Legislature(1995 - 1996)

04/17/1996 03:10 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                          
                         April 17, 1996                                        
                           3:10 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                                                      
 Representative Gene Kubina                                                    
 MEMBERS ABSENT                                                                
 All members present                                                           
 COMMITTEE CALENDAR                                                            
 HOUSE BILL NO. 483                                                            
 "An Act relating to the calculation of unemployment insurance                 
 benefits; and providing for an effective date."                               
      - PASSED CSHB 483(L&C) OUT OF COMMITTEE                                  
 HOUSE BILL NO. 501                                                            
 "An Act requiring competition in local exchange telephone service."           
      - HEARD AND HELD                                                         
 HOUSE BILL NO. 345                                                            
 "An Act relating to the procurement of investment and brokerage               
 services by the Alaska State Pension Investment Board."                       
      - HEARD AND HELD                                                         
 HOUSE BILL NO. 549                                                            
 "An Act relating to partnerships; and providing for an effective              
      - SCHEDULED BUT NOT HEARD                                                
 HOUSE BILL NO. 416                                                            
 "An Act relating to fees or assessment of costs for certain                   
 services provided by state government, including hearing costs                
 related to the real estate surety fund; fees for authorization to             
 operate a postsecondary educational institution or for an agent's             
 permit to perform services for a postsecondary educational                    
 institution; administrative fees for self-insurers in workers'                
 compensation; business license fees; fees for activities related to           
 coastal zone management, training relating to emergency management            
 response, regulation of  pesticides and broadcast chemicals, and              
 subdivision plans for sewage waste disposal or treatment; and                 
 providing for an effective date."                                             
      - SCHEDULED BUT NOT HEARD                                                
 HOUSE BILL NO. 510                                                            
 "An Act relating to occupational licensing fees and regulatory                
 costs for occupational licensing functions; and providing for an              
 effective date."                                                              
      - SCHEDULED BUT NOT HEARD                                                
 HOUSE BILL NO. 363                                                            
 "An Act requiring banks to pay interest on money in reserve                   
 accounts held in connection with mortgage loans."                             
      - SCHEDULED BUT NOT HEARD                                                
 HOUSE BILL NO. 518                                                            
 "An Act exempting certain persons engaged in selling or servicing             
 certain vehicles from overtime wage requirements."                            
      - SCHEDULED BUT NOT HEARD                                                
 HOUSE BILL NO. 407                                                            
 "An Act relating to discrimination by certain insurers against a              
 person with a genetic defect."                                                
      - SCHEDULED BUT NOT HEARD                                                
 CS FOR SENATE BILL NO. 193(L&C)                                               
 "An Act requiring insurance coverage for certain costs of birth;              
 and providing for an effective date."                                         
      - SCHEDULED BUT NOT HEARD                                                
 CS FOR SENATE BILL NO. 199(FIN)                                               
 "An Act relating to environmental audits and health and safety                
 audits to determine compliance with certain laws, permits, and                
      - SCHEDULED BUT NOT HEARD                                                
 PREVIOUS ACTION                                                               
 BILL:  HB 483                                                               
 SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                  
 JRN-DATE     JRN-PG                  ACTION                                   
 02/09/96      2689    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/09/96      2689    (H)   L&C, STATE AFFAIRS, FINANCE                       
 02/09/96      2690    (H)   FISCAL NOTE (LABOR/ALL DEPT'S)                    
 02/09/96      2690    (H)   GOVERNOR'S TRANSMITTAL LETTER                     
 02/28/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 02/28/96              (H)   MINUTE(L&C)                                       
 03/06/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/06/96              (H)   MINUTE(L&C)                                       
 04/17/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 BILL:  HB 501                                                               
 SHORT TITLE: COMPETITIVE LOCAL PHONE SERVICES                                 
 SPONSOR(S): REPRESENTATIVE(S) THERRIAULT,Martin,Mulder,Toohey,Vezey           
 JRN-DATE     JRN-PG                  ACTION                                   
 02/12/96      2726    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/12/96      2726    (H)   STATE AFFAIRS, LABOR & COMMERCE, JUD              
 02/27/96              (H)   STA AT  8:30 AM CAPITOL 102                       
 02/27/96              (H)   MINUTE(STA)                                       
 02/28/96      2909    (H)   STA RPT  2NR 3AM                                  
 02/28/96      2909    (H)   NR: JAMES, PORTER                                 
 02/28/96      2909    (H)   AM: GREEN, ROBINSON, WILLIS                       
 02/28/96      2909    (H)   ZERO FISCAL NOTE (H.STA/DCED)                     
 02/28/96      2909    (H)   REFERRED TO LABOR & COMMERCE                      
 03/08/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 03/08/96              (H)   MINUTE(L&C)                                       
 03/26/96              (H)   L&C AT  2:00 PM CAPITOL 17                        
 03/26/96              (H)   MINUTE(L&C)                                       
 03/30/96              (H)   L&C AT 12:00 PM CAPITOL 17                        
 03/30/96              (H)   MINUTE(L&C)                                       
 04/17/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 BILL:  HB 345                                                               
 SPONSOR(S): REPRESENTATIVE(S) FOSTER, Ivan                                    
 JRN-DATE     JRN-PG                  ACTION                                   
 05/10/95      2088    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 05/10/95      2088    (H)   STATE AFFAIRS, L&C, FINANCE                       
 03/21/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/21/96              (H)   MINUTE(STA)                                       
 03/21/96      3259    (H)   COSPONSOR(S): IVAN                                
 03/26/96              (H)   STA AT  8:00 AM CAPITOL 102                       
 03/26/96              (H)   MINUTE(STA)                                       
 03/27/96      3390    (H)   STA RPT  CS(STA) 2DNP 4NR                         
 03/27/96      3391    (H)   DNP:  ROBINSON, WILLIS                            
 03/27/96      3391    (H)   NR: JAMES, PORTER, GREEN, OGAN                    
 03/27/96      3391    (H)   FISCAL NOTE (REV)                                 
 04/03/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 04/03/96              (H)   MINUTE(L&C)                                       
 04/17/96              (H)   L&C AT  3:00 PM CAPITOL 17                        
 WITNESS REGISTER                                                              
 DWIGHT PERKINS, Special Assistant                                             
 Office of the Commissioner                                                    
 Department of Labor                                                           
 P.O. Box 21149                                                                
 Juneau, Alaska 99802-1149                                                     
 Telephone:  (907) 465-2700                                                    
 POSITION STATEMENT:  Testified on CSHB 483(L&C).                              
 RON TORGERSON, Chief Hearing Officer                                          
 Division of Employment Security                                               
 Department of Labor                                                           
 P.O. Box 25509                                                                
 Juneau, Alaska 99802-5509                                                     
 Telephone:  (907) 465-2775                                                    
 POSITION STATEMENT:  Answered questions on CSHB 483(L&C).                     
 TED MONINSKI, Director                                                        
 Regulatory Affairs                                                            
 AT&T Alascom                                                                  
 210 East Bluff Drive                                                          
 Anchorage, Alaska 99501                                                       
 Telephone:  (907) 264-7876                                                    
 POSITION STATEMENT:  Testified on the proposed committee substitute           
                      for HB 501.                                              
 JIMMY JACKSON                                                                 
 2550 Denali Street, Suite 1000                                                
 Anchorage, Alaska 99503                                                       
 Telephone:  (907) 265-5545                                                    
 POSITION STATEMENT:  Testified against the proposed committee                 
                      substitute for HB 501.                                   
 BOB LOHR                                                                      
 Alaska Public Utilities Commission                                            
 1016 West Sixth Avenue                                                        
 Anchorage, Alaska 99501                                                       
 POSITION STATEMENT:  Testified on the proposed committee substitute           
                      for HB 501.                                              
 JACK RHYNER, Representative                                                   
 Alaska Telephone Association                                                  
   and Tel Alaska, Incorporated                                                
 2121 Abbott Road                                                              
 Anchorage, Alaska 99507                                                       
 Telephone:  (907) 349-2400                                                    
 POSITION STATEMENT:  Testified on the proposed committee substitute           
                      for HB 501.                                              
 STEPHEN CONN, Executive Director                                              
 Alaska Public Interest Research Group                                         
 P.O. 101093                                                                   
 Anchorage, Alaska 99510                                                       
 Telephone:  (907) 278-3661                                                    
 POSITION STATEMENT:  Testified on the proposed committee substitute           
                      for HB 501.                                              
 GEORGE DOZIER, Legislative Assistant                                          
   to Representative Pete Kott                                                 
 Capitol Building, Room 432                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-3777                                                    
 POSITION STATEMENT:  Explained CSHB 345(L&C), Version K.                      
 JOHN WALSH, Legislative Assistant                                             
   to Representative Richard Foster                                            
 Alaska State Legislature                                                      
 Capitol Building, Room 410                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 465-3789                                                    
 POSITION STATEMENT:  Answered questions on behalf of the sponsor,             
                      Representative Foster, on HB 345.                        
 DOUGLAS MERTZ, Attorney                                                       
 319 Seward Street                                                             
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 586-4004                                                    
 POSITION STATEMENT:  Testified against HB 345.                                
 MILT BARKER                                                                   
 119 Seward Street, Suite 3                                                    
 Juneau, Alaska 99801                                                          
 Telephone:  (907) 586-4301                                                    
 POSITION STATEMENT:  Testified against HB 345.                                
 DAVE ROSE, Chairman and Chief Executive Officer                               
 Alaska Permanent Capital Management Company                                   
 900 West Fifth                                                                
 Anchorage, Alaska 99501                                                       
 Telephone:  (907) 272-7575                                                    
 POSITION STATEMENT:  Testified in support of HB 345.                          
 STERLING GALLAGHER, President                                                 
 Sterling Limited                                                              
 727 Canoga Avenue                                                             
 Woodhill, California 91367                                                    
 POSITION STATEMENT:  Testified on HB 345.                                     
 ACTION NARRATIVE                                                              
 TAPE 96-35, SIDE A                                                            
 Number 001                                                                    
 The House Labor and Commerce Standing Committee was called to order           
 by Chairman Pete Kott at 3:10 p.m.  Members present at the call to            
 order were Representatives Kott, Masek, Elton and Sanders.                    
 Representative Rokeberg arrived at 3:15, Representative Porter                
 arrived at 3:20 and Representative Kubina arrived at 3:25 p.m.                
 HB 483 - CALCULATION OF UNEMPLOYMT INS BENEFITS                             
 Number 069                                                                    
 CHAIRMAN PETE KOTT announced the first order of business would be             
 HB 483, "An Act relating to the calculation of unemployment                   
 insurance benefits; and providing for an effective date."  Chairman           
 Kott said the committee has previously heard HB 483 and the bill              
 has taken a different approach from the previous bill that was                
 before the committee.  It decreases the employer contribution                 
 slightly and increases the employee contribution slightly.                    
 Number 149                                                                    
 REPRESENTATIVE BEVERLY MASEK moved that the committee adopt CSHB
 CHAIRMAN KOTT asked if there was an objection.  Hearing none, CSHB
 483(L&C) was before the committee.                                            
 Number 169                                                                    
 DWIGHT PERKINS, Special Assistant, Office of the Commissioner                 
 Department of Labor, was first to testify.  Mr. Perkins stated that           
 before he would explain the changes that have occurred, he would              
 give a historical view of the program.  He read the following                 
 statement into the record:                                                    
 "For years, the unemployment insurance system has enabled Alaskan             
 workers, their families and their communities to weather periods of           
 unemployment with their economic well-being and dignity intact.               
 Recent events in Sitka and Wrangell, as well as in other areas of             
 the state affected by plant closures or layoffs, have demonstrated            
 all too well the importance of this safety net for our working men            
 and women.                                                                    
 "The schedule of benefits for unemployment insurance has not been             
 adjusted to increase the maximum weekly benefit amount since 1990.            
 Alaska currently ranks forty-ninth in the nation in unemployment              
 insurance wage replacement, with the average weekly benefit amount            
 only slightly more than 27 percent of the average weekly wage for             
 the state.  In terms of the maximum weekly benefit amount, Alaska             
 ranks thirty-fifth in the nation, notwithstanding the higher cost             
 of living here.                                                               
 "I want to emphasize that this is a modest proposal.  The bill                
 would raise Alaska's wage replacement less than 1 percent, to a               
 little over 28 percent.  While not enough to change our wage                  
 replacement ranking amongst the states, this small change would               
 provide a measure of additional security to Alaska's average wage             
 earners and help slow the erosion of purchasing power during hard             
 "As we work together to strengthen Alaska's economy to provide                
 quality jobs for Alaska's families and to move certain low-income             
 people from welfare to work, we must ensure that there is an                  
 adequate safety net in place to allow unemployed workers sufficient           
 finances to remain in their homes, in their communities, and in               
 Alaska until they are reemployed."                                            
 Number 430                                                                    
 MR. PERKINS stated in the version of the bill before the committee,           
 9-GH2027\C, Cramer, 4/16/96, is a big difference from the previous            
 version.  The bill is an act relating to employer and employee                
 contribution rates for unemployment insurance and to the                      
 calculation of unemployment insurance benefits and providing for an           
 effective date.  Mr. Perkins explained it would become effective              
 January 1, 1997, whereby the rate of contributions for each                   
 employer will go from 82 percent to 80 percent of the average                 
 benefit cost rate multiplied by the employer's experience factor              
 set out in the table.  In addition, the rate of contributions for             
 an employer must be rounded to the nearest one-one hundredth.                 
 MR. PERKINS explained currently, the employee picks up 18 percent             
 of the average benefit cost rate and that will increase to 20                 
 percent.  He referred to page 3 of the bill and said it is the                
 beginning of the unemployment weekly benefit amount that an                   
 individual will receive.  Mr. Perkins noted the wording from page             
 3 to page 6, line 3, is currently in statute.  Mr. Perkins said,              
 "What this bill proposes to do, in statute, because that was                  
 another difference - it was a floating rate that would have                   
 occurred based on income, the average income of the state is 75               
 percent of the average income in the old bill.  That was a floating           
 schedule of benefits.  It would go up and down with the amount of             
 wages made in particular years by the employee."  Mr. Perkins said            
 there was concern that it would not work in the best interest of              
 certain parties.  The legislature felt it would be more comfortable           
 to have it in statute in the event that a down-turn in the economy            
 went so bad it could have some significant changes in the amounts             
 of the rate that the employee would receive.                                  
 Number 635                                                                    
 MR. PERKINS referred to page 6, line 4, and said the new schedule             
 starts at the maximum benefit amount of $22,250.  For every $250 of           
 wage increase, the weekly benefit amount will go up $2.  It starts            
 at $214 and reaches a maximum of $248 at 75 percent of the average            
 annual wage base of $26,750.  The maximum they will receive is                
 $248.  Mr. Perkins said today, the average annual is $22,250.  Mr.            
 Perkins discussed a chart he gave committee members titled,                   
 "Employer and Employee Contributions Under the Proposal to Cap the            
 WBA (Weekly Benefit Amount) at $248 in 1997, Change the                       
 Employer/Employee Tax Share to 80/20, and Round the Employee Tax to           
 the Nearest 100th."                                                           
 MR. PERKINS pointed out that it has been since 1990 that anything             
 has been done.  In the first proposal the department brought                  
 forward was going to be by a flexible cap.  There were concerns               
 about that.  The current version before the committee is supported            
 by the department and it is a very modest proposal.  Mr. Perkins              
 said he would answer any questions the committee may have.                    
 Number 110                                                                    
 CHAIRMAN KOTT indicated the new version is a good compromise                  
 solution to the problem and much of the concern expressed by                  
 industry has been addressed.  He said it is fair that employees at            
 least share in some of the burden rather than placing all of the              
 burden on the shoulders of the employers.                                     
 Number 1146                                                                   
 REPRESENTATIVE KIM ELTON questioned whether the previous fiscal               
 note, dated February 27, still applies to the new version.                    
 MR. PERKINS gave committee members a new fiscal note that applies             
 to the Senate version.                                                        
 CHAIRMAN KOTT noted there is a significant difference.                        
 REPRESENTATIVE ELTON said he can see why industry would be pleased.           
 They would be saving $3 million and the cost would be transferred             
 to the employees.  He stated it is probably unfair to characterize            
 this for all employees.  The people at the low end of the wage                
 scale will be paying more, but they will not see any more benefits.           
 The only people that will get increased benefits are those at the             
 upper end of the wage scale.                                                  
 MR. PERKINS referred to Representative Elton's concern regarding              
 where the benefit amount starts and rises at the upper level as we            
 know it today and said Representative Elton is correct.  He said he           
 wants to address Representative Elton's concern, but he doesn't               
 want to sound biased to one group of wage earners over another.  At           
 the lower end of the weekly benefit amount based on $1,000, if you            
 take those figures and see what the benefit amount is for the other           
 end of the scale, you will see that just the opposite has occurred.           
 He referred to the wage base in today's figures and said the                  
 average wage currently for Alaska above $22,000.                              
 Number 1354                                                                   
 CHAIRMAN KOTT said he believes the average earnings in Alaska is              
 about $32,000.                                                                
 MR. PERKINS said that is correct.  He stated that this is based on            
 75 percent of that average wage base.                                         
 REPRESENTATIVE ELTON questioned whether it is fair to characterize            
 that the low income people will be paying more and will not get any           
 MR. PERKINS said Representative Elton is right in saying that but             
 conversely just the opposite has been happening on the upper end.             
 The upper end has been paying for the lower end in the benefit                
 amount in the ratio by which they receive.  In other words, they              
 actually receive more percentage wise than the person making                  
 $22,250 based on the same amount of the unemployed weeks.                     
 Number 1430                                                                   
 REPRESENTATIVE BRIAN PORTER asked if another way to characterize              
 the bill be to a redistribution of the costs and benefits based on            
 a more equitable formula.                                                     
 MR. PERKINS said Representative Porter is close.  That could be a             
 Number 1450                                                                   
 REPRESENTATIVE GENE KUBINA said he looks at this differently in               
 that the people at the low end probably have not worked full-time             
 40 hour weeks in order to have this low of a base.                            
 Number 1482                                                                   
 REPRESENTATIVE JERRY SANDERS said he thinks that Representative               
 Kubina is correct.  He said another thing that he thinks would be             
 an advantage is that a lot of the people making a small wage over             
 this period of time, not necessarily by the hour, are people from             
 outside Alaska who work three or four months during the summer.               
 They will be contributing a little higher rate and when they leave            
 Alaska, they won't gain as much and the people in Alaska will.  He            
 stated he supports the bill.                                                  
 REPRESENTATIVE ELTON said his understanding is that a minimum wage            
 job is $4.75 an hour in Alaska.  That equates to about $10,000 a              
 year.  So somebody could be working full-time and make $10,000 a              
 year which would place them down on the scale.  He said it is not             
 just part-time people the committee is taking about.                          
 Number 1539                                                                   
 CHAIRMAN KOTT said that is a valid point.  To a large extent it               
 wouldn't be under that scenario.  There may, however, be other                
 assistance programs that would be available to those people who are           
 making $10,000 or under $16,000 per year.                                     
 Number 1554                                                                   
 REPRESENTATIVE BEVERLY MASEK asked how many people are at the                 
 $22,000 level compared to employees that are at the lower level.              
 MR. PERKINS said currently, 33 percent of the claimants are in the            
 top range of the claimants receiving weekly benefit amounts.  He              
 said 33 percent of those claimants are crowded into the upper end.            
 If you go from that point and work the distribution back to the               
 other direction, you will find an interesting scenario.  Mr.                  
 Perkins asked Mr. Torgerson to comment.                                       
 Number 1616                                                                   
 RON TORGERSON, Chief Hearing Officer, Division of Employment                  
 Security, Department of Labor, informed the committee he worked on            
 the draft of the bill.  He said to keep in mind that the entire               
 benefit schedule is based on less than average wages.  So the                 
 people even at the very top end of the schedule who are making the            
 maximum are qualifying on wages that are three quarters of the                
 average wage in the state.  It really isn't a windfall to the high-           
 end wage earners.  With the change, they will be qualifying on                
 wages well below the average wage, approximately $26,000.  Mr.                
 Torgerson explained the schedule is a creature of legislative                 
 compromise and it over compensates employees at the bottom end of             
 the scale and it under compensates people making close to the                 
 average wage.  People at the very bottom end of the scale can                 
 actually draw out more in benefits than they made in base period              
 wages, but the average replacement is only about 24 percent.  The             
 schedule is certainly is not top heavy in terms of who has been               
 CHAIRMAN KOTT said there were no further witnesses to testify.                
 Number 1696                                                                   
 REPRESENTATIVE KUBINA made a motion to move CSHB 483(L&C) out of              
 committee with individual recommendations and the new accompanying            
 fiscal note.                                                                  
 MR. PERKINS pointed out that the fiscal note the committee members            
 have is for a committee substitute of the Senate version of the               
 bill.  He said he will have a corrected version of the fiscal note            
 for CSHB 483(L&C) before the committee adjourn.                               
 CHAIRMAN KOTT indicated that would be fine.  He stated without                
 objection CSHB 483(L&C) is moved out of the House Labor and                   
 Commerce Committee.                                                           
 HB 501 - COMPETITIVE LOCAL PHONE SERVICES                                   
 Number 1784                                                                   
 CHAIRMAN KOTT announced the next order of business would be HB 501,           
 "An Act requiring competition in local exchange telephone service."           
 He said HB 501 was before the committee about six weeks ago.  Both            
 HB 501 and HB 531 was put into a subcommittee.  Both of those bills           
 deal with telecommunications based on the revolutionary                       
 Congressional Act that was signed into law February, 1996.  He                
 said, "It was our impression that we should at least look at some             
 of the provisions and reach some kind of a conclusion or compromise           
 on what the state should be doing and based on that assumption, we            
 sent both bills to the subcommittee."  Chairman Kott said there has           
 been a considerable amount of time spent in trying to reach some              
 kind of conclusion or a compromise within the industry.  It was the           
 intent to bring some kind of consensus to the table and then move             
 a bill out of committee if that consensus was acquired.                       
 Number 1835                                                                   
 REPRESENTATIVE SANDERS, chairman of the subcommittee, explained the           
 subcommittee has spent a considerable amount of time on the issue             
 in trying to reach a compromise that will maintain support for                
 universal services while still paving a way for fair and open                 
 competition between the different factions.  There are several                
 factions and all of them have been cooperative but it is so                   
 complicated.  You have the rural, urban, local and long-distance.             
 When you get into long-distance, you've got the interstate and the            
 intrastate.  Representative Sanders said the committee worked on              
 both of the bills.  One bill was a one page very simple bill and              
 the other was a 16 page very complicated bill.  They were broken              
 down into a four page very complicated bill that everybody likes a            
 little bit, but nobody like very much.  Nobody is anxious to pass             
 the bill out of committee.  People have expressed an interest to              
 work on the bill more during the interim and perhaps get something            
 done next year.  Representative Sanders said with the possibility             
 that the committee could make a breakthrough during the next week,            
 it could be brought forward.  He said there is still a possibility            
 that something could be brought up that would satisfy everyone, but           
 it could be very hard to do.  There are some people that say there            
 is a need for a bill but not this bill.  There are some people who            
 say there isn't a need for a bill at all, but this one would be               
 O.K. if they had to have one.  There are people who say there isn't           
 a need for a bill, especially this bill and some say there is a               
 need for the bill now.  Representative Sanders said they have made            
 progress and the committee could be maybe about 65 percent on the             
 way to reaching a compromise.                                                 
 Number 1946                                                                   
 CHAIRMAN KOTT said it is his intent to take public testimony                  
 regarding the committee substitute, which is not before the                   
 committee.  He said rather than to adopt it, he would like to leave           
 it before the committee in order to listen to comments.  Based on             
 the comments, the committee will either adopt the committee                   
 substitute or refer it back to the subcommittee.  The version is              
 Version R, dated 4/9/96.                                                      
 TED MONINSKI, Director, Regulatory Affairs, AT&T Alascom, testified           
 via teleconference from Anchorage.  He said AT&T Alascom is one of            
 the participants that have been following the bills.  Mr. Moninski            
 said there has been previous testimony from his company where the             
 committee was told that the earlier version of HB 501 was confusing           
 and they have some serious objections to HB 531.  He pointed out              
 that there is now CSHB 501(L&C) and AT&T Alascom still has concerns           
 about the bill.  Mr. Moninski indicated AT&T Alascom would enter              
 objections to the bill as it is currently written.  They are still            
 very concerned that there is a great deal about this major change             
 in structure that has not been fleshed out yet.                               
 MR. MONINSKI referred to the Telecom Act - the federal bill, which            
 is on the books and said they know what it says but they aren't               
 entirely sure yet what it all means.  They know that the federal              
 Communications Commission is undergoing numerous rule makings to              
 help them understand what it means.  There is a federal/state joint           
 board that has been convened to deal with the significantly                   
 important issues such as universal service.  He noted Alaska has a            
 representative on the staff of that joint board.  The Alaska Public           
 Utilities Commission (APUC) has stated its intent to commence rule            
 making to help interpret the federal law.  Mr. Moninski said it               
 seems to him that with all of this work to be done and with the               
 complexities that have been noted, the legislature is probably not            
 yet aware of which issues need to be resolved.  While there may               
 very well be the need for some legislative action in the future, to           
 do it in advance of all of the work that needs to be done by the              
 various expert in industry, government and other, might make it               
 difficult for the legislature to undertake that task.   Mr.                   
 Moninski urged the committee to take no action at this time and to            
 revisit the issue, as necessary, in the future.  He noted they                
 stand ready to participate in any further discussions and work                
 Number 2113                                                                   
 CHAIRMAN KOTT asked if there are any particular areas of the bill             
 that are extremely objectionable to AT&T Alascom.                             
 MR. MONINSKI said there are certainly some issues that AT&T Alascom           
 believes have not clearly resolved and compromises that have not              
 yet really been achieved.  There are areas where the playing field            
 is not really as level as we would all like it to be.  Mr. Moninski           
 said Section 6 is incredibly complicated and has not been                     
 thoroughly developed yet.  It is not at a point where good                    
 legislating can be done.  Mr. Moninski said that is the section of            
 the bill that would on (indisc.) appear to simply turnaround some             
 rules that were created in the federal Act and apply them to                  
 interexchange carriers.  But what happens is it become very much              
 entangled in some regulatory policy that has been out in the state            
 of Alaska for some time.  That needs to be disentangled before we             
 can really look at those questions about issues and determine what            
 really is in the public's interest.  The (indisc.) simple issue               
 about whether or not it is appropriate and good policy making to              
 allow one market segment, for example, the local exchange market              
 that continues to enjoy interconnection exemptions under the                  
 federal bill to simply move into a market without its own market              
 being open for competition at all.  Mr. Moninski said he would echo           
 Representative Sander's comments in that these are very difficult             
 issues and they need further development before something is put              
 before the legislature for resolution.                                        
 Number 2202                                                                   
 JIMMY JACKSON, GCI, was next to testify via teleconference from               
 Anchorage.  He said he agrees with Representative Sanders regarding           
 the bill.  Mr. Jackson said GCI opposes the proposed draft of HB
 501 and urged that the committee not pass the bill forward for                
 further consideration.  He said GCI had hoped that the various                
 interested parties might be able to come to an agreement on a bill            
 that everyone could support.  An acceptable compromise has not been           
 reached.  He said GCI doesn't believe that it is feasible to work             
 out an acceptable compromise during the remainder of the                      
 legislative session and they believe that the legislature's further           
 attention to this matter is not desirable during the short time               
 left in the session.  Mr. Jackson said he would agree with Mr.                
 Moninski that Section 6 is a problem.  He referred to there being             
 an amendment in Section 3 and said he thinks the committee tried              
 hard to come to a compromise, but it is extremely hard to say how             
 that compromise is going to be interpreted and they fear it wipes             
 out the (indisc.) principle.  He said there are things that aren't            
 included in the bill which GCI feels are very important.  One is a            
 provision to remove the antitrust exemption that local exchange               
 carriers presently enjoy.  If they are going to be competing with             
 GCI, they shouldn't be exempted from the antitrust law.  Mr.                  
 Jackson referred to Section 5 regarding local exchange competition            
 and said it isn't strong enough.                                              
 Number 2324                                                                   
 BOB LOHR, Alaska Public Utilities Commission, testified via                   
 teleconference from Anchorage.  He said, as the APUC has done in              
 the past, they remain available to answer specific questions.  He             
 said as the bill is currently drafted, some specific provisions               
 cause the staff concern.  Section 2, for example, the notion of a             
 fast turnaround on application for an unserved area is not a                  
 problem except in resource limitations.  He referred to the last              
 sentence in Section 2, "If the commission fails to act within the             
 90 days, the application is considered to be granted," and said he            
 believes it is shaky public policy because it is a false grant of             
 a certificate of public convenience and necessity which otherwise             
 would require a finding of public needs and necessity and a finding           
 of fit willing and able just doesn't seem appropriate.  He said the           
 commission has the message that things need to move more quickly              
 and within the available resources, they will do the best job they            
 can.  He said he doesn't think a default provision for granting the           
 certificate is necessarily appropriate.                                       
 MR. LOHR referred to Section 3 and said the rather confusing                  
 compromise that does erode the used and useful standard as a                  
 consumer protection vehicle is a concern to the commission staff.             
 He said he believes there has already been adequate comment about             
 the IFC competition provisions and what those mean.  He said this             
 is an extremely complex provision.  They do require a sifting out             
 process which is actively underway at the Federal Communication               
 Commission (FCC) level as well as within the APUC itself.  It is              
 very resource intensive and they are doing the best job they can              
 with it.  Probably the worst thing that could happen would be                 
 hastily crafted state legislation that doesn't add to the clarity             
 rather than the confusion or the capacity.  He said he would be               
 happy to answer any question.                                                 
 Number 2427                                                                   
 JACK RHYNER, Representative, Alaska Telephone Association and Tel             
 Alaska, Incorporated, came before the committee to give his                   
 testimony.  He explained Tel Alaska, Incorporated, is a company               
 which operates two telephone companies in the state of Alaska,                
 Interior Telephone and Mukluk Telephone.  Mr. Rhyner discussed the            
 hard work done in the subcommittee meetings.  He said the 17 page             
 bill was supported by the local telephone companies of the state              
 who are subject of the federal Act and who are now to face                    
 competition.  He said there is a lot of confusion about the new               
 version of the bill.                                                          
 TAPE 96-35, SIDE B                                                            
 Number 001                                                                    
 MR. RHYNER said while the current proposed committee substitute for           
 HB 501 doesn't fully address all of the issues that were raised by            
 the federal Telecom Act, it does address a number of outstanding              
 problems and issues with the APUC and would provide a needed "jump            
 start" to getting that agency moving.  He said he is a little                 
 surprised and disappointed in that he participated in all the                 
 meetings of the subcommittee and at the end of the last meeting, he           
 was under the impress that a compromise had been met.  The chairman           
 asked those present whether or not there were any other objections            
 to the bill and at that time the answer was "no."  Now there are              
 objections to the compromise.                                                 
 MR. RHYNER referred to extending service areas and said the staff             
 of the commission is concerned about the length of time.  He said             
 he feels that is a consumer issue.  Historically, the people in the           
 state of Alaska have been waiting a year and in many cases longer             
 just to obtain service.  They have been waiting for approval by the           
 APUC for extension of service areas.  That would have been remedied           
 by the bill.                                                                  
 MR. RHYNER referred to eligible telecommunications carriers and               
 said this is something that relates directly to the federal Act.              
 All telephone companies that are going to receive universal service           
 funding have to be designed by the APUC as eligible.  The final               
 rules from the FCC, by law under the Act, are supposed to be                  
 completed in October which is between Alaska's legislative                    
 sessions.  If the APUC doesn't move and designate these companies             
 as eligible, the consumers and the local telephone companies will             
 lose $4.2 million every month until they are designated as                    
 eligible.  He said he couldn't say whether that go to direct losses           
 for those companies or whether it would somehow passed through to             
 the consumer.  He referred to rate flexibility and said when these            
 companies are faced with competition they would be allowed to                 
 compete rather than being an incumbent carrier that was held down             
 by regulation and allowing someone else to come in and compete with           
 MR. RHYNER referred to the long-distance section of the bill turns            
 the rules in the federal bill around so that anyone else that wants           
 to get into the long-distance market has exactly the same type of             
 arrangement for utilizing their facilities and service as they will           
 then have when they come in and use the local facilities.  Both GCI           
 and AT&T have already demonstrated their desire to get into that              
 market and have both already filed to compete in the Anchorage                
 telephone utility service area.  Mr. Rhyner said he would answer              
 questions the committee members may have.                                     
 Number 159                                                                    
 STEPHEN CONN, Executive Director, Alaska Public Interest Research             
 Group, was next to come before the committee.  He stated, "I agree            
 with the positions of the representative AT&T and GCI that the                
 questions -- the forthcoming questions as the federal legislation             
 is implemented - the factoring in of the 2001 telecommunications              
 report, an inquiry that was completed only recently, chaired by the           
 lieutenant governor, and ultimately the consumer's concerns - the             
 consumer's involvement in these debates, all suggest that this                
 matter - despite the hard work in energy undertaken to make a                 
 compromise of these two pieces of legislation - should mean that              
 this matter is taken past the session perhaps into interim hearings           
 and into the next legislative session.  The issues are startling              
 here as to universal service.  Alaska Public Interest Research                
 Group has prepared a two page statement on universal service.  It             
 is our strongly felt position that we would encourage the                     
 legislature to hold hearings that would involve the public to focus           
 not on the technical side of regulation and competition, but rather           
 on universal service as such.  What does it mean to Alaskans?  What           
 do they anticipate both in urban and rural Alaska?  How can we                
 achieve improved penetration of telecommunication services in rural           
 Alaska to improve the economic political and economic well being of           
 the people out there.  In other words, hearings held by the                   
 legislature with an end result, perhaps statutory and perhaps to              
 even lay the basis for a constitutional amendment that would make             
 of universal service an affirmative right.  This may be necessary             
 in order that the consumers and the public and their position in              
 this receive equal statue to that of the service providers - the              
 large service providers and the small service providers.  So I find           
 myself in agreement with these people.  I certainly hope that the             
 waters during the interim are not muddied by untoward pressure upon           
 our candidates and our lawmakers in the form of lobbying and most             
 especially in the form of campaign contributions.  I want your                
 heads clear to really evaluate this.  This is a critical moment in            
 Alaska's history and so perhaps, not to be precipitous is the                 
 smartest thing to do and I thank you very much for this                       
 Number 279                                                                    
 CHAIRMAN KOTT closed public testimony as there were no further                
 people to testify.                                                            
 Number 292                                                                    
 REPRESENTATIVE KUBINA indicated that he had thought they were                 
 closer to a resolution that they are.  He said he hopes everything            
 works out until a year from now and he hopes that if the                      
 legislature doesn't do something, he hopes it doesn't cause a                 
 Number 300                                                                    
 REPRESENTATIVE PORTER said he would echo Representative Kubina's              
 Number 320                                                                    
 REPRESENTATIVE SANDERS said he would agree with both of his fellow            
 subcommittee members.  He said he also thought that at the end of             
 the last subcommittee meeting that they were a lot closer to a                
 solution than they obviously are.  Representative Sanders pointed             
 out that the parties involved did say they would have to review the           
 new bill.  They did and then they came back.  Everybody said they             
 felt like progress was made, but nobody felt like enough progress             
 was made.                                                                     
 Number 353                                                                    
 REPRESENTATIVE MASEK moved to hold the bill until there are further           
 rulings from the FCC.  Work should also be done on the bill during            
 the interim.                                                                  
 CHAIRMAN KOTT indicated he appreciated the work done by the                   
 subcommittee and all parties involved.  He said when the matter was           
 sent to the subcommittee, his remarks were to the extent that he              
 wanted to ensure that the product that would come out of the                  
 subcommittee would be the very best product for Alaskans.  Based on           
 the testimony he heard today, he believes it would be in the best             
 interest of all the parties involved to retain this matter in the             
 subcommittee.  There is a work draft appearing as HB 501.  He said            
 he would ask the chairman of the subcommittee to continue to                  
 evaluate and look for middle ground to bring the parties together             
 during the interim and come up with a product that everyone can               
 agree to.  Chairman Kott said there was a motion by Representative            
 Masek to retain the bill in the subcommittee.  He asked if there              
 was an objection.  Hearing none, the motion carried.                          
 HB 345 - PENSION INVESTMENT BOARD PROCUREMENTS                              
 Number 536                                                                    
 CHAIRMAN KOTT announced the committee would hear HB 345, "An Act              
 relating to the procurement of investment and brokerage services by           
 the Alaska State Pension Investment Board."  The bill has been                
 heard before and there were some concerns.  Chairman Kott said                
 there is a proposed committee substitute.                                     
 Number 563                                                                    
 REPRESENTATIVE SANDERS made a motion to adopt the proposed                    
 committee substitute for CSHB 345(L&C), Version K, Bannister, dated           
 CHAIRMAN KOTT asked if there was an objection.                                
 REPRESENTATIVE NORMAN ROKEBERG objected.  He said the 7 percent               
 figure is still included in the bill and he objected to the                   
 original bill and will object to the committee substitute.                    
 Representative Rokeberg said he sees no reason to conduct further             
 deliberations on the bill.                                                    
 CHAIRMAN KOTT indicated the committee is addressing Version K and             
 the 7 percent figure has been omitted.                                        
 REPRESENTATIVE ROKEBERG indicated he was looking at the wrong bill.           
 He removed his objection.                                                     
 CHAIRMAN KOTT said Version K was before the committee.                        
 Number 624                                                                    
 GEORGE DOZIER, Legislative Assistant to Representative Pete Kott,             
 came before the committee to explain the difference between the               
 State Affairs Committee version of the bill and the proposed                  
 committee substitute.  He explained the bill, as the Labor and                
 Commerce Committee received it, directed the board to increase                
 brokerage in investment services to the level of 7 percent in the             
 state of Alaska utilizing state of Alaska businesses.  Unless the             
 board made a written finding that it was unable to meet this goal             
 because there weren't sufficient individuals present in the state             
 of Alaska with the requisite competency levels.  Mr. Dozier said at           
 the last hearing on the bill there was also a committee substitute            
 that was before the committee which was not adopted.  It went a               
 little further by adding a subparagraph 11 which required the board           
 to invest funds in the state of Alaska under certain conditions.              
 There was a considerable amount of testimony by individuals who               
 felt that this bill would undermine the fiscal integrity of the               
 trust corpus.  Accordingly, a committee substitute, which the                 
 committee members currently have before them, was generated.  The             
 new committee substitute directs the board to utilize investment              
 and brokerage services in the state of Alaska, but only if the                
 business can provide services without materially sacrificing the              
 level of competency that is available or without materially                   
 increasing the cost of utilizing that particular service.  It                 
 defines an in-state business as a business that is located in the             
 state of Alaska and where the majority of its employees are located           
 in the state of Alaska.                                                       
 MR. DOZIER explained the committee substitute goes further in that            
 it directs the board to invest funds in state of Alaska                       
 investments, but only to the extent that these investments would              
 have a risk level that is comparable to or more beneficial to the             
 other beneficiaries of the trust as alternative investments that              
 could be made.  He pointed out this would only be to the extent               
 that the in-state investments would have an anticipated yield that            
 is as favorable to or more favorable than other alternative                   
 investments that could be made.  He said that concludes his                   
 Number 764                                                                    
 REPRESENTATIVE ELTON asked if there is currently anything that                
 stops the state from using an in-state brokerage or investment                
 house if the yields are going to be greater.                                  
 MR. DOZIER said he couldn't say for certain, but he believes that             
 there is currently nothing in statute that would prevent that.                
 Number 789                                                                    
 JOHN WALSH, Legislative Assistant to Representative Richard Foster,           
 came before the committee.  He said he has reviewed the committee             
 substitute that is currently before the committee and has no                  
 objections to the changes made.                                               
 REPRESENTATIVE KUBINA questioned the reason for the bill.  He asked           
 if a problem has been identified where the investment board is not            
 investing at all in the state.                                                
 MR. WALSH said he thinks of it more as more of an opportunity.                
 This is an incentive to take a closer look at investment potential            
 and investment services in the state.  He said the tendency, which            
 is understandable, is to go to professional services in some of the           
 larger financial communities such as Chicago, New York, San                   
 Francisco and Seattle.  While that is understandable in that the              
 professional community and financial markets are there, he said it            
 is less likely that they would look at investments in the state.              
 It is going to be less likely that they package investments to be             
 considered given that they reside out of state.  Mr. Walsh said               
 this is not uncommon in pension trusts throughout the nation, yet             
 they have economically targeted investment motive to the pension              
 fund or requirement.  There has been testimony from the union in              
 Alaska.  This is clearly a requirement in their union trusts.  Mr.            
 Walsh said Section 11 is current law in the Alaska permanent fund             
 investment fund, so it isn't unreasonable that it be included in              
 the bill.  He said he feels there are opportunities for                       
 establishing or utilizing brokerage services in Alaska.  Given the            
 age of communication and telecommunications, it is not unreasonable           
 to begin the search for the use of local services and local                   
 investments.  It is an opportunity to enhance the economy and                 
 circulate the money more than it currently is.  Mr. Walsh said                
 there is no interest in diminishing the integrity of the funds or             
 unduly compromising the fiduciary responsibilities of the board.              
 Number 923                                                                    
 REPRESENTATIVE KUBINA asked if Section 10 is also in the permanent            
 fund requirements.                                                            
 MR. WALSH said not to his knowledge.                                          
 REPRESENTATIVE ELTON asked what the meaning is of "without                    
 materially sacrificing competency or performance."                            
 MR. WALSH said he thinks the intent is, as he understands it, is to           
 avoid what was characterized as a quota system in the 7 percent               
 previous language.  He said they didn't want to force the board to            
 meet a minimum test, the 7 percent test, at the expense of signing            
 on to less than competent or less than professional services.  He             
 said he thinks it more accurately defines the intent of the                   
 legislature.  In other words, use it where possible, but don't                
 diminish in any way what you'd normally require.  Mr. Walsh said,             
 "That keep you from having to do a quota test - 7 percent of                  
 transactions to - you know - looking at proposals before you from             
 Alaskan firms unless otherwise incompetent you would consider using           
 Number 1014                                                                   
 REPRESENTATIVE ELTON said in Section 10 it says, "In-state business           
 means a business that is located in this state if the majority of             
 individuals in the business to participate in providing the                   
 services to the board or locally in-state...."  He said he would              
 read that where Smith Barney could do that if the people who were             
 providing were Smith Barney employees in Juneau or Fairbanks.  You            
 would be talking about local firms, but would be talking about                
 national firms.                                                               
 MR. WALSH said he couldn't comment as the integrity of particular             
 individuals and particular firms because Representative Foster's              
 intent.  The board defines requirements for the investment.  He               
 said he doesn't think they're going to diminish the investment                
 grade just because the transaction is done in-state.  If it is done           
 in-state, the likelihood that local investments may be packaged or            
 offered should increase.  Mr. Walsh said he believes there are                
 people waiting to testify via teleconference.  He referred to Mr.             
 Rose and said he understands that he is a capable investment                  
 counselor that could offer these types of services.  Mr. Walsh said           
 he doesn't think it is unreasonable to expect down the road that we           
 develop this in-state with the Pacific Rim being the potential                
 client base.  This is something that could help anchor financial              
 services in Alaska.  Hong Kong has a deadline on its life                     
 expectancy with respect to free market operations.  It is uncertain           
 at any rate.  To encourage this in Alaska is an opportunity that              
 should be seriously looked at.                                                
 Number 1204                                                                   
 REPRESENTATIVE PORTER referred to the competency language and said            
 most of the businesses have data available on their return on                 
 investments and the (indisc.) costs that they take off the top.  He           
 commented that is the bottom line of competency.  He said he would            
 read it as saying that if that difference is too severe, they                 
 wouldn't have to buy into it.  Representative Porter said he                  
 understands the concern about these kinds of these things, but he             
 finds it interesting that the president of the state AFL-CIO said             
 that their trust funds have these kinds of requirements and they              
 like it fine.                                                                 
 Number 1279                                                                   
 REPRESENTATIVE SANDERS said he doesn't understand what the bill               
 accomplishes.  He said there is nothing keeping these funds from              
 currently doing these things.  We're not telling them they have to            
 do it, it is a suggestion.  He asked Mr. Walsh what is being                  
 MR. WALSH said, "It is possible for them to use these services now.           
 It may be the power of suggestion through statute that helps them--           
 it--we can't give a bidders preference as you do in vendor services           
 when the state procures computers or different capital needs.  We             
 can offer a preference because all parties would be offering the              
 same specifications, a computer with such and such specs.  So given           
 that we're gonna get the same equipment, it is reasonable that we             
 can give a preference that does business in Alaska.  Professional             
 services don't exactly have that same spec that we're not sure at             
 the end what we will get.  In other words, there is variability and           
 so we can't offer, according to Legal, a bidders preference in an             
 RFP package.  So the next best thing is sort of incentive without,            
 again, transgressing that fiduciary responsibility in the                     
 obligation, which none of us want to do.  So I guess it's between             
 moral persuasion an requirement.  And we think that as the governor           
 is working different political campaigns for marketing Alaska, we             
 think this is a similar type of local business, persuasion, and we            
 think it should yield, over time, results that help keep the                  
 classrooms full which, therefore, employs a teacher, helps keep our           
 community wholesome.  And I think, personally, that it helps root             
 a financial community that I think is prime in a global market                
 where it doesn't matter that you're commuting daily to Chicago or             
 New York.  You can do it tele-commuting and I think we're wise to             
 suggest that - it is a (indisc.) industry and Anchorage is clearly            
 a hub with this kind of necessary soil, in other words, to grow               
 such crops and I think this is the beginning of our sophistication            
 in the marketplace and I think it's a reasonable challenge for all            
 of us to suggest and to encourage."                                           
 Number 1433                                                                   
 REPRESENTATIVE ROKEBERG referred to page 3, line 3, "without                  
 materially increasing the cost to the board," and asked him to                
 comment on the word "materially."                                             
 MR. WALSH explained there is a fiscal note attached to the                    
 legislation from the Department of Revenue.  It is their position             
 that by slowing down the transactions, in other words, by going to            
 a retail outlet or by backing away from block transaction, we could           
 increase the transaction costs.  He said "materially" may be a                
 given, but we don't want to go any further than we have to in                 
 support of a local hire provision.                                            
 Number 1485                                                                   
 REPRESENTATIVE ROKEBERG referred to line 13 and said Mr. Walsh                
 mentioned that subsection 11 was similar to language in the                   
 permanent fund investment statute.  He referred to there being a              
 reference to (2) of this subsection, "are consistent with the                 
 investment policies established by the board under (2) of this                
 subsection," and said (2) of this subsection says is the board will           
 establish policies to make investments."  Representative Rokeberg             
 then referred wording on page 2, (2) "establish investment policies           
 for the funds for which it is responsible after reviewing                     
 recommendations from the investment advisory council and the                  
 Department of Revenue."  He asked if the permanent fund statute has           
 a similar clause.                                                             
 MR. WALSH said he would check on the permanent fund language.  He             
 noted the reference to subsection (2) is unique to this bill                  
 because it is a certain statute which is referenced that is not in            
 a permanent fund statute.  He said it is arguable that they could             
 have amended Section 2 to say the same thing, but other than the              
 reference to Section 2, the language is identical to the permanent            
 fund language.  Mr. Walsh noted they have spoke to Mr. Mallott,               
 Executive Director of the permanent fund and he indicated his is              
 clearly pursuing that persuasion in his statute and is working with           
 the local investment community.  He said he is very interested and            
 is looking forward to possibly packaging something with the                   
 community to the board for consideration.                                     
 Number 1780                                                                   
 REPRESENTATIVE MASEK asked Mr. Walsh if he could respond regarding            
 the current work draft, Bannister.                                            
 MR. WALSH indicated he hasn't seen the current work draft.                    
 CHAIRMAN KOTT said what he thinks Ms. Bannister, drafter of the               
 bill, is saying is she isn't sure if there is a problem or not.               
 MR. WALSH said that was probably the hesitation in the first                  
 committee substitute, that it be left at 7 percent.  He said he               
 doesn't object to the modification.  He explained he thinks what              
 Ms. Bannister is raising is the potential for a conflict or                   
 repercussion in the definition of "in-state."                                 
 REPRESENTATIVE MASEK said she would appreciate it if Ms. Bannister            
 could address the committee at the next meeting on the measure.               
 Number 1818                                                                   
 DOUGLAS MERTZ, Attorney, came before the committee to testify on HB
 345.  He explained he is an attorney in private practice in Juneau.           
 Mr. Mertz told the committee that for the last four years he has              
 represented a client who is a beneficiary of one of the trust funds           
 administered by the state Pension Investment Board.  The goal                 
 during this period is to educate and to remind the state Pension              
 Investment Board of its duty as a trustee, mainly, its duty to                
 invest solely for the best interest of the beneficiaries of this              
 pension fund and for no other reason.  Mr. Mertz said his concern             
 with the previous version of the bill and the current version is              
 that this may be the opening wedge for a classic pension fund raid,           
 the kind of thing we've seen all over the country.  Everyone of               
 those raids on a pension fund, whether it is a large or small raid,           
 has been justified on the basis that it's good for the                        
 beneficiaries.  Mr. Mertz pointed out that even when the real                 
 design of the pension fund raid is to divert money from the                   
 beneficiaries or from the fund to someone else's pocket, that is              
 the justification that is used.  He said he thinks that is the way            
 to fairly characterize this.  Mr. Mertz referred to the current               
 version of the bill and said the important thing is to look at the            
 bottom line.  If the bill changes the way the Pension Investment              
 Board makes its investments now, and now it invests solely for the            
 best interest of the beneficiaries, if it changes that then it does           
 indeed violate the trust duty because that is the only concern that           
 they are supposed to have which is solely the best interest of the            
 beneficiary, in which case it would be illegal and a violation of             
 the statute and the constitutional provision on public employee               
 pension funds.  Mr. Mertz said if it doesn't affect the way they do           
 it, if they still would exercise their complete independent                   
 judgement on what investments are in the best interest of the                 
 beneficiaries, then it doesn't accomplish anything and you might as           
 will not waste any of your time on it.                                        
 MR. MERTZ reminded the committee that the last time that the state            
 decided to act as if pension funds in its control were the state's            
 own funds and were available for purposes other than the sole                 
 benefit of the benefit of the beneficiary group was with the mental           
 health trust lands litigation.  He said you don't want to do                  
 something here that is going to create litigation either by the               
 beneficiaries or by people who think that the bill should give them           
 something else out of this, for instance like the brokerage                   
 community in Anchorage.  Mr. Mertz pointed out there are many                 
 beneficiaries of these trust funds and the people know that these             
 pension funds are funds that they have earned and there is a legal            
 duty to invest solely for their own interest.  It is highly likely            
 that if the Pension Investment Board is forced, by this bill, to              
 change the way it invests some of those beneficiaries will not                
 accept it and will decide that litigation is in order.  He urged              
 the committee to not move the legislation.                                    
 Number 2085                                                                   
 REPRESENTATIVE ELTON said in listening to Mr. Mertz's testimony, he           
 could almost make an argument that if we're going to do this, not             
 to have a 7 percent cap because at least no more than 7 percent is            
 at risk.                                                                      
 MR. MERTZ said in a sense that is correct and in another sense a 7            
 percent cap would at least give some clarity, whereas in the                  
 current version, you can have litigation over what "materially                
 sacrificing" means or some of the other terms.                                
 Number 2162                                                                   
 MILT BARKER was the next person to testify on HB 345.  He informed            
 the committee he is a public employee retirement system (PERS)                
 beneficiary and a former deputy commissioner of the Department of             
 Revenue.  He said he would underscore the comments made by Mr.                
 Mertz about the difference between this fund and other funds.  He             
 said we are talking about various funds under the supervision of              
 the Pension Investment Board and these are trust funds.  They are             
 different in character from the permanent fund and the standards              
 that apply are different.  Mr. Barker said he would like to point             
 out that within the bill there is a difference of standards, even             
 within the proposed amendment to the statutes, that is the                    
 standards for brokerages and investment advisory businesses is that           
 the use of such in-state firms must result in no material sacrifice           
 of the interest of the pension fund and the beneficiaries.  With              
 respect to investment of funds, you have a different standard in              
 which the criteria is that the investment would provide a                     
 performance yield equal to or better than other investment                    
 opportunities.  Mr. Barker said what is really being said is that             
 the use of in-state investment management services does not have to           
 provide some positive or at least no detriment to the funds.  He              
 said he thinks that is the different in standards that should be              
 addressed in the legislation.  Mr. Barker said for the reasons Mr.            
 Mertz indicated, he believes that these standards are in conflict             
 with fiduciary obligations.  He said with respect to the in-state             
 investment he would like to give an example of what could be in               
 conflict with the fiduciary obligations.  Fiduciaries not only have           
 to consider the cash flow from investments, but they need to take             
 into account the cash flow from employer contributions.  When you             
 do that, you have to recognize that in-state investments could in             
 their timing of gains and losses tend to produce losses at the same           
 time that employer contributions would be under stress.  For that             
 reason, if fiduciaries are going to act in the best interest of the           
 fund they would have to invest in Alaska less than they would in              
 investments elsewhere.  Mr. Barker said he thinks the legislation             
 is unnecessary.  [End of tape...]                                             
 TAPE 96-36, SIDE A                                                            
 Number 001                                                                    
 MR. BARKER continued, "...about that could be affected because AHFC           
 has recently initiated a multi-family mortgage program.  It's for             
 multi-family housing of five or more units and it does not have any           
 income restrictions on it.  This is something that has been a                 
 hurdle for many communities and many projects around the state -              
 large or multi-family projects - that now has a potential source of           
 financing.  And I would -- I do have some copies of a news article            
 relating to that that I can pass around if the committee is not               
 fully aware of that.  Thank you, Mr. Chairman."                               
 Number 158                                                                    
 DAVE ROSE, Chairman and Chief Executive Officer, Alaska Permanent             
 Capital Management Company, testified via teleconference from                 
 Anchorage.  He explained the organization he represents is a money            
 management firm located in Anchorage.  He said they deal with                 
 institutional investment only and not high network individuals or             
 single individuals of any kind.  Mr. Rose stated they only work in            
 Alaska and currently manage a little less than $1 billion of                  
 Alaskan money, none of which is PERS/TRS money.  He said ordinarily           
 he wouldn't testify in favor of what he would call a compulsive               
 piece of legislation.  What we have in this case is a situation               
 where the Alaska purchasing code allows a lot of discretion to the            
 PERS and PERS operatives, with respect to how they bid work and               
 conduct themselves.  Unfortunately, what has happened is PERS and             
 TRS folks have not exercised very good common sense.  They have not           
 recognized that they have come to realization that some Alaskan               
 funds can be managed, in part, by Alaskans.  Both common sense and            
 less realization does not seem to have employed.  Clearly, we have            
 an out of balance situation and it cries for solutions in two ways,           
 either the adoption of this bill or a change to the purchasing code           
 which puts Alaskans on a more even playing field.                             
 MR. ROSE referred to the last fiscal year and said the PERS/TRS               
 folks in the marketable debt area, the purchasing and sale of                 
 bonds, purchased and sold $3,324,418,776 worth of bonds.  He said             
 that is $3.3 billion and not one cent of that trade was conducted             
 through Alaska.  Mr. Rose said last fiscal year, the PERS/TRS board           
 employed 19 money managers and not one of them was Alaskan.  Last             
 fiscal year money management fee by PERS/TRS combined was $11.8               
 million and none of that was expended in Alaska.  Last year they              
 hired special consultants and paid $56,000 and none of them were              
 Alaskans.  With respect bank custody, which is a securing of cash             
 and securities, last year the PERS/TRS board spent $1,441,798.  Not           
 one cent was spent in Alaska.  Mr. Rose informed the committee that           
 currently the PERS/TRS operatives are entering into negotiations              
 for contracts, that if indeed there is a problem in Juneau with               
 respect to physical or personal ability to maintain the fund, those           
 operations would move to San Francisco and nowhere in Alaska.  Mr.            
 Rose said he would like to speak to one thing about competence.  He           
 explained the firm he works for is a small firm which manages to do           
 about 8 percent to 10 percent of its business in Alaska with                  
 Merrill Lynch, who has an institutional desk and does a fine job.             
 He said most of their business is done out of Alaska, but they make           
 it a point to give 8 percent to 10 percent of their business to               
 local competent people can handle it.  He said as money managers              
 managing money for other folks in this state other than PERS/TRS,             
 last fiscal year their most representative account earned about               
 17.25 percent audited.  The PERS/TRS return was 15.89 percent.  He            
 said last year his firm earned 1.36 percent better than PERS/TRS,             
 and overlaid on a $6 billion fund, his firms strategy would have              
 returned $81.6 million more for PERS/TRS than the firms outside of            
 MR. ROSE referred to banks and said nearly all his firm's clients             
 in Alaska use either National Bank of Alaska Trust or Key Trust               
 services.  They do an excellent job.  They don't have fails on the            
 transactions and they move hundreds of millions of dollars for his            
 firm and probably hundreds of millions of dollars for pension funds           
 MR. ROSE referred to financial consultants and said he thinks that            
 some of the people who made themselves available to the one RFP               
 last year, he and Bill (indisc.) who have handled millions of                 
 dollars didn't even make the preliminary cut.  Mr. Rose said he               
 believes that what we've had is a realization of a total imbalance            
 and loss of common sense with respect to how you deal in the                  
 Alaskan community.  There are other agencies that use that common             
 sense.  While Alaskans don't get huge amounts of business, they do            
 get tossed a bone.  These folks would rather deal outside.  Mr.               
 Rose explained the solutions are:  (1) Adopt HB 345; (2) amend the            
 purchasing code; or (3) change some attitudes of how these folks              
 operate.  We are all Alaskans, we have some real competency and we            
 deserve a shot to at least compete for contracts.  He thanked the             
 committee for listening to him.                                               
 Number 657                                                                    
 STERLING GALLAGHER, President, Sterling Limited, was next to                  
 testify via teleconference.  He explained he currently does a                 
 slightly different service than what is being talked about                    
 regarding HB 345, but he has some experience having been the                  
 commissioner of the Department of Revenue during 1974 to 1979.  Mr.           
 Gallagher explained that 1974 to 1979 was the pipeline construction           
 era.  We didn't have any savings in the savings industry in the               
 state at that point in time.  We had $100 million in the savings              
 industry and AHFC and AIDA wasn't up and running.  Mr. Gallagher              
 said he used up to 25 percent of the pension funds to make                    
 investments in the state.  He indicated he got political pressure.            
 He said there was losses of $1 million, but it worked out to be a             
 quarter of 1 percent.  The overall results of the funds was that we           
 were the number one fund earning in the United States.  There were            
 high earnings on fixed income and there was extraordinary high                
 earnings in our stock (indisc.).  While you make investments in               
 Alaska, you can also make strategies in other places.  One of the             
 failures with investment management in this state over the last 20            
 years is that we have a tendency to put procedure over                        
 responsibility.  We make it very cumbersome procedurally, but if              
 someone screws up, we don't ever fire them.  Mr. Gallagher said he            
 thinks it is far more important that we turn the clock back and               
 make people more responsible.  He said, "Under this sort of                   
 arrangement here, you're gonna hire Alaska firms.  If they screw              
 up, they're going to be screwing up in their own back yard.  It's             
 gonna be very personal for them.  They're gonna do you a damn good            
 job.  I can assure you of that."                                              
 MR. GALLAGHER said, "The other reason this hurts me - the whole               
 need for this legislation - I had a financial advisory service in             
 this state who in six years there was two RFPs to bid on with state           
 government.  One, I misplaced it and the other one I just wasn't a            
 big enough firm to beat against the outside firms.  Since that                
 time, I've been able to be hired by the University of Moscow to --            
 in Russia -- hired by the government at India, been hired by the              
 City of Socking (Sp.?), I have had to move out some of my                     
 operations out of this state all because you don't get an                     
 opportunity here and it really hurt.  We've come back to Alaska to            
 say, `Wake up guys, there are some competent people here who could            
 provide this service and they should be given an opportunity to               
 work here.'"                                                                  
 Number 839                                                                    
 REPRESENTATIVE ROKEBERG said there has been testimony in the past             
 that one of the concerns about hiring local brokerages and money              
 managers is that they have not been able to get large block                   
 training discounts on large blocks of stock when you're dealing               
 with security transactions.  He said Mr. Rose mentioned that he               
 used the Merrill Lynch institutional desk and so forth.  He asked             
 Mr. Rose if his firm is able to get large block trading discounts             
 as far as his direct dealing with member brokers on the New York              
 MR. ROSE said his firm is able to get what they consider to be the            
 best possible pricing.  He said they look at the same screens that            
 the people on Wall Street look at.  He said, "There aren't many               
 cases where we have to go outside to get the very best pricing, but           
 there are cases when we know what we wish to pay or wish to receive           
 for a purchase and sale, which is on the screen, and if you call              
 your local Merrill Lynch institutional folks up here and they can             
 match the screen price, then they get the deal.  And that is                  
 exactly the kind of deal that we get from anyone else in the                  
 country.  So that we know the prices and if these folks up here can           
 get into their trader, it should be available."                               
 MR. ROSE told Representative Rokeberg he has looked at the fiscal             
 note and almost gagged.  He said he thinks it is ridiculous to say            
 you have to spend $125,000 to figure out who you're dealing with              
 and what the costs are.  The fact of the matter is that the $3                
 billion in marketable debt is transacted by two or three people               
 within the treasury.  He said he thinks that those people, in                 
 dealing with that $3 billion, can spread some of that business                
 around.  He said he wouldn't get it because he isn't in brokerage,            
 but if he can find 10 percent of the time to give money to Merrill            
 Lynch locally, PERS/TRS could do the same.                                    
 Number 973                                                                    
 REPRESENTATIVE ROKEBERG asked Mr. Rose, with the exception of his             
 firm, how many other money managing firms are in the state of                 
 Alaska that his company competes with.  He noted there is McKinley            
 Capital Management and Mr. Godstein has a firm.                               
 MR. ROSE said, "Actually, because I do more fixed income rather               
 than stock, I really compete against National Bank of Alaska and              
 Key Trust.  Godstein and Gillum are McKinley both equities folks              
 and while we have about $60 million in equities, we don't offer the           
 same service as they do.  So there are essentially five major                 
 CHAIRMAN KOTT said the HB 345 would be held until the following               
 CHAIRMAN KOTT recessed the House Labor and Commerce Committee                 
 meeting until 2:00 p.m., April 18, 1996.                                      

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