Legislature(2003 - 2004)
04/19/2004 03:25 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
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 19, 2004
3:25 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Carl Gatto, Vice Chair
Representative Nancy Dahlstrom
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 82(L&C)(title am)
"An Act relating to the state alcoholic beverage tax for certain
wine and other beverages on amounts sold in or consigned for
shipment into the state that exceed 100 gallons a month, and to
the treatment of two or more taxpayers who have a relationship
for purposes of applying the tax for certain wine and other
beverages."
- HEARD AND HELD
HOUSE BILL NO. 331
"An Act relating to federal requirements for governmental plan
and other qualifications for the teachers' retirement system,
the public employees' retirement system, and the judicial
retirement system; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 540
"An Act relating to workers' compensation insurance rates; and
providing for an effective date."
- MOVED CSHB 540(L&C) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB 82
SHORT TITLE: ALCOHOLIC BEVERAGE TAX FOR WINE & OTHERS
SPONSOR(S): SENATOR(S) STEVENS G
02/26/03 (S) READ THE FIRST TIME - REFERRALS
02/26/03 (S) L&C, FIN
03/13/03 (S) L&C AT 1:30 PM BELTZ 211
03/13/03 (S) Heard & Held
03/13/03 (S) MINUTE(L&C)
03/27/03 (S) L&C AT 1:30 PM BELTZ 211
03/27/03 (S) Moved CSSB 82(L&C) Out of Committee
03/27/03 (S) MINUTE(L&C)
03/31/03 (S) L&C RPT CS 3DP 2NR SAME TITLE
03/31/03 (S) DP: BUNDE, DAVIS, STEVENS G;
03/31/03 (S) NR: FRENCH, SEEKINS
04/08/03 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/08/03 (S) Heard & Held
04/08/03 (S) MINUTE(FIN)
02/20/04 (S) FIN RPT CS(L&C) 5DP 1NR
02/20/04 (S) DP: WILKEN, GREEN, DYSON, BUNDE,
02/20/04 (S) STEVENS B; NR: OLSON
02/20/04 (S) FIN AT 9:00 AM SENATE FINANCE 532
02/20/04 (S) Moved CSSB 82(L&C) Out of Committee
02/20/04 (S) MINUTE(FIN)
04/05/04 (S) TRANSMITTED TO (H)
04/05/04 (S) VERSION: CSSB 82(L&C)(TITLE AM)
04/06/04 (H) READ THE FIRST TIME - REFERRALS
04/06/04 (H) L&C, FIN
04/16/04 (H) L&C AT 3:15 PM CAPITOL 17
04/16/04 (H) <Bill Hearing Postponed to Mon.
04/19/04>
04/19/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 331
SHORT TITLE: RETIREMENT:TEACHERS/JUDGES/PUB EMPLOYEES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
05/21/03 (H) READ THE FIRST TIME - REFERRALS
05/21/03 (H) STA, L&C, FIN
03/30/04 (H) STA AT 8:00 AM CAPITOL 102
03/30/04 (H) <Bill Hearing Postponed to Thurs.
4/1/04>
04/01/04 (H) STA AT 8:00 AM CAPITOL 102
04/01/04 (H) Scheduled But Not Heard
04/06/04 (H) STA AT 8:00 AM CAPITOL 102
04/06/04 (H) Heard & Held
04/06/04 (H) MINUTE(STA)
04/14/04 (H) STA AT 8:00 AM CAPITOL 102
04/14/04 (H) Moved CSHB 331(STA) Out of Committee
04/14/04 (H) MINUTE(STA)
04/15/04 (H) STA RPT CS(STA) NT 3DP 1NR
04/15/04 (H) DP: HOLM, LYNN, WEYHRAUCH; NR: COGHILL
04/19/04 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 540
SHORT TITLE: WORKERS' COMPENSATION INSURANCE RATES
SPONSOR(S): LABOR & COMMERCE
03/22/04 (H) READ THE FIRST TIME - REFERRALS
03/22/04 (H) L&C
03/31/04 (H) L&C AT 3:15 PM CAPITOL 17
03/31/04 (H) <Bill Hearing Postponed to Fri. 4/2/04>
04/02/04 (H) L&C AT 3:15 PM CAPITOL 17
04/02/04 (H) Heard & Held
04/02/04 (H) MINUTE(L&C)
04/14/04 (H) L&C AT 3:15 PM CAPITOL 17
04/14/04 (H) Heard & Held
04/14/04 (H) MINUTE(L&C)
04/16/04 (H) L&C AT 3:15 PM CAPITOL 17
04/16/04 (H) Scheduled But Not Heard
04/19/04 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
DOUG LETCH, Staff
to Senator Gary Stevens
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 331 on behalf of Senator Gary
Stevens, sponsor of the bill.
CHUCK HARLAMERT
Juneau Section Chief
Tax Division of Administrative Services
Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered questions regarding SB 82.
MELANIE MILLHORN, Director
Health Benefits Section
Division of Retirement and Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Explained the proposed committee substitute
(CS) for HB 331.
ANSELM STAAK, Chief Financial Officer
Division of Retirement and Benefits
Department of Administration
Juneau, Alaska
POSITION STATEMENT: Explained the changes in the proposed CS for
HB 331 and answered questions.
LINDA HALL, Director
Division of Insurance
Department of Community and Economic Development
Anchorage, Alaska
POSITION STATEMENT: Explained Amendment k to HB 540 and
answered questions.
CRAIG NODTVEDT, Agent
Alaska National Insurance
Seattle, Washington
POSITION STATEMENT: Testified in favor of HB 540.
ACTION NARRATIVE
TAPE 04-45, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:25 p.m. Representatives
Anderson, Gatto, Dahlstrom, and Rokeberg were present at the
call to order. Representatives Lynn, Crawford, and Guttenberg
arrived as the meeting was in progress.
SB 82-ALCOHOLIC BEVERAGE TAX FOR WINE & OTHERS
[Contains discussion of HB 225]
CHAIR ANDERSON announced that the first order of business would
be CS FOR SENATE BILL NO. 82(L&C)(title am), "An Act relating to
the state alcoholic beverage tax for certain wine and other
beverages on amounts sold in or consigned for shipment into the
state that exceed 100 gallons a month, and to the treatment of
two or more taxpayers who have a relationship for purposes of
applying the tax for certain wine and other beverages."
Number 0094
DOUG LETCH, Staff to Senator Gary Stevens, Alaska State
Legislature, presented SB 82 on behalf of Senator Gary Stevens,
sponsor of the bill. He stated:
When the 22nd Alaska Legislature passed into law House
Bill 225, breweries were allowed to keep the former
tax rate of 35 cents per gallon on sales of the first
60,000 barrels of beer sold in the state, while
wineries were not given similar consideration; as a
result, the tax on wine rose from 85 cents per gallon
to $2.50 per gallon. This statute which helps
breweries, has, unfortunately, put Alaska's small,
emerging wineries at a competitive disadvantage in the
marketplace.
SB 82 is legislation intended to reduce the tax burden
for small Alaska wine producers, at which wine is
currently taxed at the rate of $2.50 per gallon, at
the time it is sold in the state or consigned to the
state. Recognizing that a revision to current state
statute to allow wineries an exemption similar to
breweries would lead to a substantial revenue loss, SB
82 attempts to level the playing field for our small
wineries by offering a tax exemption of 100 gallons
per month, and this figure was derived after much
consideration and consultation with winery operators
and the Department of Revenue. The 100-gallon per
month figure is also an attempt to [minimize] revenue
lost from unintended beneficiaries, while keeping
within the constrictions of interstate commerce law.
The bill would decrease the impact on state revenues
by around $18,000, but while there is a revenue
decrease, it will help support continued development
of small Alaskan wineries, which currently there are
two on Kodiak Island, a third is in Haines, and a
fourth is in Anchorage. This burgeoning Alaska
industry does need our support to prosper and
contribute to the state's changing economy, and SB 82
is one means of assisting them.
While the state would loose some income under this
bill, we may also see a loss of all incomes should
these small businesses cease to exist because they
can't remain profitable and competitive in a dynamic
marketplace.
CHAIR ANDERSON noted the arrival of Representative Guttenberg.
Number 0275
REPRESENTATIVE ROKEBERG asked Mr. Letch to talk about the
wineries in Alaska.
MR. LETCH reported that on Kodiak Island there are two small
wineries that use salmonberries to make wine and a variety of
products. He said there is a You Brew Pub in Anchorage, and a
winery in Haines.
REPRESENTATIVE ROKEBERG asked if the bill is for all wines sold
less than 100 gallons and those produced in the state.
MR. LETCH replied that because of the federal interstate
commerce laws, wineries from outside of the state cannot be
excluded from taking advantage of this exemption. The 100-
gallon figure was derived to minimize the impact from out of
state wineries, he added.
REPRESENTATIVE ROKEBERG asked if that is approximately 400 to
500 bottles a year. He wondered if a company from California
could import that amount and be excluded from paying the tax.
MR. LETCH replied that that is his understanding.
REPRESENTATIVE ROKEBERG said he finds that troublesome.
CHAIR ANDERSON noted the arrival of Representatives Lynn and
Crawford.
Number 0414
CHUCK HARLAMERT, Juneau Section Chief, Tax Division of
Administrative Services, Department of Revenue, spoke about the
problem regarding out of state importation, noting that the
brewery exemption lowers the rate of tax for small brewers
depending on the size of the brewer. It does allow a lot of
leakage of the credit out of state. He pointed out that a
bigger problem is that the taxpayers are the importers or
distributors, "so we have to look through the taxpayers to the
underlying brewer .... "This bill does not have the same
problem as the brewery reduced rate because it applies to the
taxpayer irrespective of the size of the winery. It helps small
Alaska wineries because they are direct taxpayers and they get
an exclusion of 100 gallons per month, he explained. A
distributor who distributes a larger volume still gets only the
100-gallon exemption, he said.
REPRESENTATIVE ROKEBERG asked if Mr. Harlamert is suggesting
that a vintner from California cannot ship wine to Alaska
without going to a distributor.
MR. HARLAMERT said he believes that they have to be licensed in
the state so they could, in theory, become a licensed
distributor in the state and import wine, but can't just ship it
in. They can't sell direct into Alaska, he added.
REPRESENTATIVE ROKEBERG said he is confused how that works with
the "three-tier system."
Number 0683
MR. HARLAMERT related that the incidences of taxes on the
brewing, shipping, or consignment in the state amounts to ten
wine taxpayers now, and there are no wineries outside of Alaska
that pay the tax. The tax is imposed at the distributor level,
he said.
CHAIR ANDERSON asked Representative Rokeberg to explain how it
works.
REPRESENTATIVE ROKEBERG implied that he is not sure he entirely
understands how it works. This bill puts the tax on the
manufacturer of the wine, if they're in state, where currently,
the other wines are taxed at the distribution point.
MR. HARLAMERT replied exactly.
REPRESENTATIVE ROKEBERG asked if vintners from outside Alaska
would have to apply to the Department of Revenue for a licensure
under the Alcoholic Beverage Control Board (ABC Board).
MR. HARLAMERT said his understanding of the rule is that if it
is shipped into the state for resale it must be done by a
licensed distributor.
CHAIR ANDERSON stated that the bill is about getting parity for
taxation so that people from other states can't find a loophole.
REPRESENTATIVE ROKEBERG clarified that the real issue is that
when the legislature raised alcohol taxes three or four years
ago, Representative Rokeberg offered an amendment that was
consistent with federal law, which allowed the exemption from
the increase of tax of locally produced beer. But it was
consistent with the "gallonage requirement" under the U.S. tax
code, he noted. That's why the there is a reference in the bill
to 26 U.S.C. 267(b), he pointed out. He asked Mr. Harlamert to
say more about the problem he spoke about.
Number 0922
MR. HARLAMERT related that the problem he was referring to is:
When you base an exemption off of the activities or
status of the producer, but the exemption needs to be
effectuated at the taxpayer level, you create a
difficult administrative process. The brewery
exemption does that. It's rather cumbersome to deal
with when a qualified brewer ... may sell through more
than one taxpayer and we need to keep track of that.
There's a cap on the amount of beer that they can sell
at the lower rate, and if you were to extend the same
reference to federal law for wineries, I think that
the administrative complications of taking that
approach would be that much worse.
MR. HARLAMERT continued to say that the feds have a credit
mechanism that gives an advantage to small wineries. It's 90
cents a gallon, and it is phased out for between 150,000 and
250,000 gallons produced a year. He explained that it is
relatively simple to administer when dealing directly with the
producer and the taxpayer.
REPRESENTATIVE CRAWFORD asked if it is 500 bottles per month and
6,000 bottles per year.
MR. HARLAMERT replied that he thinks it is between 400-500
bottles of wine.
REPRESENTATIVE CRAWFORD asked if specialty wines would be
exempt.
MR. HARLAMERT answered that it doesn't exclude them directly.
He said, "It does via the taxpayer because they come through a
distributor. The exemption is not a function of the size of the
winery or its source. It's simply, each taxpayer gets the first
100 gallons of wine tax free."
REPRESENTATIVE CRAWFORD said, "What you're saying is, the
Fiddlehead can't buy from Columbia Crest Winery directly."
MR. HARLAMERT said that is his understanding.
REPRESENTATIVE ROKEBERG said, "But they may be able to buy from
another smaller vintner, is what I'm concerned about." He asked
if Mr. Harlamert is suggesting that they would have to buy from
a wholesale distributor and then resell it.
MR. HARLAMERT said that this is not his area of expertise and he
is hesitant to answer.
CHAIR ANDERSON asked if this issue could be worked out and the
committee could meet again on the bill.
Number 1178
REPRESENTATIVE ROKEBERG suggested that the fiscal note be looked
at. He noted a loss of $18,000 and asked the reason why that
is.
MR. HARLAMERT said, "We estimate that the total revenue decrease
will be $18.4 thousand; approximately 20 percent of that will be
realized by in-state wineries."
REPRESENTATIVE ROKEBERG asked what the volume of the two Kodiak
wineries is.
MR. LETCH replied that one of the wineries produces roughly
1,200 gallons per year with the bulk of that coming in the fall.
They would be producing about 300-400 gallons per month, for
four months, he said. He assumed that the other winery was
similar in production.
REPRESENTATIVE ROKEBERG asked how much tax they would be paying.
MR. HARLAMERT estimated that local wineries would be paying 20
percent of $18,000.
REPRESENTATIVE ROKEBERG asked, "Someone's got to tell me why
we're going to give up four times the tax that we'd be abating
to do this deal."
CHAIR ANDERSON suggested that someone from the Department of
Revenue might be able to answer that question at the next
hearing of the bill.
REPRESENTATIVE ROKEBERG said he has concerns about where the tax
fits. Mr. Harlamert's analysis seems to indicate a ratio of 4-
to-1 cost-to-benefit analysis, he pointed out.
Number 1359
REPRESENTATIVE GUTTENBERG suggested that a synopsis of the
developing wine industry should be made available at the next
hearing of the bill. He said he is interested in hearing if it
is a sustainable industry.
REPRESENTATIVE DAHLSTROM, directing her comments to Mr. Letch,
asked if this bill is at the request of one winery in
particular.
MR. LETCH said when the bill was introduced in the House, the
makers of the bill worked primarily with Mr. Steve Thompson from
Alaska Wild Wine. "We have also heard from the other wine
owners, John and Judy Lucas, and also from the Menakers who own
the winery in Haines." There has been no contact with the You
Brew Pub in Anchorage, he noted.
REPRESENTATIVE DAHLSTROM asked if Steve Thompson is the mayor.
MR. LETCH said no, he is a local resident of Kodiak.
Number 1485
REPRESENTATIVE CRAWFORD suggested that there should be more
information obtained on whether this bill opens up a loophole
for other wines to be imported.
MR. HARLAMERT offered to ask Joanna Bales who is in charge of
the alcohol [tax] program to attend the next hearing of the
bill. He said that he contacted her prior to today's meeting
and it is their understanding of the law that there is no
problem with a loophole. The incidence of tax is to "bring into
the state for sale, to distribute, or to brew," so an outside
seller needs to be licensed to do that, he explained.
REPRESENTATIVE ROKEBERG pointed out that the basis for the
brewery exemption was to keep the brewery tax at its current
level, and it only applied to the incident of a tax increase.
He asked Mr. Harlamert if that is his recollection.
MR. HARLAMERT said yes.
REPRESENTATIVE ROKEBERG added, "Those people who are locally
brewing and are not paying no tax." He asked if that would be
similar in this bill.
MR. HARLAMERT replied yes and no. He said:
It depends on their volume and I think the best way to
summarize it is, we looked at the model used for the
brewery exemption and because of two issues, one, the
administrative burden involved with it and, two, the
fact that if you do exempt it based upon the size of
the venture, then you do open up a very large number
of potential beneficiaries, all of them out of the
state, so in our dealing with the Senator's office,
we've tried to come up with the best exemption we
could come up with the least leakage.
CHAIR ANDERSON announced that SB 82 would be held until
Wednesday.
Number 1637
REPRESENTATIVE GATTO asked if the Kodiak winery sold "all they
can make."
MR. LETCH said he didn't know.
REPRESENTATIVE GATTO suggested that increasing the tax could
increase sales by pushing other importers out. He wondered if
the focus should be on increased production, which is going to
be better for the local economy, the workers, and the state, as
opposed to just increasing market share.
REPRESENTATIVE ROKEBERG said it might be hard to get empirical
evidence of market elasticity.
[SB 82 was held over.]
HB 331-RETIREMENT:TEACHERS/JUDGES/PUB EMPLOYEES
[Contains discussion of SB 145]
CHAIR ANDERSON announced that the next order of business would
be CS FOR HOUSE BILL NO. 331(STA), "An Act relating to federal
tax requirements for and other provisions of the teachers'
retirement system, the public employees' retirement system, and
the judicial retirement system; removing village public safety
officers from the public employees' retirement system;
eliminating the public employees' retirement system conditional
duty to refund contributions under $1,000 to inactive employees;
limiting service credit for village public safety officer
service in the public employees' retirement system to five
years; and providing for an effective date."
Number 1720
MELANIE MILLHORN, Director, Health Benefits Section, Division of
Retirement and Benefits, Department of Administration, explained
that HB 331 is a tax compliance bill, which is an extremely
important piece of legislation for the division, but also for
all of the members [of various retirement systems]. She
mentioned that the bill has been three and a half years in the
making. She pointed out that there is a zero fiscal note in the
committee members' packets, which would remain a zero fiscal
note so long as the bill passes out of committee in the form it
is currently written. The bill is required to place into law
those changes into the statutes in the public employees'
retirement system (PERS), teachers' retirement system (TRS), and
the judicial retirement system that are required as a result of
the review by the Internal Revenue Service (IRS), she explained.
Changes must be implemented so the plans remain qualified under
the Internal Revenue Code (IRC), she added.
Number 1788
MS. MILLHORN reviewed the events of the past three and a half
years which impacted this legislation. She explained that the
changes introduced with this CS add the changes requested by the
IRS and repeal prior legislation (SB 145, 2001 Legislative
Session) which would have allowed village public safety officers
(VPSO) employed under village public safety officer program to
become members of the public employees' retirement system. The
repeal of the inclusion of VPSOs in PERS results directly from a
specific negative Private Letter Ruling that does not allow for
the inclusion of VPSOs in PERS as specified in SB 145, she
noted.
CHAIR ANDERSON asked Ms Millhorn for a condensed summary of the
bill.
MS. MILLHORN said, "What we need to be able to do, we've
received a review by the IRS on our qualified plan status and in
order to maintain our qualified plan status, the IRS and the
division have come to an agreement that certain language must be
inserted in statute to remain qualified."
CHAIR ANDERSON asked if the language is not inserted in statute,
then what will happen to the PERS, TRS and other affected
retirement plans.
MS. MILLHORN replied that they will become non-qualified and
there would be grave tax consequences.
CHAIR ANDERSON termed the bill a "housekeeping mechanism."
Number 2035
REPRESENTATIVE GUTTENBERG asked which version of the bill the
committee is working from.
CHAIR ANDERSON replied Version H.
REPRESENTATIVE GUTTENBERG asked about the considerable title
change between Version A and Version H and other significant
changes.
Number 2052
ANSELM STAAK, Chief Financial Officer, Division of Retirement
and Benefits, Department of Administration, noting that he is
also a certified public accountant and an attorney, explained
the changes in HB 331. He pointed out that in the A version of
the bill last session it was too late to make all the changes
requested by the IRS. During the interim the agreed-to language
was added and twelve different versions were drafted until the H
version was finally settle upon, he said.
REPRESENTATIVE GUTTENBERG asked if the changes reflect the
negotiations with the IRS and not committee work.
MR. STAAK replied yes.
REPRESENTATIVE ROKEBERG asked why the VPSO was removed.
Number 2118
MR. STAAK explained that the IRS tried very hard to include the
VPSO, filing over 1,000 pages of documents to try to include
them. "What it comes down to is this; the regional native
corporation would have to declare that a portion of itself is a
government, and not a private, non-profit organization. Only
government employees can be in governmental plans," he reported.
"These are employees of a private, non-profit, 501C3
corporation, like any other non-profit, and they were simply not
willing to go that far. Second, the way the program itself is
constructed, most of the actual supervision comes at the village
level. But the most important issue is, is that if you declare
this organization a government, you can't declare it a private
non-profit," he noted.
REPRESENTATIVE ROKEBERG asked Mr. Staak to clarify what the dire
consequences mentioned by Ms. Millhorn are.
Number 2216
MR. STAAK said that if this bill is not passed, "We would have
to self-inform the IRS that we are out of compliance, and what
we get for being in compliance on retirement plans is that both
for PERS, and TRS, and the judicial retirement system, the SBS
contributions can be made pre-tax." He explained that not being
able to pay pre-tax would increase the costs to the retirement
system to well over $700 million per year and it would also put
into question some of the past retirement accounts.
REPRESENTATIVE GATTO asked if future payments would be post-tax
and he wondered what would happen to all of the payments that
have already been made and if they would now have to pay more
tax.
MR. STAAK said that is entirely possible because it is a
straightforward matter of compliance with the tax law and all
contributions made to date that have not been paid out yet could
become taxable.
REPRESENTATIVE CRAWFORD asked for clarification on the status of
the VPSOs.
MS. MILLHORN replied that the VPSOs were never actually included
for PERS purposes, so nothing will happen to them.
REPRESENTATIVE CRAWFORD summed it up by saying that the attempt
to include VPSOs in a retirement system didn't work in this
route.
MR. STAAK said that is correct and the language has to be
removed.
Number 2325
CHAIR ANDERSON announced that HB 331 was heard and held.
HB 540-WORKERS' COMPENSATION INSURANCE RATES
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 540, "An Act relating to workers' compensation
insurance rates; and providing for an effective date."
Number 2354
LINDA HALL, Director, Division of Insurance, Department of
Community and Economic Development, explained Amendment [k] to
HB 540.
TAPE 04-45, SIDE B
Number 2326
MS. HALL explained that Amendment k from the Division of
Insurance is more like a proposed committee substitute (CS)
because it makes numerous changes to the bill. She said that in
previous testimony on HB 540 she noted that the procedures in
the bill were cumbersome and the timelines were not adequate to
produce timely filings to let employers know what the workers'
compensation costs would be for the coming year. Typically,
rate changes are effective on January 1, and the division has
tried diligently this year when there was an average 22 percent
rate increase to get those out to employers in time to budget
and to bid on projects, she reported. She continued:
What we've done here, and we have worked with the
original proposer of this concept, is to take the same
concept, but to start from a very different position.
The original bill had a 60-day period for review of
the filings, not only by the Division of Insurance,
but all interested parties and insurance companies.
What we've done is move that way to the beginning.
This version of the bill would have the filing done by
the rating organization 125 days before the proposed
effective date. In reality, that's toward the end of
August. Within 20-25 days after receipt of that
filing, the Division of Insurance would hold a hearing
and at the top of page 2 of this k version, goes
through the various things that would occur in that
hearing.
Most importantly, I think, is number 2, that an
interested party, whether that is an insurance company
or - interested party's defined at the very end - an
employer association, employee, or labor association,
etc. We'd have an opportunity to inspect the filing,
to examine witnesses, to present witnesses, to present
testimony and ... after that hearing there would be a
10-day period when the hearing would remain open for
comments, other interrogatories.
All of this is designed to bring more input to the
Division of Insurance in our review of filings for
workers' compensation lost costs. We're looking to
have an opportunity to hear what insurance companies
have to say in addition to the rating organization, to
take that under consideration, then the division would
have 15 days to the day of filing, which could be
extended for an additional 15 days to request further
information, to do further review based on the
testimony at hearing, at which point then, the
division would render a decision - an approval or
disapproval or modification of the filing - and would
be required under this bill to provide reasons for
that. And all of that information will become part of
the public hearing process, become part of the filing
so that insurance companies and any other interested
party would have access to that.
Number 2197
MS. HALL stated that this is a version that the Division of
Insurance's lead property casualty actuary, who does the reviews
and makes recommendations, has worked with and is comfortable
with. She requested that the committee adopt the proposed
Conceptual Amendment 1 [k]
CHAIR ANDERSON asked if labor or anyone else wanted to testify.
Number 2166
CRAIG NODTVEDT, Agent, Alaska National Insurance, stated his
support for HB 540, including proposed [Conceptual Amendment 1].
Number 2142
REPRESENTATIVE ROKEBERG moved to adopt Conceptual Amendment 1,
labeled k, which, when combined with HB 540, would constitute a
committee substitute, and which read [original punctuation
provided]:
Section 1. AS 21.39.030(a) is amended to read:
(a) Rates, including prospective loss costs under AS
21.39.043 or any other provision of law, shall be
made in accordance with the following provisions … (no
changes to the rest of the section)
Section 2. AS 21.39.040(d) is amended to read:
(d) Subject to the exception specified in (e) of this
section and not including workers' compensation
prospective loss cost filings and workers'
compensation assigned risk pool rates by a rating
organization under AS 21.39.043, each filing shall be
on file for a waiting period of 15 days … (no changes
to rest of section)
Section 3. AS 21.39 is amended by adding a new
section to read:
Sec. 21.39.043. Worker's compensation prospective
loss cost filings.
(a) On at least an annual calendar year basis, a
rating organization shall make a workers' compensation
prospective loss cost filing and an assigned risk pool
rate filing, even if the rating organization
determines that no change in the prospective loss
costs or rates is indicated.
(b) A rating organization shall submit a prospective
loss cost filing and an assigned risk rate filing to
the director not less than 125 days before the
proposed effective date of each filing.
(c) At the time a prospective loss cost filing and
assigned risk rate filing are submitted to the
director under (b) of this section, the rating
organization shall make available to any member or
subscriber that may be affected by the filings a
complete copy of the filings, together with the
materials, aggregate data, and other information
submitted in support of the filings. The prospective
loss cost and assigned risk rate filings, and
supporting information, will be available for public
inspection. Prior to the hearing under section (d),
members and subscribers may submit interrogatories to
the rating organization, including requests for
additional supporting information concerning the
filings.
(d) The director shall hold an administrative hearing
on whether a prospective loss cost filing meets the
requirements of this chapter and whether the filing
should be approved, disapproved, or modified, in whole
or in part. The director shall hold the hearing not
earlier than 20 days and not later than 25 days after
the date of receipt of the prospective loss cost
filing by the director. The director may adopt
regulations governing the conduct of the hearing,
subject to the following:
(1) the director shall sit in a quasi-judicial capacity;
(2) an interested party may
(A) have a reasonable opportunity to inspect the
filing and supporting information and to examine
witnesses, including the designated actuary and other
witnesses of the rating organization;
(B) present witnesses, oral and written testimony,
and documentary evidence; and
(C) apply for subpoenas to be issued by the director
to compel attendance of witnesses and the production
of evidence on the interested parties' behalf;
(3) evidence and testimony from interested parties shall
be limited to matters relevant to a determination of
whether the filing's prospective loss costs meet the
requirements of this chapter and may include a
recommendation for approval, disapproval, or
modification of the prospective loss cost filing;
(4) the director shall record the hearing;
(5) formal rules of pleading or evidence need not be
observed;
(6) the director may conduct part or all of a hearing by
teleconference and allow a witness to testify
telephonically; and
(7) the director shall leave the hearing record open for
10 days after the date of the hearing, during which
time interested parties may submit additional written
testimony and documentary evidence concerning the
prospective loss cost filing to the director subject
to the limitations of paragraph (3), and during which
time members and subscribers may submit to the rating
organization and to the director proposed
modifications to the prospective loss cost filing
accompanied by the information upon which the member
or subscriber supports the modification.
(e) The director shall review the prospective loss
cost filing and the evidence presented through the
hearing process within 15 days after the hearing. The
review period may be extended for an additional 15
days if the director gives written notice within the
waiting period to the rating organization that
additional time for consideration of the filing is
required. If under (d)(7) evidence is provided to
support a modification and the rating organization
does not include the requested modification in the
filing, the director shall require that the rating
organization rebut the evidence to show why the
modification should not be included. The director may
request that the rating organization
(1) provide additional supporting information for the
filing, or
(2) modify the filing based upon evidence
provided through the hearing process.
(f) If evidence or information is requested under
section (e), the rating organization shall respond to
the director's interrogatories within 15 days of
receipt of the interrogatory unless additional time is
allowed by the director. The director shall review
the rating organization's responses to the director's
interrogatories within 15 days after receipt of the
response. The review period may be extended for an
additional 15 days if the director gives written
notice within the waiting period to the rating
organization that additional time for consideration of
the filing is required.
(g) Subject to AS 21.06.060(f), all communications
under this section among the director, the rating
organization and any interested party concerning a
prospective loss cost filing, including the director's
interrogatories, the rating organization's written
responses, modified filings and all supporting
information, except for information related to a
particular insured, are part of the filing record and
shall be made available for public inspection.
(h) The rating organization shall make available to a
member or subscriber all information that is available
for public inspection under this subsection as soon as
possible after issuance or receipt by the director.
Other interested parties may obtain copies of public
documents from the director.
(i) The director shall issue a written order approving
or disapproving the prospective loss cost filing and
the assigned risk rate filing. The order shall
include details of the director's reasoning for
approving or disapproving the filings
(j) A separate prospective loss cost filing submitted
solely to address an amendment to AS 23.30 is not
subject to the procedures of this section, but shall
be reviewed and approved or disapproved by the
director in accordance with AS 21.39.040(d). The
filing under this subsection, together with all
supporting information and communications between the
director and the rating organization, will be
available for public inspection.
(k) A written order of the director under this
section is subject to review by appeal to the superior
court. An appeal under this section shall be filed
with the court within 30 days after the date of the
written order. The court shall determine whether the
filing of the appeal will operate as a stay of the
order.
(l) A filing made under this section is subject to all
other provisions of this chapter except to the extent
they are inconsistent with this section. AS 21.39.080
does not apply to a prospective loss cost filing by a
workers' compensation rating organization.
(m) In this section
(1) "interested party" means
(A) an employer association
(B) an employee or labor association;
(C) producer;
(D) a producer association;
(E) an insurer member or subscriber of the rating
organization; and
(F) other persons who are substantially affected by the
loss cost filing.
(2) "prospective loss cost filing" means the
historical aggregate losses and loss adjustment
expenses upon which a portion of a rate is based,
adjusted through trending to a future point in time,
but does not include expenses, other than loss
adjustment expenses, or profit.
CHAIR ANDERSON asked whether there was any objection to adopting
Conceptual Amendment 1. There being no objection, it was so
ordered.
Number 2109
CHAIR ANDERSON discussed the fiscal note from the [Department of
Community & Economic Development] stating that it totals between
$7,300 and $8,200 over the next six years, and the total
department budget for FY 04 is about $5,217,000, which
calculates out to about .0013 percent of the department's
budget. This fiscal note appears to fall within the normal
operating variances, he said. He opined that a zero fiscal note
could easily be adopted because of the small amount.
REPRESENTATIVE ROKEBERG commended Ms. Hall for all of her work
on this legislation and the cooperative process used.
Number 2066
REPRESENTATIVE GUTTENBERG mentioned that the department has so
few general fund dollars that small impacts create ripples.
CHAIR ANDERSON repeated his belief that the dollar amount in
this bill is so negligible that it wouldn't have a huge impact
on the department.
Number 2024
REPRESENTATIVE ROKEBERG asked Ms. Hall if the department is
generating in excess of $35,000,000 a year in general fund
revenue.
MS. HALL replied that the department is pushing approximately
$40 million in premium taxes, which all goes to the general
fund. The Division of Insurance is operated as a receipts-based
agency for the fees that are charged to those regulated by the
division. For operational purposes, nothing is taken from the
general fund, she noted.
REPRESENTATIVE ROKEBERG supported the idea of a zero fiscal
note.
Number 1987
CHAIR ANDERSON [moved to adopt a zero fiscal note from the
Department of Community & Economic Development]. There being no
objection, a zero fiscal note was adopted.
Number 1983
REPRESENTATIVE ROKEBERG moved to report HB 540, as amended, out
of committee with individual recommendations and the attached
zero fiscal notes. There being no objection, CSHB 540(L&C) was
reported from the House Labor and Commerce Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:20 p.m.
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