that is a burden that will have to be born. Either you
drain the account by [$]8.6 million a year or more or the taxes are
going to increase and it's going to be an additional burden on the
employers and the employees."
MR. FREY remarked that much work is done to make it attractive for
[seasonal workers] to live in this state. In regards to Mr.
Brown's testimony that Alaska ranks thirty-second, Mr. Frey
specified that Alaska ranks thirty-second as far as the state's
maximum weekly benefit while the state ranks thirty-eighth in
regard to the average benefit paid. Mr. Frey said, "If we're
talking about something as critically important as unemployment
benefits and the unemployment insurance fund, I couldn't agree more
with some of the speakers in supporting the university and what
they try to accomplish in vocational and technical education ...."
He noted his support of additional capacity for training for those
that are unemployed; however, he said, "Go through the front door,
not the back door." By increasing two-tenths of one percent, it
basically eliminates a chance in the near future of [increasing]
the amount of unemployment that Alaskans receive, which is a real
shame. He informed the committee that Arkansas ranks higher than
Alaska [in regard to the average benefit paid].
CHAIRMAN ROKEBERG asked if that is in nominal dollars.
MR. FREY informed the committee that Alaska, in regard to the
average weekly benefits, pays $176 per week. That level ranks
Alaska at thirty-eight. Arkansas pays $186 in average weekly
benefits, which ranks Arkansas at thirty-third. He said, "We're
going to eliminate the opportunity that Alaska has to help those
that are unemployed." He stressed that this additional burden to
the unemployment insurance fund shouldn't be added as it would be
a shame to increase the tax burden on the employer and the employee
while removing the hope to see that [average weekly benefit] grow.
CHAIRMAN ROKEBERG inquired as to the impact of modifying SB 289
such that contributions could only be made to this fund if there
were surpluses in the [unemployment insurance] fund. He requested
that Mr. Frey think about that possibility.
Number 2287
WENDY REDMAN, Vice President, Statewide University System, began by
correcting some misinformation regarding SB 289. She specified
that there is absolutely no increase in employee tax, anticipated
by this legislation. She explained that it is a diversion of
two-tenths [of one percent] of the existing tax to this new
program. Furthermore, nothing in SB 289 relates to the weekly
benefit rates that are currently to paid to individuals on
unemployment nor is there legislation from DLWD that suggests an
increase in the weekly benefit rate. Although it may be necessary
for an increase in the weekly benefit rate, especially given the
information presented by Mr. Frey. Therefore, she expected there
to be a proposal to raise those rates within the next year or so
and at which time it would be necessary to review the solvency of
the fund. Ms. Redman believes that everyone agrees that the trust
fund must remain solvent. If a raise in the weekly benefit rate
caused a problem, the employer tax could be utilized or this
program could be eliminated. That question should be dealt with at
the time the legislature is faced with the weekly rage rate
increase.
MS. REDMAN specified that this program is designed to get needed
money into building capacity for job training in the state. She
noted that she didn't request that money be appropriated to the
university in this money. Therefore, the university would be
supportive of SB 289 without receiving any allocation. She
explained that the language was included because Senator Torgerson
felt that AHRIC would not have the opportunity to get a program up
and running right away and the desire was to get money out quickly
and he felt that the most appropriate place was the public
institutions. The university does rely upon public money to run
the program. She informed the committee that in the future the
university would apply for money along with all other authorized
training programs within the state for access to these funds.
MS. REDMAN echoed earlier comments that the university's funding
has remained flat over the last ten years. During that time, the
university has absorbed all of the inflationary increases. The
university's training programs are in desperate need at exactly the
same time at which employers are in desperate need for more trained
workers. Therefore, it is absolutely critical to have the infusion
of funding in order to build capacity. She noted that [the
university] has held consortiums in various areas/industries all of
which express the need for more trained workers. Ms. Redman
indicated her dislike of a situation in which organized labor and
the Administration are in an antithetical position with the
university; it is an uncomfortable position.
CHAIRMAN ROKEBERG interjected the need not to forget the small
business community.
MS. REDMAN remarked that many in the small business community are
supportive of SB 289. She noted the good relationship that [the
university] has in working with the small business community to
ensure that programs are duplicated.
TAPE 00-49, SIDE B
DWIGHT PERKINS, Deputy Commissioner, Department of Labor and
Workforce Development (DLWD), came forward to testify on SB 289.
He indicated there is position paper from the department which is
included in the bill packet. He stated:
The department, while we strongly support the intent of
this legislation to adequately fund vocational and
technical education and build capacity at the
post-secondary level primarily through the University
Seward Skill Center and Kotzebue Tech Center, we are
opposed to the diversion of funds from the Unemployment
Insurance Trust Fund to achieve that laudable intent. As
you know, or may not know, the UI [unemployment
insurance] trust fund is just that - protect a dedicated
fund comprised of employer and employee payroll taxes.
It is held in trust for the state by the federal
government for the sole purpose of paying unemployment
benefits to Alaskan workers in times of individual and,
often, community-wide economic hardships. The department
is not opposed to some form of tax support for vocational
and technical education, but the use of UI's taxes,
however, is inappropriate and they should be restricted
to their intended purpose. It is true that there is
currently a diversion of one-tenth of one percent of
employee UI contributions to the state training and
employment program which was established by legislation
in 1989. STEP [Statewide Employment Program], however,
is closely tied to the unemployment insurance program -
eligibility for services restricted to workers who have
contributed to the UI by working for a contributing
employer, the statutory purpose of the program is to
reduce claims against unemployment benefits and reduce
unemployment cost. When not reappropriated to the STEP
account, the unexpended funds have always been deposited
back into the corpus of the UI fund for future benefits
to pay out. So, with that, Mr. Chairman, at this point,
although we do strongly support the intent, we'll have to
agree to disagree on the way to fund it.
Number 0123
REPRESENTATIVE MURKOWSKI said it appears that the concern deals
with the solvency aspect of the fund. She wondered how solvency is
being defined and asked at what point is there not enough in the
fund and therefore need to go out to the employers for an
additional "hit".
RON HULL, Deputy Director, Division of Employment Security,
Department of Labor and Workforce Development, came forward to
testify on SB 289. He asked Representative Murkowski to repeat the
question.
REPRESENTATIVE MURKOWSKI stated she would like to hear some
discussion regarding the solvency aspect of the fund and how the
fund has gone from being solvent to less solvent.
TOM WILEY, Unemployment Insurance Actuary, Division of
Administrative Services, Department of Labor and Workforce
Development, came forward to answer questions on SB 289. He
explained that when the fund falls below three percent of the total
payroll, the trust fund solvency adjustment tends to jack up the
employer's tax rate to bring the fund towards what is considered a
balance point. A balance point is somewhere around $200,000 given
today's payroll. The fund seeks to set itself at 3.15 percent of
the total payroll. This works out to be approximately $200 million
which is about where the fund is today. In the long run, a 0.2
percent diversion would lower the trust fund below that level and
would trigger an add-on employer tax.
REPRESENTATIVE MURKOWSKI asked what the tax would be if the add-on
employer tax is triggered.
MR. WILEY replied that is a difficult question to answer for a
number of reasons because there are so many dynamics. In the long
run, if 0.2 percent of the tax is diverted from the trust fund, the
employer tax will increase 0.2 percent to make up for it. It would
take a number of years for the rates to begin to move up. During
that period of time, the trust fund will be reduced by $8.6 million
per year. This does have some implications with respect to
solvency from the point of view of the federal government. He said
the federal government has been worried about each state's trust
fund solvency for a number of years, and so they have established
a national standard based on an average high-cost multiplier. He
stated:
There's a very strong indication that some money - in
about two or three years - that will be going out to the
states - a large amount of what's called Reed-Act funds
will be affected by whether or not the state's trust fund
meets this national standard. Apparently, Alaska is just
slightly below meeting the national standard. Now,
that's not a real concern for us as a state because we
have a fast-acting trust fund mechanism, but, from a
national point of view, it may cause us to lose
eligibility to receive this Reed-Act money which is
estimated at roughly $25 million. From that point of
view, the solvency could be affected from a national
perspective.
Number 0310
CHAIRMAN ROKEBERG said part of the problem is that he does not have
a clear understanding. He asked, "You said when the trust fund
falls below three percent of the total payroll, is that the total
estimated state payroll?"
MR. WILEY said it is the total estimated payroll in the State of
Alaska.
CHAIRMAN ROKEBERG wondered how often that is calculated.
MR. WILEY responded that it is calculated toward the end of every
year usually around the beginning of November. The calculation is
used to set the tax rates for employers and employees for the
following year.
CHAIRMAN ROKEBERG asked, "So, you have a January 1 calendar year
adjustment then the rate if need be?"
MR. WILEY stated that is correct and said the tax year is based on
a regular calendar year.
CHAIRMAN ROKEBERG wondered, "The deviation from your (indisc.) at
a 3.15 for the last 10 years, how often are you deviating?"
MR. WILEY explained that there was not an adjustment this year
because the trust fund was just about where it should be. If there
were a diversion, he is sure there would be an add-on tax that
would probably start the year after next.
CHAIRMAN ROKEBERG asked, in the last 10 years, how often there had
been a deviation.
MR. WILEY said it is usually the case that there is a deviation, up
or down. He explained, "After the bad recession (indisc.) period
in the late 80s, the trust fund solvency adjustment caused tax
rates to be higher for a number of years."
CHAIRMAN ROKEBERG wondered what the highest rate was.
MR. WILEY replied that it was 4.14 percent.
CHAIRMAN ROKEBERG asked what year that was.
MR. WILEY stated that it was 1989. Over a number of years after
that, the trust fund rebuilt itself and went over the balance
point. There have been some reductions in the employer tax rate
over the past few years.
CHAIRMAN ROKEBERG wondered what the lowest rate was.
MR. HULL replied that it was 1.96 percent.
CHAIRMAN ROKEBERG referred to the 0.2 percent diversionary amount
and asked if there is a chart or graph which illustrates this.
MR. HULL indicated there is a chart [Included in the bill packet].
CHAIRMAN ROKEBERG referred to the chart which shows a 0.54 percent
employee tax and a 2.14 employer tax.
MR. WILEY stated that is for the current tax year.
CHAIRMAN ROKEBERG wondered if that was for the year 2000.
MR. HULL replied yes.
MR. WILEY indicated that it is the average employee tax and that
some employers pay more and some pay less.
CHAIRMAN ROKEBERG wondered what the difference is based on.
MR. WILEY explained there are 20 rate classes. Ten are above and
10 are below the average. He said it also depends on the
employer's experience.
CHAIRMAN ROKEBERG said, "...employee turnover, so they have higher
claims, historically."
MR. WILEY answered that is essentially it.
CHAIRMAN ROKEBERG speculated that it would almost be like having a
rating underwriting type of thing.
Number 0524
MR. WILEY stated:
What we do is we look at payroll and we analyze decline
in payroll, and each employer gets what's called a
payroll decline quotient and so they are rated based on
these quotients and put into one rate class or the other.
CHAIRMAN ROKEBERG wondered how many states besides Alaska have an
employee contribution.
MR. WILEY said he believes there are only two others currently.
CHAIRMAN ROKEBERG referred to concern expressed in earlier
testimony with respect to employees being taxed. He asked where in
the bill are employees protected.
MR. HULL commented that in the bill "it taxes the employee, then
credits in the same amount."
CHAIRMAN ROKEBERG asked if it is a "two-step thing" and if it
because of federal law.
MR. HULL answered that it is two-step. He said it is not because
of federal law, but he thinks it is because "they want to put it on
the employers. The STEP bill is written the same way - existing
statute. The one percent from STEP is then credited to the
employee so it isn't an additional tax."
CHAIRMAN ROKEBERG referred to Section 23.15.835, subsection (b),
which states:
Notwithstanding AS 23.20.290(d), the department shall
credit each employee with an amount equal to the amount
collected from the employee under (a) of this section
against unemployment contributions owed by the employee
under AS 23.20.
MR. HULL explained the STEP one percent is taken, but then a credit
is given. The credit does not mean less money coming out of their
check, but it is not an added tax to the employee.
CHAIRMAN ROKEBERG clarified that the bill sponsor stated this is
not a burden because there tends to be a surplus. He asked,
"That's where this thing starts breaking down or what?"
Number 0625
MR. WILEY said he believes what is confusing is that the money is
being diverted from the employee side of the tax structure.
Instead of the 0.2 percent going into the trust fund, it is going
into the new program. The balance of the trust fund is reduced as
a result of diverting the money. The adjustment to make up for the
reduction of the trust fund is placed on the employer.
CHAIRMAN ROKEBERG wondered how it is placed on the employer.
MR. WILEY answered that the trust fund calculation is two steps.
The first step looks at benefit costs and comes up with an average
rate to pay benefits. This is the tax rate which is divided 80/20
between the employer and the employee. The second part of the
calculation looks at the solvency of the trust fund. If the trust
fund is lower than it should be, there is an add-on tax which is
only placed on the employer.
CHAIRMAN ROKEBERG asked if that is an add-on surcharge for the
following year.
MR. WILEY replied, "Yeah, kind of." As money is diverted from the
trust fund, the trust fund balance will fall. When the balance has
fallen enough, the adjustment calculation will increase. He said,
"We'll say, 'It's too low. We need to put an additional tax onto
the employer to make up for the difference'."
CHAIRMAN ROKEBERG said, "So, it'd kind of be an automatic default
is that would work to put the surcharge on the employer."
MR. WILEY stated that is correct.
CHAIRMAN ROKEBERG indicated the sponsor stated there would always
be surplus. He said that does not seem to make sense.
Number 0710
MR. WILEY responded:
Well, actually, I think what'll happen because the
calculation is always based on the balance from the prior
years, we will end up with several years of diversion
from the trust fund, and then the trust fund solvency
adjustment will put large add-on on the employer tax
rate...The only thing that could stop that would be if
payroll earnings went up much more than they're projected
to do, so that taxes coming in, based on all this
increased employment, were so heavy that they would
somehow make up for this. And I think that's probably
very unlikely to occur.
REPRESENTATIVE MURKOWSKI said, "So, this figure is tied in - this
three percent, kind of your benchmark here - that's tied in to the
federal..."
MR. WILEY interjected and explained that the three percent is
actually state law. He commented that the federal government has
a different standard for solvency which is a flat standard they
apply to every state.
REPRESENTATIVE MURKOWSKI asked, "Even if we were to choose to
adjust somehow, that solvency figure, we still have a tie-in to the
federal?"
MR. WILEY responded:
Not in terms of the calculation of our own tax rate, but
in terms of the federal government, down the road,
looking at our trust fund balance, and if it's lower than
what it is now, we may very likely not meet that national
standard which could result in quite a loss of money.
CHAIRMAN ROKEBERG asked if there is any impact on the draw in the
bill and when the calculations are made for adjusting the taxes.
MR. WILEY replied, if the bill passed, the department would not
actually see the employee taxes until the end of the year.
Employee taxes due for the July-August-September quarter are not
paid until the following quarter. He commented, "Because we look
at the trust fund balance at the end of September, we would have
five quarters of draw from employee taxes that would not be
calculated into the tax rate calculation until the year after
that."
Number 0872
CHAIRMAN ROKEBERG stated that it is his understanding that there
should be a surplus, but there could occasionally be an adjustment
in the rate.
MR. WILEY clarified that there is no surplus in the trust fund now.
With the way the timing of the bill would work and with
contributions, the tax would be affected one-quarter of this
calendar year, four quarters of the next calendar year, and only
then would the trust fund take the diversion into account. While
it is raising the tax rate for that year, if it is indeed enough to
raise the tax rate, then it would "start trying to make it back" a
year and a half after the law is enacted. If the diversion is not
quite enough to trigger the trust fund solvency adjustment and
another year of diversion takes place before the trust fund
solvency adjustment is triggered, then "we could possibly look at
nine quarters of money being diverted from the trust fund." This
might kick the trust fund up to 0.2 percent or possibly even 0.4
percent which would be a 0.2 or 0.4 percent increase in what the
employer tax rate would normally be. He indicated that it is a
very imprecise science.
MR. HULL agreed that it is imprecise. He noted that the fund was
built so that the tax rates do not react instantly. If there is a
downturn in the economy, what "we" do not want to do is raise the
tax rates on employers. It would be based on a three-year cycle.
REPRESENTATIVE MURKOWSKI said:
Mr. Chairman, I'll just ask the question that you asked
somebody on-line. I think you'd asked, well, let's do
this contribution only if there is a surplus in the fund,
but what you're saying is, because of this lag, you can't
do it that way. It just doesn't work.
MR. WILEY reiterated that there is no surplus in the fund this
year. If there were a surplus in the fund, then there would not be
a surplus in the fund next year because of the draw. He stated,
"What you would certainly have would be a program that would be
kicking in and out and the funding would certainly be unstable."
MR. PERKINS interjected and commented that it could possibly raise,
at higher levels, the tax rate of employers.
CHAIRMAN ROKEBERG asked if any of the STEP money is now going to
the University of Alaska.
Number 1066
MR. HULL indicated that STEP money is granted all over the state.
He explained that anybody who has a vocational-technical program
can apply for those funds. He said, "The other thing that one of
the callers talked about - only 75 percent of Alaskan's employers
pay these taxes as well as the employees. The rest are
reimbursable."
CHAIRMAN ROKEBERG asked, "Only 75 percent. The rest are
reimbursable, like the state employers?"
MR. HULL answered:
When they talked about UAA [University of Alaska,
Anchorage], the school systems don't pay it, the city,
municipality, boroughs don't pay it. Some private,
non-profit corporations don't pay those taxes.
CHAIRMAN ROKEBERG wondered if they are exempt from paying those
taxes.
MR. HULL explained that if one of their employees is laid off and
they draw benefits, then they are paid directly from the employer.
CHAIRMAN ROKEBERG asked, "They apply to you and the employer pays?"
MR. HULL replied, "The employer pays us the money and we pay it to
them [the unemployed person]."
CHAIRMAN ROKEBERG inquired as to how someone qualifies for this.
MR. WILEY responded, "You have to be a state government, local
government or a private, non-profit corporation."
CHAIRMAN ROKEBERG asked Ms. Jackson to answer some of the questions
from previous testifiers.
Number 1192
MS. JACKSON reiterated that this is not an employee tax. She does
not know how else to say it except to say it using number.
CHAIRMAN ROKEBERG said that it looks like an employer tax.
MS. JACKSON replied that is exactly right. She stated, "If it's a
tax and it isn't even that."
CHAIRMAN ROKEBERG asked her to explain that.
MS. JACKSON referred to Attachment 1 [Included in the bill packet.]
and explained that the State of Alaska has a 80/20 split; 80
percent employer, 20 percent employee. The average rate for the
employer is 2.14 percent. The average rate for the employee is
0.54 percent. The 0.54 percent remains intact. There is a step of
one-tenth of one percent which does not mean that the employee pays
0.64. They still pay 0.54 percent and it means that 0.44 percent
goes into the UI trust fund. If another one-tenth is taken out
from somewhere else, it simply diverts it from going directly into
the trust fund, and does not increase the employee tax. The trust
fund is "crux of the biscuit" in this particular case. She stated
that the reason it is coming out of the employee side and not the
employer side is because if you go over to the employer side, then
you bump into some serious federal regulations.
CHAIRMAN ROKEBERG asked (indisc.).
MS. JACKSON answered, "As a credit. Yes, sir." She said there is
not any increase and there never has been. She reiterated that the
bill does not talk about a weekly benefit rate and never has. If
there is some discussion about the weekly benefit rate and an
increase, she has not heard about it. There is no legislation that
she is aware of that would do that.
CHAIRMAN ROKEBERG wondered, "They'd raise the weekly benefit rate?"
MS. JACKSON replied yes.
CHAIRMAN ROKEBERG stated that the bill could always be amended.
MS. JACKSON responded, "Sure. Well, you could. It would change
the title. That would be fun." She explained that the adjustments
to the fund are really the crux of the biscuit. There are two
things that "hit" the fund. The money that goes out when benefits
are paid or the money that goes in. She indicated that the
department is saying that if the amount of money that goes into the
fund is limited, then there will have to be an employer adjustment.
This would be correct if the unemployment claims were still paid
out. She said the goal is to train people so they have employable
skills and that the unemployment rates drop. When unemployment
rates drop, the whole statewide employment factor is involved.
This is good for everybody.
CHAIRMAN ROKEBERG commented that it is supply-side economics and
said, "If you train enough people, the unemployment rate will go
away."
MS. JACKSON stated that she knows better than to get into a
discussion with the chairman on economics [laughter].
CHAIRMAN ROKEBERG called an at-ease at 4:55 p.m. and returned at
4:56 p.m. He explained there was not a quorum available to take
action on CS SB289(FIN) am and the committee would return to the
bill. He indicated HB 342 would be taken up at this time.
HB 342-AIDEA: BONDS & RURAL DEVELOPMENT
[A quorum was established during this portion of the meeting.]
CHAIRMAN ROKEBERG announced the next order of business is HOUSE
BILL NO. 342, "An Act relating to the financing authority, payment
in lieu of tax agreements, and tax exemption for assets and
projects of the Alaska Industrial Development and Export Authority;
relating to renaming and contingently repealing the rural
development initiative fund within the Department of Community and
Economic Development, and establishing the rural development
initiative fund within the Alaska Industrial Development and Export
Authority; and providing for an effective date."
Number 1500
KEITH LAUFER, Financial and Legal Affairs Manager, AIDEA (Alaska
Industrial Development and Export Authority), came forward to
testify on HB 342. He was accompanied by Katelyn Markley,
Development Specialist, AIDEA. He stated that AIDEA is in support
of HB 342. He explained that HB 342 has three purposes. It
extends AIDEA's general bonding authority that would otherwise
sunset July 1, 2000. Secondly, it transfers the Rural Development
Initiative Fund (RDIF) loan program that was formerly in the
Department of Community and Regional Affairs to AIDEA. Finally,
the bill makes technical changes to the provisions of existing law
relating to tax exemptions and payment in lieu of tax agreements
between municipalities and users of AIDEA's development finance
projects. With respect to the bonding sunset, the sunset is one
that has periodically appeared in AIDEA's bills. The current
sunset is effective July 1, 2000 and would prevent AIDEA from
issuing all bonds regardless of size without specific legislative
approval. Specifically, the sunset would prevent AIDEA from
issuing bonds under $10 million for development finance projects.
Bonds in excess of $10 million now require, and will continue to
require, specific legislative authorization. The sunset would also
prevent AIDEA from issuing conduit revenue bonds. These bonds,
which do not obligate either AIDEA's credit or the credit of the
state, can provide qualified projects with low-cost, tax-exempt
financing pursuant to the internal revenue code.
CHAIRMAN ROKEBERG asked Mr. Laufer to provide an example of that.
MR. LAUFER explained that AIDEA has issued tax-exempt conduit
revenue bonds to help finance the Fort Knox gold mine ($71
million), the Goat Lake Hydroelectric project ($23 million), the
Fairbanks Sewer and Water project ($6 million), and, recently, the
Association of Village Council Presidents ($916,000).
CHAIRMAN ROKEBERG wondered where Goat Lake is located.
MR. LAUFER responded that Goat Lake is located in the
Skagway-Haines area.
CHAIRMAN ROKEBERG asked Mr. Laufer to continue with his testimony.
MR. LAUFER said HB 342 would extend the sunset until July 1, 2003
and makes clear that the conduit revenue financing bonds are not
subject to the sunset. The bill transfers the RDIF program to
AIDEA. The program makes small loans under $200,000 to businesses
located in communities of under 5,000 people. AIDEA has long
supported this program in a couple of manners. First, it has
coordinated its export assistance and loan guaranty program with
the RDIF to make both programs more effective. In 1993 and 1996,
the Alaska State Legislature authorized AIDEA to purchase loan
portfolios from the state and use the proceeds from those sales to
recapitalize RDIF. The bill would transfer the program to AIDEA
which furthers AIDEA's mission in rural Alaska and will also allow
the program to become self-sustaining without the need for periodic
legislative appropriations to recapitalize the program. AIDEA will
continue to work with the department to administer the program. In
addition, there is a separate appropriation in an appropriations
bill that will AIDEA to purchase the existing RDIF loan portfolio
from the state. This is one of the reasons for some of the
complexity in the bill because the bill does not repeal the old
program until that sale can be consummated. Finally, the bill
makes technical changes to tax exemptions, provisions related to
AIDEA-owned development finance projects. Under existing law,
local jurisdictions may exempt users of AIDEA-owned development
projects from property tax or may enter into payment in lieu of tax
agreements with respect to those projects. Unfortunately, existing
law is unclear on the mechanisms to be used. There are two
specific things the bill clarifies. First, existing law speaks to
AIDEA entering into payment in lieu of tax agreements with project
users. Mr. Laufer said, "In fact, if those agreements are to be
entered into it would be between the local jurisdiction and the
users of the project, not AIDEA. The bill makes that
clarification." Another example is that existing law anticipates
that local jurisdictions can grant those exemptions, but does not
provide a specific exemption in law to allow for that. There are
exemptions in law that could provide exemptions, but none specific
to AIDEA-owned projects. The bill makes the change to make clear
that there is a permissive exemption that municipalities can grant,
if they so choose, for the projects.
CHAIRMAN ROKEBERG commented, "In other words, you're leaving it to
their discretion, and it's something like the developer would
bargain with the municipality in question...in concert with you if
you were financing them."
MR. LAUFER stated that is correct.
CHAIRMAN ROKEBERG asked if there was any hidden bonding authority
in the bill for another $300 million dollars for the DeLong Lake
road project.
MR. LAUFER replied that it would be difficult to hide something
like that.
Number 1877
REPRESENTATIVE MURKOWSKI indicated there is an amendment from
Senate Finance that would essentially limit the assets transferred
to the fund to $2 million. She said she assumes this is something
AIDEA would support.
MR. LAUFER said yes and explained that it was something that was
proposed in Senate Finance. He stated that AIDEA anticipates that
that is the amount that will be necessary to capitalize the fund as
a revolving fund. AIDEA has no problem with the amendment.
REPRESENTATIVE MURKOWSKI made a motion to adopt Amendment 1 which
reads:
Page 4, line 20, following "deposited into the fund by
the authority."
Insert "The assets transferred to the fund by the
authority may not exceed $2 million."
There being no objection, Amendment 1 was adopted.
Number 1946
REPRESENTATIVE MURKOWSKI made a motion to move HB 342 as amended
out of committee with individual recommendations and the attached
zero fiscal note. There being no objection, CSHB 342(L&C) moved
out of the House Labor and Commerce Standing Committee.
SB 289-TECH & VOC EDUC/EMPLOYMENT ASSISTANCE
REPRESENTATIVE HALCRO made a motion to move CSSB 289(FIN) am out of
committee with individual recommendations and the attached fiscal
note.
REPRESENTATIVE HARRIS objected for the purpose of discussion. He
said:
I think this puts a lot of us in a rather tough situation
because this body has allocated a lot of money, or is
attempting to allocate a lot of money to the university.
Some of it could go to vocational education. I, quite
frankly, oppose taking what will be, I think, maybe not
the intent at this point, but unintended consequences
will be that workers - people who are out of work have
paid into their unemployment insurance as well as the
employers, could and probably will suffer in the amount
that they could receive. And, as has been stated, Alaska
workers are paid considerably less than most workers in
other states. I think we are thirty-eighth or something
like that. As all of us know, our cost of living in
Alaska is certainly not down to thirty-eighth lowest. I
think the unintended consequences of this will be that
Alaskan workers will not get an increase in unemployment
benefits without an increase in the unemployment
insurance that the employers will pay because the
employees will not pay more. So, for that reason,
probably in deference to the sponsor to this bill, I may
remove my objection to allow it to move from this
committee, but it's not without very severe opposition.
In my opinion, I think many questions haven't been
answered and, even though we don't deal with what's
happening in the other body, I think we have addressed a
lot more of the university's concerns that they have and
I think that this is a vehicle to attempt on the backs of
workers to address the concerns and issues of the
university at times. I think we address it much
differently and much more appropriately, in my opinion.
REPRESENTATIVE HALCRO stated that he also has some concerns. He
commented, "Of course, [HB]441 is the desired gift, if you will,
for the university...hopefully [SB]289 will not be necessary."
REPRESENTATIVE MURKOWSKI indicated that she is looking at this as
not necessarily the funding for the university this year. She said
she has certain reservations based on the testimony she has heard
about the fact that it is not necessarily an employee tax. It is
a hit to the employer if in fact the solvency point is triggered.
She stated:
I guess if we're prepared to say we're going to start
moving the taxes in this state, and I've been one of
those that's been kind of out front with it, but I'd like
to think that it's part of some kind of an overall plan
and that it's not just going to be the employers that see
the hit. It's a big policy statement that's being made
here.
Number 2307
CHAIRMAN ROKEBERG said the "double dip" issue with respect to the
university does need to be resolved. He pointed out that this
committee is very sensitive to and supportive of AHRIC and the
other job training and vocational programs in the state. He
stated, "We need to put more resources in this state behind
vocational training and job training. No question about it." He
indicated he has significant concerns and cannot intellectually
look at this any other way than as a tax on business. He said he
thinks the goal of the use of these funds is very laudable. He
stated, "I think we're finding ourselves at the end of our
five-year plan being trapped by the budget again, looking for money
and ways to find money that doesn't show up (indisc.) impacting the
budget gap that's leading us into things like this."
REPRESENTATIVE HARRIS added that he thinks it is unfortunate that
the university may in fact get labeled by certain groups and people
in this state as attacking the benefits of unemployed workers. He
said this would be very unfortunate. It may be an unintended
consequence that may get labeled on the university. He does not
wish that to happen.
CHAIRMAN ROKEBERG asked if there is any further objection. There
being none, CSSB 289(FIN)am moved from the House Labor and Commerce
Standing Committee.
HB 169 - ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY
TAPE 00-50, SIDE A
CHAIRMAN ROKEBERG announced that the next order of business is
HOUSE BILL NO. 169, "An Act relating to including the costs of
expansion activities and political activities in rates of electric
cooperatives."
JEFF LOGAN, Legislative Aide for Representative Joe Green, Alaska
State Legislature, stated that HB 169 addresses electrical
cooperatives. Electric cooperatives are authorized under federal
and state law to allow average people to come together and form an
organization to produce and transmit electricity. The federal act
speaks to a dual goal of providing reliable low-cost power. HB 169
addresses two kinds of activities undertaken by an electric
cooperative; political activities and expansion activities. HB 169
says that before a cooperative can use rate money collected from a
member they must first get the permission of that member to do so
for certain types of activities.
MR. LOGAN further stated that on page 1, line 12, of HB 169, it
begins a list that sets out what the cooperative management must do
to gain the approval of its members before it can embark on
political activities or expansion activities. The check list goes
like this: they must first advise the members that a portion of
their rate money would be used for expansion or political
activities; they must tell the members how much of the rate money
would be used for those activities; advise the customer that the
cooperative would not refuse to serve or discriminate against the
customer if they decline to consent; and, finally, they have to
receive the consent of the cooperative members. He explained that
they define expansion and political activity on page 2, line 23
through line 30, of HB 169. The term "expansion activity" means an
activity that is intended to attract customers to an electric
cooperative who at the time of the activity are customers of
another electric public utility. The term "political activity"
means an activity intended to advocate for a political position not
directly related to the core services of the utility or to advocate
for a public policy issue not directly related to the core services
of the utility. What they are trying to do is keep the cooperative
management focused on the core services they were chartered to
provide, which is low-cost reliable electric power.
MR. LOGAN continued that there are restrictions currently in place
against using rate money for some political purposes. This issue
has been considered before by the legislature. When AS 42.05.381
was originally enacted it required only that rates be just and
reasonable as determined by the Alaska Public Utilities Commission
(APUC). In 1976 it was amended to require the APUC to specifically
omit certain expenditures related to advertising and public
relations. The problem is these activities are taking place even
though they are specifically prohibited in statute. With HB 169
they are simply asking the legislature to allow rate payers to
protect themselves.
Number 0679
REPRESENTATIVE MURKOWSKI wondered if they have to get everyone's
consent or 50 percent.
MR. LOGAN responded that the utility would propose a certain
activity and perhaps put on the billing statement what they were
planning on doing with a portion of the rate and the customer could
check "yes" or "no."
REPRESENTATIVE MURKOWSKI said that it is 50 percent plus one.
MR. LOGAN said that it was not the way they had envisioned it
originally, but they would not be opposed to it. The utilities
keep records of all their members and what share they own of the
cooperative. They know what percentage the customer's vote would
count for. The general manager of the state's largest utility
testified that it would not be difficult to administer.
REPRESENTATIVE HALCRO pointed out that most of the utilities have
a board of directors that are elected by the members. He wondered
why they do not just allow the members to simply vote out the board
of directors if they're angry as opposed to putting limits on them
by statute.
MR. LOGAN responded that the problem with that is the money is
still gone and they can get rid of the people who made the
decision, but the customers cannot get their money back.
Representative Green asked Nan Thompson [Chair, Regulatory
Commission of Alaska], when she testified in the Utility
Restructuring Committee, whether or not the Regulatory Commission
of Alaska (RCA) would be able to make retroactive rate adjustments.
She responded that they cannot. It reinforces the need for the
bill, because they can spend the money for some wild-eyed scheme
and then be voted out, but the customers money is still gone. He
referred to a letter from Chugach Electric Association [CEA] saying
that in 1998 CEA incurred $797,891.77 of direct expense associated
with the unsolicited takeover attempt. That is pretty serious
money.
REPRESENTATIVE HALCRO agreed that it is a tremendous amount of
money, but pointed out that if the cooperative comes under attack
by an outside group they will be limited to respond in public. In
one sense they are protecting the rate payers' dollars, but they
are also tying the cooperative's hands to be able to respond in a
situation they might need to. He asked Mr. Logan if he would
agree.
MR. LOGAN answered, "Actually, no." He said that he went over it
with the drafter and in anticipation of that question he looked at
the definition of "expansion activity," which means an activity
that is intended to attract customers to an electric cooperative.
It does not say anything about defending the current customer base.
He pointed out that "political activity" means an activity intended
to advocate for a political position not directly related to the
core services of the utility, while he thinks any measure providing
utility to a current member is a core service of the utility.
Number 1132
GEORGE KITCHENS, President, Golden Valley Electric Association
(GVEA), testified via teleconference from Fairbanks. He said that
he is testifying in opposition to HB 169. He indicated that some
very good points have been made by Mr. Logan that cooperatives are
owned by their members, the members do elect the board members and
board members do hire managers to run electric cooperative. It is
true that members can recall board members and they can elect new
ones. He indicated that one area he would like to point out is the
timing of the legislation, particularly when they are considering
electric restructuring in Alaska; it may be a bad idea. He does
believe that the RCA is the appropriate body, since they do review
utility rates, to determine what costs should or should not be
included in rates and could do so through regulation to address
specific issues, such as those proposed in this legislation. HB
169 may discourage efforts by Alaska cooperatives to attract and
retain business customers in the state. It may also thwart efforts
of the electric industry to develop new and innovative services.
HB 169 may also infringe upon free speech rights granted under the
constitution. He indicated that they are not sure what the shape
of the restructured market will look like in the state, but it is
entirely possible that electric cooperatives in a competitive
marketplace might be advertising to attract customers outside of
their traditional service areas and to the extent that legislation
or regulations that evolves to achieve a competitive marketplace.
It would restrain their opportunity to participate in a competitive
marketplace if they are restricted from advertising outside their
service areas to attract new customers. He reiterated that the
timing of the legislation is off, considering the timing of the
restructuring of the electric market.
Number 1320
BERNIE SMITH, Commissioner, Regulatory Commission of Alaska (RCA),
testified via teleconference from Anchorage. He stated that he was
willing to answer any questions. He said that they think the idea
behind the legislation is good and well, but their main concern is
that they need to let the members vote on it and if they vote for
"expansion activity" than so be it. He suggested that they could
probably add the "political activity" to the statute, which would
strengthen the statute and remove those costs when they do a rate
case.
CHAIRMAN ROKEBERG wondered if they restricted "expansion activity"
to a market expansion outside of the certified service area.
MR. SMITH responded that what they would prefer, because the core
activity is a little vague, if they used a term that would be
directly related to the certified services of the utility;
therefore, if they go outside of their certified area they would
have to go to the RCA to expand that certification area and the RCA
would have a chance to review that.
CHAIRMAN ROKEBERG said that insofar as the vote and the tariff
rate-making activities if it would make it a little (indisc.).
MR. SMITH responded, "Yes, Mr. Chairman, I think so."
Number 1472
DON EDWARDS, General Counsel, Chugach Electric Association (CEA),
testified via teleconference from Anchorage. He stated that he
agrees with what Mr. Kitchens said in his testimony and his
reaction to HB 169 is that things are not as they appear and he is
worrying that that is true of the legislative process. It has been
made clear and the purpose of the bill is to prevent the Matanuska
Electric Association (MEA) from a takeover. He indicated that they
are sympathetic to the problem, but they do not agree that HB 169
is the right vehicle to remedy that problem. They have also made
it clear that the effect of the bill will not be to prevent the
kind of expenditures that the supporters of the bill say as a
reason for it. Even though they don't know exactly what the bill
is intended to do they can look at some of the things it might do.
One of those things is that it is only electric cooperatives who
are specially disabled by HB 169; therefore, if an investor-owned
electric utility were to make expenditures for political activities
or expansion activities presumably they would not be similarly
disabled. He noted that he shares Mr. Kitchens' concern that if
competition begins to develop that it will specially disable
electric cooperatives from operating in that environment. The
second point is that when they are dealing with restrictions on
speech and HB 169 would restrict commercial speech in the
"expansion activity" portion and it would restrict political speech
in the "political activity" portion. When dealing with that the
law is quite clear that they have to be able to articulate strong
policy reasons in support for the restrictions. The means have to
be tailored carefully to deal with the problem; they cannot be any
more extensive than is necessary. The problem with disabling only
electric cooperatives and not investor-owned utilities highlights
that problem with the bill. He added that CEA strongly opposes HB
169.
Number 1674
REPRESENTATIVE HALCRO said that Mr. Logan gave them an example of
how much money CEA had to spend to defend themselves from the
unsolicited takeover attempt. He wondered, considering the amount
of money that CEA had to spend, if they are still in opposition to
the bill.
MR. EDWARDS stated that they are and it is important that a
company, especially a cooperative, be able to communicate with its
customers. It is important even in an noncompetitive environment.
He agreed that they be able to respond quickly and set the record
straight immediately. He pointed out that as cooperatives they
operate under a democratic system and to some extent he would
counsel that it should be acceptable and they should rely on that
process.
ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative
Association (ARECA), trade association for the electric utility
industry in Alaska, said his association not only includes
cooperatives but also municipals as well as IOUs [Investor Owned
Utilities], hence ARECA represents virtually the entire state when
it comes to the electric industry. He said that he is here to tell
the committee that his board of directors, roughly a month ago in
consideration of HB 169, unanimously adopted a resolution in
opposition to this legislation. Frankly, he noted that ARECA is in
opposition for many of the same reasons and all the same reasons
that Mr. Edwards and Mr. Kitchens have already mentioned. He
explained that as a matter of fact both of these gentlemen have
articulated many of the things that he would have told you and just
to save time he will not.
MR. YOULD commented that he did have a couple of additional points
that he would like to make. He mentioned that HB 169 is aimed
strictly at cooperatives (co-ops) and not only that but strictly
electric co-ops. He asked why telephone co-ops were not included
or municipal utilities. He said that Mr. Edwards had indicated
that the answer is "invest in your own utilities." Mr. Yould
agreed. He acknowledged that HB 169 is really trying to restrict
the activities one business sector in the state that is a very
viable business sector and it is a sector that is important since
it provides 70 percent of the electricity in the state. He
emphasized that it does a very good job of providing electricity so
he has to say if the legislature is going to attempt to tie
electric co-op hands why not tie everybody's hands at the same
time.
MR. YOULD remarked that he would like to talk a little bit more
about friendly consolidations. He reminded the committee that in
rural Alaska, for instance, there is a little tiny co-op in
virtually every community out there but ARECA has found that
perhaps the most appropriate template for rural Alaska is
consolidation and ownership by one large co-op such as Alaska
Village Electric Cooperative, Incorporated (AVEC) which owns rights
to sell electricity in 51 villages. He added that HB 169 as
expansion activity is presently defined would preclude or severely
restrict those types of consolidations and he can see a time in
Alaska as the need to gain better efficiencies comes along
(obviously here already since ARECA is looking at it with Power
Cost Equalization) that friendly consolidations could be very
important mechanisms to make sure that cheaper electricity is
available. He reiterated that HB 169 as presently written would
preclude those sorts of things.
MR. YOULD said that co-ops are getting into other businesses that
compliment their core business. He noted that satellite
television, home security, Internet, and dispersed generation are
possibilities. He explained that it is entirely possible that
companies such as Chugach selling fuel cells up in Fairbanks or
vice versa and once again HB 169 as presently written would
preclude those types of activities. He reiterated that ARECA is
universally against HB 169.
Number 1840
CHAIRMAN ROKEBERG said that since everybody is opposed to HB 169 he
asked what can the cooperatives and associations represented by the
testifiers do about not wasting their members' money in the future.
He inquired as to what the testifiers have as a counter proposal.
MR. YOULD replied by asking the committee to assume that perhaps
the takeover attempt was not frivolously made because it is not
necessarily a bad idea to have consolidation. He admitted that at
least the takeover attempt got the issue out on the table and as a
matter of fact there was a similar takeover attempt just in the
other direction back in 1993. He noted that consolidation is not
necessarily bad.
CHAIRMAN ROKEBERG emphasized that those were two efforts where
probably millions of dollars of consumers' monies have been wasted
by people's egos in his opinion. He acknowledged that on the other
hand Mr. Yould would say, and Chairman Rokeberg will not argue the
point, that sometimes consolidations are positive particularly if
the weaker company, business, or entity is not going to survive.
Nevertheless, he remarked that he thinks that ARECA should review
that and perhaps come up with some recommendations along these
lines.
Number 1977
REPRESENTATIVE HALCRO reminded the committee that the Matanuska
Electric Association (MEA) letter says that their attempted
acquisition of Chugach was supported by 59 percent of their members
so in that case 59 percent (and he is not sure if that is 59
percent of total MEA members or 59 percent of those who voted) said
"Go ahead; it's a good idea" then the members are in fact [in
favor].
MR. YOULD reiterated that it was a good idea.
REPRESENTATIVE HALCRO observed that he does have problems with HB
169 but he is just saying that in that particular instance which
Chairman Rokeberg referred to the members obviously did not think
it was a bad idea.
MR. YOULD acknowledged that Representative Halcro's observation was
a very good point and as a matter of fact as everybody knows there
was an election recently out in MEA land which resulted in a change
in the board perhaps in response to backlash although that is hard
to say. He remarked that the one board member who is no longer
there at MEA was an 18-year veteran and a very creditable veteran.
CHAIRMAN ROKEBERG observed that it sounds like there is another 59
percent [who did not approve the attempted takeover].
Number 2034
REPRESENTATIVE HALCRO commented so the 59 percent that voted in
favor of the takeover are the 59 percent that responded. He
mentioned that in some cases as in the instance when the Anchorage
Telephone Utility (ATU) had Citizen's Utility, which was out of
Connecticut, come in and make a public push to acquire ATU. He
indicated that the two were battling it out so in this kind of case
where an outside electrical co-op or investor-owned utility is
coming in and they are not as page 1, line 5, says "subject to
regulation by the commission," it would be subject to regulation by
their own commission in their own home-chartered state or
home-chartered area he would assume. He asked Mr. Logan if an
outside company coming in, which is pitching to buy Chugach, MEA,
or Joe's Electric Co-op, falls under HB 169 guidelines and are they
going to have to go to their members in California, Washington, or
their own state and get permission before they start flooding the
airwaves saying what a good company they are.
MR. LOGAN replied no but an outside company would indeed be
regulated by the commission because in order to serve customers
they would have to have a certificate of need (CON). He reiterated
that an outside company would indeed be regulated by the commission
but the outside company would not fall under the auspices of HB
169. He said that while it was initially the sponsor's position
that if an outside company were to launch some type of a hostile
takeover against the members of a cooperative the cooperative could
defend themselves, the sponsor has since decided that, as he
mentioned in the previous committee in which the chairman was in
attendance, some type of sunset might be appropriate. He noted
that the Regulatory Commission of Alaska (RCA) Chair had indicated
that they would be watching these types of things closer so a
sunset provision could let it go for a few years and see if the RCA
actually does protect consumers the way the legislature has
envisioned they should and if so HB 169 could evaporate. He
explained that also if an investor-owned utility purchased another
utility citizens could come up and buy "ML&P [Municipal Light and
Power in Anchorage]." He commented that if something like that
happened then HB 169 would also sunset to allow Chugach or MEA to
be where they are today in a position to defend themselves.
Number 2140
REPRESENTATIVE HALCRO envisioned a situation happening where an
outside company comes in who has the ability to go out in the
marketplace and pitch their wonderful story of why they should
acquire MEA. He added that then Chugach wants to jump in and be an
equal competitor for acquisition then Chugach's hands are tied with
HB 169. He noted that citizens from the outside can basically take
a walk in the park while Chugach is scrambling around trying to get
permission from their members.
MR. LOGAN explained that the sponsor [does not think that] would
necessarily be a bad thing and that is, speaking from his
experience as a former Chugach board member, the whole reason for
the co-op being there is to provide customers with reliable,
low-cost power. He commented that if the co-op's members do not
want to take over ML&P then management should not be able to force
it down their throat.
CHAIRMAN ROKEBERG announced that the committee will put HB 169
aside and take it up immediately at the next meeting. [HB 169 was
heard and held.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee was recessed to the call of
the chair at 5:53 p.m.
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