03/07/2011 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB87 | |
| HB164 | |
| HB155 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 87 | TELECONFERENCED | |
| += | HB 164 | TELECONFERENCED | |
| += | HB 155 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 7, 2011
3:20 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Craig Johnson, Vice Chair
Representative Mike Chenault
Representative Steve Thompson
Representative Lindsey Holmes
Representative Bob Miller
MEMBERS ABSENT
Representative Dan Saddler
COMMITTEE CALENDAR
HOUSE BILL NO. 87
"An Act relating to penalties for antitrust violations."
- MOVED CSHB 87(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 164
"An Act relating to insurance; relating to health care
insurance, exemption of certain insurers, reporting, notice, and
record-keeping requirements for insurers, biographical
affidavits, qualifications of alien insurers assuming ceded
insurance, risk-based capital for insurers, insurance holding
companies, licensing, federal requirements for nonadmitted
insurers, surplus lines insurance, insurance fraud, life
insurance policies and annuity contracts, rate filings by health
care insurers, long-term care insurance, automobile service
corporations, guaranty fund deposits of a title insurer, joint
title plants, delinquency proceedings, fraternal benefit
societies, multiple employer welfare arrangements, hospital and
medical service corporations, and health maintenance
organizations; and providing for an effective date."
- MOVED CSHB 164(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 155
"An Act relating to public construction contracts."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 87
SHORT TITLE: ANTITRUST VIOLATION PENALTIES
SPONSOR(s): REPRESENTATIVE(s) OLSON, HOLMES
01/18/11 (H) PREFILE RELEASED 1/14/11
01/18/11 (H) READ THE FIRST TIME - REFERRALS
01/18/11 (H) L&C, JUD
02/28/11 (H) L&C AT 3:15 PM BARNES 124
02/28/11 (H) Scheduled But Not Heard
03/07/11 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 164
SHORT TITLE: INSURANCE: HEALTH CARE & OTHER
SPONSOR(s): LABOR & COMMERCE
02/18/11 (H) READ THE FIRST TIME - REFERRALS
02/18/11 (H) L&C, FIN
02/21/11 (H) L&C AT 3:15 PM BARNES 124
02/21/11 (H) Heard & Held
02/21/11 (H) MINUTE(L&C)
02/23/11 (H) L&C AT 3:15 PM BARNES 124
02/23/11 (H) Heard & Held
02/23/11 (H) MINUTE(L&C)
02/28/11 (H) L&C AT 3:15 PM BARNES 124
02/28/11 (H) Scheduled But Not Heard
03/07/11 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 155
SHORT TITLE: PUBLIC CONSTRUCTION CONTRACTS
SPONSOR(s): LABOR & COMMERCE
02/11/11 (H) READ THE FIRST TIME - REFERRALS
02/11/11 (H) L&C
02/25/11 (H) L&C AT 3:15 PM BARNES 124
02/25/11 (H) Heard & Held
02/25/11 (H) MINUTE(L&C)
02/28/11 (H) L&C AT 3:15 PM BARNES 124
02/28/11 (H) Heard & Held
02/28/11 (H) MINUTE(L&C)
03/07/11 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
JAMES WALDO, Staff
Representative Lindsey Holmes
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 87 on behalf of a joint prime
sponsor, Representative Lindsey Holmes.
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General
Commercial/Fair Business Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Provided comments and answered questions
during the discussion of HB 87.
LINDA HALL, Director
Division of Insurance
Anchorage Office
Department of Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified on the changes in the proposed
committee substitute (CS) and answered questions during the
discussion of HB 164.
JENNIFER SENETTE, Staff
Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on Amendment 1 to HB 155, on
behalf of the House Labor & Commerce Committee, chaired by
Representative Kurt Olson.
MAX MIELKE, Business Manager
Plumbers & Pipefitters Local 262
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
MATHEW MIELKE
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of HB 155.
JON SMITH, Member
Alaska Council of Carpenters Local 2247
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
MARVIN YODER, Deputy Administrator
City of Wasilla
Wasilla, Alaska
POSITION STATEMENT: Testified in support of HB 155.
SHANE LINSEY
Wasilla, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
LORI DAVEY, Member
Board of Supervisors
South Goldenview Rural Road Service Area
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 155.
NANCY M. PETERSON, Public Works Director
City of Unalaska
Unalaska, Alaska
POSITION STATEMENT: Testified in support of HB 155.
SHIRLEY MARQUARDT, Mayor
City of Unalaska;
Vice President, Alaska Municipal League (AML)
Unalaska, Alaska
POSITION STATEMENT: Testified in support of HB 155.
BRET HELMS, Training Director
United Association of Plumbers and Pipefitters, Local 375
Fairbanks, Alaska.
POSITION STATEMENT: Testified in opposition to HB 155.
ZEBULON WOODMAN, Member
Laborers Local 942
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
JEAN TRAINOR, Member
Alaska Public Employees Association (APEA)
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
JIM LAITI, Business Representative
Plumbers and Pipefitters Local 375
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 155.
JASON ALWARD, Business Agent
International Union of Operating Engineers Local 302
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
RON AXTELL, Representative
Laborers Union Local 942
Wasilla, Alaska
POSITION STATEMENT: Testified during the discussion of HB 155.
KEITH MONTGOMERY, Business Representative
Carpenters Local 1281
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
JOHN GARRETT, Member
Sheet Metal Workers Local 23
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
BRONSON FRYE, Member
Painters and Allied Trades Union, Local 1959
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
LARRY BELL, Representative
International Brotherhood of Electrical Workers (IBEW) Local
1547
Wasilla, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
SHAWN CROSS, Apprentice
International Brotherhood of Electrical Workers (IBEW) Local
1547
Eagle River, Alaska
POSITION STATEMENT: Testified in opposition to HB 155.
ACTION NARRATIVE
3:20:09 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:20 p.m. Representatives Olson,
Miller, Thompson, and Holmes were present at the call to order.
Representatives Chenault and Johnson arrived as the meeting was
in progress.
HB 87-ANTITRUST VIOLATION PENALTIES
3:20:26 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 87, "An Act relating to penalties for antitrust
violations."
3:20:33 PM
JAMES WALDO, Staff, Representative Lindsey Holmes, Alaska State
Legislature, introduced himself.
3:20:56 PM
REPRESENTATIVE HOLMES moved to adopt the proposed committee
substitute (CS) labeled 27-LS0331\I, Bannister, 2/16/11, as the
working document. There being no objection, Version I was
before the committee.
MR. WALDO explained the proposed CS would update the penalties
for antitrust violations for Alaska. Currently the maximum
penalty for an antitrust violation is $20,000 for a natural
person and $50,000 for an organization. This bill would
increase the maximum penalty for antitrust violations to
$1,000,000 for a natural person and $50,000,000 for an
organization. The federal penalties are set at $1,000,000 for
an individual and $100,000,000 for a corporation. He suggested
that the level selected would act as a deterrent. The first
section relates to the criminal violation, and would increase
the offense from a misdemeanor to a class C felony.
3:23:51 PM
MR. WALDO related that proposed Section 2 was added in the
proposed CS, to allow the attorney general to seek civil
penalties. This would provide an extra tool for the Department
of Law (DOL) to pursue antitrust violations, which while not
frequently used is available to the department.
CHAIR OLSON remarked that he and Representative Holmes have
worked with Mr. Sniffen on the language for this bill.
3:24:59 PM
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law (DOL), said that the proposed CS would update
the antitrust provisions to add a civil penalty provision.
Currently, the DOL does not have a civil penalty in its
antitrust statute. He pointed out that the criminal violations
are more difficult to prosecute due to the necessity to prove
beyond a reasonable doubt when making the case. In multi-state
actions, states with the strongest penalty provisions end up
with more of the settlement money. The state has made good
arguments but it would have been nice to have had more authority
so it could have argued for a "bigger piece of the pie." The
amounts are on the high side compared to other states, but not
to federal statutes. In 2007, the federal statutes were amended
to increase the penalty to $10,000,000 for individuals and
$100,000,000 for corporations.
MR. SNIFFEN recalled some states are working to increase their
penalty provisions. He referred to a chart in members' packets,
which outlines the penalty statutes for other states. Most
states were hoping that they could amend their statutes to be in
line with federal statutes, he said.
3:28:09 PM
REPRESENTATIVE MILLER asked whether the only penalties are
fines, except for imprisonment of not more than a year. He
surmised that a corporation could not be imprisoned.
MR. SNIFFEN answered that a state can imprison corporate
officials, and violations by corporations can be felonies. The
federal government has imprisoned corporate officials, which can
be difficult, but can occur.
3:29:21 PM
REPRESENTATIVE CHENAULT asked whether the penalties of
$1,000,000 and $50,000,000, respectively, were reasonable since
none of the other states' penalties were near that amount.
MR. SNIFFEN agreed, except for the federal penalties which are
set at $10,000,000 and $100,000,000. He offered his belief that
many of the other states enacted their laws in the 70s and 80s.
Some are outdated. Alaska would definitely on the high side
compared to other states, he said.
REPRESENTATIVE CHENAULT expressed concern that the state would
strive to match the federal government.
3:30:41 PM
REPRESENTATIVE JOHNSON referred to the chart previously referred
to, noting that Kansas has a $5,000 per day penalty and he
wondered how the penalty is implemented, from inception until
the time it is resolved, since the penalties could accrue pretty
rapidly.
MR. SNIFFEN related it is difficult to determine the start and
stop dates. He explained the DOL likes to avoid that method of
imposing a penalty since it can be difficult to determine when
it should start or end. Typically a penalty provision would
commence as soon as the violation is detected and if it goes to
court the jury often will often decide the start and when the
penalty is abated. He elaborated that determining the dates can
lead to considerable discussion and debate. He said sometimes
it can be argued that violations start or stop when a memo is
written to someone in the company. He further related that the
per day penalty provision can create a factual question whereas
a flat amount, in particular, a large one, leaves it to the
court to decide based on the facts and the goal of deterrence.
REPRESENTATIVE JOHNSON asked whether it would be a deterrent to
have a $5,000 per day amount.
MR. SNIFFEN agreed with the logic, that it would provide an
incentive to settle, but he said it also depends on the company
since it may result in the attitude of simply the company's cost
of doing business. In other instances a flat rate of a
$50,000,000 fine can also an incentive.
3:33:45 PM
CHAIR OLSON asked if he was familiar with the San Diego based
Sempra Energy litigation with the State of California, which
arose out of the Energy Crisis of 2000-2001.
MR. SNIFFEN said he was unsure.
CHAIR OLSON stated it was a price fixing case and the state
settled out of court. He thought the damages collectively
reached nearly $2 billion. He said the damages were thought to
have been $32 billion and if so, this bill might be on the light
side.
3:35:06 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 87.
REPRESENTATIVE CHENAULT asked whether someone could address the
Department of Law's fiscal note.
MR. SNIFFEN said he prepared the fiscal note and HB 87 has no
additional fiscal impact.
REPRESENTATIVE CHENAULT asked if the DOL would not be used.
MR. SNIFFEN related that the DOL currently handles these types
of cases. He was unsure this would create more work, but the
bill would allow for additional penalties and allow the
department to have better recoveries.
REPRESENTATIVE CHENAULT expressed general concern on zero fiscal
notes. As bills pass additional costs are incurred, he said.
CHAIR OLSON noted the bill has another committee of referral,
which he thought was the House Finance Committee.
3:37:10 PM
REPRESENTATIVE JOHNSON asked how many cases of this type the DOL
is currently handling.
MR. SNIFFEN answered that the DOL just resolved a multi-state
case involving the drug Ovcon, manufactured by Warner Chilcott
pharmaceuticals. He stated he has another case under
consideration that probably is not worth pursuing unless the
state had provisions such as this in place to allow for
significant recovery. He summarized that there are a few cases,
not many.
CHAIR OLSON corrected an earlier statement. The next committee
of referral is the House Judiciary Standing Committee.
3:38:20 PM
REPRESENTATIVE CHENAULT moved to report the proposed committee
substitute (CS) for HB 87, labeled 27-LS0331\I, Bannister,
2/16/11, out of committee with individual recommendations and
the accompanying zero fiscal note. There being no objection,
CSHB 87(L&C) was reported from the House Labor and Commerce
Standing Committee.
3:38:56 PM
The committee took an at-ease from 3:38 p.m. to 3:41 p.m.
3:41:17 PM
HB 164-INSURANCE: HEALTH CARE & OTHER
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 164, "An Act relating to insurance; relating to
health care insurance, exemption of certain insurers, reporting,
notice, and record-keeping requirements for insurers,
biographical affidavits, qualifications of alien insurers
assuming ceded insurance, risk-based capital for insurers,
insurance holding companies, licensing, federal requirements for
nonadmitted insurers, surplus lines insurance, insurance fraud,
life insurance policies and annuity contracts, rate filings by
health care insurers, long-term care insurance, automobile
service corporations, guaranty fund deposits of a title insurer,
joint title plants, delinquency proceedings, fraternal benefit
societies, multiple employer welfare arrangements, hospital and
medical service corporations, and health maintenance
organizations; and providing for an effective date."
3:41:23 PM
REPRESENTATIVE JOHNSON moved to adopt the proposed committee
substitute (CS) for HB 164, labeled 27-LS0444\M, Bailey, 3/4/11,
as the working document. There being no objection, Version M was
before the committee.
CHAIR OLSON objected for purpose of discussion.
3:41:44 PM
LINDA HALL, Director, Division of Insurance, Anchorage Office,
Department of Community & Economic Development (DCCED), referred
to the changes in the CS. The majority of changes were added to
clarify the bill. She turned to page 50, which adds a provision
to ensure clarity. She referred to page 9, subsection (b),
which read, "Notwithstanding the definition of 'group market' in
AS 21.54.500..." She said the Division of Insurance (DOI)
wanted to be certain to avoid any ambiguity as to whether
individual policies could be sold to a group under certain
circumstances.
3:43:41 PM
MS. HALL referred to page 62, proposed Section 93 of Version M,
which was added. She read, "Unless another form of payment is
agreed to by the policy holder or beneficiary, an..." which
requires an insurer to pay with a negotiable bank check. She
pointed out publicity by life insurance companies of
"checkbooks," which provided a means of distributing proceeds
from life insurance. She stated this is an appropriate way of
distributing proceeds as it allows the beneficiary to
contemplate and determine what to do with the funds. The
policy holder or the beneficiary would need to agree to
something other than a negotiable check. The DOI would adopt
regulations for disclosure, based on a model. This would allow
the policy holder or beneficiary to determine how to receive the
funds rather than receive a lump sum. This is especially useful
during stressful times.
MS. HALL related that proposed Sections 86 and 87 were deleted.
These sections dealt with insolvencies and loss reimbursement,
and money deposited to the guarantee fund. The industry
expressed concern as to how this would impact Alaska as compared
to other states. Thus, the DOI asked these proposed sections be
deleted from the bill.
3:46:02 PM
MS. HALL referred to the final substantive change is in proposed
Section 62 and 77, which refer to the individual and group rate
filings. She previously discussed the DOI having the ability to
review health insurance rates prior to them being used. The
language has been adjusted to match the file and use language
for other insurance rates. She related that rates must still be
filed and the DOI would have an opportunity to review them.
Rates would go into effect 45 days after filing, if not
disapproved. She stated an effective date of January 1, 2012,
was added to allow insurers time to adopt the changes.
3:47:03 PM
REPRESENTATIVE CHENAULT referred to the "checkbook" issue. He
asked if that provision would only be in effect if the party
knew he/she was the beneficiary and would need to agree to the
one-time payout or another method of payment.
MS. HALL responded that either the policy holder or the
beneficiary would have to agree. The policy holder could
designate the method up front, whereas the beneficiary could
only exercise the option later.
REPRESENTATIVE CHENAULT asked whether beneficiaries could opt
for a lump sum.
MS. HALL answered yes.
CHAIR OLSON removed his objection.
3:48:55 PM
REPRESENTATIVE JOHNSON made a motion to adopt Conceptual
Amendment 1, which read [original punctuation provided]:
AMENDMENT
To: CS HB 64(LC)(27-LS0444\M)
By: Rep. Olson
Page 1, Line 9: Following "corporations," delete "and"
Page 1, Line 9: Following "organizations" delete ";"
and insert ", and alternate forms of payment to policy
holders;"
Page 12, Line 20: Delete "or coverage"
Page 28, Line 28: Delete "3.7 percent on"
Page 38, Line 23: Delete "30" and insert "45"
Page 38, Line 25: Delete "becomes" and insert "may
become"
Page 49, Line 14: Delete "30" and insert "45"
Page 49, Line 15: Delete "becomes" and insert "may
become"
REPRESENTATIVE HOLMES objected for the purpose of discussion.
3:49:31 PM
MS. HALL explained Conceptual Amendment 1. She stated that
Conceptual Amendment 1 would address inconsistencies the DOI
found in HB 164. The first two relate to the title, adding a
reference to proposed Section 93, the retained asset account.
The next 2, page 12 and 28 are technical changes. The changes
on page 38 and page 49 are the two rate filings for consistency
purposes, changing the time to 45 days and changed language,
"become effective" to "may become" effective so insurance
companies can make changes out farther than 45 days to allow an
option so their rates won't automatically become effective.
3:50:48 PM
REPRESENTATIVE JOHNSON asked whether rates ever are reduced and
if 45 days is appropriate.
MS. HALL answered that health insurance rates have not, but some
rates do decrease.
REPRESENTATIVE JOHNSON commented that the rates are not going
down so he wondered, "Why not do it now?"
REPRESENTATIVE HOLMES removed her objection. There being no
further objections, Conceptual Amendment 1 was adopted.
3:52:36 PM
MS. HALL referred to a letter dated March 4, 2011, from the
National Association of Professional Surplus Lines Offices, Ltd.
(NAPSLO) regarding surplus lines. She stated several statements
were made in the letter. She agreed the state is not required
to share the taxes. The state is changing the way in which it
collects taxes on surplus lines coverage. Most of the premise
of the nonadmitted and reinsurance act is that the states will
regulate their own risk, collect the taxes, and allocate those
to the states in which the risk is located. She also referred
to statements about taxing authority being given to an agency.
She responded to that by stating the legislature has already
given taxing authority to the DOI. The DOI levies taxes on
insurance premiums so that is not a new authority being given to
an agency. She pointed out that this is not a "policymaking
power" but authority to participate in a clearinghouse. The
bill specifically states the agreements are solely to allow for
the mutual collection and allocation of premium taxes, which is
more an administering function than policymaking. She said,
"This is not a tax increase. Our policy holders today are taxed
at the premium tax rates of each of the states where they may
have some type of risk located." The DOI is not changing the
tax method. In fact, the DOI's surplus line tax is lower than
most states. The DOI is changing the method and who collects
it, and how it is allocated. The changes to the surplus line
tax in an attempt by the federal government to streamline the
process. The bill would make Alaska statutes conform to the
federal Nonadmitted and Reinsurance Act that will become
effective on July 21, 2011 so the state is not in violation of
federal law, which specifically preempts state statutes. She
said, "This is not something the DOI dreamed up all by itself."
This particular type of legislation to authorize entry into this
type of interstate agreement is pending in 17 states. Another
compact legislation, which is more complicated than this
approach is pending in eight states. Competing legislation is
under discussion in five states. Eleven states are currently
studying the issue. Thus, a number of approaches are being
taken to implement the federal law, she said.
3:56:30 PM
CHAIR OLSON remarked that the proposed committee substitute
would bring the state into compliance.
MS. HALL answered yes.
3:56:50 PM
REPRESENTATIVE JOHNSON referred to the letter in members'
packets that was previously mentioned. He then referred to the
next to the last paragraph, which read: "NAPSLO respectfully
requests that should Alaska wish to determine as a matter of
public policy to share taxes,..." He asked who makes the
determination. He asked whether the DCCED or the legislature
makes that determination. He explained that the NAPSLO is
asking for clarity so their brokers would clearly understand.
He asked whether a system currently exists so that brokers will
understand what is happening.
MS. HALL responded that the proposed CS clearly states the state
will allocate to the states where the risk is located unless the
states have not entered into a mutual agreement. If the other
state has not entered into a mutual agreement, Alaska will keep
the tax, she said. She remarked that she thinks it is fairly
clear. She referred to the proposal that was attached to the
letter. She said the specific provision in HB 164 that pertains
to allocation and allocation formulas was deleted. She was
unsure of how those provisions were interpreted, but this CS
identifies the state will share the taxes back to the state in
which the risk is located, in the same way the taxes are
currently paid directly to those states. The state is not
forfeiting something. The federal law makes states collect 100
percent of the tax. Thus, the state currently collects only the
portion of the risk taken in Alaska, which is the only portion
that is taxed. With the changes in federal law the state is
required to tax 100 percent of the policy for someone whose home
state is Alaska. She offered her belief that there would not be
significant multi-state risks. Under federal law, the state
would collect 100 percent and allocate back the amount paid in
the individual state.
REPRESENTATIVE JOHNSON asked whether she was comfortable that
brokers and policyholders can clearly understand these
provisions and changes in the CS.
MS. HALL answered yes, she is very comfortable with the clarity
in this bill.
3:59:51 PM
CHAIR OLSON added that Nonadmitted and Reinsurance Reform Act
(NRRA) has been in every trade publication for the past few
months and has been reviewed in a number of ways. The vehicle
that appears to have the most support is the manner in which the
DOI is addressing the NRRA.
4:00:24 PM
REPRESENTATIVE CHENAULT stated he was looking for the fiscal
note, which he thought would be a positive fiscal note. He
asked for clarification on the amount of money that is collected
on behalf of other states.
MS. HALL responded that Alaska does not currently collect for
other states, just Alaska's taxes. Thus, Alaska is not
collecting for others.
REPRESENTATIVE CHENAULT recalled that Alaska would collect 100
percent.
MS. HALL agreed that Alaska would collect 100 percent and then
allocate the taxes back to the states. In further response to
Representative Chenault, she explained that the broker or the
clearinghouse proposed in HB 188 would be tasked with making the
allocation.
4:01:54 PM
CHAIR OLSON commented the allocation would only apply to states
outside of Alaska. He asked Ms. Hall to hazard a guess as to
the percentage collected.
MS. HALL responded that the DOI collects approximately
$50,000,000 in premium tax, with approximately $3,000,000 as
surplus lines premium tax. The DOI's tax auditor estimates,
given that the DOI does not collect statistics, approximately
$500,000 is multi-states risks. She concluded that $500,000 of
$50,000,000 is a pretty nominal amount.
4:02:49 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 164.
4:04:11 PM
REPRESENTATIVE JOHNSON moved proposed CSHB 164, labeled 27-
LS0444\M, Bailey, 3/4/11, as amended, with a zero fiscal note.
There being no objection, CSHB 164(L&C) was reported from the
House Labor and Commerce Standing Committee.
4:04:37 PM
The committee took an at-ease from 4:04 p.m. to 4:07 p.m.
HB 155-PUBLIC CONSTRUCTION CONTRACTS
4:04:37 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 155, "An Act relating to public construction
contracts."
4:08:03 PM
REPRESENTATIVE JOHNSON made a motion to adopt Amendment 1,
labeled 27-LS0249\B.3, Bannister, 2/22/11, which read as
follows:
Page 1, line 5:
Delete "$75,000"
Insert "$50,000"
Page 4, lines 8 - 9:
Delete ", except for a school district of a
municipality or a regional educational attendance
area"
REPRESENTATIVE HOLMES objected for purpose of discussion.
4:08:44 PM
JENNIFER SENETTE, Staff, Representative Kurt Olson, Alaska State
Legislature, stated that Amendment 1 would reduce the threshold
from $75,000 to $50,000. The second change is in proposed
Section 8, on page 4, lines 8-deleting except for a school
district. Initially, the draft inadvertently exempted school
districts, but it was not the sponsor's intent to exempt school
districts. Thus, Amendment 1 will correct that error and brings
school districts under the umbrella so they are subject to the
provisions of the bill, including the proposed $50,000 cap.
REPRESENTATIVE HOLMES removed her objection.
There being no further objection, Amendment 1, was adopted.
4:10:26 PM
MAX MIELKE, Business Manager, Plumbers & Pipefitters Local 262,
stated that he is a 56 year Juneau resident. He said he is the
Business Manager for the Plumbers and Pipefitters with about 100
members. He stated that he strongly oppose HB 155. He related
that in the 80s and early 90s members had a tough time. He said
that at times a plumber might be laid off for several months and
small contracts helped members survive. He said this is not a
union versus non-union issue. He also said he was glad to see
the amendment added for the school districts. He characterized
the bill as a form of right to work legislation and "is a start
to the race to the bottom."
4:13:03 PM
REPRESENTATIVE MILLER asked whether there was any figure his
organization would feel comfortable with given that the Little
Davis-Bacon applies to contracts over $2,000.
MR. MIELKE answered that several carpenters are working in the
union hall on small projects, probably under $12,000. He stated
that during his career the small projects kept members going.
He expressed concern on the limit.
4:14:28 PM
CHAIR OLSON clarified that the $2,000 figure was set in 1935 and
has not been adjusted since then. He recalled that if the
figure was adjusted for inflation the amount would be about
$32,000.
MR. MIELKE offered that construction work has not changed that
much. He maintained members' work for small projects provides
the "bread and butter" for contractors.
4:15:13 PM
MATHEW MIELKE stated he grew up in Juneau. He said his father
worked in the construction industry but has also worked in the
industry. He agreed with his father's testimony. He further
said small jobs have made a difference to him. He offered his
belief that he often would not have been able to "put food on my
own table if it wasn't for a $5,000 job that my boss got." He
was unsure how low the minimum limit for Little Davis-Bacon
would affect him. He feared he would be unemployed, drawing
unemployment, and someone from out of state would be awarded the
bid on a job. He expressed concern that raising the contract
limit from $2,000 to $75,000 before the Little Davis-Bacon Act
(LDBA) would apply would attract Lower 48 contractors who will
low bid contracts, perform subpar work, and leave. He said,
"They don't really care if they get a bad reputation for it."
The current requirement for LDBA allows local trained and
skilled workers to work on construction jobs. The workers do
good jobs, maintain their reputations, and are proud of the work
they perform in the communities in which they live. He stressed
that this is very important to him. He concluded by saying, "I
look around the room and I don't really fit in here..."
CHAIR OLSON commented that everyone fits in this room. He
remarked that at least one person sitting at the table has
employed union and non-union people.
REPRESENTATIVE CHENAULT agreed.
4:17:37 PM
JON SMITH, Member, Carpenters Local 2247, stated that he was
raised in Dillingham and has lived in Juneau the past 11 years.
He spoke in opposition to HB 155. He shared some quotes he
found. He read, "The proponents of prevailing wage legislation
wanted to prevent government from using its purchasing power to
undermine wages of its citizens. It is believed that government
should set an example by paying the wages prevailing in a
locality for each occupant hired to government contracts and
building code projects." He said that rings true to him since
it sets an example by paying the prevailing wage of the area as
the standard. He related that it is not inexpensive to live in
Alaska. It is especially expensive to live in rural Alaska. He
grew up working construction and liked working the Little Davis-
Bacon jobs because he knew what he'd be paid. It said it was
important to him growing up and working in the construction
industry. He read, "The purpose of the Davis-Bacon Act is to
protect its employees and government contractors from
substandard wages and to promote the hiring of local labor
rather than the cheap labor from distant places." He
characterized the Little Davis-Bacon Act (LDBA) as the "level
playing field." He further related that when out of state
contractors come to Alaska on a Title 36 project, they are aware
of the specific labor costs, whether the labor is union or
nonunion labor. Removing the requirement for Little Davis-Bacon
means an out of state contractor will bring in his own crew and
pay whatever wage he wants to pay. He offered his belief that
most Alaskans cannot afford to work for less. The standard of
living is less in the Lower 48 so the wages are less. In
closing, he said the cost of a $50,000 is just that, but the
Department of Labor & Workforce Development (DLWD) will have a
certified payroll, and wages are set. He said if this bill
passes the same project will cost $50,000, but the DLWD will not
have a certified payroll, and the employees would not be
guaranteed a good wage. The contractor will still bill out
$50,000 but the workers could be set at the minimum wage.
4:21:09 PM
MARVIN YODER, Deputy Administrator, City of Wasilla, asked to
speak in support of HB 155. He recalled prior testimony. He
offered his belief that this bill would affect mostly state and
local government. He reviewed the Governor's proposed budget
and very few projects for his community are listed under
$100,000. He predicted the percentage of people affected would
be low. He acknowledged that an out of state contractor might
mobilize for a $50,000 contract in Anchorage or Fairbanks, but
he did not think it was likely contractors would bid on projects
in Fort Yukon for the same cost. He related he has frequently
worked in bush Alaska on small projects. He pointed out that it
is not just the wages people are concerned about but the
paperwork required. He said it should be good for the small
rural communities to bid on the small projects. He concluded
that this is not a big change, considering it represents 70
years of inflation. It makes it much easier for municipal or
state government to have this threshold and efficiency.
4:23:43 PM
SHANE LINSEY expressed his concern with the language in HB 155.
He asked, "If it's not broke why fix it?" The state has done
well with its finances and has about a $12 billion surplus. He
offered his belief that this bill would not benefit the state,
but would allow lower wages to be paid while lowering the
quality of work. He said, "As the saying goes, you get what you
pay for, and this Davis-Bacon allows an even playing field for
all the contractors when they are bidding on these contracts."
He stated his opposition to HB 155.
4:24:39 PM
LORI DAVEY, Member, Board of Supervisors, South Goldenview Rural
Road Service Area, stated that her rural road service area is
17.5 miles off the Rabbit Creek and Goldenview area of Anchorage
hillside. She offered the South Goldenview Rural Road Service
Area's support for HB 155. She stated her fellow board member,
Robert Johnson, is also with her today. She related the
struggle the road service area has had grappling with
requirements on any project of $2,000 or more when the Little
Davis-Bacon Act (LDBA) "kicks in." She related that $2,000 of
materials is a very low threshold for road improvement projects.
A culvert replacement or pothole material can easily go over
$2,000 and trigger the Davis-Bacon rates, she said. She further
related that the Little Davis-Bacon provisions significantly
raise the cost of any roadwork. The rate has been in place
without any adjustment since 1935, that even the basic rate of
inflation would raise the rate to $32,000, using an average
inflation rate of 3.78 percent. She stated that Little Davis-
Bacon wages are much greater than the prevailing wage. She said
that her road service area pays almost double wages. It
adversely impacts residents since they cannot fix as many roads.
These funds directly impact property taxes. She explained the
residents pay 1.8 mils per hundred thousand dollar valuation on
their homes. These are not just big companies affected by the
Little Davis-Bacon provisions, but homeowners. The increased
threshold and more clearly defining the different between
maintenance and construction, residents will be able to maintain
and improve our roads more cost effectively. The basic buying
power with inflation corrections will double and more roads will
be able to be improved. She urged members to pass HB 155 to
better utilize public monies, create efficiencies, and
accomplish more road work.
4:26:49 PM
NANCY M. PETERSON, Public Works Director, City of Unalaska,
stated her strong support for HB 155. She stated that she is a
manager of rural public construction projects and supports
raising the threshold for the application of the Little Davis-
Bacon Act. She related that many small projects have increased
in cost to the point the projects are no longer viable and do
not get built due to the wage requirement. She also has worked
with small contractors who chose not to bid on projects due to
the added reporting requirements for the jobs. She has served
on the Alaska Municipal League (AML) public works and
infrastructure legislative subcommittee for the past eight
years. She has listened to small communities and villages
discuss projects that were lost due to the extra wage costs
required. These communities have limited resources. When
project costs increase from $15,000 to $20,000 can affect
whether the project is feasible. Many of the rural projects are
"quality of life projects" rather than the projects driven by
life safety issues. These projects are good projects but cannot
be justified when costs escalate. She recalled testimony from a
prior hearing in which one speaker mentioned the small number of
projects this bill would affect based on the number of state
projects under $75,000 in its database. She asked members to
also consider all the projects that were not built because the
cost of the project increased so communities could no longer
support them. She offered her belief that HB 155 would create
new opportunities for all of Alaska's communities. She strongly
urged members to pass HB 155.
4:29:24 PM
SHIRLEY MARQUARDT, Mayor, City of Unalaska; Vice President,
Alaska Municipal League (AML), offered her strong support for HB
155. She stated that AML is on record with its resolution of
support for the bill including the $50,000 threshold. She
explained at the last AML membership meeting, its membership
voted to increase the threshold for Little Davis-Bacon wages
from $2,000 to $50,000 on public construction projects and an
exclusion for maintenance contracts be added. She said she
thinks this is a reasonable and responsible adjustment after 76
years of the status quo for the wage threshold while the
construction and maintenance costs have maintained a steady
increase. With a long overdue adjustment and the exclusion of
maintenance contracts, the legislature will provide
opportunities to municipalities that currently forego projects
or maintenance due to the cost. She said that this is a
significantly positive change for all communities in rural
Alaska. Jobs and updated infrastructure as smaller projects
become a reality provide a "win-win" with the passage of HB 155,
she also said.
4:30:53 PM
BRET HELMS, Training Director, United Association of Plumbers
and Pipefitters, Local 375, stated his opposition to
modifications to Little Davis-Bacon proposed in HB 155. The
proposal to raise the threshold limit for construction contracts
will not necessarily lower construction costs but may increase
the number of out of state employers who bid on construction
projects. Currently, employers are required to pay Little
Davis-Bacon journeyman prevailing wages unless the employer has
a federally registered apprenticeship program. He predicted
that if HB 155 is passed, employers will not be required to have
a registered apprenticeship program and wages will be subjective
to the employer. He expressed concern that apprentices trained
in programs will not have the opportunity to work on these
projects. These are good jobs and jobs that allow Alaskan men
and women to support their communities, raise families, and
remain in Alaska. He feared they may be replaced by a cheap
nonresident, low skilled work force brought in from the Lower
48. He concluded by stating this proposal would diminish wages
and would also lower the standard of living across Alaska, in
communities that are already suffering in the depressed economy.
He thanked members for listening to his comments.
4:32:21 PM
ZEBULON WOODMAN, Member, Laborers Local 942, said he has lived
in Alaska his entire life. He said, "Leave this law alone." He
offered his belief that exempting the Little Davis-Bacon Act
(LDBA) from jobs up to $50,000 would have affected hundreds of
projects last year. With many projects being awarded to
nonunion contractors, this proposal attacks wages for many
nonunion workers who do not have an advocate. The Little Davis-
Bacon wages provide a level playing field for all bidding
contractors. It helps to ensure a quality wage and is not "a
race to the bottom by contractors who are willing to pay workers
less." This bill would take dollars away from the worker to
allow municipalities to obtain more work for less money. No one
suggested taking "a dime from a contractor or limiting rental
rates on equipment, or limit the profit on the sale of
material." He related he heard considerable discussion on the
onerous paperwork, which was too much for the contractor. He
said, "If we take money out of the workers pocket it will make
life better for the contractor." He expressed concern for the
working family. He said that raising the threshold may not
reduce the cost of bids, since contractors may "pocket more
money" while workers are paid less. He urged members to oppose
HB 155.
4:34:07 PM
JEAN TRAINOR, Member, Alaska Public Employees Association
(APEA), stated she is speaking as an APEA member and also as a
long-term nonunion and union worker in Alaska. She stated she
has lived in Alaska for over 35 years. She urged members to
oppose HB 155. She characterized HB 155 as "a race to the
bottom." She said she has repeatedly heard stories about low
paid workers from the Lower 48 taking Alaskan dollars and
sending outside, which does not help Alaska's communities. She
suggested supporting our communities is accomplished by paying a
fair wage to Alaskans. She said she is especially bothered by
Lower 48 workers driving down wages. She suggested that 1,400
projects were in the $2,000 to $50,000 range. Small "bread and
butter" projects provide wages that bridge the big projects for
workers. Alaska has a boom and bust economy. There are times
when fair wages paid under Little Davis-Bacon projects provide
income that helps see the families through the leaner times.
4:36:31 PM
REPRESENTATIVE THOMPSON asked whether she lived in a road
service area.
MS. TRAINOR answered yes. In response to Representative
Thompson, she said even though she lives in a road service area
in the Goldstream Valley, she still supports HB 155.
REPRESENTATIVE THOMPSON pointed out that Little Davis-Bacon has
the potential to double road service area fees added to her
property taxes.
MR. TRAINOR emphasized she is fully supportive to have the
people grading her road obtain a fair wage.
4:37:43 PM
JIM LAITI, Business Representative, Plumbers and Pipefitters
Local 375, stated he is a lifelong Alaskan. He has worked in
the construction industry since the 1970s. He related that the
work is seasonal and cyclical. He recalled years in which he
worked for eight or so contractors. He worked on day, week, or
monthly jobs, all of which help support local contractors who
must maintain their facility and staff. Additionally, he and
his friends must also maintain their homes during the winter
months as compared to those who live in the Lower 48 and just
work during the construction season. He asked members not to
advance HB 155, which will negatively impact Alaskan workers as
well as contractors. He stated that using a skilled highly
trained worker can make all the difference on a renovation
project or maintenance project in terms of the overall cost over
time.
4:40:20 PM
JASON ALWARD, Business Agent, International Union of Operating
Engineers Local 302, stated that he is a lifelong Alaskan. He
is speaking on behalf of himself. He asked whether a problem
exists in terms of the very old statute pertaining to
construction contracts over $2,000 should be covered under
prevailing wages. He offered his belief that a problem does not
exist with the status quo. Seven or eight states currently have
lower threshold on contracts. This ensures that Alaska Hire is
a priority. He offered his belief that using the Little Davis-
Bacon will "level the playing field" for contractors by
eliminating employers from the ability to "get jobs on the backs
of their employees." He stated that raising the threshold does
not guarantee jobs will cost less. It only guarantees that
workers paid less and even more importantly, the worker may not
be an Alaskan worker. He characterized this bill as a "race to
bottom" which he did not believe is necessary at a time when the
state has $12 billion in surplus funds. He concluded by stating
that diminished wages for Alaskans for mostly seasonal
occupations is not the answer. He said, "I oppose HB 155.
Thank you."
4:42:27 PM
RON AXTELL, Representative, Laborers Union Local 942, stated
that he helps represent over 2,000 Alaskan union laborers in
Southcentral Alaska. He also speaks for small business workers
who are entitled to earning a living wage. He asked how to
stretch workers and improve Alaska when this bill has the
potential to move Alaska backwards. He offered his belief that
by raising the threshold on paying the prevailing wage for
projects it also would lower the standard of many workers who
count on prevailing wage work. He stated that if the wage is
inadequate it is possible jobs will not be available. He
related that a higher ceiling makes it more likely outside
bidders will bid successfully on jobs. There is no guarantee
these contractors will hire Alaskans. The state subsidizes
programs. He asked whether paying less will result in
subsidizing more programs. He urged members not to change the
current limit.
4:44:10 PM
KEITH MONTGOMERY, Business Representative, Carpenters Local
1281, stated he is a 28 year resident of Alaska. He said he is
glad to see the amendment to the bill was adopted. He offered
his belief that HB 155 does not provide a mechanism to develop
the workforce or the standards set forth in prevailing wage
jobs.
4:45:38 PM
JOHN GARRETT, Member, Sheet Metal Workers Local 23, stated he is
an 18 year Alaskan. He spoke in opposition to HB 155. He
recalled prior testimony and commented with respect to raising
thresholds. He said that jobs can be divided into phases. A
person could have large jobs divided into many phases, which is
just one way to game the system. He agreed with the comments
that this bill is a "race to the bottom." He thought it might
lead to the situation in which people cannot afford to live in
the state. He reminded members that health care and utility
costs have increased exponentially. He said, "This is not a
union or nonunion issue. This is a worker issue." He did not
understand why the burden is placed on the worker. He
understood that costs need to be considered but this is not the
way to do it. He thought the approach attacked workers.
4:47:28 PM
BRONSON FRYE, Member, Painters and Allied Trades Union, Local
1959, stated that he is a lifelong Alaskan and is a journeyman
drywall, finisher, and painter by trade. He has worked union
and nonunion jobs. He currently represents painters, drywall
finishers, floor coverers, and glaziers. He has been in
commercial construction for ten years. The Davis-Bacon or
prevailing wage jobs provide the financial lifeblood for many
construction workers in Alaska. He said he bases this on his
experience and comments by many others in the construction
industry. He emphasized that this is not a union versus
nonunion issue. The wages paid to union and nonunion workers on
Davis-Bacon projects promotes the growth of the middle class and
boosts the state's overall economy. Since the state has a $12
billion surplus, it would be a travesty to pass a bill that
would devastate the income of thousands of construction workers
in Alaska. He explained that "race to the bottom" has a real
and tangible meaning. When a contractor bids on a project, the
three main variables in construction are material cost,
overhead, and labor cost. Of those, the material cost and
overhead are approximately the same, but the labor cost is the
only real variable. Construction contracts are awarded to the
lowest bidder. Having a standard, such as Little Davis-Bacon
helps the worker. It also ensures the construction contract is
awarded to a responsible contractor and is not a "race to the
bottom." He urged members to please oppose HB 155.
4:50:58 PM
LARRY BELL, Representative, International Brotherhood of
Electrical Workers (IBEW) Local 1547, stated he has three kids
and is a second generation Alaskan. He is a resident of
Wasilla. He represents almost 8,000 active and retired members
of the IBEW. He stated his opposition to HB 155. He said that
this bill is not good as a measure of the "floor" wage for
Alaskans. It is not good for local hire. It is not good for
seasonal workers in Alaska. It is not good for the quality or
ensuring quality of construction on state-funded projects. He
implored members to leave this bill alone. He offered his
belief that HB 155 ensures employment on public funded jobs will
focus on efficiency and the ability to do the job right and
effectively.
4:52:01 PM
SHAWN CROSS, Apprentice, International Brotherhood of Electrical
Workers (IBEW) Local 1547, stated that he was testifying in
support of his local union. He asked committee members to
oppose HB 155.
[HB 155 was held over.]
4:53:13 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:53 P.M.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB87 Supporting Documents - Civil Penalties Other States.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 87 |
| HB164 Draft Amendment to CS ver M.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 164 |
| HB164 Draft Proposed CS ver M.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 164 |
| HB164 Sectional Analysis ver M.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 164 |
| HB164 Opposing Documents - Letter NAPSLO 3-4-2011.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 164 |
| HB155 Opposing Documents - Email Steve Hennessey 3-4-2011.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 155 |
| HB155 Opposing Documents - Fax Zeb Woodman 3-1-2011.pdf |
HL&C 3/7/2011 3:15:00 PM SFIN 4/17/2011 10:00:00 AM |
HB 155 |
| HB155 Supporting Documents - Fax City of Wasilla 3-1-2011.pdf |
HL&C 3/7/2011 3:15:00 PM |
HB 155 |