Legislature(1995 - 1996)
02/07/1996 03:13 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE February 7, 1996 3:13 p.m. MEMBERS PRESENT Representative Pete Kott, Chairman Representative Norman Rokeberg, Vice Chairman Representative Beverly Masek Representative Jerry Sanders Representative Kim Elton Representative Gene Kubina MEMBERS ABSENT Representative Brian Porter COMMITTEE CALENDAR SENATE BILL NO. 131 "An Act relating to investments by fiduciaries." - PASSED OUT OF COMMITTEE *HOUSE BILL NO. 414 "An Act requiring conciliation panel review in a civil action against an architect, engineer, or land surveyor; and providing for an effective date." - HEARD AND HELD *HOUSE BILL NO. 435 "An Act relating to employment contributions and to making the state training and employment program a permanent state program; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 346 "An Act relating to regulation of telecommunications utilities." - SCHEDULED BUT NOT HEARD HOUSE BILL NO. 311 "An Act repealing the limitation on the hours a person may be employed in a mine; and making a related technical amendment to avoid changing the penalties for failing to make payments into an employee benefit fund." - SCHEDULED BUT NOT HEARD (*First public hearing) PREVIOUS ACTION BILL: SB 131 SHORT TITLE: INVESTMENTS BY FIDUCIARIES SPONSOR(S): LABOR & COMMERCE JRN-DATE JRN-PG ACTION 03/15/95 618 (S) READ THE FIRST TIME - REFERRAL(S) 03/15/95 618 (S) L&C, FIN 03/21/95 (S) L&C AT 01:30 PM FAHRENKAMP RM 203 03/21/95 (S) MINUTE(L&C) 03/22/95 746 (S) L&C RPT 1DP 4NR 03/22/95 746 (S) ZERO FISCAL NOTE (DCED) 04/11/95 (S) FIN AT 09:00 AM SENATE FINANCE 532 04/11/95 (S) FIN AT 02:30 PM SENATE FINANCE 532 04/12/95 (S) FIN AT 09:00 AM SENATE FINANCE 532 04/12/95 (S) FIN AT 02:30 PM SENATE FINANCE 532 04/13/95 (S) FIN AT 09:00 AM SENATE FINANCE 532 04/13/95 (S) FIN AT 02:30 PM SENATE FINANCE 532 04/19/95 (S) FIN AT 09:00 AM SENATE FINANCE 532 04/21/95 1137 (S) FIN RPT 1DP 5NR 04/21/95 1137 (S) PREVIOUS ZERO FN (DCED) 04/21/95 (S) MINUTE(FIN) 04/22/95 (S) RLS AT 02:30 PM FAHRENKAMP ROOM 203 04/22/95 (S) MINUTE(RLS) 04/26/95 1252 (S) RULES TO CALENDAR 4/26/96 04/26/95 1253 (S) READ THE SECOND TIME 04/26/95 1254 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/26/95 1254 (S) READ THE THIRD TIME SB 131 04/26/95 1254 (S) PASSED Y20 N- 04/26/95 1260 (S) TRANSMITTED TO (H) 04/27/95 1566 (H) READ THE FIRST TIME - REFERRAL(S) 04/27/95 1566 (H) LABOR & COMMERCE, FINANCE 01/31/96 (H) L&C AT 03:00 PM CAPITOL 17 01/31/96 (H) MINUTE(L&C) 02/07/96 (H) L&C AT 03:00 PM CAPITOL 17 BILL: HB 414 SHORT TITLE: MANDATORY MEDIATION/DESIGN PROF LAWSUITS SPONSOR(S): REPRESENTATIVE(S) GREEN JRN-DATE JRN-PG ACTION 01/12/96 2428 (H) READ THE FIRST TIME - REFERRAL(S) 01/12/96 2429 (H) LABOR & COMMERCE, JUDICIARY 01/29/96 (H) L&C AT 03:00 PM CAPITOL 17 01/29/96 (H) MINUTE(L&C) 01/31/96 (H) L&C AT 03:00 PM CAPITOL 17 01/31/96 (H) MINUTE(L&C) 02/07/96 (H) L&C AT 03:00 PM CAPITOL 17 BILL: HB 435 SHORT TITLE: STATE TRAINING & EMPLOYMENT PROGRAM SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 01/19/96 2488 (H) READ THE FIRST TIME - REFERRAL(S) 01/19/96 2488 (H) LABOR & COMMERCE, HES, STA, FINANCE 01/19/96 2488 (H) 3 FISCAL NOTES (2-DCRA, LABOR) 01/19/96 2488 (H) GOVERNOR'S TRANSMITTAL LETTER 02/07/96 (H) L&C AT 03:00 PM CAPITOL 17 WITNESS REGISTER WILLIS KIRKPATRICK, Director Division of Banking, Securities and Corporations Department of Commerce and Economic Development P.O. Box 110807 Juneau, Alaska 99811-0907 Telephone: (907) 465-2521 POSITION STATEMENT: Commented on SB 131. VERN SAYLES, Executive Vice President and Manager Key Trust Company of Alaska; Alaska Bankers Association P.O. Box 100910 Anchorage, Alaska 99501 Telephone: (907) 564-0403 POSITION STATEMENT: Testified on SB 131. JEFF LOGAN, Legislative Staff to Representative Joe Green Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-6547 POSITION STATEMENT: Gave sponsor statement for HB 414. REPRESENTATIVE JOE GREEN Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-6547 POSITION STATEMENT: Answered questions on HB 414. RUSS WINNER, Attorney 900 West Fifth Avenue, Number 700 Anchorage, Alaska 99501 Telephone: (907) 277-9522 POSITION STATEMENT: Testified on HB 414. COLLIN MAYNARD, Chair Legislative Liaison Committee Alaska Public Design Council 1400 West Benson, Number 500 Anchorage, Alaska 99517 Telephone: (907) 274-3660 POSITION STATEMENT: Testified in support of HB 414. TERESA WILLIAMS, Assistant Attorney General Fair Business Practices Section Civil Division Department of Law 1031 West 4th Avenue, Suite 200 Anchorage, Alaska 99501-1194 Telephone: (907) 269-5100 POSITION STATEMENT: Testified on HB 414. MIKE TAURIAINEN 35186 Spur Highway Soldotna, Alaska 99669 Telephone: (907) 262-4624 POSITION STATEMENT: Testified in favor of the concept of HB 414. CATHERINE REARDON, Director Central Office Division of Occupational Licensing P.O. Box 110806 Juneau, Alaska 99811 Telephone: (907) 465-2538 POSITION STATEMENT: Answered questions on HB 414. SHARON MACKLIN, Lobbyist Alaska Professional Design Council 315 Fifth Street, Number 8 Juneau, Alaska 99801 Telephone: (907) 586-9518 POSITION STATEMENT: Testified on HB 414. DAVID DEAN 500 First Avenue, Suite 3 Fairbanks, Alaska 99701 Telephone: (907) 456-5189 POSITION STATEMENT: Testified in support of HB 435. REBECCA NANCE, Director Central Office Division of Employment Security Department of Labor P.O. Box 25509 Juneau, Alaska 99802-5509 POSITION STATEMENT: Testified in support of HB 435. ACTION NARRATIVE TAPE 96-6, SIDE A Number 001 The House Labor and Commerce Standing Committee was called to order by Chairman Pete Kott at 3:13 p.m. Members present at the call to order were Representatives Kott, Masek, Elton, Sanders and Kubina. Representatives Porter and Rokeberg were absent. SB 131 - INVESTMENTS BY FIDUCIARIES Number 025 CHAIRMAN PETE KOTT announced the first order of business would be SB 131, "An Act relating to investments by fiduciaries." He asked if there was anybody present from the Senate Labor and Commerce Committee to present the bill. Chairman Kott didn't get a response to his question. He noted there is a sponsor statement in each of the committee member's file. Chairman Kott asked Mr. Kirkpatrick to come forward and give his perspective on SB 131. Number 240 WILLIS KIRKPATRICK, Director, Division of Banking, Securities and Corporations, Department of Commerce and Economic Development, explained SB 131 has been considered in prior years and may have been included in the Eighteenth Legislature. He said the bill would assist trust companies operating in Alaska, specifically the larger trust companies, by giving them a little more latitude to do their business with affiliates outside the state. It also provides for an investment that is called an investment of the trust companies called proprietary investment of the press company's parents or affiliates that may be used in a common trust situation. Mr. Kirkpatrick said SB 131 is almost verbatim of a Washington State law. He informed the committee that over the past couple of years, he has been in contact with Washington's trust company concerning this type of legislation and how they administer it in that state. They have informed him they have had no particular problems with this bill. They very closely examine the trust company's activities. He said in Alaska, they examine the only trust company which is Key Trust of Alaska. It is over two billion in size and is a substantial company. Mr. Kirkpatrick said he would be happy to answer questions. Number 396 CHAIRMAN KOTT asked if the bill would permit trust funds to be invested in mutual funds. MR. KIRKPATRICK said it would, but it's defined as to what the mutual fund can have as its portfolio which are governments or better. So a bank's proprietary fund investment, which may be an investment company registered under the 1940 Securities and Exchange Commission Act, which is commonly known as a mutual fund, has as its portfolio specific defined investments. In that connotation, under SB 131, those investments of that mutual fund or that investment company would have to meet certain investment criteria. That is what is generally called governments or better. The common trust would probably be made up of those things that are extremely liquid and risk free. REPRESENTATIVE NORMAN ROKEBERG referred to Mr. Kirkpatrick saying that there was only one trust company in Alaska and asked if this would affect the trust departments of national charter banks in the state of Alaska. MR. KIRKPATRICK clarified there is one trust company in Alaska under his regulation. He answered in the affirmative to the question. Number 545 VERN SAYLES, Executive Vice President and Manager Key Trust Company of Alaska, said he was would testify on behalf of the Alaska Bankers Association via teleconference from Anchorage. The following is Mr. Sayles testimony: "As Mr. Kirkpatrick has outlined the purpose of the bill is really twofold to provide, in our minds, more investment opportunities for the Alaska consumer. We feel that these opportunities will include a better opportunity for diversification of the consumer's portfolios, to provide lower costs, also by doing that it will lower the potential risk of the individual investor, provides for better (indisc.). We feel the bill addresses this opportunity in two ways. One is to expand the current state statutes in reference to common funds to include the word `affiliate,' and second, to add specific language for the use of mutual funds. Most of us, I believe, are familiar with mutual funds in the concept of basically investing pools of money that have been accepted and created from individuals and institutional investors. These types of investments are normally sold across state lines, subject to federal regulation. "Common funds, on the other hand, are not always available across state lines unless specific reference to affiliates are included. By incorporating that reference, it would be able then to offer to our customers here in the state of Alaska those types of investments that are now being offered in states such as Washington, Oregon, specifically Utah and the West. We feel these changes will definitely enhance the ability of the consumer to receive a good investment product. At this point in time, I would certainly entertain any question that you may have as well." Number 689 REPRESENTATIVE ROKEBERG referred to trust departments of banks and said in terms of their investments for their clients, they cannot invest in mutual funds presently. MR. SAYLES said there is no specific reference in the state statutes that allows for it. It doesn't disallow for it obviously, but they feel it would be a necessary addition to the statute to specifically include that as a reference. Number 780 REPRESENTATIVE JERRY SANDERS asked Mr. Sayles if he or any of the banks currently invest in any other instruments, other than mutual funds, that aren't specifically in the statute. MR. SAYLES responded that he isn't aware of any. The statute is fairly general but it usually refers to individual stocks, bonds, those types of real estate investments. He noted that most of the investments in the state that he is familiar with would certainly fall in those categories as do the mutual funds. It is a matter that those funds are not clearly defined. The underlying investments with the pools within the pools would probably meet the state statute requirements. The statute allows for investment in common stocks, but not specifically the fund approach. Representative Sanders asked that if this is put into statute, it wouldn't in any way make the state of Alaska responsible for any problems that may occur. MR. SAYLES said, "Absolutely not." Number 878 There being no further testimony, REPRESENTATIVE KIM ELTON made a motion to move SB 131 out of committee with the attached zero fiscal note and individual recommendations. Hearing no objection, SB 131 moved out of the House Labor and Commerce Committee. HB 414 - MANDATORY MEDIATION/DESIGN PROF LAWSUITS Number 1124 CHAIRMAN KOTT announced the next order of business would be HB 414, "An Act requiring conciliation panel review in a civil action against an architect, engineer, or land surveyor; and providing for an effective date." JEFF LOGAN, Legislative Staff to Representative Joe Green, Alaska State Legislature, came forward to give the sponsor statement. He read his statement into the record: "The bill before you establishes a dispute mediation process for claims against design professionals. The goal of the new process is to determine if a claim has merit, and if so, to facilitate a settlement, before going to court. The goal of the bill is to keep these cases out of the court system. "Under the terms of the bill, the Department of Commerce will impanel a three-member volunteer, but compensated board to review the claim. Following an informal hearing the board will issue a written finding of liability, or `certificate of merit' that can be used in the settlement process. The cost of the proceedings is borne by the parties. Either party can settle at any stage of the process. "Similar Legislation has been enacted in Arizona, California, Colorado, Georgia, Hawaii, Kansas and New Jersey. And it has been successful. "A study to determine the effectiveness of a similar law in California has found that fewer lawsuits are filed, and more malpractice suits are settled before they reach the jury. So, again, the point of the bill is to keep these cases out of court. "The bill is an attempt to keep frivolous lawsuits out of the court system. In several other states, the mediation process has provided a low-cost alternative to litigation and we believe it can work here in Alaska as well." MR. LOGAN said he would like to review the bill. CHAIRMAN KOTT noted there is a proposed committee substitute (CS), Version K. Number 1249 REPRESENTATIVE GENE KUBINA moved to adopt the proposed CSHB 414(L&C), Version K, 2/6/96. Hearing no objection, it was so ordered. MR. LOGAN explained the reason Version K is before the committee instead of the original bill is because he has been working with the court system and the design professionals. They have been working with trial attorneys. He said he thinks Version K is a better "mouse trap." MR. LOGAN referred to Section 2 and said the bill really starts there. On line 9, a person who has a claim against the design professional shall file claim. On page 2, line 18, Section 710, it says, "The claimant shall set out facts upon which the claim is based,". Mr. Logan said in order to file, you first go the department and put in writing what your claim is against the design professional. He said within 10 days after receiving the claim, the department notices the design professional. Then at least 10 but not more than 20 days from that date the design professional responds. Mr. Logan noted the committee members have a flow chart in their files to show the flow, in the initial stages, to get up to the panel of how the bill works. In order to file a claim, you must put down a $750 deposit. When the design professional responds to the claim, he or she also submits $750. The $1,500 is the seed money to start the preceding. MR. LOGAN referred to page 3, line 5, and said not more than 15 days after the date of receiving the response, the department forms a panel. The panel is made up of 20 attorneys in which you only pick one, 20 design professionals which you pick one, and a professional mediator. The department picks a chairman. Panel members are compensated at $300 per claim, plus per diem and travel. He noted it is the same per diem and travel authorized for other state employees. The Department of Commerce, along with keeping the lists, supplies the office and meeting space, the office equipment and office supplies for the panel. The department's only involvement is to keep a list of people, which they have a lot of those people anyway, and then to supply a place to meet. He noted there are conference rooms in Anchorage, Juneau and the Frontier Building in Fairbanks. Number 1414 MR. LOGAN referred to page 4, line 2, and said within five business days after the panel if formed, the panel gives notice of the meeting by certified mail. At this point Mr. Logan said, "So we've got the claim, we've got the response by the design professional, the department has put together three people to hear the claim and those three people are now sending out notices telling everybody there is going to be a hearing. That hearing is going to be at least 15, but not more than 30 days. There is a couple of weeks to put everything together." MR. LOGAN referred to line 12 of page 4, and said that is the first outlet valve. He read, "At any time, by mutual consent of the parties involved, the department, before the appointment of the chair, or the chair after the chair's appointment, may terminate the proceedings and the claimant may proceed in the appropriate court." Mr. Logan said if they get this far and they decide this thing just isn't working, everybody can throw their hands in the air and the claimant proceeds to court. He noted he doesn't claim it is fool proof, but it is an improvement. MR. LOGAN stated the hearings are not open to the public. He referred to page 4, line 15, "A person, other than the panel, witnesses, consultants called by the panel, and the persons listed in AS 09.55.740, may not be present at a panel hearing..." Mr. Logan referred to line 20 and said the panel shall be informal. He continued to read from the bill, "The panel may designate who, among the parties, shall have the burden of going forward with the evidence..." Mr. Logan said the panel is also empowered to issue subpoenas and a member of the panel or the commissioner may sign the subpoenas. Once they are before the panel, the parties may not conduct discovery. MR. LOGAN explained there is a second release valve on page 5, line 24. He said at any time, the panel may encourage the parties to voluntarily settle or otherwise dispose of the case. MR. LOGAN referred to page 6, line 3, and said within 15 days after the completion of a hearing, the panel issues a written advisory decision and the decision must be one of four conclusions that are on 12 of page 6. He read from the bill, "(1) the evidence does not indicate that the design professional failed to comply with the applicable standard of care;". Mr. Logan said, "Number 2, is if the design professional failed to comply with the applicable standard of care." Mr. Logan noted he is looking at line 17 of page 6 and said, "Number 3 is the evidence indicate that maybe the design professional did fail to comply but it wasn't the cause of the problem. And 4, is that there is a material issue of fact not requiring an expert opinion, bearing on liability that should be considered by a court." MR. LOGAN referred to line 25, and said this gets back to Section 1. Mr. Logan said, "Before filing the opinion, the advisory decision rather, the panel shall determine if sufficient funds have been deposited. So, we have inserted a mechanism in the bill to ensure that the costs of the proceedings are not borne by the state. If the $1,500, deposited at the beginning of the proceeding, aren't enough to cover the costs of proceeding, the panel says to one of the parties or potentially both of the parties, `annie up.' Referring back to Section 1, we have a hammer that says if the design professional doesn't pay the board, that's the AELS Board, may suspend, refuse to renew or revoke the certificate. So If you try to get around it, don't pay, they're gonna play with your license. And the panel decision may not be released until the department has - they're sure that all the expenses are covered." MR. LOGAN referred to the top of page 7 and said it is set out how the additional costs are allocated. He continued, "If the panel finds, under (b)(1) and that was that the design professional did not do anything wrong, then the claimant pays the additional expenses, and that would be - I guess we could say a frivolous case, and the penalty for bringing a frivolous to the panel is that you pay. If the design professional is found to have done something wrong, the design professional pays any costs above and beyond the initial $1,500 deposit, which is made up of $750 from each party. And if the panel finds Number 3 or Number 4, that the evidence indicates the design professional failed to comply but it wasn't their problem, or that the thing is just too complex for us to render a decision, they split the additional costs." Number 1699 MR. LOGAN referred to page 7, Section 09.55.760, SUBSEQUENT LITIGATIONS; EXCLUDED EVIDENCE, and said this is an important component of the bill, but one that will probably get more consideration in the Judiciary Committee. MR. LOGAN read from page 7, line 17, "A statement made in the course of the hearing of the panel is admissible in a subsequent civil action." However, the decision, conclusion, finding, or recommendation of the panel may not be admitted. The point of this is still to settle out of court. Mr. Logan said you get the decision of the panel and if the design professional has been found to not have a problem, the design professional says to the claimant, "Hey, look, they found I didn't really do anything wrong, the court is probably going to find that, let's just settle it out here." He said a member of the panel is not liable for civil damages. Mr. Logan explained the rest of the bill is definitions, effective dates. He referred to Section 3 and said there is a court rule change. Mr. Logan said this concludes his review of the bill. Number 1793 REPRESENTATIVE ROKEBERG questioned the wording of a mandatory situation. He asked if there isn't a choice or an election at the beginning. MR. LOGAN explained it is before you go to court with a claim against a design professional, you must go through this process. Representative Rokeberg said if there is an extraordinarily major cause of action, it would seem that this particular process should be able to be avoided in its entirety. Mr. Logan said if there is a big lawsuit, one side is going to want to settle. One side is going to have to potentially pay that, so they're going to want to settle and they're going to be motivated through this process and settle before they go to court. For the big cases, it's a quicker process to go through this because the courts will not be entangled with all the little cases that will be filtered out in this process. REPRESENTATIVE ROKEBERG said he is conceptually in favor any kind of dispute resolution methodology that can alleviate the crowding in the courts and also lead to a quicker resolution of difficulties and conflict. He asked Mr. Logan to describe why there was a decision made on the part of the sponsor of the bill or the people involved in drafting regarding avoiding that election at the beginning. MR. LOGAN said that was at the request of the design professionals, after working with the trial attorneys, they requested that the provision be included in the legislation. Number 1945 REPRESENTATIVE JOE GREEN said there may be an issue that this just acts as another impediment to somebody who wants to go to litigation. The bill says you have to go through this extra hurdle. Number 1969 REPRESENTATIVE ELTON said he thinks he understands that if somebody doesn't like this process, they can throw up their hands and go back to court. He said the way he reads the statement in the sectional analysis is it allows the claimant to proceed to the appropriate court at any time, but only by mutual consent with the other parts. Representative Elton said it seems to him that if he is a claimant, he can't throw up his hands and say, "This process isn't working for me," and go to court unless the defendant or the design firm agrees to let him go to court. He said there doesn't seem to be much an out for the claimant. MR. LOGAN said the point is to stay out of court. Unless there are some restrictions to stay within the confines of this process, it breaks down. REPRESENTATIVE ELTON said there doesn't seem to be an lot of latitude. The plaintiff is required to go through this process. The plaintiff is required to stay in the process unless the person they have a problem with lets them out. He said he thinks that is substantially different than characterizing this as a mutual (indisc.) process. REPRESENTATIVE ELTON referred to the compensation rate being set at $300 and attorneys are required to participate in this process. He questioned what kind of attorneys there would be if they're involved in a process that might take 30 days. He said he isn't sure he is comfortable with an attorney or an arbitrator serving for $300 for 30 days. Representative Elton asked how the $300 figure was arrived at. MR. LOGAN explained the $300 figure is a figure that came from the "model legislation." It is a number that has been used on other states. A number of professionals, including attorneys, do what is known as "pro bono" work, often in these types of cases. REPRESENTATIVE ELTON said he is also interested in why the hearings are to be closed to the public. He said they don't close the courtroom doors to the public. MR. LOGAN said it is to protect the design professional in the event that he/she has found not to have done anything wrong. If they are found to have done something wrong, the public will know about it in the court proceedings, which are open. If they haven't done anything wrong, it is to protect their name, license and reputation. REPRESENTATIVE ELTON stated he objects to that when it happens with judges and would object to that when it happens with design professionals. The public deserves to know. REPRESENTATIVE ELTON referred to the deciding of damages and said this panel can't decide damages. He said he is assuming that if in fact the claimant, for example, is dissatisfied, they're going to go on to court. He said if the design professional is found at fault, he is assuming they would have to go to court anyway to establish a damages figure. MR. LOGAN said he hopes to the contrary. They would both get a copy of the panel's decision and one lawyer would call the other lawyer and say, "Hey, they found this and this is about what we think you owe us, lets sit down and talk about it." He said he is hoping this would keep the suit out of the court system and it would help the settlement process before they got to court. REPRESENTATIVE ELTON said he is interested in discussion about why this process proceeds without discovery or before discovery can occur. He said it seems to him that puts the claimant at some disadvantage. MR. LOGAN said the committee will hear more about that from people who have actually gone through this. This has proved to be a useful model in other states. REPRESENTATIVE ELTON referred to an article he remembers reading in the Wall Street Journal that talked about the enforced mediation process that you go through if you're suing your stock broker. He said one thing that stuck in his mind was that it was skewed it towards the stock broker, and in this case, somebody may say you've skewed it to the design professionals by having a three member panel, two of whom are or should be disinterested, the attorney and the mediator, and another who may be having drinks after work with the person that has been sued. He questioned why the design professional is in on the panel. MR. LOGAN explained it is so the panel has some expertise in these matters. They can also call in other design professionals who have technical experience and expertise in the matters that they consider. It is to balance it out so there is somebody speaking from the group. REPRESENTATIVE ELTON said we don't expect a design professional to serve on the jury or a judge to have design professional experience. Number 2310 REPRESENTATIVE GREEN pointed out that this adds some degree of knowledge to the process, more than tending to skew it. There is always the final appeal through a court. He urged the committee to remember that this is not to replace the court. This is only to try to get settlement before you get to court. The issues of discovery and the hearing being open to the public is more of a court nature. Representative Green said, "It's trying to get you and I to agree on, O.K., I either have done you wrong, or I haven't done you wrong, and if I have lets see if we can't come to a compromise and we're out of here. We didn't ever have to go to court. I can't satisfy you. You're not satisfied. Do you still want to go to court?" He said they still have that prerogative. He explained that he is trying to minimize the amount of litigation that is going to end up in court. In other states that have adopted such a policy, it has worked very satisfactorily. REPRESENTATIVE ELTON said he agrees with Representative Green in that if we can mediate before we have to litigate, we're much better off. He stated he is somewhat concerned about the structure. Number 2369 CHAIRMAN KOTT referred to the time parameters levied in various areas within the bill and said he has concerned with issuing of the advisory opinion by the panel, within 15 days. He referred to what the elements the advisory opinion must contain. He asked how the time line was arrived at and if it was enough time. MR. LOGAN said the time line was arrived at by talking with people who have actually gone through the process. That seemed to be a number that was quick enough to not drag it out, but allowed them enough time to do their work. REPRESENTATIVE GREEN indicated the numbers are arbitrary and they seem to be reasonable enough to get the process moving, but not unreasonable enough to allow adequate introduction of material. Number 2459 RUSS WINNER, Attorney, testified via teleconference from Anchorage. He explained his practice is a broad range practice and he represents plaintiffs and defendants in a wide variety of litigation. Prior to opening his practice, he taught law school. [End of Tape....] TAPE 96-6, SIDE B Number 001 MR. WINNER said he believes nobody, including the trial lawyers, favors frivolous litigation. He said he believes there is less frivolous litigation filed (indisc.) some members of the panel. Nonetheless, he said that is something to be avoided. Mr. Winner said the bill, as drafted, is not well crafted to serve that purpose given the specific and unique circumstances in Alaska. MR. WINNER said to him, the bill appears to be special interest legislation. It is designed to establish a procedure for design professionals and to try to minimize suits filed against them. It seems to maximize settlement of suits filed against them. He questioned why the bill only includes design professionals. Mr. Winner asked why they should be given special privileged treatment among all other professionals. He questioned why it shouldn't include teachers, realtors, business persons, air taxi operators or attorneys. He asked what is so special about design professionals. MR. WINNER informed the committee he believes not enough money is being provided, in terms of compensation, to the panel members. The response he heard is that it would be in the nature of pro bono work. Perhaps some attorneys would be willing to volunteer their time pro bono, but he doesn't believe that the class of attorneys that is contemplated in the bill would be readily available to serve in that function. He referred to pro bono work that attorneys do and said it is usually attorneys that have recently passed the Bar and don't have a whole lot of experience. They want to expose themselves to people in other areas. He noted seasoned trial lawyers tend to be busy and he doesn't believe there will be a great number of them who are willing to volunteer the time. The same could be said of other panel members such as mediation specialists for design professionals. If you want to get somebody who is good, you've got to pay them. If you're not going to pay them and if you're asking for volunteer services, you're going to an area of uneven quality or you're going to have difficulty finding people to agree to do the job and then do the job as a (indisc.). He said he thinks there are problems with sufficient funding to get the job done. MR. WINNER said it seems to him that the procedure that is contemplated is too cumbersome. It is really a mini trial as you're talking about testimony, depositions, exhibits, possibility of discovery, etc., all before a lawsuit is filed. Mr. Winner said if there is going to be mediation, it can occur more expeditiously than that. He said he settles most of the cases he is involved with and often, it's (indisc.) of mediation. It doesn't require this kind of cumbersome procedure. It can often happen just by (indisc.) letters and a mediator reads the letters and tries to elicit the strengths (indisc.) from each side as he shuttles back and forth between the sides. He said he has found that to be effective in the cases he has worked on and he doesn't see why there is a need to establish a mini trial procedure prior to filing a suit. Mr. Winner said he realizes that an advantage is that this will be private and the reputation of the design professional won't be (indisc.) by a lawsuit being filed. He said he doesn't know that you need to have a mini trial as part of the process. MR. WINNER said he believes that the composition of the panel is biased in favor of the design professionals. What is involved is a mediator who apparently will be neutral and an attorney. Mr. Winner said attorneys, in general, are not pro plaintiff. Plaintiff's attorneys are pro plaintiff. Defense lawyers tend to be pro defense. The fact that there is "an attorney on the panel" does not indicate to him that the attorney is going to be (indisc.) in favor of one side or the other. He said he would look at the attorney as essentially a neutral position as the mediator. Mr. Winner referred to the design professional and said that person will probably will be (indisc.) towards the defendant. He referred to the consultant and said he would imagine in some cases a consultant would be brought in. The consultant is only going to be paid per diem if he is from out of town. He said he has a question about whether you're going to find a consultant willing to do the job for free, and if he is, he would question whether he is unbiased. The composition of the panel as contemplated is stacked a little against the plaintiff and is in favor of the design professional. MR. WINNER said he thinks that what is contemplated in the bill is too early in the process. The Alaska Court System, just revised the rules of civil procedure. Under civil rule 26, there is immediate mandatory exchange of information between the plaintiff and the panel if a lawsuit is filed. That is supposed to take place within the first month or two of the lawsuit being filed. The very first thing that happens, you've got to exchange relevant documents. Rather than force the plaintiff, who has perfect information about liability, to go through a mini trial before filing a lawsuit. It might be better to file the lawsuit. Allow the parties to exchange their documents and, at that point, have a mediation - maybe a streamlined mediation and see if there is an opportunity for the parties to settle the case at that point. MR. WINNER said he thinks that the procedure suggested in the bill is cumbersome and not well tailored to the situation in Alaska. Mr. Winner said he would submit that is one thing which unique about Alaska is civil rule 82 is it allows for the prevailing party to receive an award of partial attorney fees against the other party. He said he believes that is a deterrent to frivolous lawsuits being filed. In fact, a lot of other states are looking at Alaska and are considering adopting something like rule 82 as a way of trying to prevent frivolous lawsuits from being filed. The other deterrent of frivolous lawsuits is Alaska's civil rule 11. If a frivolous lawsuit is filed, then the court can award sanctions against the plaintiff's attorney and the plaintiff for filing a frivolous lawsuit. So, in Alaska, there are deterrents to frivolous lawsuits being filed. The thanked the committee for listening to him. Number 402 REPRESENTATIVE ROKEBERG referred to lawsuits being settled by mediator and asked if this is where there is mutual voluntary arbitration or mediation. MR. WINNER said usually what happens is you file the suit, do discovery and if there is any basis for summary judgement to be entered then the parties file their pleadings and get ruling to record on summary judgement. He referred to the court trial and said the party knows (indisc.) will be. They go in and often both sides agree (indisc.) mediator. The mediator can either be a superior court judge who is not the judge assigned to the case, or increasingly, you can go to a mediator, who is often a retired judge, who will for a fee, sit as a mediator and shuttle back and forth between parties. If it is a retired judge who is serving as a mediator this is often a business he does. He noted Judge Ripley and Judge Hansen are serving as mediators. The plaintiff and defendant share the costs of the mediator. The mediator process usually takes no more than a day. The parties submit written material to the mediator before going in. It is not a trial, but the judge has a good understanding of what would happen if there was a trial and he is not afraid to offer his recommendations and opinions to each side. The defendants usually want to have the plaintiffs sit in mediation to hear from the mediator whether or not there is a good case. Mr. Winner said the plaintiff's council would like to have the defendant, or somebody who has got authority for the defendant to participate in the mediation along with the defendants lawyer. He noted that in his experience, that is often something that is done fairly close to the trial date. Mr. Winner said with his practice, he tries to arrive at settlement or mediation discussions earlier in the litigation. He said it may not be inappropriate to adjust the mediation to occur after the exchange of documents but before formal deposition, etc. Mr. Winner noted the one disadvantage to his suggestion is that the lawsuit is filed and becomes public knowledge. Number 563 REPRESENTATIVE KUBINA referred to the process Mr. Winner described in settling some of his suits and asked if this is something that is currently done with design professionals. He also asked if it takes a change in statute to do so or is it something that could also be done by court rule. MR. WINNER explained it is something that could be done by court rule. The courts could adopt a court rule requiring mediation after the exchange of discovery. That is certainly something that could happen regarding lawsuits against design professionals. REPRESENTATIVE KUBINA questioned why the bill is only specifically for design professionals and not the greater field that was mentioned before. He also asked if the greater field is using this type of mediation more than the design profession is. Number 627 COLLIN MAYNARD, Chair, Legislative Liaison Committee, Alaska Public Design Council (APDC), testified via teleconference from Anchorage. He noted the APDC is a consortium of professional society representing architects, engineers, land surveyors and building code officials. He said the legislation is designed to limit frivolous lawsuits and has been adopted in seven other states for design professionals. Over 30 states, including Alaska at one point, have review panels for medical professionals. Mr. Maynard referred to the Georgia case and said that was a law which was geared for medical professionals, however, they didn't push medical professionals in the statute. They just said professionals. The Georgia supreme court said it was all professionals. He said the APDC doesn't see any reason why this couldn't apply to any other licensed professional. This is something that has been adopted in other states for design professionals. If other professionals would like to do this as well, his organization sees no reason they shouldn't. Mr. Maynard said the APDC supports the bill because it would reduce the number of frivolous suits. The number of suits in California went down by about 25 percent. It will result in cases being settled earlier by encouraging dropping of the suits deemed frivolous and encouraging defendants to settle out on claims. He said the panel system was (indisc.) shotgun approach to lawsuits by forcing claimants to go after the people really at fault. Part of the problem with construction and design officials is you have a design team of four or five different firms and if the mechanical system fails, they sue just the mechanical engineer, they sue just the mechanical engineer, they sue the (indisc.) engineer, the constructional engineer, the (indisc.) engineer, the contractor, everybody who ever set foot anywhere near the construction site gets sued. In that trap, you get a lot of people who had nothing to do with the cause of the problem. What the bill will do is get rid of those people and make the case open on the people who are really at fault. It should result in fewer (indisc.) would provide a lead to the over (indisc.) court system. MR. MAYNARD referred to the election to bypass the (indisc.) panel, and said in Hawaii they have a provision that says, "Under circumstances, and they list what they are, the size of the lawsuit or claim, if one of those things applies and you didn't have to go through the panel." He said between 1985 and 1991, there were 132 claims (indisc.). Basically, the panel doesn't do anything. If you sue for enough money, you don't have to go through the panel. It makes the frivolous lawsuits go to the panel. Mr. Maynard referred to the privacy issue and said he isn't so sure that is as much of a concern. The closed meeting is to make so you have just the parties involved. He said he would talk to writers of the model law to find out why that provision is included and get back to the committee regarding that matter. Mr. Maynard said the APDC would not have a problem with immediate mandatory discovery, but they don't want drag out discovery and depositions going back and forth. It takes forever and costs thousands of dollars, then they can determine you didn't have anything to do with this in the first place and shouldn't have been there. MR. MAYNARD said he doesn't think a design professional would be biased on the panel. He stated he knows a lot of design professionals. He said he believes the people who would be volunteering for this would have enough ethics to make sure that if they knew about something involved in the suit, they would excuse themselves. Number 909 REPRESENTATIVE ROKEBERG referred to Mr. Maynard discussing the size of a claim in Hawaii and asked if it would allow a bypass right to court and avoid the mediation because they've set a limit on the amount the prayer in complaint stipulated. MR. MAYNARD explained in Hawaii they set seven or eight different criteria which could get you out from the panel process. One of them is the size of the lawsuit and the size of the claim. If you sue for a lot of money, you don't have to go through the panel process. Number 965 REPRESENTATIVE ELTON said if Mr. Maynard is suggesting a design professional wouldn't be swayed one way or the other, why not have a member of the public on the panel. He asked why there is instance on having an assigned professional as a member of the panel. MR. MAYNARD said he thinks the make up of the panel is to have the attorney there to be able to talk about legal questions and the design professional has the experience on how the construction works so that you don't have bring in a whole stream of expert witnesses to talk about how construction works, what the process is and the nitty gritty of it. He said what you'd be doing is bringing in consultants for particular issues and the design professional on the panel is a special engineer. The real issue of fact in this suit is a mechanical engineering technical question. So you bring in the mechanical engineer to answer that particular technical question, then when the panel goes off for deliberations and the question comes up about how something works, they have the ability to explain to the other two people on the panel. This would be just like the lawyer being able to explain how the law works to the other two people. Number 1056 REPRESENTATIVE ROKEBERG referred to the provisions of establishing the panel and said the bill indicates that there will be a list of 20 or more design professionals. He pointed out that he has worked in the real estate development business in Alaska for over the last 30 years and he knows the community of architects is relatively small. Those who are in the engineering professions are members of other societies and other associations of their profession. There could be various conflicting personalities, biases and competitive situations where if there was one peer judging another, and they're within the same profession, there may be a potential of some bias. He asked Mr. Maynard if he would consider a stipulation in the selection of a panel member to select somebody from another discipline or someone who holds a different license than the person who is before the panel. MR. MAYNARD said he isn't sure that would be necessary because if a mechanical engineer is being sued, you'd probably want a mechanical engineer on the panel. He suggested adding a provision that would say that the party would have the right to object to any of the members of the panel. There would probably have to be a limit on that. Mr. Maynard said he wouldn't have a problem with something along those lines. Number 1180 TERESA WILLIAMS, Assistant Attorney General, Fair Business Practices Section, Civil Division, Department of Law, said one of the issues is whether or not design professionals should be segregated out for different treatment than other kinds of persons who are defendants in lawsuits especially when land surveyors are included as design professionals. She said we've got a special category for design professionals and then land surveyors are being added to that groups. Ms. Williams said there are questions about why should that particular group of (indisc.) professions be treated differently. She referred to page 2, line 12, Section 09.55.700, (b), and said the design professional can waive this whole process. That would be an equal protection due process issue as to why the design professional didn't have to go through this process, but the claimant did. MS. WILLIAMS referred to page 3 and said there isn't a real clear definition of who the chair person will be. It says, "A person experienced in court claims settlement process." From a legal point, that would need to be clarified. MS. WILLIAMS referred to page 4, Section 09.55.730, (a) and (b), and said the bill seems to go two different ways. If it is mediation, then it is appropriate to have it closed and to have the ability to exclude a party. If it is not mediation and is a mini adjudication, then the due process requirements are not met because the person doesn't have the right to call witnesses. The panel may, in its discretion, permit you to call witnesses. She said there seems to be a mixing of apples and oranges. If it is meant to be a mediation process it needs to go one way and if it is meant to be a mini adjudication, it needs to go the other way. Ms. Williams explained under (a) it says that it is a closed hearing, "The panel may, in its discretion, conduct and inquiry of a party, witness, or consultant without the presence of a party." She referred to wording on line 21, "the record may not be made available to the parties" and said that is an issue. If a statement is an issue against a person, why is that no recording can be obtained of that statement. That doesn't make sense in why the recording would not be available. Ms. Williams referred to page 4, lines 25 through 26, "The panel may, in its discretion, permit a party or counsel for a party to question other parties, witnesses, or consultants." She said these sections go two different ways. One would be more appropriate in mediation and the other would be inappropriate in a committee on adjudication as this is supposed to be. Number 1415 MS. WILLIAMS referred to page 5, line 7, "The panel shall attempt to secure the voluntary appearance, testimony, and cooperation of parties, witnesses, and consultants without coercion. She said that would raise an issue of whether or not the panel had to go through a process of calling the witness and having the witness not show up before it could issue a saphena, which would certainly slow the process down if was required to go through a preliminary process before it could issue a saphena. MS. WILLIAMS referred to wording on page 5, line 25, "the panel may encourage the parties to voluntarily settle" and said if this is supposed to be a settlement process, it seems to be inconsistent to make that discretionary. She referred to line 27 and said it provides for the exclusion of parties. MS. WILLIAMS referred page 7, line 25, "PANEL MEMBER IMMUNITY." and said she has a question of whether or not a person would have immunity from liability if there is intentional wrong doing by a panel member, for example, accepting a bribe. MS. WILLIAMS referred to the tolling of the statute of limitations, which starts on page 7 and goes over to page 8, and said there doesn't seem to come to a completion of this idea. The statute of limitations is tolled for six months and you cannot bring an action within that six months. She said there is no window of opportunity after the six months is up before to follow your action before the statute of limitations begins to run again. So having the statute of limitations start on that day, and that day being the first day that you could file an action, doesn't seem to allow enough room in the window of time to file the action. MS. WILLIAMS said there are lots of policy issues that other parties can address, but the one she mentioned are legal issues she perceives. Number 1563 CHAIRMAN KOTT asked Ms. Williams if she thinks an attorney would risk settling until after discovery is complete. MS. WILLIAMS said, as an attorney, she could tell the committee that settlement happens at all stages. Number 1601 MIKE TAURIAINEN was next to testify via teleconference from Soldotna. He informed the committee he is a consulting civil engineer and is also on the AELS board, however, he is testifying as an individual and not as a member of the board. Mr. Tauriainen said his intention was to testify in favor of HB 414, based on the earlier draft which is similar to SB 119. He said he is in favor of the concept, however, he just received the new work draft which seems to be more cumbersome than SB 119. It is more wordy and that may bias his initial evaluation of the bill. Mr. Tauriainen said there needs to be some sort of streamed of (indisc.) to eliminate frivolous claims. He said we need to keep in mind that frivolous claims is what we're trying to eliminate. The process needs to be streamlined so that it encourages the elimination of those frivolous claims. The advantage of this bill or similar bills is that it should reduce the loads on the court system, reduce the cost of professional liability insurance to professionals and reduce the amount of time professionals have to spend defending themselves against frivolous claims. He stated a concern of his is that if a claim is frivolous and the panel so determines, it still doesn't seem to discourage a plaintiff from continuing on to litigation. If they're going to file a frivolous claim, he is not sure how to best deal with that, except by enabling the assessment of the costs to the party filing a frivolous suit or costs filed against the professional. Mr. Tauriainen said the deposit should be increased to around $3,500 which is limit for small claims. That way the frivolous filer would have to pay not only the panel costs but also the legal costs of the design professional, and likewise, if it is determined that the design professional is responsible they should pay for panel costs and the legal costs of the plaintiff. He said he would be reluctant to bring in consultants and expert witnesses into the process. That seems to complicate the process. The design professional should be somewhat in the same profession as the charged professional to facilitate the panel's work. Mr. Tauriainen said if they do elect to encourage that, there should be no payment of panel costs by the parties. He said he would send the committee written comments. Number 1929 CHAIRMAN KOTT asked Mr. Tauriainen if he has any hard data on the numbers of frivolous claims against design professionals in Alaska. MR. TAURIAINEN indicated he didn't have that answer. He said he would like to point out a loophole regarding a definition on page 8, line 28, "`professional negligence' means a negligent act or omission by a design professional in providing professional services;". He then referred to line 30 and said, "limits professional services to those provided by the design professional as licensed." Some cases could legitimately arise and may be more likely to rise for the design professional practicing outside his legitimate scope of licensure. Mr. Tauriainen said definition (7) should be modified to not give the design professional that loophole Number 2027 CATHERINE REARDON, Director, Central Office, Division of Occupational Licensing, came before the committee to address HB 414. She said according to the bill, it would be the Division of Occupational Licensing that selects the panel. Teresa Williams, Department of Law, spoke on behalf of the Administration regarding legal issues and the policy. She said she would review some of the management details. Ms. Reardon said a few of the questions she has are, "Are you going to want a way for a claimant who is indigent to file a law suit? Are you going to want us to have a mechanism where if someone says `I don't have $750 but I want a file a lawsuit' for us to excuse the person and if not, I'm wondering if we're gonna get any feedback from the court about having served as a block to people's access." Ms. Reardon said most of the other issues have been discussed or asked about by members of the committee. She said she'll do her best to find panel members who will be willing to take on the task for the $300. Ms. Reardon noted she hasn't had experience with this and doesn't know whether she will have difficulties in finding attorneys who will take on this task. The is a concern because if she fails in that task within the 15 or 30 days, she is curious what the implications will be for the parties. Ms. Reardon said what if the panel doesn't successfully follow all the time lines and instructions in the statute, will that be anything that the legislature is looking at her division to assist the panel in reminding them that the time deadline is being missed. She asked if the parties will be looking in her direction of the panel messes up. Ms. Reardon said as she understands it, she is pretty much leaving them to follow through on their own and just provide the office space for them to function in. She said she is not staff support. Number 2281 REPRESENTATIVE GREEN asked what they currently do with indigent people who want to file through a court. MS. REARDON said, "I am not very knowledgeable about that, but I believe there is. I think court filing costs are $100, although I'm certainly not an expert in this topic, and I believe they have to provide some kind of alternative although it probably very rarely be legitimately exercised in this particular case. I just thought of the possibility that someone is gonna say, `No, I don't want to pay $750, I don't have it, I just want to sue this person.'" Number 2342 REPRESENTATIVE ELTON referred to deadlines listed in the bill such as the 15 day deadline and said he is assuming those are not working day deadlines otherwise they would say so. If there is a 15 day deadline, that may mean there is 11 days to accomplish your work. REPRESENTATIVE GREEN said it would be his understanding that it would be working days. Most of the time it is generally working days unless it specified to be calendar days. REPRESENTATIVE ROKEBERG asked Ms. Reardon if there is any other mediation processes or something similar to that the division if involved in. MS. REARDON said they are not involved in anything like this. The court system handels the medical review panel that is fairly similar to this. TAPE 96-7, SIDE A Number 000 CHAIRMAN KOTT asked what the per diem rate is. He said it seems like the parties will asked to "pony up" almost on every occasion. MR. LOGAN said that is true. He said they were trying to keep the fees as low a possible. There was full expectation that, in most cases, there will be additional funds required. Number 097 REPRESENTATIVE ROKEBERG referred to the zero fiscal note from Division of Occupational Licensing and asked if all of the bookkeeping, etc., is going to come out of the gross proceeds. MS. REARDON explained the fiscal note was based on the original bill which didn't involve her division. She said she would expect a modest fiscal note. REPRESENTATIVE SANDERS noted he isn't prepared to move the bill out of committee. CHAIRMAN KOTT indicated there will be a new fiscal note. He referred to there being other issues and said he thinks the bill should be held over. He also said the indigent issue should be reviewed along with some of the definitions. Chairman Kott said it is his intent to hold the bill to work with the sponsor on a new committee substitute. Number 338 SHARON MACKLIN, Lobbyist, Alaska Professional Design Council, referred to the issue of having a design professional on the panel and whether that was inappropriate or appropriate. She said as an example, she though she would mention the fee arbitration panel system that the Alaska Bar Association has. She noted she is a member of the panel as a lay person. On their panel people can bring complaints to the fee arbitration panel about being charged too much or not enough. That panel is made up of two attorneys and one lay person. When she got on that panel she thought this is going to be a fixed deal. The panel will always decide in the favor of the attorney - that he/she did not charge too much. Ms. Macklin said she has been on the fee arbitration panel for about four years and do maybe two a year. She stated she has been very surprised that lawyers don't automatically protect lawyers just because of their professional camaraderie. They really do look at the issues and put a lot of thought in it. In her experience of working with design professionals for almost ten years, they also would put a lot of thought into it and not automatically protect or support a fellow design professional. MS. MACKLIN referred to the time frames and said on fee arbitration panels, that usually takes them from three to five hours. She referred to the question of how many court cases there have been in which design professionals were involved and said APDC set out a questionnaire to all of the owner companies in the state. Very very few cases ever go to court. She said 95 percent of civil cases never go to court. What the APDC is concerned about is these cases that end up costing the design professionals $5,000, $10,000 up to $15,000 in legal fees that never go anywhere. Ms. Macklin explained most of the companies she works with have a deductible of $20,000 to $25,000 on their liability insurance. She said in the future she could give the committee some examples of cases. Number 623 REPRESENTATIVE GREEN said a professional is rather reluctant to decide in favor of another professional if there is any question of doubt to its absolute legitimacy because it reflects back on his professional standing. Representative Green discussed a situation regarding a car accident he was in several years ago where his bill was exorbitant. He applied to Orange County Medical Association and they said it was exorbitant. The physician ended up significantly reducing his bill. REPRESENTATIVE GREEN referred to Chairman Kott's statement that there will be a CS, and said that is very likely. However, he would like to review questions in the committee minutes. He said there may or may not be a CS. CHAIRMAN KOTT said there is one area that should probably be clarified regarding the 15 day working period. It should probably be clarified with the wording "working days," if that is what we're shooting for. Chairman Kott said his office will work with Representative Green regarding a CS. He also noted there would be a new fiscal note. HB 435 - STATE TRAINING & EMPLOYMENT PROGRAM Number 862 CHAIRMAN KOTT announced the next order of business would be HB 435, "An Act relating to employment contributions and to making the state training and employment program a permanent state program; and providing for an effective date." Number 903 DAVID DEAN testified via teleconference from Fairbanks. He said he is fairly familiar with the state training employment program since he works with an office that administers the pilot program that has been in existence for several years. He said he is also familiar with the benefits it has provided to residents throughout the state. Of all the of the employment training programs available to Alaskans, none compare to the flexibility and benefits this program has offered. Many unemployed workers have obtained funding for short duration training and immediately obtain a job after completing their training. Without the benefit of the (indisc.) funding, there would have been no alternatives except to continue on unemployment or some of the social welfare programs that currently exist. Mr. Dean pointed out that it is important to remember that the Step Program doesn't supplant the existing programs, it greatly enhances them. On the surface this program sounds too good to be true. Residents obtain job related skill training, unemployment insurance payments are reduced, non resident workers don't take Alaskan jobs and there is no cost to the state. Funding is obtained from working Alaskan's contributions to the unemployment insurance trust fund in a perpetual process almost assuring the fund is replenished by those who are working. The program allows the work force to take advantage of technological improvements in the workplace as they develop and not after someone from the Lower 48 arrives in Alaska to take another Alaskan's job. Mr. Dean urged passage of HB 435. CHAIRMAN KOTT referred to Mr. Dean's comments regarding non- residents don't take Alaskan jobs. MR. DEAN explained through technological advances, if the work forces isn't trained locally, there will be non-residents coming into the state to take those jobs that Alaskans now hold because they're not advancing in the state of art training. The bill funds training and keeps it current. A lot of that training currently is offered in the Lower 48. People get the experience or qualifications and then they move to Alaska where the jobs are. Mr. Dean said he thinks the Step Program prevents some of that because it allows for the training of our own work force. Number 1035 CHAIRMAN KOTT referred to the Department of Labor's most recent annual report regarding non Alaskans work in the state of Alaska in 1984, and said there are 77,000 non-residents working in Alaska. We must do something to ensure Alaskans work in Alaska. He added that the unemployment rate during that same period ranged from 5,000 to 17,000. Number 1140 REBECCA NANCE, Director, Central Office, Division of Employment Security, Department of Labor, came before the committee to testify on HB 435. She said she believes the committee members have received a brief program overview, the 1995 Executive Summary and the sectional analysis of the bill. She noted David Stone of Echo Bay had to leave the meeting, but said she would submit written testimony from him. MS. NANCE referred to Section 1 and said it is the legislative findings. It sets up the goals of the program which is basically to train Alaskans for jobs and to reduce claims on the Unemployment Insurance Program. MS. NANCE referred to Section 2 and said it simply codifies the old temporary program and sets up a new chapter, Chapter 23. Within that chapter there would be eight sections. Section 010 would create the program as a permanent program using primarily the original language. This is essentially the same bill that has been in the pilot phase. MS. NANCE said Section 020 establishes the employment assistance and training account in the general fund. She said this isn't general fund money, it is money that has been earmarked and then the legislature appropriates the funds so they can be spent on this program. MS. NANCE referred to Section 030 and said it provides the funding mechanism for the program. She said 1/10 of 1 percent of employee wages go into this program and are earmarked. The legislature approve and appropriate those funds for this use. The maximum amount any individual would pay into this program as part of their tax contribution would be $24 and some change, per employee, if they max out on their wages. She said she believes $24,200 is the amount they pay of the 1/10 of 1 percent. Number 1280 MS. NANCE referred to Section 040 and explained it targets the population for the program. She said she believes this is the part of the Step Program that allows the flexibility that Mr. Dean spoke to. There are a lot of other federal programs such as dislocated worker programs and the JTPA. The guidelines and rules for the JTPA Program are very very rigid. The Step Program simply trains Alaskans for Alaskan jobs. The intended target group are past, future or current recipients of unemployment insurance. MS. NANCE referred to Section 050 and said it defines the services that must be provided. Not all of these services must be provided by a grantee, one or more of some sort of combination of services listed must be provided by the grantee. Number 1318 MS. NANCE said Section 060 defines the duties of the department in terms awarding grants to the Alaska Human Resource Investment Council. The council was established by the legislature last year. It consolidated four councils into one council. So, instead of having four councils with 40 people, it consolidated into one council with 26 people. Those people will be working under a subcommittee structure. This supersedes the sunsetted Alaska Job Training Council (AJTC) that used to get the grant awards. Ms. Nance said the council, as in the pilot program, may administer its own employment and training programs or it may awards grants to other entities as long as the target lists are adhered to and, again, as long as the grantee provides one or more of the services in Section 050. MS. NANCE explained Section 070 sets out the duties of the Alaska Human Resource Investment Council in awarding step grants. Again, the flexibility really comes into play here. She said Step isn't interested in displacing current training programs in Alaska. They just want to fill the void where no training exists. MS. NANCE referred to Section 900 defines terms. MS. NANCE explained Section 3 simply provides an effective date of July 1, 1996. MS. NANCE informed the committee members the program has been a very flexible program, it's Alaska specific, it is paid for and utilized by Alaskan workers, it stabilizes employment and it keeps Alaskans trained and ready to work in Alaska. She urged support for the bill. Number 1430 REPRESENTATIVE ROKEBERG asked Ms. Nance to explain the 1/10 of 1 percent, the impact, the fund raising aspects and the cost to Alaskan workers. MS. NANCE said the 1/10 of 1 percent is the employee wage contribution. The employer does not pay for this, the employees do. There is a ceiling on the amount they can pay in and 1/10 of 1 percent is $24.20. The employee rate is 1/2 of a percent of their wages to the $24,000 figure. This year there is about $3.5 million in the Step program that is employee contributions. REPRESENTATIVE ROKEBERG questioned whether any collections will be changed. MS. NANCE said it is identical to pilot that has been in effect for the last six years. The only significant change is that we're moving to the Human Resource Investment Council instead of the Job Training Council. REPRESENTATIVE ROKEBERG asked if there is an employer contribution. MS. Nance said no. Number 1530 CHAIRMAN KOTT asked how much is the percentage that employees are currently paying. MS. NANCE said employees pay 1/2 of 1 percent of their wages up to $24,200 into the unemployment insurance trust fund. She pointed out Alaska is only one of four states that has employees paying into it at all. CHAIRMAN KOTT asked Ms. Nancy if she is paying into it. MS. NANCE indicated she is not. Chairman Kott asked if he is paying into it. Ms. Nance said she is not aware of Chairman Kott's businesses outside of the legislature. REPRESENTATIVE SANDERS said he is paying into it and he believes it is a great idea. CHAIRMAN KOTT asked if it is reflected on his earnings. Representative Sanders indicated it is reflected on his earnings. MS. NANCE pointed out that if this isn't made permanent, the Step program will go away, it sunsets. Number 1660 CHAIRMAN KOTT noted the committee didn't have a quorum present so action couldn't be taken on the bill. He announced the bill would be held over until the next Labor and Commerce Committee hearing. REPRESENTATIVE ROKEBERG noted the bill has a number of committee referrals. CHAIRMAN KOTT said there are four committees of referral. He also said his understanding is that there is no fiscal impact. MS. NANCE said there is no fiscal impact, it is basically a wash, and anything that is not spent goes back to the unemployment trust fund. There is no impact. Number 1774 REPRESENTATIVE ROKEBERG referred to an employees paycheck and asked if this shows up as a separate line item. MS. NANCE said it is included in the unemployment insurance contribution. ADJOURNMENT Number 1773 There being no further business to come before the House Labor and Commerce Committee, CHAIRMAN KOTT adjourned the meeting at 5:15 p.m.