Legislature(1997 - 1998)
01/24/1997 03:05 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 January 24, 1997 3:05 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative John Cowdery Representative Bill Hudson Representative Jerry Sanders Representative Joe Ryan MEMBERS ABSENT Representative Eric Croft Representative Gene Kubina COMMITTEE CALENDAR OVERVIEW: Department of Commerce & Economic Development HOUSE BILL NO. 18 *"An Act extending to certain partnerships and corporations the 10 percent procurement preference currently given to certain sole proprietorships who are Alaska bidders and owned by persons with disabilities." - MOVED HB 18 OUT OF COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HB 18 SHORT TITLE: STATE PROCUREMENT DISABILITY PREFERENCES SPONSOR(S): REPRESENTATIVE(S) JAMES JRN-DATE JRN-PG ACTION 01/13/97 31 (H) PREFILE RELEASED 1/3/97 01/13/97 32 (H) READ THE FIRST TIME - REFERRAL(S) 01/13/97 32 (H) LABOR & COMMERCE, FINANCE 01/24/97 (H) L&C AT 3:00 PM CAPITOL 17 WITNESS REGISTER MARIANNE BURKE, Director Division of Insurance Department of Commerce & Economic Development P.O. Box 110805 Juneau, Alaska 99811-0805 Telephone: (907) 465-2515 POSITION STATEMENT: Presented an overview of the Division of Insurance WILLIAM L. HENSLEY, Commissioner Department of Commerce & Economic Development P.O. Box 110800 Juneau, Alaska 99811-0800 Telephone: (907) 465-5442 POSITION STATEMENT: Presented an overview of the Department of Commerce & Economic Development CATHERINE REARDON, Director Division of Occupational Licensing Department of Commerce & Economic Development P.O. Box 110806 Juneau, Alaska 99811-0806 Telephone: (907) 465-2534 POSITION STATEMENT: Presented an overview of the Division of Occupational Licensing JEANNETTE JAMES, Representative Alaska State Legislature P.O. Box 56622 Juneau, Alaska 99801-1182 Telephone: (907) 465-3743 POSITION STATEMENT: Testified on HB 18 DUGAN PETTY, Director Division of General Services Department of Administration P.O. Box 110210 Juneau, Alaska 99811-0210 Telephone: (907) 465-2250 POSITION STATEMENT: Testified on HB 18 DUANE M. FRENCH, Director Division of Vocational Rehabilitation Department of Education 801 West Tenth Street, Suite 200 Juneau, Alaska 99801-1894 Telephone: (907) 465-2814 POSITION STATEMENT: Testified on HB 18 ACTION NARRATIVE TAPE 97-2, SIDE A Number 001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee to order at 3:05 p.m. Members present at the call to order were Vice-Chairman Cowdery, Representatives Sanders, Ryan and Hudson. Number 069 MARIANNE BURKE, Director, Division of Insurance, Department of Commerce and Economic Development, came forward to testify. She stated that one of the most important activities which the division will address this year is the implementation of the provisions of the Kassebaum-Kennedy Act. This Act has been widely publicized and related legislation regarding the same will be brought before this committee. This Act is in response to long-standing complaints by employees, especially those who felt as though they were trapped in a job. If some employees leave their jobs they lose medical coverage. If someone in a family for example, has an on-going medical problem and the employee takes a different job, the new employer could exclude coverage for this family member under a pre- exiting condition. MS. BURKE stated that the Kassebaum-Kennedy Act was the most far- reaching health care legislation on the national level since medicare. The state of Alaska will have two options for implementing the provisions of this federal legislation. Alaska can either take a proactive approach by amending existing statutes to incorporate all the provisions of the Kassebaum-Kennedy Act or do nothing. In the latter event the federal agency, under the Secretary of Health & Human Services, will enforce this Act on Alaska. Alaska's laws are more closely aligned with the federal laws than many other states, but this is highly technical legislation with a very important time line. MS. BURKE continued that the Governor or Chief Executive Officer of each state must submit a plan of action to the Secretary of Health & Human Services by April 1, 1997 or the assumption will be made that a state accepts federal oversight. Alaska must have legislation in progress, drafted, written, introduced, or however the federal government chooses to define "in progress," which will bring Alaska into compliance January 1, 1998. The division is presently working on drafts of this legislation. MS. BURKE stated that the division has enough answers from the federal government to introduce legislation which will keep state regulation in the state's hands, rather than default to the federal government. She added that this was a wonderful opportunity for the citizens of Alaska. Under this legislation, if an employee chooses to leave their job to take another job, they will not be forced to satisfy some period of time before they are covered by insurance. It's also an opportunity for the state of Alaska to adopt the self-insured plan which would mean that an individual can switch from an insured plan to a self-insured plan or visa versa. This gives Alaskan citizens more options, as well as mobility, and takes the economic decision out of the arena as to whether or not an employee will lose coverage for themselves or their family. MS. BURKE further stated that Senator Kelly would introduce an old bill which basically does three different things. It will bring about efficiencies in existing regulations and get rid of barriers which have been created. (Ms. Burke did not specify which legislation she was referring to.) For example, in Alaska presently, an insurance company from Germany cannot be admitted as an insurer of surplus "lines" because in an obscure portion of a statute it says that a certificate of solvency from their country would be required. Great Britain is the only country which issues these. MS. BURKE noted compliance problems with some Alaska statutes as a result of welfare legislation passed last year. There are other provisions, none of which she felt would be controversial, but they are very important to the efficient business of insurance and regulation in the state of Alaska, as well as to protect the buying public when they deal with insurance companies. Number 614 CHAIRMAN ROKEBERG asked if a policy issue needed to be made in relation to letting the federal government intercede or for Alaska to take the initiative to institute the Kassebaum-Kennedy Act legislation themselves. MS. BURKE stated that they referred this to the administration for a decision. After having met with her counterparts of other states she noted that there isn't a state in the nation that wants the federal government to take over this program. She felt safe in saying that the administration will choose to maintain regulation on the state level. CHAIRMAN ROKEBERG suggested a work session with the committee on these various issues or to meet with Ms. Burke individually on this legislation. Number 702 REPRESENTATIVE JOHN COWDERY asked about a person, for example, who has a job and is injured. As a result of this injury the employee is laid up for quite a while. In the meantime, one of their children has a medical problem. In Representative Cowdery's experience this child would not be covered. He asked what has been done in regards to this situation presently. MS. BURKE responded that she thought Representative Cowdery referred to the provision of the Comprehensive Omnibus Budget Reform Act (COBRA) which allows a person to continue their coverage. Children have this right under an employee who was previously covered by a policy, they have the right of continual coverage by payment of the premium themselves. REPRESENTATIVE COWDERY said he understood this, but used the example of someone who is in a body cast for two years. It may be difficult for them to pay this premium. MS. BURKE said this situation is not addressed in the Kassebaum- Kennedy Act at all. Number 830 REPRESENTATIVE BILL HUDSON asked if there was a cost analysis attached to this legislation. MS. BURKE answered that the ability to assess potential cost is beyond the data which they have access to since self-insured plans are exempt by federal law from any reporting or regulation by the division. There have been numerous studies done on the national level on the impact of this legislation. The impact is considered to be minimal in relation to an individual who is not covered through the employer, but if they are going to, they would fall back to a high risk group. The costs don't go away, they just get shifted. The state, as a purchaser of insurance, receives its portion of the allocated cost of the high risk group. The state would absorb a portion as any other employer would. Number 920 REPRESENTATIVE HUDSON noted that there would probably be additional state costs for the implementation of the Kassebaum-Kennedy Act, but he clarified again that Ms. Burke could not presently assess this cost. MS. BURKE answered yes, but she added that the state may be paying these costs already whether through medicaid because the individual is unable to pay. Number 950 REPRESENTATIVE HUDSON stated that this would be an interesting examination of the whole issue of portability and prior injuries related to insurance coverage, etc. Number 1002 COMMISSIONER WILLIAM HENSLEY, Commissioner, Department of Commerce & Economic Development came forward to present an overview of the department. He noted that this department was relatively small, but very diverse. There are under 400 employees in this department and they perform functions such as corporate licensing services for businesses, professions and corporations. They insure the financial solvency of the state's financial institutions. They also regulate, through the Alaska Public Utilities Commission (APUC), utilities and they also provide service loans to commercial fisherman, as well as to non-profit hatcheries. They work with marketing of tourism and seafood. They also promote and finance economic development in a broad variety of sectors through various institutions. COMMISSIONER HENSLEY continued that in the budget overview distributed to the committee was an organizational chart on page 19 to show how the department is structured. From a budgetary standpoint their operating budget requested for 1998 is $60.8 million and of that amount $23 million is non-general fund money and consists mainly of corporate and endowment funds, also federal funds and loan receipts. Twenty six million dollars is designated in other program receipts from fees for service. The general fund's unrestricted request is $11.7 million which shows that the department has about one-half of one percent of its unrestricted general fund as the total state general fund request. COMMISSIONER HENSLEY noted that the pie chart on page 16 indicates the overall state general fund monies which are literally a sliver of this funding. One other instructive graph which shows what's been happening in the department since fiscal year 1990 is that its general fund unrestricted request has gone down at a 45 degree angle and its program receipts have grown, yet in the course of all this time its unrestricted revenue for the state treasury has continued to grow. These revenues come into the state from activities generated within the department. COMMISSIONER HENSLEY stated that the department more than pays its way. He noted a few changes which the department plans to present including a $200,000 increase in tourism marketing for enhanced television advertizing which will be matched by $66,000 of industry contributions. This will enable the tourism council to increase television advertizing from 9 weeks to 14 weeks which will generate 72 million "gross impressions" to the American public. The department feels as though this is an important addition in view of the tremendous competition for tourism around the country. Also, the Division of Trade and Development budget is being reduced by $82,700 through the elimination of one Minerals Development Specialist in Juneau. Furthermore, there is one Minerals Development Specialist in Fairbanks. This means they will also have a Development Specialist in Fisheries, one in Forest Products and one in Minerals Development. COMMISSIONER HENSLEY continued that in the film office they eliminated one Development Specialist position for $157,000 leaving $14,000 in travel and $50,000 in contractual services for the film program. It is not the intent to stop promoting this area. The tourism staff will assume responsibilities and the activities which they will engage in are trade publication advertizing, participating in some film location expositions, hosting some in- state location scouts and some product development trips for producers. When the department receive calls for location assistance from outside production companies they pass these on to local destination marketing organizations much as they do with tour operator calls which they receive. COMMISSIONER HENSLEY noted that several of the department's entities are up for sunsetting. The licensing boards which are up for extensions this session are: architects, engineers and land surveyors; barbers and hairdressers; physical and occupational therapists; dental; accountancy; and veterinary. Also, the department's been informed that the budget and audit committee will sponsor the extension legislation. Some legislative revisions may be based on audit findings. COMMISSIONER HENSLEY stated that the license fees have been lowered for over 15,000 license holders this year. During fiscal year 1996 the number of occupational licenses increased by over 4,000 for a total of 35,402 in the state. This fall the division has also implemented welfare reform in the licensing area with provisions requiring license denial if applicants are behind on child support. COMMISSIONER HENSLEY added that the governor has submitted an executive order to transfer the Division of Measurement Standards from the Department of Commerce and Economic Development to the Department of Transportation and Public Facilities. This division operates the commercial vehicle weigh stations, the oversize and overweight permits and it also monitors commercial weighing and measuring devices. This transfer, which would become effective July 1, would consolidate the state's commercial vehicle safety programs under one agency. COMMISSIONER HENSLEY continued that the governor, himself and other members of the cabinet have carried a strong message to the business community not only within the state, but also outside the state that Alaska is open and ready for business. They have visited with a variety of corporate leaders throughout the country and overseas to solicit investment in Alaska. Two years ago he had the good fortune to be part of the change in direction in dealing with the oil industry. They felt it was important to sit down face to face in order to talk about the future of the oil industry, to see what the oil companies plans were and what the state could do to assist maintaining production and exploration in Alaska. It's been very productive and exciting especially since the smaller companies are interested in exploration in Alaska. Furthermore, as part of these visits the department tried to cross the industry sectors as much as possible. COMMISSIONER HENSLEY cited a visit with the RTZ Corporation in London, a world-wide mining company. He also cited a visit with P&O, the parent of the Princess Tours Company. In both visits, Alaska was an important part of this company's business. He mentioned a trip to Houston to visit a small coil tubing company that provided a substantial amount of tubing that was used in Alaska, which cut the cost of doing business on the North Slope. He hoped that someday it would be practical to have a plant like this in Alaska. Furthermore, he addressed the concept of Work Star, which is related to welfare reform. He explained by fiscal year 1999, 10,000 welfare recipients need to engage in productive work. This will be a major challenge to the state. Therefore, the business community needs to work with the state. Work star would encourage businesses to assist the state by offering technical assistance, work shops and financial assistance through partial employee payments to help businesses achieve the standards set by the welfare reform initiative. COMMISSIONER HENSLEY continued that the department was also working on a project called Marketing Alaska. Industries were broken down into sectors including both the private and public. Each sector came up with ideas on how to improve the economy with built-in periodic updates. According to the periodic updates, a more conservative initiative approach was taken in some cases. This was especially true for the seafood sector. He stated there was a huge potential for Alaska in several of the companies. COMMISSIONER HENSLEY cited Sakhalin Island in Russia as a strong potential for investment opportunities. The department intended to work closely with those companies interested in this investment. The governor also intended to visit this area in the near future. Another area of interest for this program he noted was the Alaska Seafood Center in Anchorage. COMMISSIONER HENSLEY added that the governor also created a sub- cabinet to deal with the salmon industry last spring. A meeting was established in Juneau on January 27, 28 and 29, 1997 to establish some ideas to present to the legislature. Furthermore, the department had been providing staff to establish a business plan for the timber industry in Southeast Alaska including coordinating the state's response to the closure of the Ketchikan Pulp Mill. Commissioner Hensley stated he would be happy to answer any questions that the committee members might have. Number 1995 REPRESENTATIVE ROKEBERG thanked the commissioner for his testimony. He asked Commissioner Hensley to respond to the issue addressed in the Governor's State of the State speech regarding the five point plan for economic development. There was a pioneer incentive mentioned. He asked if the department would be providing any legislation surrounding that issue. Number 2012 COMMISSIONER HENSLEY replied, "yes." The department initially was focusing on the air service between Asia and Alaska. The Department of Revenue was leading the effort to draft legislation, however. The Commerce and Economic Development Department was also concentrating on a more generic piece of legislation that was practical. Number 2052 REPRESENTATIVE COWDERY asked Commissioner Hensley how many employees were in the department? COMMISSIONER HENSLEY replied, "390 employees." Number 2062 REPRESENTATIVE COWDERY asked Commissioner Hensley if the number of employees would decline after the weight and measure transfer? Number 2068 COMMISSIONER HENSLEY replied the department would be reduced by 45 people. Number 2079 REPRESENTATIVE COWDERY asked Commissioner Hensley if a lobbyist had been hired to help the state regarding the Sakhalin Island project? Number 2085 COMMISSIONER HENSLEY replied there was an existing organization called the American Business Center that was established on site already. It was the intention of the department to engage in a small business contract with them to provide data and contacts. It was economically very reasonable for them to do this. REPRESENTATIVE COWDERY asked if there would be a conflict of interest if this organization was involved in other interests of competition. COMMISSIONER HENSLEY said that this wasn't their understanding and it was the organization's responsibility to facilitate for any business, particularly for oil field service work at Sakhalin Island. Number 2150 REPRESENTATIVE HUDSON said he had been asked by the local area Kensington miners how they could find such good timing to eliminate the one and only major contact they have with the mining industry (in reference to the elimination of a Minerals Development Specialist position). Kensington is trying to open up a mine and generate 400 jobs. If the department wants to save $82,000 he said he would suggest other places to save it. He felt that this was short sighted since they're on the cutting edge of opening this mine. He asked for the Commissioner to seriously think about this. COMMISSIONER HENSLEY said he had a soft spot in his heart for mining since he had tried at one time to get a mining operation off the ground up north. The department has spent a fair amount of time interacting with the mining industry this past year. They are trying to respond to the administration's effort to scale down the budgets, but still be able to do the job. Mining is a growth area and they have high hopes for a wide range of mining opportunities in the mill right now. Number 2232 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development, made a statement from the gallery. She stated that she would assist with licensing type legislation this session and offered to talk with any of the representatives at any time about concerns, etc. Ms. Reardon said that the representatives would probably hear about occupational licensing frequently this session because of the large number of licenses it regulates. She also noted that the division's annual report was out which lists the 35 programs under their auspice. HB - 18 STATE PROCUREMENT DISABILITY PREFERENCES Number 2406 REPRESENTATIVE JEANNETTE JAMES came forward to present testimony on HB 18. She stated that current law for the disabled gives them a preference as an entity. When this original legislation was written there was a provision which required qualifying disabled people to operate as sole proprietors. She guessed that the drafters never visualized that two or more disabled people would want to do business together. What this current legislation does is to allow 100 percent disabled corporations and partnerships to be eligible for disabled preferences. TAPE 97-2, SIDE B Number 000 REPRESENTATIVE JAMES stated that the administration does support this bill. It has a zero fiscal note and she offered to answer any questions. Number 046 REPRESENTATIVE COWDERY referred to the zero fiscal note and noted that if they do allow a preference wouldn't this mean an expense to the state. REPRESENTATIVE JAMES noted that a fiscal note is required when additional costs would have been included initially or not covered already in some other existing way. She suspected that this wouldn't cause an additional charge to allow these people into the system. When the original preference was given a fiscal note was already included. Number 097 REPRESENTATIVE HUDSON referenced a letter in the bill packet dated April 10, 1995 from Ms. Bannister and asked if all legal problems had been cleared up in this final draft. REPRESENTATIVE JAMES responded affirmatively. Number 131 CHAIRMAN ROKEBERG interjected that the letter which Representative Hudson noted had referred to an entire global issue of six months as a matter of residence. He believed that legislative counsel referred to this in the context of the entire statute, not particularly this provision brought forward by Representative James. Ms. Bannister took the liberty of bringing this up as a potential constitutional issue as it relates to the six months issue and the equal protection clause. It was a letter drafted to put the bill sponsor on notice that there could be potential ramifications of the statute, but not certainly Representative James' requested amendment to this statute itself. REPRESENTATIVE SANDERS asked about the fiscal note issue. He added that there is an extra cost to the state when a contract is let under this legislation. "If you pay an extra 10 percent for a contract that's an extra expense to the state, right?" If the legislation is broadened so that other individuals get this preference then there will be a bigger expense, even if this was factored into the previous legislation. Number 228 REPRESENTATIVE JAMES responded that when the original bill went through with a preference and they visualized what the potential was for severally disabled people who might be in business and qualify, more people have not been added to this list. What has been added is a different way of doing business. She's not sure what the previous fiscal note was, but because of the known numbers of disabled individuals who might be in business within Alaska, a fiscal note would have been prepared. Number 298 DUGAN PETTY, Director, Division of General Services, Department of Administration came forward to testify. He noted that this bill was essentially the same as the one supported in this committee last year. The Department of Administration supports this bill. This bill corrects an oversight with the initial legislation where it's allowed for a bidder who employs persons with disabilities as long as they are a sole proprietor, and qualified through the Alaska's bidder preference to receive a 10 percent preference. What the present legislation effectively does is discriminates in those same situations where a sole proprietor, partnership or a corporation exists under the same circumstances. MR. PETTY continued with respect to the division's fiscal note and stated that there was no additional cost per se. No additional people will be hired to administer this law if passed. MR. PETTY continued that Representative Sanders did have a point as to the preferences on the books, that there was some financial consequences to administering them in the overall cost to the contract. The legislature has deemed that from a policy standpoint the benefits of those preferences and fostering certain types of Alaska businesses are worth this additional incremental cost. The division doesn't show this in its fiscal note because the cost of awarding this bid is simply not a cost which comes back to the division. The division has seen in this particular preference a bit more activity over the last couple of years and some circumstances where the costs have been demonstrably different than what the cost would have been without it, but it is their job to administer the division in accordance with the law. There is not a significant amount of additional cost associated with this, but they haven't done any projections. Number 425 REPRESENTATIVE HUDSON stated that he doesn't see how they can attribute any additional costs because they don't know what's going to come up. It may mean simply trading off a sole proprietor for a 100 percent owned corporation which means an expanding of the pie of those who can seek and qualify for the 10 percent disabled bidder's preference. Number 515 CHAIRMAN ROKEBERG stated that he has looked at the statute AS 36.31.70, and subsection (e) specifically. When this new legislation goes into effect it seemed that in reading the entire statute there could already be a 5 percent state residency bid preference. He confirmed that this was correct. He also referenced under subsection (c) a provision which calls for offering services through an employment program which offers a 15 percent bidders preference. He asked what this program was. MR. PETTY responded that an employment program is a successor to terminology which they used to call a sheltered workshop. An employment program is a program that has been certified by either the Division of Vocational Rehabilitation or the Division of Developmental Disabilities Program. This bill doesn't allow for an employer to receive both the preference for an employer who employs someone with a disability and the employment program preference. It would be one or the other. This 10 percent disabled bidder preference is added to the 5 percent Alaska bidder preference. In order to qualify for this someone must first qualify for the 5 percent Alaska bidder preference. MR. PETTY went on to note his understanding that someone can't have the 15 percent employment program preference in addition to the 10 percent disabled bidder or an employer who employs disabled bidder preference. These two can never be connected. The maximum benefit anyone can receive is 20 percent. Number 681 DUANE FRENCH, Director, Alaska Division of Vocational Rehabilitation, Department of Education, testified by teleconference. Mr. French stated that he supports this bill because it will expand opportunities for businesses that are wholly owned by individuals with disabilities to qualify under the bidders preference and for individuals with disabilities who have formed a partnership to qualify under the bidders preference. This legislation will expand vocational opportunities for people with disabilities. He wishes he could tell the committee that there are a lot of businesses owned by people with disabilities which are operating successfully and would qualify under the bidders preference, but unfortunately that's not the case. There are only a few businesses and he didn't think they needed to be overly concerned about there being a flood of businesses wholly owned by people with disabilities who would qualify under this preference, but it will make it possible for those few businesses which are fully owned by people with disabilities. MR. FRENCH stated that there are businesses which would qualify, but not very many. He knew of two or three specifically right now, but he said this didn't mean there weren't more which they were not aware of. He added that the partnership provision only applies to partners who each have a disability and would not apply to a husband and wife team where one or the other has a disability. Number 954 MR. FRENCH continued to address subsections 1 and 2 in relation to what defines disability. The same definition used by the Americans with Disabilities Act would apply to this legislation and would include persons with HIV. Number 1032 REPRESENTATIVE HUDSON made a motion to move HB 18 out of committee with individual recommendations with an accompanied zero fiscal note and asked for unanimous consent. Hearing no objections, it was so moved. ADJOURNMENT CHAIRMAN ROKEBERG adjourned the House Labor & Commerce Committee at 4:17 p.m.