Legislature(1995 - 1996)
03/18/1996 03:12 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 March 18, 1996 3:12 p.m. MEMBERS PRESENT Representative Pete Kott, Chairman Representative Norman Rokeberg, Vice Chairman Representative Beverly Masek Representative Jerry Sanders Representative Brian Porter Representative Kim Elton MEMBERS ABSENT Representative Gene Kubina COMMITTEE CALENDAR HOUSE BILL NO. 482 "An Act relating to state procurement practices and procedures; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 439 "An Act relating to minerals, including coal, to the statewide bonding pool for the reclamation activities imposed on mining operations, and to the statewide bonding pool's use for surface coal mining projects." - PASSED CSHB 439(L&C) OUT OF COMMITTEE HOUSE BILL NO. 533 "An Act relating to the board of directors of the Alaska Aerospace Development Corporation." - HEARD AND HELD CS FOR SENATE BILL NO. 197(L&C) "An Act relating to insurance covering an insured who is a victim of domestic violence and requiring certain disclosures by an insurer." Confirmation of Governors Appointments: Real Estate Commission PREVIOUS ACTION BILL: HB 482 SHORT TITLE: STATE PROCUREMENT PRACTICES & PROCEDURES SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 02/09/96 2686 (H) READ THE FIRST TIME - REFERRAL(S) 02/09/96 2686 (H) L&C, STATE AFFAIRS, FINANCE 02/09/96 2687 (H) 2 FISCAL NOTES (ADM, DOT) 02/09/96 2687 (H) 5 ZERO FNS (2-ADM, DCED, DCRA, CORR) 02/09/96 2687 (H) 5 ZERO FNS (DOE, DEC, F&G, GOV, DHSS) 02/09/96 2687 (H) 5 ZERO FNS (LABOR, LAW, DMVA, DNR, DPS) 02/09/96 2687 (H) 2 ZERO FNS (REV, UA) 02/09/96 2687 (H) GOVERNOR'S TRANSMITTAL LETTER 03/18/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: HB 439 SHORT TITLE: MINING BONDING POOL & ADVISORY COM'N SPONSOR(S): REPRESENTATIVE(S) BRICE,Kelly JRN-DATE JRN-PG ACTION 01/22/96 2507 (H) READ THE FIRST TIME - REFERRAL(S) 01/22/96 2507 (H) RESOURCES, LABOR & COMMERCE, FINANCE 01/31/96 2587 (H) COSPONSOR(S): KELLY 02/05/96 (H) RES AT 8:00 AM CAPITOL 124 02/05/96 (H) MINUTE(RES) 02/05/96 2626 (H) RES RPT 2DP 2NR 2AM 02/05/96 2627 (H) DP: NICHOLIA, AUSTERMAN 02/05/96 2627 (H) NR: WILLIAMS, GREEN 02/05/96 2627 (H) AM: OGAN, KOTT 02/05/96 2627 (H) FISCAL NOTE (DNR) 03/18/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: HB 533 SHORT TITLE: ALASKA AEROSPACE DEVELOPMENT CORP. BOARD SPONSOR(S): COMMUNITY AND REGIONAL AFFAIRS JRN-DATE JRN-PG ACTION 02/28/96 2913 (H) READ THE FIRST TIME - REFERRAL(S) 02/28/96 2913 (H) LABOR & COMMERCE 03/18/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: SB 197 SHORT TITLE: INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES SPONSOR(S): SENATOR(S) DONLEY, Ellis, Salo, Duncan, Pearce, Zharoff, Lincoln; REPRESENTATIVE(S) Davies JRN-DATE JRN-PG ACTION 01/05/96 2058 (S) PREFILE RELEASED - 1/5/96 01/08/96 2058 (S) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2058 (S) LABOR & COMMERCE 01/16/96 2144 (S) COSPONSOR(S): DUNCAN 02/15/96 (S) L&C AT 1:30 PM BELTZ ROOM 211 02/15/96 (S) MINUTE(L&C) 02/20/96 (S) MINUTE(L&C) 02/23/96 2512 (S) L&C RPT CS 5DP NEW TITLE 02/23/96 2513 (S) ZERO FISCAL NOTE TO SB & CS (DCED) 02/26/96 (S) RLS AT 12:45 PM FAHRENKMAP RM 203 02/26/96 (S) MINUTE(RLS) 02/28/96 2568 (S) RULES TO CALENDAR & 1NR 2/28/96 02/28/96 2571 (S) READ THE SECOND TIME 02/28/96 2572 (S) L&C CS ADOPTED UNAN CONSENT 02/28/96 2572 (S) COSPONSOR(S): PEARCE, ZHAROFF, LINCOLN 02/28/96 2572 (S) ADVANCED TO THIRD READING UNAN CONSENT 02/28/96 2572 (S) READ THE THIRD TIME CSSB 197(L&C) 02/28/96 2572 (S) PASSED Y18 N- E2 02/28/96 2579 (S) TRANSMITTED TO (H) 02/29/96 2955 (H) READ THE FIRST TIME - REFERRAL(S) 02/29/96 2956 (H) LABOR & COMMERCE, FINANCE 03/18/96 (H) L&C AT 3:00 PM CAPITOL 17 03/18/96 3186 (H) CROSS SPONSOR(S): DAVIES 03/20/96 (H) L&C AT 3:00 PM CAPITOL 17 03/20/96 (H) MINUTE(L&C) 03/22/96 (H) L&C AT 3:00 PM CAPITOL 17 WITNESS REGISTER DUGAN PETTY, Director Division of General Services Department of Commerce and Economic Development P.O. Box 110204 Juneau, Alaska 99811-0204 Telephone: (907) 465-2250 POSITION STATEMENT: Testified on HB 482. FRED PASCO, Legislative Secretary to Representative Tom Brice Alaska State Legislature Capitol Building, Room 426 Juneau, Alaska 99801 Telephone: (907) 465-3466 POSITION STATEMENT: Gave sponsor statement on HB 439. CHARLIE BODDY Usibelli Coal Mine, Incorporated Fairbanks, Alaska Telephone: Not provided POSITION STATEMENT: Testified on HB 439. JULES TILESTON, Director Division of Mining and Water Management Department of Natural Resources 3601 "C" Street, Suite 800 Anchorage, Alaska 99503-5935 Telephone: (907) 269-8624 POSITION STATEMENT: Testified in HB 439. CLIFF STONE, Legislative Assistant to Representative Alan Austerman Alaska State Legislature Capitol Building, Room 434 Juneau, Alaska 99801 Telephone: (907) 465-6588 POSITION STATEMENT: Gave sponsor statement on HB 533. JEFF BUSH, Deputy Commissioner Department of Commerce and Economic Development P.O. Box 110800 Juneau, Alaska 99811 Telephone: (907) 465-2500 POSITION STATEMENT: Testified in support of the concept of HB 533. PAT LADNER, Executive Director Alaska Aerospace Development Corporation 3601 "C" Street Anchorage, Alaska 99503 Telephone: (907) 561-3338 POSITION STATEMENT: Testified in support of HB 533. SENATOR DAVE DONLEY Alaska State Legislature Capitol Building, Room 11 Juneau, Alaska 99801 Telephone: (907) 465-3892 POSITION STATEMENT: Sponsor of SB 197. MICHAEL LESSMEIER, Attorney Lessmeier and Winters One Sealaska Plaza, Suite 303 Juneau, Alaska 99801-1249 Telephone: (907) 586-5912 POSITION STATEMENT: Testified against SB 197. BEVERLY BOWERS Bering Sea Womens Group Box 1596 Nome, Alaska 99762 Telephone: (907) 443-5491 POSITION STATEMENT: Testified in support of SB 197. JOHN GEORGE, Lobbyist American Council of Life Insurance 3328 Fritz Cove Road Juneau, Alaska 99801 Telephone: (907) 789-0172 POSITION STATEMENT: Testified against SB 197. LAUREE HUGONIN, Executive Director Alaska Network on Domestic Violence and Sexual Assault 130 Seward Street, Number 501 Juneau, Alaska 99801 Telephone: (907) 586-3650 POSITION STATEMENT: Testified in support of CSSB 197(L&C). ACTION NARRATIVE TAPE 96-23, SIDE A Number 001 The House Labor and Commerce Standing Committee was called to order by Chairman Pete Kott at 3:12 p.m. Members present at the call to order were Representatives Masek, Sanders, Elton, Rokeberg and Kott. Representative Porter arrived at 3:14 p.m. HB 482 - STATE PROCUREMENT PRACTICES & PROCEDURES CHAIRMAN KOTT announced the first order of business would be HB 482, "An Act relating to state procurement practices and procedures; and providing for an effective date." Number 083 DUGAN PETTY, Director, Division of General Services, Department of Commerce and Economic Development, came before the committee to address HB 482. He explained that at the conclusion of the last legislative session, Commissioner Boyer gave him a packet of information which was the 1994 Federal Acquisition Streamlining Act. He was asked to review the information and note things that we could do in our state procurement practices to make them more efficient and a more results oriented process. He was also asked to incorporate some of the reform measures that have taken place in the 1994 Act. Mr. Petty informed the commissioner that HB 116 had just passed through the legislature which removed the Alaska Seafood Marketing Institute (ASME) from the procurement code. In each committee the bill went through somebody raised a concern as to whether or not ASME should be removed from the procurement code or whether something should be done to reform and make the procurement code more streamlined and responsive. Mr. Petty explained he told the commissioner that he believed this was a good time to look at reform in the procurement code. He said he also told the commissioner we are fortunate to have a relatively new procurement law which is based on the model procurement code, and many of the changes the federal government had to make, we didn't have to do because we enjoy the benefit of a more straight forward and simpler process. Mr. Petty pointed out that we live in complex times and the market is changing. We live in a rapidly evolving market with electronic interconnects which really changed our procurement process in many ways. He said he believes we need to look at our processes and how we do them to make them responsive to today's changing market. We also need to look at the resources we have available to see what can be done to bring about a more effective procurement given the resources we have and given the fact that we are not likely to get more resources in the future. MR. PETTY said in an effort to bring about those efficiencies, Commissioner Boyer began a streamline initiative during the summer. One of the major impetuses of that initiative was to form a procurement advisory council. This council is made up of stakeholders, procurement practitioners within and outside of state government, people from ARCO, vendors and representatives of small business advocacy groups. He said they started looking at practices from their regulations, from statute, from policy as well as nonresponsive procurement processes and see if they couldn't situationally re-engineer those to be more responsible to today's state procurement needs. He said the council has met a number of times and came forward with a list of about 34 recommendations to Commissioner Perkins and Commissioner Boyer. They reviewed the recommendations. They took some out and they made some suggestions. What the committee has before it is suggested changes by the procurement advisory council and the two commissioners, which is advanced to try and build a foundation for beginning to streamline our procurement process. Number 384 MR. PETTY said he would review changes by hitting the significant sections. He said this is not inclusive of all sections; however, there are a number of the changes in statutes that move one section of existing statute to another location or, because of changes that are proposed, affect other sections. MR. PETTY referred to Section 3 and Section 38 and said they simply permit the commissioner of the Department of Administration to delete names of vendors that are suspended or debarred. If they are suspended or debarred, which is currently provided for in statute, this eliminates an inconsistency in statute. MR. PETTY said Section 4 would allow the department to acquire small leased office space, which would be identified as 5,000 square feet or less, under small procurement rules. This means you could get three proposals and award to the low responsive responsible bidder, taking into account Alaska bidder preferences. MR. PETTY explained Section 5 would authorize extensions of leases up to ten years in return for rent concessions. He said this may seem similar to a bill that passed the legislature a couple of years ago. There was about an 18 month window where the department was authorized to extend leases for five years in return for rent concessions of up to 10 percent. That proved to be very successful in driving down the costs of the leasing budget. The bill would ask to basically do the same thing on a permanent basis in statute, but give the department the ability to go up to ten years rather than five. Mr. Petty pointed out that many lessors have said five years didn't offer them the opportunity to refinance. They felt they could drive better prices by refinancing on a longer term and the state might take advantage of better savings. MR. PETTY referred to Sections 6 and 7 and said they would allow for the lease/purchase acquisition of real property when the annual payments did not exceed $500,000 or the total value of the lease/purchase agreement does not exceed $2.5 million. Currently, any acquisition of real property through a lease financing arrangement requires notice to the legislature and the enactment of the law. Number 553 MR. PETTY explained Sections 8 and 12 would allow bidders for services and supply contracts to not list their subcontractors within five days of bid opening and would give them more flexibility to change subcontractors. He said he would note that the provision, as it relates to current construction contracts, would not change. This would only change the subcontractor notice requirement for services and supplies. MR. PETTY said Section 9 would permit the procurement officer issuing a request for proposal (RFP) or a bid to shorten the circulation period. The statute requires a 21 day notice. It may currently be shortened under a determination by the chief procurement officer. This would empower the person who is actually issuing the bid or proposal to make the decision as to what adequate circulation is for notice and they would have to do a determination that it is advantageous to the state and adequate competition is anticipated. MR. PETTY explained Section 10 is an amendment of a section that actually had it genesis in this committee last year. Representative James had a bill extending the procurement preference to certain entities. As the bill came through the House Labor and Commerce Committee, there was some discussion about a trend in (indisc.) bidder preferences. The department actually worked with the sponsor on a committee substitute to try and ensure that the bidder, if they were to receive the bidder preference, had maintained a place of business for six months of the bid selling the kind of product and service for which the state was issuing the bid for. This provision is intended to resolve a current issue that they have with brokering of the bidders preference. It is effectively the same provision that was amended in HB 288 last year in the House Labor and Commerce Committee. Number 695 MR. PETTY explained Section 11 would make the use of RFPs an easier threshold to meet. Currently, the chief procurement officer must make the determination if the use of competitive sealed proposals is appropriate. This would allow the commissioner of the Department of Transportation and Public Facilities to make that determination for construction and would allow the procurement officer to make a determination when the RFP process is most advantageous to the state. Mr. Petty explained this is one of the ways current reform trend in public procurement seeks to try and include past vender performance as a criteria in making an award and also seeks to make awards best value procurement rather than low bid procurement. MR. PETTY referred to Section 14 and said when a RFP is cancelled prior to notice of intent, the state would maintain a list of proposals received, but would return the proposals to the bidder. Currently, when an RFP is cancelled, those bids and proposals must remain with the procurement officer, which after the procurement is cancelled, becomes public information. Bidders can get this information and then view another bidders proposal. He said they would want, if an RFP is cancelled, to return the proposals back to the bidders. MR. PETTY explained Section 16 would make the term "sole source requirement" more flexible. There has been circumstances with a relatively rigid requirement where there must be clear and convincing evidence that only one source exists where agencies will spend a tremendous amount of time and effort documenting that there is only one source that appears reasonable because the other source is out of state or is out of the country and it is much more expensive. That doesn't meet the test as it currently exists in statute. He said they have had situations where they'll spend a lot of time and effort trying to document it, not meet it, go out to bid and wind up doing business with the one bidder that they assumed they'd be doing business with. This seeks to free that up and would allow you to enter into a single source after there was a determination that it was not practical to go through the normal competitive bid process in a determination that a single source contract would be in the state's best interest. Mr. Petty said it also permits the chief procurement officer to delegate this to other procurement officers. MR. PETTY said Section 17 would allow the chief procurement officer to delegate the limited competition requirement as a method of source selection when it is contrary to the state's best interest to enter into a contract under the normal procurement process. The chief procurement officer may determine that a limited competition situation exists. This would allow the chief procurement officer to delegate it. Mr. Petty pointed out another feature of Section 17 is that for legal services contracts, the attorney general would be named as the person determining when it was appropriate to enter into a legal source for just legal services contracts. Number 909 MR. PETTY referred to Section 19 and said it would create another method of source selection which is called the innovative procurement method. There is a recognition that in today's rapidly evolving procurement environment in the marketplace that the invitation to bid process, which has been the mainstay of public procurement for 100 years or better, and the RFP process doesn't always work. We need to have innovative thinking to figure out better ways of getting the job done. This would establish an innovative procurement track which would challenge procurement officials in the state to do some "outside the box thinking." He said they would have to have the procurement plan reviewed, as to form, by the Department of Law. They would have to have the chief procurement officer determine that it is advantageous to the state to use an innovative procurement process. Mr. Petty said the idea is if we can document some successful uses that innovate procurement processes, we could come back and institutional it. Public procurement throughout the United States is struggling with trying to make the procurement process responsive. This is one way that we could build innovation into the system, but it is controlled and they would be expected to report on it to compile those successes and failures as well. Number 985 MR. PETTY said Section 22 would expand the requirement of independently examining material facts when determining that a limited competition procurement or a sole source for emergency competition procurement is required. He said Section 22 fits with Section 16 and 17. If we're going to give procurement officers more empowerment and authority under 16 and 17, then 22 also makes them accountable for the independent verification of the material facts and also would extend the penalties of a class A misdemeanor to those state officials who might make that determination and not just the chief procurement officer. MR. PETTY explained Section 23 would increase the threshold requirements for use of the small procurement process, which is a simplified process compared to the invitation to bid (ITB) and RFP process. Currently, ITBs and RFPs must be used if the material, construction or service is to be over $25,000. This would expand, for services and supplies, the requirement to use an ITB or RFP when it trips $50,000, and for construction when it trips $100,000. He said that is the threshold that has been established under the 1994 Federal Streamlining Act. Theirs, if you use electronic commerce, would go higher than those thresholds. Number 1072 MR. PETTY said Section 29 allows the commissioner of the Department of Administration to establish, by regulation, a simplified procurement process. Currently, we have a two tiered process which brings the initial protest to the contracting officer with the ability to appeal that decision to the commissioner of Administration as a second tier. The third tier would be to appeal the commissioner's decision to the court. That process takes time and effort not only by the state but also by the contractors that use it. It is the only process we have in statute even if it's a small procurement that is being protested. He said they would want to establish a more streamline simplified protest process that would be consistent with whatever the threshold would be set in statute for the use of small procurement. MR. PETTY informed the committee that Section 30 would require that an invitation that is a protest for solicitation of an RFP or an ITB be brought to the state within ten days before bid opening. He said that is currently a practice of what is done in regulation. Mr. Petty said they want to require bidders to make sure they read it and bring that forward at an early stage where something can be done with the bids to make changes without causing a delay such as extending the bid opening because it was a late protest. Those delays not only affect the state, but they affect the vendors that are submitting bids on it as well. Number 1196 MR. PETTY said Sections 31, 32, 34 and 35 all have to do with the protest process. Currently, we have sort of nonstandard time frames for responses for when the protest report has to be submitted by either the procurement officer or the protester. This seeks to make them more standard with a 10-15-30 day scenario. It is more consistent with court rules and it would be easier for the procurement officials as well as the vendors who are involved in the protest to follow. There is no advantage gained one way or the other with that. It is just a matter of trying to standardize these rules. MR. PETTY explained Sections 36 and 37 would require a contract claim to be brought against the state under a contract controversy within 30 days from the date that the contractor becomes aware of it or the date that they should have become aware of it. Currently, under their contract controversies, there is no statute of limitations for bringing a claim against the state. Mr. Petty said there are lessors who have brought claims as much three years after the award of the lease which makes it difficult for the state to protect its interests. Number 1268 MR. PETTY said Section 33 would limit the protestors' damages to reasonable bid preparation costs or proposal preparation costs. That has been consistent with court settlements for a number of years. He noted they have been advised that was a bit different and the Department of Law has recommended that we protect ourselves by including this in the statute. MR. PETTY informed the committee that Section 39 would exempt the operation, protection and disposal of assets acquired from the agricultural revolving loan fund that go to the Department of Natural Resources. Mr. Petty said an example he is aware of is Matanuska Maid which is operating under a foreclosure. Arguably, it could be said that the operation should be under the procurement law and any disposal of that would be under the procurement process the way the law currently reads. MR. PETTY explained Section 40 exempts lobbying public relations and advertising contracts by the Office of the Governor. That is a recognition that there are times when it is necessary to get people that can be effective in lobbying, either in Washington, D.C., or advertising in local markets, where the RFP or ITB process simply breaks down and doesn't work. He noted this would not extend to line agencies of government. Mr. Petty said another part of Section 40 exempts the acquisition of livestock by Alaska Correctional Industries. The Mount McKinley meat packing plant in the Matanuska Valley, operated by Alaska Correctional Industries, has an obligation to buy livestock that farmers bring into them. It is not possible for them to put out an invitation to bid or quotes for that livestock coming in. It is a barter type situation. This would try to rectify that inaccuracy. Number 1370 MR. PETTY explained Section 41 clarifies that it is specifically permissible to use general services' administration supply schedules for purchases. In the Federal Acquisition Streamlining Act of 1994, the federal government made available for the first time, under their cooperative purchases, the use of federal GSA supply schedules by state and local governments. Mr. Petty said many state and local governments aren't particularly excited about that if they are big and do a lot of high volume purchasing because they can drive pretty good pricing if they have the resources. He said the state needs to take a look at that because we don't have the volume purchasing that a lot of the larger states have. These prices could actually be better prices than what we get on our term contracts. Mr. Petty said he would see that working in such a way that we would be gatekeeper for those contracts. Where we have existing term contracts in place for the items, we wouldn't use those contracts. But where we don't and we go out to bid, we'd like to be able to use those contracts as benchmarks and say, "Here is what the GSA pricing schedule is and if you can't beat that price, we'd want to go with the GSA pricing schedule." Mr. Petty said he would be happy to answer questions. Number 1444 REPRESENTATIVE BRIAN PORTER referred to the lease/purchase change and said he was under the impression that the legislature had to approve lease/purchases over $10 million. He asked if it is something different for those under that amount. MR. PETTY explained that there has been a number of changes to statute over the past five or six years in that area. If it is simply an operational lease, the legislature has to approve it if it is over $500,000 a year or $2.5 million over the term of the lease. He said that information is provided in their budget process. The statute says that approval of the budget covers that. Mr. Petty said on the lease/purchase agreement side, where the lessor would go out and issue certificates for participation or if there is some method of lease financing, the difference at the end is we would have an ownership interest in it. Currently, the threshold is zero. If we are to do any lease/purchase of real estate, it requires notice to legislature and a law to be passed authorizing it. Number 1528 REPRESENTATIVE NORMAN ROKEBERG asked Mr. Petty for the citation of the statue as it relates to the legislative approval for any operating lease. MR. PETTY responded it is 36.30.080. REPRESENTATIVE ROKEBERG questioned what the rationale was about being exempt from legislative approval if there is a $2.5 million lease/purchase agreement. MR. PETTY explained that they need the ability, if there is a lease that they are into that can be converted to a lease/purchase agreement and it makes sense to purchase and is good business for the state, there needs to be some ability to seize those opportunities. REPRESENTATIVE ROKEBERG said, "Seize on the opportunity - I mean these things are -- these windows are to me very narrow. I don't think that is necessarily the case. I'm not sure why you can't go through the existing statutory procedure. If there is a good enough deal you can bring it to the LBA Committee and ask them for authority to proceed - can you not? MR. PETTY indicated it requires a law and LB&A wouldn't meet the requirement to actually pass the law. Number 1615 REPRESENTATIVE ROKEBERG said, "In Section 5 on page 2 you have the lease extension authorization. I'm really concerned about this entire clause. Number 1, the maximum extension of ten years and then these thresholds of savings of only 5 and 10 percent. I mean I think these are really not the proper numbers frankly, based on my experience in the commercial real estate.... The 10 percent is not, you know, in the real world is relatively a marginal savings and I can see this being abused or has a possibility of abuse, cause there doesn't seem to be a deep enough discount (indisc.) the reason for an extension. Plus the other thing about the ten year extension is that if you are in a falling marketplace, as we are now, if you go in and tie up a leasehold interest for ten years, you're not going to be in a position to benefit from any other reductions that may be coming in the future. The converse obviously is true for the business sense and it is very unusual for the state of Alaska -- in the state of Alaska even for commercial enterprises to enter into a ten year leasehold interest unless it is build-to-suit type situation. Very very unusual. At this point I'm going to be very outspokenly against this particular section. Also, you mentioned Section 36. You said that the -- 30 days the claim must be filed within 30 days. It's on page 14. You said that -- you brought up an example about lessees or leasehold interests here again where there would be claims. Would this be like for the claim on the part of a landlord for escalation adjustments for utilities and things like that. Or what were you referring to? Do you know?" Number 1715 MR. PETTY said what he was referring to in a three year issue, although he believes it probably could cover Representative Rokeberg's issues, was it is just a claim where the contractor came in and said, "You owed me more money because I built this building this way instead of that way in response to your lease." Mr. Petty said it's not that they don't believe that they should be addressed but they should be addressed timely. REPRESENTATIVE ROKEBERG said there could be a dispute about the specifications and sometimes that doesn't come to light until the project is significantly underway. He said 30 days seems like an awfully short period of time. MR. PETTY said he believes it could be extended. The point is to have some statute of limitations. He said as they read the bill, an argument could be made that the contractor should be aware of that claim, at least within the contract period. They would have a right during that contract period or as much as 30 days after the exploration of the contract to bring it. He said what they are trying to prevent is a situation where a contractor brings a claim two or three years after the contractual relationship ended. Number 1911 MR. PETTY said he would address Representative Rokeberg's earlier concern about the lease extension. He said they were able to use the flexibility they had in the lease extension for the 18 month window effectively. Mr. Petty pointed out they did not, in all cases, agree to extend the lease for five years for a 10 percent reduction. In some cases they said, "Ten percent doesn't work for you, Mr. Lessor, because the market dictates a stronger savings than that," and negotiated higher savings. He said they have applied this in a way that it has to make good business sense. Just because it meets the requirements of the law and doesn't make good business sense, doesn't mean that they ought to enter into it. He said he believes the department has been responsible on how they dealt with this in the past and he wouldn't see that changing even though the bill would allow them to enter into agreements. Number 1958 REPRESENTATIVE KIM ELTON said he made an assumption that may have been an erroneous assumption and that is that a lot of the real property leases that the department may enter into are for three year periods with the possibility of additional one year extensions. He said he didn't read this in terms of signing a ten year real property lease. He asked if a ten year real property lease is common or is it more common to have a real property lease of three or five years with the possibility of one year extensions. MR. PETTY said ten years ago they would say that three years and five years is about as long as they would go. The fact of the matter is that if they bid on those short turnaround basis today, the moving, cabling and loss of productivity costs would simply eat them alive. He said particularly in the office lease area we have to try and go for longer term leases to prevent the costs of the moves which are becoming more and more expensive. Years ago it used to be relatively cheap to box up stuff and move. That is not the case today. Mr. Petty referred to a decline in market and said while that is true, we can drive good prices on long term leases. He said the average is probably five years for a lease, but if they were going out for a 20,000 square foot lease in today's market, he would look for at least a ten year lease agreement. Number 2045 REPRESENTATIVE ELTON said Section 4 allows for the use of a small procurement process for leases of 5,000 square feet and said he would have expected that the standard would be cost and not necessarily the number of square feet. If you are doing a ten year lease, the cost could be considerable even though you've got 5,000 or less. He asked for an explanation of why the size of the foot print of the real property is the standard rather than the cost. MR. PETTY said if you define leases in terms of size, they are hoping that keeps the size down on leases and is an easier way to deal them. The cost issue escalates up if we're saying that small leases of a certain size makes sense to do in an expedited procurement process regardless of the relative values going up or down over the years. He said this is the threshold the department has proposed. There may be a threshold that makes better sense to the committee. There ought to be a more streamline approach to acquiring small offices. Mr. Petty said he believes that the department does an excellent job at what they do and it tends to be a very contentious environment. He said this will go a long way to give them the flexibility to get the job done with the resources they have available to use. Number 2129 REPRESENTATIVE ROKEBERG referred to Section 5 and said the impact of the marketplace is very substantial particularly if there is a leasehold interest coming through a natural expiration. To use this particular thing and put it in statute on an ongoing basis would have a very devastating impact on the nature of the marketplace within an area like Anchorage. He said this is like granting yourself a renewal option in statute. Renewal option are 100 percent in favor of the tenant. He said he will be adamantly opposed to this. Representative Rokeberg said he thinks these types of clauses are good when conditions are such that the state can take advantage of them, but he believes they should be limited in scope and only for a short period of time. The lease should come to the end of its natural expiration and (indisc.) marketplace and let competition and other landlords and building owners bid on it. MR. PETTY said he wishes they had the staff resources to be replacing all their leases timely when they expire. REPRESENTATIVE ROKEBERG suggest lengthening the leases. He said there is a lot of things they could do. MR. PETTY explained the statute does not permit them to extend a lease beyond its expiration. He said he believes Representative Rokeberg has valid points and that he understands the real estate and the commercial leasing market. Mr. Petty said one of the problems they have when there is an expiring lease is most lessees enjoy the benefit of being able to go back and negotiate with the current lessor to gain rent concessions rather than to go back out in the marketplace. He explained there is a significant cost to go back out into the marketplace. Mr. Petty said the state could be caught in a situation when they go back out in the marketplace, lose a lot of productivity and spend a lot of money to move down the street for a small savings. If they could effectively negotiate a better deal than what they believe the market would yield, they ought to be able to do that. Under the current statute, it is not possible. Number 2263 CHAIRMAN KOTT said in a rising market this would give Mr. Petty the opportunity to extend that lease at a 5 or 10 percent savings depending on the case. He said in response to Representative Rokeberg's comment, the operative word if "may." There is no guarantee that the state won't try to go out there and enter into a 10 percent savings if there is a (indisc.) drop in the real estate market. REPRESENTATIVE ROKEBERG referred to Section 30, relating to the protest of ten days and said he has concerns with the way it is drafted where if there are an improprieties you have to give ten days notice. As a practical matter, it is difficult. He said he understands the reasoning for the clause. One of the major concerns and problems with the procurement code is how disruptive it gets when you have certain vendors who specialize in state (indisc.) because they know the (indisc.) and they delight in things that can hold up the process or slow it down if it doesn't go their way. He said he doesn't understand the use of "alleged improprieties." MR. PETTY said that language, in his view, means that if the bidder believes that we've done something wrong in the bid document or in the process or if there is an ambiguity in the solicitation that they would bring that within ten days before the bid opening. It distinguishes between the protest award. They would clearly have the right to protest the award afterwards because it was a separate issue. If there is something wrong with a bid or an RFP, they certainly have the right to protest it. They are just trying to get them to bring it forward within ten days of the bid opening. Number 2299 REPRESENTATIVE ROKEBERG questioned how the new additional language is consistent with the existing language. He asked if they are exclusive. MR. PETTY said they are not exclusive. He referred to the current language and said they have to protest that award within ten days after the notice of intent to award. The current statute doesn't address the time frame for bringing a protest, a solicitation or the document itself. This attempts to use that same ten day standard. CHAIRMAN KOTT referred to Section 30 and said the ten day requirement is something that is currently being practiced based on regulations. MR. PETTY confirmed they currently do have that in their regulations. Number 2411 REPRESENTATIVE ELTON questioned the time period is between the request for a proposal and the time a proposal must be submitted. MR. PETTY said, "That is a 21 day period by statute from the time that the proposal is put out on the street or the ITB is awarded or put out on the street, the time we open the bid or the due date on the submission of the proposal is 21 days. To shorten that, currently the law requires a determination by the chief procurement officer to reduce that period." [END OF TAPE] TAPE 96-23, SIDE B Number 036 CHAIRMAN KOTT referred to wording in Section 43, "If the procurement officer determine in writing that a shorter notice period is advantageous." He said that 21 day period could be cut down to something less if adequate competition is anticipated. He asked if there would ever be a case where that period of time could be shortened to 11 days and affect Section 30 where it says we must have a filing within ten days. MR. PETTY said that issue was raised in the Senate State Affairs Committee. He explained the department's inclination to deal with that is to have that ten day rule only when the pool solicitation notice is in effect, but if there has been a shortened circulation period simply to require a protest of solicitation to be brought before the bid opening. It would simply have to be brought before the bid opening. That would seem to give somebody as much opportunity as possible to protest the solicitation in advance and give the department a chance to delay the process. Number 093 REPRESENTATIVE PORTER asked if in some cases do they pre-bid conferences that all bidders go to. MR. PETTY said that is a practice used primarily for more complex or high dollar volume term contracts or bids. He said they do use the proposal of the pre-bid conference process. REPRESENTATIVE PORTER referred to Section 30 and said if this conference were scheduled more than ten days after the bid had been let, they would not be precluded from trying to square away ambiguities. That is what that conference is for. MR. PETTY said that is true; however, what they typically find is the shortened circulation bids are usually for the off-the-shelf less controversial type items. If there is a proposal or pre-bid conference, it would be unusual that it would be a short circulation type situation. He said Section 30, as it is written, would apply to any bidder proposal. Usually those more complicated ones have a longer period. REPRESENTATIVE PORTER said Section 30 says that if you have a concern about ambiguity that you must file that ten days before the due date. He asked if the statute would preclude the ability to clear up an ambiguity at a pre-bid conference that was something less than ten days. MR. PETTY said he doesn't believe it would because if that came out in a pre-bid conference at a mark less than ten days, it would be knowledge that the contracting officer would have and it would be hard for them to ignore that knowledge and not act on it. He explained that his reading of the Cliff Berg decision is that the contracting officer must act on the knowledge he has. He said he doesn't think that would be any kind of a basis to not deal with the protest on its merit. He said if that was an issue the committee wanted to address, he is sure they could look at amending this to have a pre-bid conference exception to that rule. REPRESENTATIVE PORTER indicated that would be helpful to him. Number 201 REPRESENTATIVE ROKEBERG told Mr. Petty he thinks the department is doing a good job in terms of trying to come to grips with the procurement code. The vendors and business people of the state hate it. He explained his concern is with the innovative procurement idea and asked Mr. Petty to give an example. MR. PETTY said, "I can give you an example. The two live examples that it is my understanding that the Procurement Advisory Council would be addressed by this. One of them is the Exxon Valdez oil spill procurements that have taken place for their research and project studies. We met with a group of procurement officers several years back to try and figure out, within the state procurement laws, a way that we could go out and competitively acquire, in accordance with 36.30, these unique requirements that they had for studies. And we couldn't figure out a way that satisfied the Exxon Valdez Trustee Oil Spill Council because they wanted, at one point, before awarding and before completing the evaluation on the RFPs, to make the proposals public. Our procurement process, for a good reason prevents that. It prevent that because if we disclose a proposal to another proposer before we have had a discussion stage, that would give them an unfair advantage. So it's appropriate that it should prevent that from happening. But in this case, we could not figure out a way to acquire what they needed and meet the requirements. In the end, the federal contracting officers wound up buying those studies under a federal procurement practice known as a broad agency announcement which allowed them to do what they needed to get the job accomplished and still had a (indisc.) procurement process. I felt, frankly, frustrated because one of our goals is to help agencies get their job done in accordance with the law and we just simply weren't able to make that happen. That is a case where we could have developed an innovative procurement process that would have accomplished the end result. We wouldn't have heard, `Well the procurement law won't let us do it,' and had the accountability and the competition that we believe the law intended to have. MR. PETTY said, "Another case and point that I have been advised of is that the actual procurement of the new ferry was exempted by the legislature some years back would have actually fit under this innovative procurement process but couldn't technically have been done under the ITB or the RFP rules in the procurement process." MR. PETTY said he wouldn't suggest that this should be used all the time, but it is an avenue where procurement professionals can figure out a better approach to getting the job done. He said in state government, we need to encourage some innovative thought processes when we can, yet maintain the controls and the accountability. He said it allows them, when there is a unique requirement or when there is a value that can be achieved, to employ that kind of process. He said he would not think they would undertake this lightly. Number 357 REPRESENTATIVE ELTON said the purpose is to permit latitudes that allow professions to do their jobs. He said he thinks when you try to apply a cookie cutter recipe to each of the individual situations that a procurement officer is going to face, that is very very difficult. While there may be individual parts that can be fine tuned on this bill, the purpose of the bill is really noble. He said this does allow the professionals in the field latitude to accomplish some things that are very difficult to otherwise achieve with a cookie cutter approach. He said he would also note that the latitude always comes with danger and the danger, in this instance, would be legislative audits and other things that may sway legislative opinion on the way an agency (indisc.). Representative Elton said professional latitude gets right to the heart of this. Number 438 CHAIRMAN KOTT said HB 482 would be held until Wednesday. HB 439 - MINING BONDING POOL & ADVISORY COM'N Number 470 CHAIRMAN KOTT announced the committee would address HB 439, "An Act relating to minerals, including coal, to the statewide bonding pool for the reclamation activities imposed on mining operations, and to the statewide bonding pool's use for surface coal mining projects." FRED PASCO, Legislative Secretary to Representative Tom Brice, Alaska State Legislature, read the following statement on behalf of Representative Brice: "House Bill 439 originally sought to open the statewide bonding pool participation of Alaska's coal industry, in addition to creating a commission to evaluate the Alaska coal program. The matter of the bonding pool was addressed in a subsequent piece of legislation initiated in the other body and now in the House. However, there are issues beyond the statewide bonding pool affecting the coal industry in Alaska "The Alaska coal program is currently included in the proposed operating budget for FY 97, but Representative Brice strongly feels that the issues surrounding surface coal mining in Alaska with state regulatory primacy is the most effective approach to them, compel us to look to the long term impact of the state coal program with respect to federal primacy of over this resource. "The CS proposes to establish a temporary commission tasked with evaluating the Alaska coal program under the state Surface Coal Mining Control and Reclamation Act as it relates to the federal act and the Office of Surface Mining. This will open discussion on the issue during the life of the commission and enlarge the base for future decisions regarding state primacy with respect to regulation of surface coal mining in Alaska. "Once again, Representative Brice thanks you, Mr. Chairman, and the members of the Labor and Commerce Committee for the opportunity to present this legislation." Number 542 REPRESENTATIVE ELTON referred to page 1, line 8, of the proposed committee substitute which said, "The commission shall be composed of individuals not employed by government at any level..." He asked what the rationale is of having a commission that is (indisc.) commission exclusively rather than a commission that also has a representative or two on a nine member commission that understands the application of regulations as well as serving under the regulations. He questioned why they can't be employed by government at any level. MR. PASCO said when the commission we first discussed, they were looking at an original fiscal note of $75,000. Partially, an approach to this was looked at from the standpoint of the industry hoping to finance some of the undertaking of the commission. With an arrangement that the Department of Natural Resources, Division of Mining and the Coal Association had discussed, they came to an understanding that through private sector members of the commission being funded, per diem and travel costs by the industry, this is one mechanism which would lower the cost to the state. In addition, the publishing of the report would make it available to the division for its analysis. REPRESENTATIVE ELTON said he would be a little bit bothered, whether they're members of the commission or not, if they don't show up they are not going to be assets to the commission from (indisc.). CHAIRMAN KOTT noted there may be somebody on teleconference that could address that issue. Number 661 REPRESENTATIVE SANDERS moved to adopt the proposed committee substitute for HB 439, Version K, dated 2/22/96. CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB 439 was before the committee. Number 685 CHARLIE BODDY, Usibelli Coal Mine, Incorporated, testified via teleconference. He informed the committee he is also Secretary/Treasurer of the Alaska Coal Association. Mr. Boddy informed the committee that the bill before the committee is a bill the Alaska Coal Association has worked on through the Minerals Commission for about six years. The importance of the legislation at this time is that there has been major legislation at the federal level. One piece of federal legislation is HR 2372, sponsored by Wyoming Representative Barbara Cubin. He said there is another piece of legislation in the Senate. This legislation would turn control of the surface coal mining and reclamation in states that have primacy programs, which Alaska has, back to the state. Mr. Boddy noted Usibelli would get together with the state and federal agencies to work through exactly how that role change would occur. He referred to the composition of the commission and how the appointments would go and said they believe there should be certain members selected from the House and Senate, and the Governor will have (indisc.) appointed. Number 827 REPRESENTATIVE ROKEBERG asked why the pooling was taken out of the committee substitute. CHAIRMAN KOTT said he believes the pooling has been removed because SB 240 is now in the House. He referred to the selection of the members of the commission and said the current bill indicates that the Governor shall make the appointments to the commission. Chairman Kott said he doesn't see anything that indicates some of the members will be from the Senate or House. MR. BODDY clarified that as those individuals are selected, possibly there should be a division in that the Governor should not be selecting all nine members. He suggested that maybe the Governor, the House and the Senate should all select three members. Number 909 JULES TILESTON, Director, Division of Mining and Water Management, Department of Natural Resources, was next to testify via teleconference from Anchorage. He said he has reviewed the committee substitute. The Administration has proposed returning primacy of the Alaska Coal Program to the federal government. As a result of that DNR has been working very closely with representatives of the Alaska Coal Association and the federal government to make sure something doesn't drop through the cracks should that primacy shift actually take place. This included a series of informal discussions at which time they identified several processing of decision points that needed fine tuning. He said they held a two day coal reclamation workshop with members of the industry, consultants and Alaskan scientists who are familiar with reclamation practices in Alaska. There is a follow up meeting scheduled for next week. Mr. Tileston explained that last week the Administration amended its proposed fiscal 97 budget to retain in the state primacy of the coal program. He said he would give the committee a "What if" scenario. If you assume that the Alaska Coal Program is to be retained, then we have already underway a series of steps that would do that and then the issue becomes one of what do we gain in relationship and there is a modest cost that goes with it. However, if you assume that the Alaska Coal Program cannot be funded, and that is a budget decision, then a sunsetted organization appointed by the Governor would serve a useful mechanism to ensure that the federal government listens to and fairly considers the specific challenges of producing coal in Arctic and SubArctic environments. Alaska is not like Canada or West Virginia and that is how the federal program is presently structured. Number 1032 REPRESENTATIVE ELTON said it seems odd to him that we are creating a commission of nine members to study this issue and to deal with primacy issues, none of whom would end up being agency people who were the applicators of the regulation. He asked if it would be helpful to have one or two members of this nine member commission actually be the people who apply regulations instead of industry people. MR. TILESTON said the basic thing they did in concert with the Alaska Coal Association at Representative Brice's request is take a very hard look at the fiscal note. A large percentage of that cost is when you start adding commissioners or these sorts of levels of staff. He said they were looking at a program that would assure industry the opportunity to pull together what they thought. He noted this is very similar to the way the way the Alaska Minerals Commission now operates. The costs go up as you add state government officials to the commission. REPRESENTATIVE ELTON questioned whether there would be agency people in attendance when the commission meets. MR. TILESTON said the fiscal note does contemplate that there would be staff support. He said he anticipates that one month of staff support would be required for each of the two years that the commission would be in operation. Mr. Tileston said they are working daily and his presumption at this point is that the coal program primacy will remain in the state. He said the department works daily with the various coal organizations and lessees. Number 1143 REPRESENTATIVE ELTON said it has been noted that this is a two year project. The committee substitute says it sunsets on July 1, 1999. He said the way he reads it, it would be three years. MR. TILESTON said Representative Elton is correct. Number 1256 REPRESENTATIVE ROKEBERG said in the sponsor statement there is an indication that there would be as much as $1.6 million with a $123,000 match. He asked what is happening in terms of the funds and what impact the bill has on those funds as well as the Governor's amended budget recommendation. MR. TILESTON said the Administration originally deleted the coal program and that was for general funding. There was a very substantial federal (indisc.) program that went with it. He said Representative Brice's figures were indeed in the Administration's original budget. Last week, the Administration adjusted that budget and the adjustments were made from other agencies within the Department of Natural Resources to come up with the general fund match money. The coal program, as far as the Administration, has been restored to its budget. The general fund amount was approximately $123,000 and in return, there was a combination of funds not only from federal match but from another entirely separate program called the Abandon Mine Lions Program. That has about $4 million, 100 percent federal kitty that is currently available to the state. He said right now they'll be contracting for "dirt work" to reclaim former areas mined by coal, (indisc.) track will be up in the Sutton area. REPRESENTATIVE ROKEBERG said this isn't all related to the Healey area. MR. TILESTON explained that the only producing coal mine today is at healey, the reclamation is not. REPRESENTATIVE ROKEBERG questioned whether Usibelli benefit from this federal money. MR. TILESTON said he would say the state as a whole benefits from it because part of it deals with the permitting, which is done in his shop, as opposed to Denver if the federal government takes it on. The fact that areas which are currently being used for recreation in the Sutton area have high walls that do indeed pose health hazards. They'll be reduced as a result of the AML program. Number 1352 CHAIRMAN KOTT referred to the issue of the sunsetting clause and asked if that was a typographical error. MR. TILESTON said it was an improper addition on his part. CHAIRMAN KOTT said we're giving them two years and on the third year, if they need it, they're on their own. He referred to testimony given in the House Resources Committee, and said according those who testified in the industry, two years was sufficient enough. MR. TILESTON said the wrong fiscal year was inadvertently inserted. Number 1394 REPRESENTATIVE ELTON moved on page 2, line 6, substitute 1998 for 1999. REPRESENTATIVE PORTER objected for the purpose of discussion. He said if it is that the committee wants to entertain the notion of putting three, three and three rather than all nine coming from Governor, they might need this time for that process to fully be completed. He said we wouldn't be able to make our appointments until next year. REPRESENTATIVE ROKEBERG questioned why the Senate President and House Speaker make the appointment. REPRESENTATIVE PORTER said, "Because they generally would like to check with us." Number 1394 REPRESENTATIVE ELTON said if there is going to be an amendment to change the appointment process, he would withdraw his amendment. CHAIRMAN KOTT said the amendment is withdrawn and asked if there was further discussion. Number 1465 REPRESENTATIVE PORTER moved that on page 1, line 11, the committee delete the phrase, "The governor shall appoint the member of the commission. Each member serves at the pleasure of the governor." and insert "Three members of the commission shall be appointed by the governor, three by the Speaker of the of the House and three by the Present of the Senate whose members shall serve at the pleasure of their appointer." REPRESENTATIVE ELTON objected for the purpose of discussion. He said, "A guess the only concern that I have, I don't know frankly if it is a valid concern or not, but we've got a commission in which we're requiring that the people all have knowledge of the surface coal mining industry. My guess is there is not an awful lot of -- not a large pool of people out there that may be available. I guess we're making an assumption also that this will bring balance to it. I don't know that it does. I guess somebody would have to convince me that we're going to end up with appointees that are better or worse under the old system. It just doesn't make an awful -- essentially what we're saying is we don't trust the Governor to do this so we're going to complicate the process and I don't know if that's a fair assumption." REPRESENTATIVE PORTER said what he is saying by the amendment is that regardless of who is in office at this particular time when these kinds of commissions are appointed, they are either confirmed or made by the legislature in balance with appointments made by the Executive Branch. Since there are no provisions for confirmation, he would offer the alternative of appointments from both groups. These kinds of commissions should, as much as possible, represent a balance of philosophies and points of view in addition to the requirement of a particular expertise. CHAIRMAN KOTT asked Mr. Boddy to comment as to how many applicants we really have out there and how difficult it would be to acquire the nine members. Number 1650 MR. BODDY said he believes that there would be a sufficient number of people probably to commission three or four times depending on the expertise you wanted to draw from. REPRESENTATIVE ROKEBERG said he still isn't clear on the amendment in terms of the appointments by the House and Senate. He asked if that is the Speaker and President, and then without confirmation so there wouldn't be a problem with that. REPRESENTATIVE PORTER said as the bill currently stands, it would be a three year commission. REPRESENTATIVE ROKEBERG said given the short duration of this commission, they should be appointed and get to work right away rather than wait for the next session to be confirmed. Number 1734 REPRESENTATIVE ELTON said we're recreating a situation where we're recreating the same problem we've had with other appointments. Representative Elton pointed out the effective date of the bill is July 1, and asked if the existing Speaker and the existing Senate President would the ones that are going to be allowed to appoint six members of the committee despite the fact that their term in office goes for another three or four months. He said he isn't sure that makes sense, yet he doesn't want get into the situation where we wait until there is a new Speaker and Senate President to do the appointments. REPRESENTATIVE ROKEBERG said he wasn't aware that they lost their titles and positions until the end of the year. REPRESENTATIVE ELTON pointed out the new legislature will elect the new presiding officers. CHAIRMAN KOTT said there is still a motion before the committee and asked for a roll call vote. Representatives Sanders, Masek, Porter Rokeberg and Kott were in favor of the motion. Representative Elton was against the motion. Representative Kubina was absent. So the amendment was adopted. REPRESENTATIVE PORTER explained he was anticipating that there would be discussion about confirmation and we'd end up that way. He said that is why he wanted to leave that option open. Representative Porter said he wouldn't be opposed to an amendment to shorten this time period considering the method for appointment the committee just adopted. REPRESENTATIVE ROKEBERG said he would support Representative Elton's motion. REPRESENTATIVE ELTON said he just withdrew it. He said if somebody offers it, he may vote for it. He said we've created a situation in which we may have delayed the appointment process. Number 1897 REPRESENTATIVE ROKEBERG moved on page 2, line 6, to substitute 1998 for 1999. CHAIRMAN KOTT said there is a motion to change the sunset date from July 1, 1998, to 1999. He asked if there was objection. Hearing none, the motion was adopted. Number 1931 REPRESENTATIVE ELTON made a motion to move HB 439, as amended, with the attached new fiscal note, out of committee with individual recommendations. CHAIRMAN KOTT said there is a motion before the committee to move CSHB 439 out of committee with individual recommendations and the attached fiscal note. He said the motion needs to be amended as there is a draft fiscal note. Chairman Kott said the committee has to adopt the draft fiscal note. REPRESENTATIVE ROKEBERG made a motion to adopt the fiscal note attached to CSHB 439(L&C), as amended, before the committee. CHAIRMAN KOTT said there is a motion to adopt the draft fiscal note as the fiscal note that will be forwarded to House Finance. He asked if there was an objection. Hearing none, the draft fiscal note was adopted. Number 1143 REPRESENTATIVE ELTON moved that CSHB 439, as amended, with the new fiscal note, out of committee. Hearing no objection, CSHB 439, as amended, was moved out of the House Labor and Commerce Committee. HB 533 - ALASKA AEROSPACE DEVELOPMENT CORP. BOARD Number 2061 CHAIRMAN KOTT announced the committee would address HB 533, "An Act relating to the board of directors of the Alaska Aerospace Development Corporation." CLIFF STONE, Legislative Assistant to Representative Alan Austerman, sponsor of HB 533, read the following statement into the record: "The Alaska Aerospace Development Corporation (AADC) is a young organization that has energetically pursued its charge to bring a new industry and new opportunities to Alaska. Its first task was to bring talented people with significant experience in the aerospace industry to Alaska as employees and consultants. It has done that. Through their efforts, the AADC has won federal contracts, generated significant industrial interest, and brought Alaska international recognition as a potential center for a major growth industry. The probability for success is extremely high and the prospects for Alaska's economy are exceptional. "AADC's focus has been on two projects. The development of a rocket launch complex in Kodiak and the location of satellite ground stations in the Fairbanks area. AADC has also pursued educational opportunities throughout the state and global warehousing and manufacturing possibilities in Anchorage. "The present board of directors of the AADC has served the state of Alaska extremely well, in directing the purposes of the corporation. The professional, technical and scientific expertise provided by the University of Alaska members of the board, have guided the start up phase of this endeavor. "As we move into the construction phase of this operation and beyond, it is imperative that the board be restructured to include specific members of the business community. These individuals should have experience in and an understanding of economic development and marketing analysis, based on their existing or previous participation in private enterprise. "Additionally, the CS and new comparison charts that you have before you would allow two more individuals who have or currently hold positions in the commercial space industry to serve on the board." MR. STONE said as an ex officio member, Representative Austerman feels this would lend credence to the space industry and puts more expertise on the board as we move into the operational phase of this project. Number 2270 REPRESENTATIVE ROKEBERG asked if the legislative ex officio is already included in the statute. MR. STONE said he believes that is in statute, under the education section, 14.40.830, subsection (d), "In addition to the members of the board or directors described in (a) of this section, two members of the legislature shall serve as ex officio nonvoting members..." He said the Speaker of the House made a decision to appoint Representatives Austerman and Therriault. Senator Frank was appointed as the nonvoting member. Number 2355 REPRESENTATIVE SANDERS made a motion to adopt CSHB 533, work draft 9-LS1737/C. CHAIRMAN KOTT asked if there was an objection. Hearing none, the committee substitute was adopted. Number 2403 REPRESENTATIVE PORTER indicated concern regarding a board having an even amount of members. MR. STONE said the addition of the tenth member is a nonvoting member. He said Mr. Ladner with Alaska Aerospace felt that it would be a good addition to the board to have an international member so there would be connections to the Pacific Rim and beyond. He said the board would be a nine voting member board. [END OF TAPE] TAPE 96-24, SIDE A Number 037 MR. STONE noted Representative Austerman would like the committee to consider three amendments. Number 051 REPRESENTATIVE ROKEBERG moved Amendment 1, which follows: Page 2, line 1 and 2, following "(4)": Delete "the executive director of the Alaska Science and Technology Foundation;" Renumber the following subsections on page 2: Line 3; (5) becomes (4) Line 5; (6) becomes (5) Line 12; (7) becomes (6). Number 070 CHAIRMAN KOTT objected for the purpose of hearing Representative Rokeberg describe the amendment. REPRESENTATIVE ROKEBERG said the amendment would delete director of the Alaska Science and Technology Foundation (ASTF). He said he would defer to Mr. Stone. Number 106 MR. STONE said it was felt that because of HB 315, which passed last year, ASTF now has the authority to grant Alaska Aerospace up to $5 million to get the project off the ground. Although legal counsel says there is no conflict of interest with the executive director of that entity sitting on the board, Representative Austerman felt it might be in the best interest to delete the executive director of ASTF and allow some more expertise from either the business world or from the commercial space industry. REPRESENTATIVE ELTON said the ASTF executive director would be deleted and substituted with an additional person from a commercial space industry. MR. STONE explained the executive director of ASTF would be deleted, then two corporate officers would be added to the top of the list. He noted that is in the proposed Amendment 2. Number 277 CHAIRMAN KOTT withdrew his objection to Amendment 1. Number 296 REPRESENTATIVE ROKEBERG moved that Amendment 2 be adopted which follows: Page 1, line 8 and 9, following "(1)": Delete "one state resident who have recently held or who are currently holding positions in a private corporation as a president, " Insert "two state residents who have recently held or who are currently holding positions in a private corporation as a president," Renumber the following: Page 2, line 20, following "in": Delete "(a)(1), (6), and (7)" Insert "(a)(1), (5), and (6)" Page 2, lines 23 and 24, following "in": Delete "(a)(1), (6), and (7)" Insert "(a)(1), (5), and (6)" CHAIRMAN KOTT said hearing no further objection to Amendment 1, it has been adopted. He said there has been a motion to adopt Amendment 2, and asked if there was objection. REPRESENTATIVE ELTON objected for the purpose of a question. He said this means we now would have two state residents who probably won't have any expertise at all in the field. He asked for an explanation. He referred to a University of Alaska facility member that is involved in research and asked why that wouldn't be just as valuable a second corporate officer. MR. STONE said in his mind, it certainly is. The person who sits on the existing board has been a valuable asset to the Aerospace Board. When his rotation came up, it was felt that going into the construction and then the eventual operational phase of the launch facility and the satellite down link, people with the business sense - marketing analysis, economic development expertise, could better guide us to bring in the customers to further the mission of the corporation. Number 408 REPRESENTATIVE ELTON said he would lift his objection with the observation that 50 percent of the people that direct private corporations are in the lower half of their field. He noted he is not sure that he is totally comfortable with the notion that one is better than the other. REPRESENTATIVE ROKEBERG asked if perhaps the addition of the word "chairman" or "president" may be appropriate. MR. STONE said it goes on to say, "private corporation as president, vice-president, corporate officer, financial officer..." It is broad and lists four or five individuals. He said to address Representative Elton's concerns, the thinking was that at least people in those positions should have a good working knowledge of what it takes to run a corporation. Number 511 REPRESENTATIVE ELTON reiterated his intent to withdraw his objection. CHAIRMAN KOTT said there being no further objection, Amendment 2 was adopted. Number 552 REPRESENTATIVE ROKEBERG moved Amendment 3, which follows: Page 2, following line 25: Insert "Sec. 4. AS 14.40.831 is amended to read:" Chair and vice-chair. [THE PRESIDENT OF THE UNIVERSITY OF ALASKA OR THE DESIGNEE OF THE PRESIDENT SHALL BE THE CHAIR OF THE BOARD OF DIRECTORS OF THE CORPORATION. THE COMMISSIONER OF COMMERCE AND ECONOMIC DEVELOPMENT OR THE DESIGNEE OF THE COMMISSIONER SHALL BE VICE-CHAIR.] The board of directors of the corporation shall select a chair and vice-chair from among all voting members of the board of directors of the corporation. Renumber the following section on Page 2: Change "Sec. 4. TRANSITIONAL PROVISION. to Sec. 5. TRANSITIONAL PROVISION." CHAIRMAN KOTT asked if there was an objection to the adoption of Amendment 3. REPRESENTATIVE ELTON said, "I hate to object because it sounds like that's what I really am." He referred to Amendment 3 and said he doesn't understand the "Chair and vice-chair." Representative Elton said he doesn't see how the language would fit. Number 643 MR. STONE said Section 4 is almost the statute in total. He noted he should have provided a copy of the statute to the committee members. The president of the University of Alaska or the designee of the president shall be the chair of the board of directors of the corporation. The commissioner of Commerce and Economic Development or the designee of the commissioner shall be vice-chair of the board of directors of the corporation. Mr. Stone indicated that there is one more sentence that he can't bring to mind. He said the feeling was if you lost president Jerome Komisar to one event or anther, somebody else coming in could be from out-of-state or could be an in-state person. Representative Austerman's feeling was that in discussions with Mr. Ladner, the board of directors of the corporation could then, amongst themselves, pick the best qualified individual. Number 711 REPRESENTATIVE ELTON withdrew his objection to Amendment 3. CHAIRMAN KOTT said hearing no further objection, Amendment 3 has been adopted. Number 750 JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic Development, said the Administration generally and basically supports the concept behind the bill. He stated the department generally concurs with the approach taken and the amendments that were just adopted. He noted they were amendments outlined in his proposed testimony. Mr. Bush said the board and the department foresaw they would have the commissioner of Commerce and Economic Development, the president of the university or his designee. The department then would recommend that there be seven public members appointed. Of those seven members, the department would recommend that at least three would have space expertise. The language in the committee substitute is fine except he would recommend one change, and that is the removal of the word, "commercial" in the phrase "commercial space industry." He said it concerns them only because there may be people with expertise in the space industry but not necessarily in the commercial space industry who may be qualified to be on the board. Mr. Bush said they would recommend it be changed to the number of at least three. MR. BUSH said another change would be the removal of the director of the Geophysical Institute of the University of Alaska, and make that another public appointee as well. He said the board would be seven public appointees, at least three of which would have space expertise and two of which would have expertise on financial matters. Mr. Bush said that would leave two positions that are not specifically designated at this point in time. The reason is the Governor has indicated he would like to appoint someone from the local community that is most affected by the project so that there is local interest. Number 987 PAT LADNER, Executive Director, Alaska Aerospace Development Corporation, testified via teleconference from Anchorage. He said his board should be congratulated for the fine work it has done. Mr. Ladner said the launch site was originally supposed to be at Poker Flat, but due to flight safety considerations, they had to do an evaluation and find another site. Originally, the board had a large contingency from the university and rightfully so. He said they are now moving into the next phase and he thinks they now need more corporate input. Mr. Ladner said his chairman believes that there are two options. You can leave the board the way it is because of all the things that are going on right now. You could ask the board to come up with a recommended change structure or you can change the board. MR. LADNER said if it is the determination of the legislature to change the board, then the board should be changed and have a quantum leap upgrade from the outstanding people that currently serve. To do that, a good portion of the people need to have commercial space experience. He said he thinks the commercial space area is what they need as they are doing commercial ground stations in Fairbanks. They are looking at a vast majority of the launches and Kodiak is (indisc.) commercial space and not military. Mr. Ladner said by bringing the people from the commercial space industry on to the board, they would bring a lot of expertise and recognizable credibility to what they are doing. Also, some of the people they were working with to create partnerships and possibly equity financial investments, you'd want to have a position on the board for those people. REPRESENTATIVE ROKEBERG said Mr. Ladner had indicated the "commercial" space industry and said there had been concerns about the "commercial" space industry. He said the existing statute has the words, "experience understanding the aerospace or commercial space industry." He asked if there are enough commercial space industry companies in operation that they could draw from. Representative Rokeberg asked if there isn't also the potentiality of some competitive advantages or disadvantages if these people were on the board. Number 1197 MR. LADNER said it could be that way but there are a lot of real notable aerospace or commercial space people. He said you would have people like Tom Stafford, who was on Apollo 14 and 15, and is very well respected, but is not associated with any one company. He is recognized throughout the world and would bring extreme credibility to any organization he is associated with. He said he thinks the option should be made. Mr. Ladner said if somebody came in and said, "Hey, I'll put in $15 million but I want a seat on the board," the right answer would be, "You have a seat on the board." REPRESENTATIVE ROKEBERG asked if it is his intention to try to use the board seats as marketing tools. MR. LADNER said absolutely not. He pointed out there are currently people on the board who are not connected with any major space industry but they bring a lot to the board. Mr. Ladner said they need more of those types of people on the board, along with the corporate people, the financial officers, and chief executive officers. REPRESENTATIVE ROKEBERG asked Mr. Ladner if he has seen the committee substitute. MR. LADNER indicated he didn't have the committee substitute or the amendments. REPRESENTATIVE ROKEBERG said rather than delete "commercial space industry" it should read "aerospace or commercial space industry." MR. LADNER indicated that would be fine with him. Mr. Ladner explained on February 29, they held their final design review for the Kodiak launch complex in Washington, D.C. He said over 105 people attended from the aerospace industry, and government people from the Air Force and NASA. Mr. Ladner noted there was a midway point design review September, a year ago. At the most recent design review Senator Stevens gave the welcoming and opening remarks, followed by Senator Murkowski. Representative Young's chief of staff provided some comments. The Governor provided an excellent VHS video that welcomed everyone to the meeting and expressed his support and willingness to work with the industry. MR. LADNER referred to the satellite ground stations in Fairbanks and said one company has purchased or leased land on Chena Hot Springs road called "Earth watch" and they should be starting their ground station shortly. Space Imaging International is in the process of finalizing their lease agreement on the Richardson Highway. Mr. Ladner said they are also working with Orvil (Sp.?) Science - Orv Image, for another ground station in the Fairbanks area. The Air Force has also identified a place in Fairbanks. He referred to the cottage industry possibilities and said they are really good. Space Imaging could employ anywhere from 10 to 30 people depending on what type of operation they establish. MR. LADNER said a lot of this is the remote sensing which they would have access to within the state to satisfy a lot of our natural resources mapping and planning for governmental agencies. MR. LADNER referred to the Kodiak launch complex and said they are putting together the construction request for proposals package. They are also finishing up the environmental process. Hopefully, construction will start before the end of the construction season. Number 1515 There being no further questions or testimony, CHAIRMAN KOTT closed public testimony on HB 533. REPRESENTATIVE ROKEBERG moved Amendment 4. He explained the amendment would be on page 2, line 5, add the words "aerospace or". It would then read, "four members who have held or currently hold positions in the aerospace or commercial space industry..." CHAIRMAN KOTT asked if there was an objection to the amendment. Hearing none, Amendment 4 was adopted. Number 1559 REPRESENTATIVE ROKEBERG made a motion to move CSHB 533(L&C), as amended, Version C, with individual recommendations and a zero fiscal note, out of committee. REPRESENTATIVE ELTON objected. He asked which committee the bill would go to next. CHAIRMAN KOTT indicated Labor and Commerce is the last committee of referral. Number 1593 REPRESENTATIVE ELTON said the committee dealt with a bill earlier which reduces state costs by eliminating state positions. Now there is a bill before the committee where they could also reduce costs. With the adoption of Amendment 4, on page 2, line 12, we provide for one nonvoting member who has recognized prominence and influence within the international aerospace industry. He said he doesn't feel strongly about this because he thinks that sometimes cost is initially (indisc.). Now that people can be added from the noncommercial part of the aerospace industry, why not just add four people, provided that one is a person who has recognized prominence and influence within the international aerospace industry. That way nine people would be brought to the board meetings rather than ten and that person, with that stated area of expertise, would be allowed to vote. He said the person could be someone we're bringing in from Great Britain, Germany or Seattle. We don't know who or where, but why fly somebody from some place down south for these meetings when they don't get a chance to vote. CHAIRMAN KOTT asked Representative Elton if he still maintains his objection. REPRESENTATIVE ELTON said he will maintain his objection. He indicated he will think about this and maybe bring an amendment to the floor. CHAIRMAN KOTT asked Representative Rokeberg to withdraw his motion. He then asked Representative Elton to think about it over the next two days and bring something back to the committee at the next meeting. REPRESENTATIVE ELTON said he would draft an amendment for the committee's consideration. CHAIRMAN KOTT said the bill would be held over until the following Wednesday. REPRESENTATIVE ROKEBERG suggested that the committee might want to consider if the Kodiak public member also.... SB 197 - INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES Number 1745 CHAIRMAN KOTT announced the committee would address CSSB 197(L&C), "An Act relating to insurance covering an insured who is a victim of domestic violence and requiring certain disclosures by an insurer." Number 1750 SENATOR DAVE DONLEY, sponsor of the measure, said SB 197 would prohibit discrimination against victims of domestic violence by insurance carriers in Alaska. This has been a very serious problem in the Lower 48, and although insurance companies assure us that they don't currently practice this in Alaska and we don't have any evidence of it being in Alaska, we want to keep it from becoming a problem like it has outside Alaska. Representative Donley said there has been such a serious problem that seven to ten other states have already adopted similar legislation that is pending before Congress. He said he thinks four other states currently have legislation pending before them. Representative Donley said the bill has the support of many many public interest groups around the state. Number 1795 REPRESENTATIVE ROKEBERG questioned what the bill does. SENATOR DONLEY explained the bill says that if you're an insurance company you cannot deny insurance, increase rates or otherwise discriminate against a victim of domestic violence if that is your only reason for doing so. He said the bill has been carefully drafted in consultation with the Division of Insurance to make sure that the word "only" is included. So if they didn't know that a person was the victim of domestic violence, they wouldn't be in violation for any of those things because it wouldn't be the only reason they were making the decision they made if they were adjusting the rates. Senator Donley said some of the testimony in the record regarding some of the concerns from insurance companies, the division feels they are totally addressed by making sure the word "only" is kept in the bill. REPRESENTATIVE ROKEBERG asked what type of insurance. He asked what an example of the problem. SENATOR DONLEY explained the bill extends to all types of insurance. The biggest problem currently in the Lower 48 is what our statutes refer to as disability insurance which is commonly referred to as health insurance. He noted in the committee files there are some examples of what has happened in other areas. He indicated he has been asked, "If this hasn't been a problem in Alaska, why do you want to do it?" He said it is basically to keep it from happening in Alaska. Number 1925 REPRESENTATIVE SANDERS asked if it is possible that by the passage of the bill, it will encourage victims of domestic violence to remain in that situation rather than to encourage them to get out of the situation. SENATOR DONLEY said one thing that happens today is people are afraid to report domestic violence because they fear they would jeopardizing their access to insurance. He said he has heard that from men and women's groups and the shelters around the state. They actually think there could be a problem in the state right now, but the victims are afraid to report it because they are afraid they'll lose their insurance. That is another reason it would be difficult for them to get out of their situation. Number 1966 REPRESENTATIVE ROKEBERG referred to a letter in his committee file from Lessmeier and Winters regarding State Farm's position. He asked Senator Donley to comment. SENATOR DONLEY said he believes they recommended some different language. CHAIRMAN KOTT informed Representative Rokeberg that somebody from Lessmeier and Winters was on teleconference. Number 2004 CHAIRMAN KOTT asked Senator Donley how you would determine whether or not a person was a victim of domestic violence. He noted the question is in regards to releasing the records by the insurer. He read from the bill page 1, line 13, "except with the permission of the applicant or the insured as required by a court of competent jurisdiction." He asked how a company would know whether or not this would be record that would fall within this category. SENATOR DONLEY said he would like to have the Division of Insurance answer that question as he worked with them in coming up with the language. He said it was a specific request from the Network on Domestic Violence and Sexual Assault. Senator Donley said he was asked by Representative Masek's staff how it would be enforced. He explained it would be the same provision as any other insurance provisions. The division would identify that something is going on or they'd be responding to a complaint from a consumer. They would then have to do some sort of finding of fact that there was a domestic violence situation and then we'd proceed from that point. Number 2097 MICHAEL LESSMEIER, Attorney, Lessmeier and Winters, testified via teleconference. He informed the committee he was testifying on behalf of State Farm. Mr. Lessmeier explained State Farm has a serious concern about domestic violence and as a result of that concern, they've done a number of things across the country. One is to support tougher penalties for partner violence. Another thing that State Farm has done is they have initiated the corporate alliance to end partner violence which is a program of (indisc.) companies that is intended to increase public awareness for domestic violence. Another thing they have done is supported legislation that prohibits discrimination against victims of domestic violence. Mr. Lessmeier said they support what Senator Donley is trying to do, but they don't agree with how he is going about doing it. MR. LESSMEIER explained a concern is that the current version of SB 197 doesn't clearly state that an insurer must be allowed to underwrite or rate for a medical condition, the same as they would for someone who is not a victim of domestic abuse. Our concern is that it should be a non-factor; it shouldn't be a positive or negative factor. The language in the bill is not clear on that issue. He said they suggested some language that would solve that problem. MR. LESSMEIER said the second is that SB 197 is, in their view, are very unnecessary and very burdensome, for example subsection (b), which addresses the records disclosure. In many instances they don't know if somebody is a victim of domestic violence because there is nothing in their applications that so indicates. It is not one of their underwriting criteria. The question is, "What are we supposed to do in that situation." There are currently court rules, (indisc.) rules, that deal with physician/patient privilege. Mr. Lessmeier said their concern is they don't know how one would read, in years down the road, the provision that is set forth in subsection (b). MR. LESSMEIER said another problem is the subsection dealing with required disclosure. That is a major underwriting change that would literally apply across all lines of insurance. If the intent is a concern about domestic violence, this provision is extremely broad and goes far beyond that. Mr. Lessmeier said one of the questions they have is, "What are the needs for this?" If there is a need for it, why not try to accomplish this in another less burdensome way. For example, have required disclosure only if there is a request for it. MR. LESSMEIER said their final concern is the bill applies to all lines of insurance. It doesn't just apply to the lines where there have been problems. Those lines of insurance are life, health and disability. Mr. Lessmeier said that to their knowledge, there have been no complaints about any problems in Alaska. Mr. Lessmeier referred to the legislature passing a bill and said to use language that is specific and is applicable to the problems that have occurred. He noted the committee has their written comments. Number 2268 REPRESENTATIVE ELTON noted he was provided with the written comments. He referred to Mr. Lessmeier's concern with subparagraph (b) and said he doesn't understand what the problem is. He said if you don't know, then you can't violate provisions of subparagraph (b) because you can't release information that you don't know about. Representative said he doesn't understand the problem Mr. Lessmeier has with that paragraph. MR. LESSMEIER explained the difficulty is that indeed they may not know and may not have reason to know, but that still might not prevent somebody from taking action against (indisc.) that we shouldn't know. Those are the kinds of things that occur in the legal arena all day long. Mr. Lessmeier said the point they want to make is there is a legitimate concern about discrimination in this area. In attempting to solve that problem, lets not create so many other problems that we've created a larger problem than we saw. Number 2320 REPRESENTATIVE ELTON said he remains unconvinced because the subparagraph says that you may not disclose that information. He said he is having a difficult time understanding that if it is a prohibitive subparagraph that you may not disclose information, he has a tough time understanding why there is a problem Mr. Lessmeier may have with not disclosing information he knows nothing about. MR. LESSMEIER said that is not what the language says. The language says, "Records that reflect the fact." It doesn't say, for example, "a statement by someone that is a victim of domestic violence." He stated another concern they have, as a result of that, is they oftentimes in litigation may see, for example, different issues where there was a question about the causation of a particular injury; and, in looking back at the causation of a particular injury, they come upon records that indicate that there had been a preexisting injury and that the preexisting injury was allegedly caused by an instance of domestic violence. In that instance, one of the questions they would have is if you have (indisc.) license, could they go back and use that prior information. Mr. Lessmeier explained what he is saying is that we are creating an area where there is certainly potential for litigation. He said it is their belief that it is happening unnecessarily. MR. LESSMEIER said when you look (indisc.) domestic violence and you look at the concept, what you will see is an insurer, particularly a property and causality insurer, is the least likely to know about an instance of domestic violence. People in the work place, neighbors, family and friends are more likely to know than the insurance company is. They are also the least likely to disclose it. Number 2320 REPRESENTATIVE ELTON asked Mr. Lessmeier to expand on the arguments regarding the types of lines of insurance offered and expand on the fact that if there is no problem in some lines, then why would we need exclusion language in the bill. MR. LESSMEIER said if the bill is to solve a specific problem that is (indisc.), why not go after the problem where everybody thinks it is most likely to occur. He noted in Alaska, we're dealing with an abstract problem. Mr. Lessmeier said he doesn't think there has been any evidence that there has even been a complaint about this in Alaska. [END OF TAPE] TAPE 96-24, SIDE B Number 047 REPRESENTATIVE ELTON referred to the first paragraph of the letter from Mr. Lessmeier and said he notes that although State Farm strongly supports legislation that prohibits discrimination, you want to be sure that any legislative prohibition doesn't prevent an insurer from underwriting a rating for a medication condition, he assumed, not related to domestic violence. MR. LESSMEIER stated that it doesn't matter what it is related to. He said they just want to be able to underwrite for the medical industry. If they can't do that what happens is they end up in a situation where they may be discriminating for a condition as opposed to treating them neutrally. Once that happens, then they discriminate against other people that may have a condition that is unrelated to this particular condition. REPRESENTATIVE ELTON said he understands the concern, but the difficulty he is having is a portion of the bill provides for a required disclosure on what elements constitute the refusal of offering the insurance. He said it would seem to him that if you go through and make a decision based on other medical facts, you would disclose that, therefore, precluding any assertion that the denial was based on the fact this person was victim of domestic violence. MR. LESSMEIER said he thinks there is a concern about that being an issue with or without the required disclosure. There either is or there isn't evidence of underwriting based on a status separate and apart from this issue. He said if that is going on it would be easy to detect. If that is a legitimate concern, you solve that problem based on a specific situation rather then what this bill does which requires disclosure anytime there is a denial of coverage. REPRESENTATIVE ROKEBERG referred to the letter which included suggested language from Mr. Lessmeier, "(3) An insurer is granted immunity for criminal or civil liability resulting from compliance with this statute." He asked Mr. Lessmeier if he thinks he is putting himself in harms way of being sued because he would try to enforce the provisions of the statute. MR. LESSMEIER said that is one of the concerns he has and that is why he wanted that language in the bill. REPRESENTATIVE ROKEBERG asked Mr. Lessmeier to give him an example of how that would occur. MR. LESSMEIER explained a possible example would be someone claiming that this information should have been disclosed to someone else in order to protect someone. Number 150 REPRESENTATIVE ROKEBERG said he isn't sure he understand the entire concept of customary business practice in the insurance industry as far as disclosures of records and the files on a client. He asked what the industry standard is for this type of thing. MR. LESSMEIER said he doesn't know of any disclosure that occurs in the matter of course except, for example, the property and casualty business. He explained the only disclosure he is aware of that would occur would be in the context of litigation and once someone litigates an issue, then things are disclosed as a matter of course in the context of that litigation. He stated he isn't aware of any other disclosures. REPRESENTATIVE ROKEBERG asked if anybody can make inquiries about what is in his client's files. MR. LESSMEIER said they can make inquiries, but that information is typically not released. The only exception he knows of would be inquiries that are made by the Division of Insurance. He explained they are required to keep records and certain documentation to satisfy the Division of Insurance. The other exception to that would occur in instances of fraud where there is suspicion of fraud. REPRESENTATIVE ROKEBERG asked if the requirement in the bill is to provide confidentiality for those records. He also asked if that is a burden on the industry. MR. LESSMEIER explained part of the problem is that it is unclear to him as to what this would mean. He asked if they would be required to search records. For example, if there is a concern about fraud, would they be prevented from providing records to the national bureau that investigates those things or shares information. If they are involved in a civil case, would they be prevented from somehow using cases in the civil case. He stated that, as a matter of practice, people treat these records as confidential. CHAIRMAN KOTT announced the next person to testify would be Beverly Bowers. Number 294 BEVERLY BOWERS, Bering Sea Womens Group, was next to testify via teleconferece from Nome. She said in listening to Mr. Lessmeier's testimony she can appreciate what he is saying, but he is talking almost as though his very reasons are reasons to pass the bill. He said there hasn't been any complaints in Alaska but there are complaints in other places. This discrimination against victims of domestic violence is being done in other states and we know it can be done here in Alaska. Discrimination is very widespread in many different ways. As we talk of insurance we forget it also covers medical care and in going to get medical care, the reason for the injury is stated when a woman comes to the emergency room. The insurance company is aware of this. Nothing is ever kept a secrete, we know this is going to come out in some way. Ms. Bowers said this is a very widespread problem and we need to take this step to prevent this very thing from coming to Alaska. Alaska has a reputation of protecting its women and doing things in advance. Ms. Bowers urged passage of the legislation. Number 397 JOHN GEORGE, Lobbyist, American Council of Life Insurance, was next to address SB 197. He explained the American Council of Life Insurance is a life insurance trade association representing virtually all of the life insurance companies that do business in the state of Alaska. He informed the committee his clients have provided him with about a four page list of changes they would like made to the bill. Mr. George said he has also reviewed Mr. Lessmeier's shorter version of recommended changes and those changes accomplish virtually everything his clients have tried to do in their four pages of suggested changes. He said he is prepared to throw their support totally behind State Farm's proposal. REPRESENTATIVE ROKEBERG asked Mr. George how the concept of the bill would affect the life insurance underwriting industry in Alaska. MR. GEORGE said there are several ways. For instance, we know that there are cases where a spouse has procured insurance on their spouse in order to collect should that person die, which could be from domestic violence. There are cases where the policy was purchased years ago, but now we have this insurance policy out there and we could collect a lot of money if our spouse were to die. He said there may actually be a case where an insurer could be sued for writing a policy because that encouraged a murder. Mr. George noted the life insurers are also writers of health insurance. Mr. George said the things Mr. Lessmeier talked about being supportive of a domestic violence bill, something that is going to preclude insurers from discriminating. He said they have no problem and encourage that. Number 510 REPRESENTATIVE ELTON apologized for having to leave the meeting earlier for a few minutes. He indicated that when he came back it seemed he walked in on an argument against life insurance. He said it seems to him there are many reasons not to issue or even have a life insurance (indisc.) if we stretch as far as saying that may be a cause for murder. Representative Elton asked if he missed something. MR. GEORGE said there are a number of reasons the life insurance industry is commenting on this bill. That is one of the things. As he recalls, there is a probate bill that deals with that and precludes a spouse from collecting benefits under a life insurance policy if they were the cause of the death. The disclosure of information is a concern to them as well. They don't generally know about these things, they don't go and ask the question, but the way the bill is worded it might infer from a pattern of prior injuries that they were a result of abuse. Mr. George referred to disclosing that information and said there are not exceptions in law for who you can disclose it to unless you have permission of the insured or a court order. So arguably, if the Division of Insurance wanted to see those, and he believes they have a right to look at any record an insurance company has, then there is the question of whether they can have it or not. You better go get a court order. MR. GEORGE explained insurance companies reinsure risks. So they might take their entire book of business and ask another insurance company to take a portion of it. The other insurance company might say, "We want to see your underwriting files." They're possibly going to become an insurer but they're not the insurer on the business. He asked if it permissible to share that underwriting information or do you have to go through the entire book of business and pull those pieces out. Mr. George said the State Farm proposal is simple, it's straight forward, and it protects the victims of domestic violence from discrimination. Number 666 LAUREE HUGONIN, Executive Director, Alaska Network on Domestic Violence and Sexual Assault, was next to address SB 197. Ms. Hugonin explained that advocates working to end violence against women encourage battered women to document their injuries by seeking medical care and by requesting that the violent incident be noted in their medical records. She said health care providers are usually the first service professional and sometime non-family member to have contact with women who have been abused and are in a unique position to identify victims of domestic violence. If we are able to identify abused women through routine screening and accurate diagnosis, this can help in breaking the cycle of violence. Early prevention can prevent or ameliorate many of the long-term health and social consequences associated with victimization. Ms. Hugonin explained that she would review what they are doing in Alaska to help medical providers recognize domestic violence and to be able to identify it. MS. HUGONIN gave committee members a pamphlet called "One in Five Women," which is a pamphlet for health care providers to be able to know about domestic violence. She explained in 1995, the Division of Public Health, Maternal, Child and Family Health Section, receive a three year federal grant to train medical professionals and to develop a sustainable training team in the state. She said this is only one of two projects that were funded in the country and the only state project that was funded. MS. HUGONIN informed the committee that nationally, the American Medical Association, the American College of Obstetrics and Gynecology, the American College of Physicians, the American Trauma Society, the American Association of Emergency Physicians, and several other organizations are working to reduce injuries, prevent domestic violence and save lives by development of other professional medical educational materials. National health initiatives require medical institutions to develop domestic violence protocols, plans for training and improving their facilities response to domestic violence. She said battered women are finding the courage to reach out for their medical care and documentation. Medical care givers have now become committed to prevention of this lethal crime through identification and documentation. Unfortunately, in the Lower 48 medical care givers now know that doing the right and responsible thing of identifying and documenting abuse may result not only in the loss of health insurance coverage, but other important protection such as life, disability and home owners insurance. The reality is that every women is at risk of becoming a victim of domestic violence. Just as there is no excuse for that violence, legal or otherwise, there is no excuse for the insurance industry to justify this discriminatory practice. Ms. Hugonin said her organization is aware that currently it has not been identified as a problem in Alaska. We don't know that that means it doesn't exist. There is considerable concern that people are not coming forward with it as a problem because of a consequence of losing their insurance. Several states have passed legislation prohibiting discrimination and several other states have legislation pending. She urged support of SB 197 in its current form. Number 928 REPRESENTATIVE ELTON made a motion to adopt HCSCSSB 197(L&C). CHAIRMAN KOTT asked if there was an objection. REPRESENTATIVE ROKEBERG objected. Number 962 REPRESENTATIVE ELTON withdrew his motion. CHAIRMAN KOTT said the committee would address the committee substitute the following Wednesday. Number 975 CHAIRMAN KOTT said the committee would address the appointment of Clair Ramsey to the Real Estate Commission. He noted the Governor has also added Gorden Severson, from Anchorage, to another one of the vacant positions. He said he would like to move these names forward if there is no objection to the two member. REPRESENTATIVE ROKEBERG said there is no objection. CHAIRMAN KOTT said those two names would be moved out of committee with the recommendation that they go forward before the whole body. ADJOURNMENT Number 1010 CHAIRMAN KOTT adjourned the meeting at 5:57 p.m.