Legislature(1995 - 1996)
04/19/1996 03:15 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE April 19, 1996 3:15 p.m. MEMBERS PRESENT Representative Pete Kott, Chairman Representative Norman Rokeberg, Vice Chairman Representative Brian Porter Representative Kim Elton MEMBERS ABSENT Representative Beverly Masek Representative Jerry Sanders Representative Gene Kubina COMMITTEE CALENDAR HOUSE BILL NO. 407 "An Act relating to discrimination by certain insurers against a person with a genetic defect." - PASSED CSHB 407(L&C) OUT OF COMMITTEE 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. 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." - HEARD AND HELD HOUSE BILL NO. 549 "An Act relating to partnerships; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 363 "An Act requiring banks to pay interest on money in reserve accounts held in connection with mortgage loans." - HEARD AND HELD HOUSE BILL NO. 518 "An Act exempting certain persons engaged in selling or servicing certain vehicles from overtime wage requirements." - 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 regulations." - SCHEDULED BUT NOT HEARD PREVIOUS ACTION BILL: HB 407 SHORT TITLE: INSURING PERSONS WITH GENETIC DEFECTS SPONSOR(S): REPRESENTATIVE(S) DAVIES, Brown, Nicholia JRN-DATE JRN-PG ACTION 01/10/96 2401 (H) READ THE FIRST TIME - REFERRAL(S) 01/10/96 2402 (H) LABOR & COMMERCE, JUDICIARY, FINANCE 01/24/96 2529 (H) COSPONSOR(S): NICHOLIA 03/27/96 (H) L&C AT 3:00 PM CAPITOL 17 03/27/96 (H) MINUTE(L&C) 04/17/96 (H) L&C AT 3:00 PM CAPITOL 17 04/18/96 (H) L&C AT 2:00 PM CAPITOL 17 04/19/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: HB 345 SHORT TITLE: PENSION INVESTMENT BOARD PROCUREMENTS 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 04/17/96 (H) MINUTE(L&C) 04/18/96 (H) L&C AT 2:00 PM CAPITOL 17 04/18/96 (H) MINUTE(L&C) 04/19/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: HB 416 SHORT TITLE: OMNIBUS STATE FEES & COST ASSESSMENTS SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 01/12/96 2432 (H) READ THE FIRST TIME - REFERRAL(S) 01/12/96 2432 (H) STATE AFFAIRS, L&C, RESOURCES, FINANCE 01/12/96 2432 (H) 7 FNS (DCED, 2-DEC, 2-GOV, LABOR, DMVA) 01/12/96 2432 (H) FISCAL NOTE (REV) 01/12/96 2433 (H) GOVERNOR'S TRANSMITTAL LETTER 04/09/96 (H) STA AT 8:00 AM CAPITOL 102 04/09/96 (H) MINUTE(STA) 04/11/96 (H) STA AT 8:00 AM CAPITOL 102 04/11/96 (H) MINUTE(STA) 04/15/96 3738 (H) STA RPT CS(STA) NT 1DP 1DNP 4NR 04/15/96 3739 (H) DP: ROBINSON 04/15/96 3739 (H) DNP: OGAN 04/15/96 3739 (H) NR: JAMES, PORTER, GREEN, IVAN 04/15/96 3740 (H) 5 FNS (2-GOV, 2-DEC, DCED) 1/12/96 04/15/96 3740 (H) 3 FNS (LABOR, DMVA, REV) 1/12/96 04/17/96 (H) L&C AT 3:00 PM CAPITOL 17 04/17/96 (H) MINUTE(L&C) 04/18/96 (H) L&C AT 2:00 PM CAPITOL 17 04/18/96 (H) MINUTE(L&C) 04/19/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: HB 549 SHORT TITLE: LIMITED LIABILITY PARTNERSHIPS SPONSOR(S): JUDICIARY BY REQUEST JRN-DATE JRN-PG ACTION 04/03/96 3617 (H) READ THE FIRST TIME - REFERRAL(S) 04/03/96 3618 (H) JUDICIARY, L&C, FINANCE 04/10/96 (H) JUD AT 1:00 PM CAPITOL 120 04/10/96 (H) MINUTE(JUD) 04/12/96 3696 (H) JUD RPT 5DP 1NR 04/12/96 3696 (H) DP: PORTER, B.DAVIS, TOOHEY, BUNDE 04/12/96 3696 (H) DP: GREEN 04/12/96 3696 (H) NR: FINKELSTEIN 04/12/96 3696 (H) FISCAL NOTE (DCED) 04/12/96 3696 (H) ZERO FISCAL NOTE (REV) 04/12/96 3696 (H) REFERRED TO LABOR & COMMERCE 04/17/96 (H) L&C AT 3:00 PM CAPITOL 17 04/17/96 (H) MINUTE(L&C) 04/18/96 (H) L&C AT 2:00 PM CAPITOL 17 04/18/96 (H) MINUTE(L&C) 04/19/96 (H) L&C AT 3:00 PM CAPITOL 17 BILL: HB 363 SHORT TITLE: INTEREST ON MORTGAGE ESCROW ACCTS SPONSOR(S): REPRESENTATIVE(S) BUNDE JRN-DATE JRN-PG ACTION 12/29/95 2361 (H) PREFILE RELEASED 01/08/96 2361 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2361 (H) STATE AFFAIRS, L&C, FINANCE 01/18/96 (H) STA AT 8:00 AM CAPITOL 102 01/18/96 (H) MINUTE(STA) 01/23/96 (H) STA AT 8:00 AM CAPITOL 102 01/23/96 (H) MINUTE(STA) 02/01/96 (H) STA AT 8:00 AM CAPITOL 102 02/01/96 (H) MINUTE(STA) 02/20/96 (H) STA AT 8:00 AM CAPITOL 102 02/20/96 (H) MINUTE(STA) 02/21/96 2826 (H) STA RPT CS(STA) NT 1DP 2DNP 3NR 02/21/96 2826 (H) DP: GREEN 02/21/96 2826 (H) DNP: JAMES, PORTER 02/21/96 2826 (H) NR: IVAN, ROBINSON, WILLIS 02/21/96 2826 (H) ZERO FISCAL NOTE (DCED) 02/21/96 2826 (H) REFERRED TO LABOR & COMMERCE 04/17/96 (H) L&C AT 3:00 PM CAPITOL 17 04/17/96 (H) MINUTE(L&C) 04/18/96 (H) L&C AT 2:00 PM CAPITOL 17 04/18/96 (H) MINUTE(L&C) 04/19/96 (H) L&C AT 3:00 PM CAPITOL 17 WITNESS REGISTER REPRESENTATIVE JOHN DAVIES Alaska State Legislature Capitol Building, Room 422 Juneau, Alaska 99801 Telephone: (907) 465-4457 POSITION STATEMENT: Prime sponsor of HB 407. TIM VOLWILER 8030 North Douglas Highway Juneau, Alaska 99801 Telephone: (907) 463-4825 POSITION STATEMENT: Testified against HB 345. WILLIE ANDERSON NEA - Alaska 114 Second Street Juneau, Alaska 99801 Telephone: (907) 586-3030 POSITION STATEMENT: Testified against HB 345. JIM SIMEROTH, President Kenai Peninsula Education Association P.O. Box 921 Kenai, Alaska 99611 Telephone: (907) 283-5177 POSITION STATEMENT: Testified against HB 345. GEORGE DOZIER, Legislative Assistant to Representative Pete Kott Alaska State Legislature Capitol Building, Room 432 Juneau, Alaska 99801 Telephone: (907) 465-3306 POSITION STATEMENT: Explained HB 416. JUANITA HENSLEY, Chief Driver Services Division of Motor Vehicles Department of Public Safety P.O. Box 20020 Juneau, Alaska 99811-0020 Telephone: (907) 465-4361 POSITION STATEMENT: Answered questions on HB 416. NANCY SLAGLE, Director Division of Budget Review Office of Management and Budget Office of the Governor P.O. Box 110020 Juneau, Alaska 99811-0020 Telephone: (907) 465-4681 POSITION STATEMENT: Answered questions on HB 416. CATHERINE REARDON, Director Central Office Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, Alaska 99811-0806 Telephone: (907) 465-2534 POSITION STATEMENT: Answered questions on HB 416. BILL EZELL Accounting Firm of Deloitte and Touche Limited Liability Partnership Address not provided Telephone: (703) 532-3566 POSITION STATEMENT: Testified in support of HB 549. PATTI SWENSON, Legislative Assistant to Representative Con Bunde Alaska State Legislature Capitol Building, Room 108 Juneau, Alaska 99801 Telephone: (907) 465-6824 POSITION STATEMENT: Gave sponsor statement for HB 363. LUCILLE STIETZ National Bank of Alaska P.O. Box 107025 Anchorage, Alaska 99510 Telephone: (907) 257-3434 POSITION STATEMENT: Testified against HB 363. STEVE CONN, Executive Director Alaska Public Interest Research Group P.O. Box 101093 Anchorage, Alaska 99503 Telephone: (907) 278-3661 POSITION STATEMENT: Testified in support of HB 363. LISA BELL, Senior Vice President and Chief Operating Officer Alaska Federal Savings Bank 2094 Jordan Avenue Juneau, Alaska 99801 Telephone: (907) 790-5104 POSITION STATEMENT: Testified against HB 363. ACTION NARRATIVE TAPE 96-38, SIDE A Number 001 The House Labor and Commerce Standing Committee was called to order by Chairman Pete Kott at 3:15 p.m. Members present at the call to order were Representatives Porter, Elton, Rokeberg and Kott. HB 407 - INSURING PERSONS WITH GENETIC DEFECTS Number 049 CHAIRMAN PETE KOTT announced the committee would address HB 407, "An Act relating to discrimination by certain insurers against a person with a genetic defect." REPRESENTATIVE JOHN DAVIES, prime sponsor of HB 407, explained he has prepared a proposed committee substitute (CS) for HB 407, work draft C. He informed the committee the main change is on page 2, lines 5 through 10, subsection (b). Number 114 REPRESENTATIVE NORMAN ROKEBERG moved to adopt the proposed CSHB 407, 9-LS1209\C, Ford, 4/16/96. CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB 407, 4/16/96, Ford, Version C, was before the House Labor and Commerce Committee. Number 197 REPRESENTATIVE DAVIES explained the purpose of the addition in the CS is to try to respond to some of the concerns that were addressed at the last hearing. There may be situations where having some sort of genetic marker in concert with a probability of the development of a disease or actually having some other medical condition that would presuppose the symptoms would develop soon. He said he tried to say that you wouldn't apply this bill in the case where a person had asymptomatic genetic characteristic and some other indicator that there was a probability of developing some disease where there was a probability of substantial increase in claims. The bottom line is if the circumstances that are present would indicate, to a reasonable person with the history, that there would be a substantial increase in claims then this bill wouldn't apply. He said what he is trying to get at is a situation where the only piece of information is an asymptomatic genetic characteristic. There are many circumstances where just that alone has absolutely no probability that attaches to that, but you would have a particularly significant disease develop - it's indistinguishable from the rest of the population in the insurance pool. Number 326 REPRESENTATIVE BRIAN PORTER said, "I would assume then that the term `actuarial projection' in this context means that a person that is found to have this genetic characteristic, that that genetic characteristic has had in the past enough experience that sans symptoms, that's known, it's extremely likely that `X' is going to happen and that `X' is going to be more (indisc.-- coughing)." Number 391 REPRESENTATIVE DAVIES pointed out he has submitted the CS to a couple of insurance organizations to see what their view is. He said his understanding is that their response is that this significantly improves the bill from their point of view, but it might not quite get it over the hurdle. He referred to a response from the Health Insurance Association of America (HIAA) which says that they don't support policies or practices by which any person who has a health insurance plan is singled out for termination of coverage or premium increase because of claims history results of any medical test, including genetic tests. He said their testimony has been that they are unaware of any current use or plans by their member companies that require applications for private health insurance to undertake any type of genetic tests for the purpose of obtaining major medical coverage. Representative Davies said it would be his understanding that there isn't any widespread or prevailing practice in the insurance industry to do this right now. What he is concerned about are those small number of instances where individuals for pathological reasons are getting singled out for discrimination in particular cases. Since it doesn't appear to be the policy of the insurance industry to do this, he would like to just put an additional barrier to prevent that from happening. As you get more and more information there will be a tendency for this type of situation to happen more often. He said he doesn't want people to feel that they shouldn't get genetic tests for fear of their insurance policies will go up. Representative Davies said he wants this information in a positive sense in that people can get tests where it is appropriate and use that in preventative maintenance. REPRESENTATIVE DAVIES referred to a publication entitled, "Science and Engineering Ethics" and explained they sent out 917 questionnaires to people who may be at risk. They had 455 respondents who asserted that they had experienced genetic discrimination and 437 said they had not. If you looked at those further, it may be that some of those would not be legitimate claims, but there were 455 respondents who felt they had been discriminated against solely on the basis of asymptomatic genetic disorder. Representative Davies pointed out there was an article recently in the Juneau newspaper that indicated that there are 11 states that have some sort of law that relates to this topic. REPRESENTATIVE DAVIES referred to a speech by Harold Varmus (Sp.?) given at Kansas State University on February 5, 1996, and said Mr. Varmus indicates that he gave the speech as director of the National Institute of Health. Representative Davies read, "To make any further progress, we have an immediate political issue to resolve. We must insist that all states and the federal government pass laws to protect our citizens from abuses of genetic information. Recently, the Equal Employment Opportunity Commission ruled that the Americans for Disability Act prevents job discrimination based on genetic information. This will help, but strong laws that guarantee the privacy of genetic information, the protection from reprisals by insurance companies will be essential. And currently only a few states, Kansas not among them, have such laws. Provisions in Senator Castlebaum's proposed health insurance (indisc.) are enlightening in this respect." Representative Davies said he would answer questions. CHAIRMAN KOTT asked if there were questions of Representative Davies. Hearing none, he asked if there were further witnesses. There being none, Chairman Kott closed public testimony. Number 828 REPRESENTATIVE KIM ELTON moved to pass HB 407, Version C, dated 4/16/96, out of committee with individual recommendations and the attached zero fiscal note. CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB 407(L&C) was moved out of the House Labor and Commerce Committee. HB 345 - PENSION INVESTMENT BOARD PROCUREMENTS Number 954 CHAIRMAN KOTT announced the next order of business would be HB 345, "An Act relating to the procurement of investment and brokerage services by the Alaska State Pension Investment Board." TIM VOLWILER was first to testify on HB 345. He indicated he didn't know what version of the bill the committee was addressing. CHAIRMAN KOTT informed Mr. Volwiler the committee was addressing Version K, Labor and Commerce, dated 04/10/96. MR. VOLWILER informed the committee he anticipates retiring through the teacher's retirement system (TRS) in about ten years. He said he has expressed his reservations about the bill previously. Mr. Volwiler said this is a defined benefit system for retirees, so as an individual, he anticipates receiving the same amount of money regardless of what happens to the pension funds. However, if the pension funds are used, in his view, inappropriately for economic development within the state and the investments perform poorly, then every municipality and the state is going to have to make up the difference in those earnings which didn't happen because it was used for local investments that may have been more risky. Mr. Volwiler said he doesn't like seeing any requirements put on the Pension Investment Board. He said he believes the board is operating fine by itself. Mr. Volwiler said he doesn't know what is meant by materially sacrificing competency or performance. He referred to the risk and expected yield and said he thinks it is hard to predict what the risk of an investment is going to be and what the yield is going to be. MR. VOLWILER referred to AAA municipal bonds and said if you want to buy 50, he doesn't think it is appropriate in the state of Alaska. He stated he would buy one bond from every state and that is diversification. Mr. Volwiler explained he doesn't want to see the legislature use this as a shadow, (AIDEA). If those investments are earning less, it will be the taxpayers of the municipalities and the state who are going to pay the difference. He stated he is strongly opposed to HB 345. Number 1055 WILLIE ANDERSON, NEA - Alaska, was next to address HB 345. He stated he testified against the earlier version of the bill. Mr. Anderson said he appreciates the work the staff to the House Labor and Commerce Committee did to try to mitigate some of the opposition to the bill earlier. He said the bill still needs a lot of work. Mr. Anderson referred to the top of page 2 of the bill, "The board shall (10) increase the board's utilization of brokerage and investment services provided by in-state business," and said the problem with that is the need to increase. When does this increase? He asked if it means that you have one brokerage firm this year, so you must have two next year and three the next year. He referred to testimony given on the bill the previous Wednesday where it was stated that there was only five brokerage firms in the state that deal with any level of quantity like this pension investment addresses. He stated that is a major concern to NEA - Alaska and they still oppose the bill. Additionally, when you look at item (11), based on risk level and expected yield, potentially you could have the total investment of the pension fund invested in the state of Alaska if you have an expected yield of 10 or 12 percent and it is equal to other diversified yields. Once again, this is guess work, you can't guarantee any precise yield. The company puts forth their perspectives and you take your best guess on it. The potential is the entire pension fund could be invested in the state of Alaska using these standards and it isn't very wise investment strategy from their perspective. It is NEA - Alaska's belief that the bill is unnecessary as the Investment Board currently has the authority to make decisions about which firm to and which investments to use. He continued to give testimony against the bill. Number 1346 CHAIRMAN KOTT said Section 11 basically says that the board should invest funds in the state if, in fact, the risk level and expected yield is either equal to or more favorable than alternative investment opportunities. He said if we had AAA bonds in New York and AAA bonds that were available in Alaska, with 6 percent yield in the New York bond and 6 1/4 yield in the Alaska bond, which would be the best bond to invest in that would contribute to the pension fund? MR. ANDERSON said under those circumstances, the Alaska bond would be the best yield to invest in because it causes economic growth to the state and it gives a better yield for the pension fund. If it is expected that all the bond investments should be in Alaska as opposed to diversifying around the country, that could be a major problem. If it is a municipal bond, there is a level of security in that, but if it is corporate bond, there is less security in that and it could have a higher yield but you wouldn't want to put all your bond investment in that corporate bond in the state of Alaska. Number 1432 REPRESENTATIVE ELTON said he agrees with Mr. Anderson's response. He also pointed out the board currently has the ability to do that now. It would be smart to diversify in the bond markets. CHAIRMAN KOTT said he wouldn't believe that the members of the board who are charged with fiduciary responsibility would put all that money in one nest egg in the state of Alaska. REPRESENTATIVE ELTON said with the word "shall" on page 2, line 2, there could be some that could make the argument that it is not a permissive word and "shall" says that you shall do that. CHAIRMAN KOTT said considering the portfolio we're talking about, he doesn't think anyone in Alaska could offer a bond that would be equal in yield and risk. Number 1520 REPRESENTATIVE ROKEBERG said we should do things to encourage investment in the state; however, he does have problems with the bill as it is currently written. Number 1614 JIM SIMEROTH, President, Kenai Peninsula Education Association, testified via teleconference. He stated there are about 700 people who are a little nervous about this bill. Some of them fear it is a possible raid on their pension funds. He noted he didn't have the most current version of the bill and requested it be faxed to him. Mr. Simeroth said there is a lot of concern and there seems to be a bit of micromanaging of the Pension Investment Board and that creates real concern. It has already been expressed that the Pension Investment Board could, if they so choose, make Alaska investments. He said that is appropriate, but it should be left up to the board to utilize those services that they deem are most appropriate in-state or out of state. Mr. Simeroth referred to requisite skills that are required and said he doesn't know what those would be. Again, that seems to be part of what the board would be addressing when they decide where the investments are going. There is concern that this might evolve into something where politically the decisions are made where pension investments are going to be. In addition, some people are concerned that if we're looking for a high rate of return, the risk goes up. We have a pension fund that currently operates very well and he doesn't see the need for tampering with it. Number 1826 CHAIRMAN KOTT indicated there were no further witnesses to testify. He then closed the public hearing. He announced the bill would be held until the following Monday. HB 416 - OMNIBUS STATE FEES & COST ASSESSMENTS CHAIRMAN KOTT announced the committee would hear HB 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," introduced by the Governor. Chairman Kott noted there was a proposed committee substitute. He also informed the committee there is a Senate version of the Governor's fee bill in the Senate Rules Committee. Number 1894 GEORGE DOZIER, Legislative Assistant to Representative Pete Kott Alaska State Legislature, came forward to testify. He informed the committee that the proposed CS inserts into HB 416 several pages of material addressing vehicle registration fees and, accordingly, the title is changed in the proposed CS. Mr. Dozier explained the CS proposes across the board a $5 increase in motor vehicle registration fees. At the same time, it revokes the $10 penalty, which currently exists in law, for registration at motor vehicle offices. It rewards individuals that mail in their registration by deducting $5 from the registration fees. This is anticipated to generate approximately $700,000. The proposed CS has intent or purpose language contained in Section 1 which says, "The legislature intends to annually appropriate at least $700,000 of the amount the state receives from motor vehicle registration fees to the Department of Public Safety for state troopers. He said that concludes his summary. Number 1971 CHAIRMAN KOTT explained the CS essentially increases, across the board, registration fees which still is substantially below other states on the average. It repeals the $10 in-person charge that is currently in place. He said it is his understanding the Division of Motor Vehicles is the only division that charges for in-person contact. The $5 increase in registration fees would be reduced if, in fact, the person were to send their registration in through the mail. In essence, there would be no increase whatsoever. The anticipated revenue, based on this approach, would be about $700,000. It is the intent of the sponsor that the money that is generated would be used to support an increase of troopers on the street. Number 2021 REPRESENTATIVE ROKEBERG questioned whether the legislature just passed a Senate bill that made it biannual and it also spoke to the same fees. CHAIRMAN KOTT said there was a Senate bill that was passed. He said depending on whether or not the Senate bill is signed into law, this will would.... REPRESENTATIVE ROKEBERG questioned whether or not HB 416 should be amended to reflect the bill that was just passed. Number 2071 JUANITA HENSLEY, Chief, Driver Services, Division of Motor Vehicles Department of Public Safety, informed the committee the Senate bill has been transmitted back to the Senate for concurrence. If the Senate concurs, it will go to the Governor for signature. The Department of Public Safety and the Administration supports that bill and also HB 416. Ms. Hensley said as far as how that will work with the biannual registration and increasing the fees, she couldn't tell the committee the technicalities whether HB 416 would override the Senate bill since this HB 416 would pass at a later date, or whether just the fee structure would increase the registration biannually by $10 and then give a biannual break of $10. Number 2116 REPRESENTATIVE PORTER said to make it all work, he thinks HB 416 should be amended to coincide with the biannual scheme. He said there could be a conflict. MS. HENSLEY said that is correct. CHAIRMAN KOTT said language could be adopted that would basically reflect that biannual registration would then increase the fee twofold. MS. HENSLEY asked the committee to keep in mind that the biannual registration bill reduces the registration fee by $2 per vehicle if they register for the two year period. She pointed out the fee for rental cars is not reduced and will still be an annual registration fee. Number 2143 REPRESENTATIVE ELTON said he would imagine the fiscal note would change. Number 2178 REPRESENTATIVE ROKEBERG made a motion to adopt CSHB 416, Version 9- GH2024\F, Cook, 4/19/96. CHAIRMAN KOTT said there is a motion to adopt CSHB 416, 4/19/96, Version F. He asked if there was an objection. Hearing none the CS was before the committee. Number 2208 NANCY SLAGLE, Director, Division of Budget Review, Office of Management and Budget, Office of the Governor, came before the committee. She explained she has a spreadsheet that will explain what the different sections of the State Affairs version of the bill does. Ms. Slagle referred to the first section and said it allows them to access the real estate surety fund to charge all the hearing costs. It simplifies the whole process. It is also a cost savings to the general fund. MS. SLAGLE referred to the Section 2 and said it relates to the Postsecondary Education Commission. She said it allows the commission to charge postsecondary education private institutions for the processing of their applications to operate. This hasn't ben done in the past and basically what has happened is the Student Loan Corporation has basically covered the cost of the processing of those applications. This gives the ability to charge on a sliding scale based on tuition revenues the institutions would receive. The charges would be anywhere from $200 to $2,500 depending on the amount of revenues they receive. MS. SLAGLE said the third section allows the Human Rights Commission to charge for items they provide in the way of education and training information materials. This would be a small amount, but with the tightening of budgets they have, their ability to provide this information has reduced substantially. This will give them the ability to make those charges. MS. SLAGLE explained the fourth section relates to the Department of Labor. It gives them the ability to require self insured employers to pay a 4 percent fee for the cost of processing disputed claims with the Workers' Compensation Board. The State Affairs Committee amended this section so that political subdivisions would be exempt from this requirement. The fee would cover the costs of processing and hearing claim disputes. MS. SLAGLE informed the committee members Section 5 deals with the Department of Natural Resources and is a fee for evaluating for auditing applications of exploration credits for mine development. She said they also have an amendment that goes hand in hand with their streamlining bill to simplify the processing of exploration credits for mine development. She said this is the fee portion of it. MS. SLAGLE referred to the sixth section which relates to the Department of Transportation and Public Facilities and said it allows the charging for the use of state marine and harbor facilities. The concern is mostly in the area of municipalities being required to charge fees to cover the costs of maintaining these facilities. There tended to be....[END OF TAPE] TAPE 96-38, SIDE B Number 0014 MS. SLAGLE explained Section 7 relates to the Department of Commerce and Economic Development. It changes the statutory setting of the business license fees. In the past those have been $25 per year and this would increase it to $75 every two years. Ms. Slagle said this hasn't been changed since statehood and is a revenue generator for the state. Number 038 REPRESENTATIVE ROKEBERG asked if the only reason the fees are being raised is because it is revenue generating. MS. SLAGLE indicated that is correct. REPRESENTATIVE ROKEBERG said as a business license holder, he isn't too happy about that. MS. SLAGLE pointed out it is an increase of $12.50 per year and is the first increase since statehood. Number 077 MS. SLAGLE explained Section 8 relates to the Division of Governmental Coordination. This would allow them to charge fees for federal consistency determinations under the Alaska Coastal Management Program. Currently, they basically have a process of providing a consolidated approach to reviewing permits. She said this would allow them to collect additional fees from industry to help in their processing to speed this permit review process along. Currently, they have no ability to do that and it requires statutory changes. Ms. Slagle said it is her understanding that the industry is supportive of this so they can get a quicker response from the state. MS. SLAGLE explained Section 9 allows the Department of Military and Veterans Affairs to charge fees for providing emergency management response training. Currently, they have the ability to charge for providing training for oil spill related types of response, but not for general emergency management response. This would expand their statutory authority so that they could provide the other types of response. This would cover basically just the travel and facility rental that's necessary to do training. MS. SLAGLE said the next section, Section 10, allows the Department of Environmental Conservation to charge for pesticide and broadcast chemical use and for review of subdivision plans for sewage waste disposal or treatment facilities. The amount charged for the pesticide and broadcast chemical use would basically be charged to chemical manufacturers located in the Lower 48 which produces the chemicals such as Dow, etc. Number 188 REPRESENTATIVE ROKEBERG said, "The changes in the fund appears to be any hearing that's held, the way the language reads to me, could be reimbursed from the fund. Then there is language down here, `If a party that's aggrieved is found not to have a meritorious action,' are they liable for collection of money or what?" Number 180 CATHERINE REARDON, Director, Central Office, Division of Occupational Licensing, Department of Commerce and Economic Development, explained the proposed change in the bill is to allow all hearing costs to be billed to the surety fund so they don't have to wait to find out whether they were meritorious or not before making that billing. If a claim is found to be meritorious, the claim is paid out of the fund and then they attempt to recover the payment from the licensee who was responsible for the injury. REPRESENTATIVE ROKEBERG referred to page 2, line 16, "or from other parties under AS 08.88.490," and asked who that would be. MS. REARDON said she isn't certain. She said that often times there are several licensees who are being charged in the same activity. She said that is current language and she said she would check on that. REPRESENTATIVE ROKEBERG said the issue is before any surety bond monies were paid, they were only paid upon an award. He asked if that is the difference here. MS. REARDON explained this does not change the pay out of awards. It simply changes the billing of the hearing costs. Currently, the costs of paying the hearing officer and any associated attorney general costs were being paid by real estate licensees out of their general fund program receipts operating budget, then if the injured party was successful in their claim, the actual claim was being paid out of the surety fund. All that will happen is the actual cost to the division of holding the hearing will be billed to the surety fund up front. REPRESENTATIVE ROKEBERG said the realty license fees were just raised substantially and now they're going to remove that burden from their general fund license fee and it will go to the fund for the reimbursement for all the costs, including attorney general's fees for the hearings. Representative Rokeberg asked Ms. Reardon when the new license fees were calculated, was this new policy change taken into consideration? MS. REARDON explained they didn't because they are in a "chicken and the egg" kind of situation. If they billed the fees assuming that the legislature is going to change the law and it doesn't happen, they won't have enough in the surety fund. If they wait to try and get the legal change until they set their fees, there won't be a way to get them in sync. However, if it turns out that they've over collected in the general fund program receipt part of the Real Estate Commission, they will end up lowering fees subsequently or perhaps they will be able to spend more money on the Real Estate Commission out of the general fund. There is no way to get the two activities in sync. Number 348 REPRESENTATIVE ROKEBERG asked where this recommendation came from. MS. REARDON explained the Real Estate Commission endorsed it and voted on the record to support it. She said it was a proposal that come from her and she asked Real Estate Commission and they agreed. She said they have for a long time wanted to be able to know how much is being spent on hearings and to have those hearings billed to the surety fund. It was the difficulty of having to wait to see if the injured person prevailed or not that kept the division from successfully transferring those costs. REPRESENTATIVE ROKEBERG questioned what the maximum statutory level of the surety fund. MS. REARDON explained the maximum is $500,000. When it goes above $500,000, the money lapses into the general fund of the state. If it goes below $250, then no money can be spent on educational purposes. She noted it is currently very close to $500,000. Number 423 REPRESENTATIVE ROKEBERG referred to page 8, line 6, and moved to delete "$75" and reinsert "$50". REPRESENTATIVE ELTON objected. Number 450 A roll call vote was taken. Representatives Porter, Elton and Kott voted against the amendment. Representative Rokeberg voted in favor of the amendment. So the amendment failed. Number 490 CHAIRMAN KOTT said the committee has lost a quorum so the bill would be held over. He then closed the public hearing on the bill. HB 549 - LIMITED LIABILITY PARTNERSHIPS Number 520 CHAIRMAN KOTT announced the committee would hear HB 549 "An Act relating to partnerships; and providing for an effective date," sponsored by the House Judiciary Committee by request. He asked if there was anyone to testify. Number 548 BILL EZELL, Accounting Firm of Deloitte and Touche, Limited Liability Partnership (LLP), testified via teleconference in support of HB 459. He explained 41 states, along with the District of Columbia and Guam, have passed limited liability of partnership legislation. Remaining states, like Alaska, are considering similar legislation this year. The proposed Alaska LLP statute is consistent to the LLP legislation passed in other states. (Indisc.) a former organization wished to operate is one of the most important decisions an individual starting a new business or continuing an existing will make, providing reasonable protection for our owners' personal assets, considering tax implications and finding an organization form that compliments the culture of the organization for all important factors. For many businesses, particularly small businesses, an LLP will be a good choice to meet these objectives. Mr. Ezell explained an LLP is a form of general partnership. It is not related to a limited partnership in with only the general partner has unlimited liability. (Indisc.) a newly formed partnership can elect to register as an LLP. An LLP is also taxed in the same manner as a general partnership. In a tradition general partnership, all of the partners are personally liable for all the obligations of partnership and for damages caused by the action of any other partner acting in the scope of partnership business. The distinction for an LLP is that a partner would not be personally liable for those partnership obligation who are acting out of negligence, wrongful acts, wrongful admission and so forth, committed by another partner of the partnership. In other words, a partner remains fully liable for his or her own personal action, but not to the extent of their personal assets for the actions of other partners. The partnership itself remains fully liable to the extent of its assets, capital and insurance for the obligations of the partnership. Generally, other forms of organization, which are already available in Alaska, provide far greater protection of the personal assets of their owners. A shareholder in a general corporation, professional corporation or limited liability corporation has exposure only to the extent of his or her own stock investment from obligations arising out of the actions of other owners. These forms of organization can be expensive to establish and complex to maintain, particularly for small businesses. An LLP, by contrast, is inexpensive to organize and not complex to maintain. It also allows the owners to continue to operate as partners rather than individual owners. Such a distinction is often important to professional service firms such as attorneys, accountants, architects and engineers, where all the owners are typically active in the business. MR. EZELL explained in speaking on behalf of the six largest accounting firms and limited liability partnerships, they are interested in having consistent protection for all of the partners no matter where they live and work in the United States, that these protections would only be (indisc.) bankruptcy of a firm. He noted they have also found in states where LLP has been enacted that many small professional service firms have chosen this new form of organization. He urged that the committee pass HB 549. Number 764 CHAIRMAN KOTT closed the public hearing. He announced the bill would be held over. HB 363 - INTEREST ON MORTGAGE ESCROW ACCTS Number 775 CHAIRMAN KOTT brought HB 363, "An Act requiring banks to pay interest on money in reserve accounts held in connection with mortgage loans," sponsored by Representative Bunde, before the House Labor and Commerce Committee. Number 795 PATTI SWENSON, Legislative Assistant to Representative Con Bunde, Alaska State Legislature, came forward to give the sponsor statement for HB 363. She indicated she would address CSHB 363(STA). This bill requires the banks to pay 3 percent interest on any money held in an escrow account in the amount above the Real Estate Settlement Procedures Act (RESPA) limit. The interest will be computed monthly. Consumers may elect to have the interest credited to the mortgage principal or paid directly to them. Yearly, information about each escrow account shall be given to the borrower. The information shall include the cost to administer the account, the amount of money in the account at the end of each month, the amount of interest earned on the account each month and a schedule of payments made by the bank from the account. Ms. Swenson explained escrow accounts are profitable for banks. The accounts are also good services for individuals and municipalities. However, mortgagors used deserve to have an accurate accounting of their money as well as an amount of interest paid to them for the use of their money. She urged support for the bill. Number 897 LUCILLE STIETZ, National Bank of Alaska (NBA), was next to testify. She said they have a couple of recommendations from the Credit Union League, the Alaska Bankers Association and the Mortgage Bankers Association. She noted she believes the committee has also received a number of letters laying out their reasoning. Ms. Stietz explained NBA is opposed to CSHB 363(STA) and they don't feel it is necessary because the federal government's passage of RESPA in 1995, has basically limited the amount the mortgage servicers can hold in customer's accounts. It hasn't been tested yet, but she believes most of the lenders have already switched over to aggregate accounting. Ms. Stietz said the bill, as it is currently written, would limit the charge of interest on escrows to banks. It does not cover credit unions, mortgage companies and other lenders. Banks are only one small part of the total mortgage picture, so it's an unlevel playing field. Ms. Stietz pointed out that Bank of America and Key Bank have recently moved their mortgage loan servicing operations outside of the state. She said when you mandate additional costs to be added to servicings for one type of an institution and not for another, there will be a tendency to speak on a level playing field and that could adversely affect jobs in Alaska. She said she would be happy to answer questions the committee may have. MS. SWENSON noted that banks are defined in statute as all of those institutions. "Bank" is used as a generic word. So the playing field Ms. Stietz was talking about is more even than she thinks. Number 1038 STEVE CONN, Executive Director, Alaska Public Interest Research Group (APIRG), testified via teleconference from Anchorage, in support of HB 363. He said his organization represents consumers statewide. Speaking on behalf of many people who have escrow accounts and who are obliged to pay fees for every aspect of the usage of the services of financial institutions. He said, "We believe that the real level of playing field should be between (indisc.) financial institutions and mortgage institutions and ourselves." Mr. Conn said nothing in this world is for free and neither should the money that is kept in escrow, as is required by the institutions and contracts, be used by those institutions for free. He said APIRG welcomes this bill. It offers a modest return for money held in escrow and it offer an opportunity to receive a clear accounting of escrow accounts. He urged support for the bill. Number 1126 LISA BELL, Senior Vice President and Chief Operating Officer Alaska Federal Savings Bank, came before the committee. She explained Alaska Federal Savings Bank is the only federally chartered savings bank in Alaska, headquartered in Juneau, and has five branches serving four Southeast Alaska communities. Ms. Bell said she is testifying on behalf of Alaska Federal Savings Bank and the Alaska Bankers Association in opposition to HB 363. At first glance the bill would appear to be a good idea and good pro- consumer legislation. She said she thinks the committee would find, on closer inspection, that it is actually quite burdensome to banks and of little benefit to the borrowers. Alaska Federal Savings Bank, like other Alaskan banks that do servicing in state, finds that the key word really is service. She said they need to be able to provide face-to-face opportunities for Alaskans to meet with bankers to talk about local economic issues and other types of conditions that may affect their loans or their abilities to repay their loans. That is important to customers; they like to be able to walk in and talk to somebody. She said the banks need to be able to maintain that service. Ms. Bell said she feels that passage of the bill would really hinder the ability to offer that service. She said her bank prepared a profitability analysis of their Servicing Department in September of 1995, and they found it to be marginally profitable - enough to allow them to continue. Anything that would tip the balance, would probably force them to sell off servicing. That would mean that servicing might go out of state. The amount of interest that someone is likely to earn over a year on an average escrow balance, it is probably quite small. You may be talking about $25 or $30. It obviously depends on how much is being held in an account. The average amount of money wouldn't be very much. She indicated there would be red tape that both the customer and the banks would go through because there are Internal Revenue Service reporting responsibilities. The customer would have to pay interest. Ms. Bell continued to give testimony against HB 363 and urged the committee not to move the bill. CHAIRMAN KOTT closed the public hearing. He announced the committee would hold the bill. ADJOURNMENT CHAIRMAN KOTT adjourned the House Labor and Commerce Committee meeting at 4:35 p.m.