Legislature(1999 - 2000)
03/15/1999 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 March 15, 1999 3:15 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative Andrew Halcro, Vice Chairman Representative Jerry Sanders Representative Lisa Murkowski Representative John Harris Representative Tom Brice Representative Sharon Cissna MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 123 "An Act exempting individuals who provide ski patrol services on a voluntary basis from the requirement for payment of minimum wage and overtime compensation; and providing for an effective date." - MOVED CSHB 123(L&C) OUT OF COMMITTEE * HOUSE BILL NO. 128 "An Act relating to lease-purchases of personal property." - MOVED HB 128 OUT OF COMMITTEE * HOUSE BILL NO. 110 "An Act relating to the sale, offer to sell, and labeling of fluid milk, meat, and meat products." - HEARD AND HELD * HOUSE BILL NO. 17 "An Act relating to the calculation of employee contributions and credited service in the public employees' retirement system for noncertificated employees of school districts, regional educational attendance areas, the Alaska Vocational Technical Center, and the state boarding schools; and providing for an effective date." - MOVED HB 17 OUT OF COMMITTEE (* First public hearing) PREVIOUS ACTION BILL: HB 123 SHORT TITLE: EXEMPT VOL. SKI PATROL FROM MINIMUM WAGE SPONSOR(S): LABOR & COMMERCE BY REQUEST Jrn-Date Jrn-Page Action 3/03/99 342 (H) READ THE FIRST TIME - REFERRAL(S) 3/03/99 342 (H) L&C 3/10/99 (H) L&C AT 3:15 PM CAPITOL 17 3/10/99 (H) HEARD AND HELD 3/12/99 (H) L&C AT 3:15 PM CAPITOL 17 3/15/99 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 128 SHORT TITLE: LEASE-PURCHASE OF PERSONAL PROPERTY SPONSOR(S): REPRESENTATIVES(S) MURKOWSKI Jrn-Date Jrn-Page Action 3/05/99 368 (H) READ THE FIRST TIME - REFERRAL(S) 3/05/99 368 (H) L&C 3/15/99 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 110 SHORT TITLE: SALE/LABELING OF MEAT/MILK PRODUCTS SPONSOR(S): REPRESENTATIVES(S) HARRIS, Dyson Jrn-Date Jrn-Page Action 2/24/99 300 (H) READ THE FIRST TIME - REFERRAL(S) 2/24/99 300 (H) L&C, JUD 3/10/99 418 (H) COSPONSOR(S): DYSON 3/15/99 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 17 SHORT TITLE: PERS CREDIT FOR NONCERTIFICATED EMPLOYEES SPONSOR(S): REPRESENTATIVES(S) BRICE, Phillips, Smalley, Cissna, Croft Jrn-Date Jrn-Page Action 1/19/99 22 (H) PREFILE RELEASED 1/8/99 1/19/99 22 (H) READ THE FIRST TIME - REFERRAL(S) 1/19/99 22 (H) LABOR & COMMERCE, HES 2/12/99 210 (H) COSPONSOR(S): PHILLIPS 2/24/99 308 (H) COSPONSOR(S): SMALLEY 3/03/99 350 (H) COSPONSOR(S): CISSNA 3/05/99 378 (H) COSPONSOR(S): CROFT 3/12/99 (H) L&C AT 3:15 PM CAPITOL 17 3/12/99 (H) L&C MEETING CANCELLED 3/15/99 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER DWIGHT PERKINS, Deputy Commissioner Department of Labor P.O. Box 21149 Juneau, Alaska 99802-1149 Telephone: (907) 465-2700 POSITION STATEMENT: Explained Version H committee substitute for HB 123. BRADLEY W. DENISON, Senior Vice President and General Counsel Rent-a-Center, Incorporated 5700 Tennyson Parkway Plano, Texas 75024 Telephone: (907) 972-801-1111 POSITION STATEMENT: Testified on HB 128. JOHN W. WAGNER, President Far North Venture, Limited d.b.a. Premier Rental Purchase 418 Third Street, Number 9 Fairbanks, Alaska 99701 Telephone: (907) 456-2023 POSITION STATEMENT: Testified in support of HB 128 as owner of rental stores in Anchorage and Fairbanks. PETE FELLMAN, Researcher for Representative John Harris Alaska State Legislature Capitol Building, Room 110 Juneau, Alaska 99801 Telephone: (907) 465-4859 POSITION STATEMENT: Explained HB 110. JANICE ADAIR, Director Division of Environmental Health Department of Environmental Conservation 555 Cordova Street Anchorage, Alaska 99501 Telephone: (907) 269-7644 POSITION STATEMENT: Testified on HB 110. BERT GORE, DVM, State Veterinarian Animal Industries Division of Environmental Health Department of Environmental Conservation 500 South Alaska Street, Suite A Palmer, Alaska 99645-6399 Telephone: (907) 745-3236 POSITION STATEMENT: Testified on HB 110. BELINDA CLIFTON, Environmental Health Officer II Animal Industries Division of Environmental Health Department of Environmental Conservation 500 South Alaska Street, Suite A Palmer, Alaska 99645-6399 Telephone: (907) 745-3236 POSITION STATEMENT: Testified on HB 110. JULIE KOEHLER P.O. Box 21106 Juneau, Alaska 99802-1106 Telephone: (907) 586-6070 POSITION STATEMENT: Testified in support of HB 110. DONALD LINTELMAN Northern Lights Dairy HC 60 Box 3300 Delta Junction, Alaska 99737 Telephone: (907) 895-4824 POSITION STATEMENT: Testified in support of HB 110. MARGARET CARR 3505 Woodland Park Drive Anchorage, Alaska 99517 Telephone: (907) 243-4234 POSITION STATEMENT: Testified in support of HB 110. MICHELLE WILSON Alaska Conservation Voice 809 West 20th Avenue Anchorage, Alaska 99503 Telephone: (907) 279-0777 POSITION STATEMENT: Testified in support of HB 110 on behalf of the Alaska Conservation Voice and herself as a new mother. BOB SHAVELSON P.O. Box 1498 Homer, Alaska 99603 Telephone: (907) 235-4068 POSITION STATEMENT: Testified in support of HB 110. RICK HELMS, Southeast Political Alternate Board of Directors Alaska Public Employees Association/ Alaska Federation of Teachers P.O. Box 32912 Juneau, Alaska 99803 Telephone: (907) 789-5951 POSITION STATEMENT: Testified in support of HB 17. JOHN CYR, President NEA-Alaska 114 Second Street Juneau, Alaska 99801 Telephone: (907) 586-3090 POSITION STATEMENT: Testified in support of HB 17. GUY BELL, Director Division of Retirement and Benefits Department of Administration P.O. Box 110203 Juneau, Alaska 99811-0203 Telephone: (907) 465-4471 POSITION STATEMENT: Provided information on HB 17, brought forward alternate wording. BARBARA HUFF TUCKNESS, Director Governmental and Legislative Affairs General Teamsters Local 959 State of Alaska 520 East 34th Avenue Anchorage, Alaska 99503 Telephone: (907) 565-8122 POSITION STATEMENT: Testified in support of HB 17. ACTION NARRATIVE TAPE 99-23, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 3:15 p.m. Members present at the call to order were Representatives Rokeberg, Halcro, Harris and Brice. Representatives Sanders, Cissna and Murkowski arrived at 3:19 p.m., 3:21 p.m. and 3:25 p.m. respectively. Number 0030 CHAIRMAN ROKEBERG called a brief at-ease at 3:16 p.m. The committee came back to order at 3:19 p.m. HB 123 - EXEMPT VOL. SKI PATROL FROM MINIMUM WAGE Number 0053 CHAIRMAN ROKEBERG announced the committee's first order of business is HB 123, "An Act exempting individuals who provide ski patrol services on a voluntary basis from the requirement for payment of minimum wage and overtime compensation; and providing for an effective date." He noted the existence of a new committee substitute (CS), Version H, labeled 1-LS0577\H, Cramer, 3/11/99. The chairman stated this version comes to the committee courtesy of the Department of Labor and he invited Mr. Perkins forward. Number 0101 DWIGHT PERKINS, Deputy Commissioner, Department of Labor, came forward. He noted the committee's previous discussion of HB 123 [March 10, 1999] and mentioned his further discussion with Mr. Carr of the Department of Labor's Wage and Hour section in Anchorage. Mr. Perkins indicated the department is in favor of exempting volunteer ski patrollers from potential liability regarding wage and overtime hour laws, in light of the great service they perform and the desire expressed for this exemption by the ski patrollers and the committee. The department thinks an appropriate fit is in subsection (16) [AS 23.10.055(16)] concerning emergency medical services, rather than as an additional subsection (17). The department would encourage the committee to accept this and move forward. Section 2 of Version H reads: * Sec. 2. AS 23.10.055(16) is amended to read: (16) an individual who (A) provides emergency medical services only on a voluntary basis; (B) [OR AN INDIVIDUAL WHO] serves with a full-time fire department only on a voluntary basis; or (C) provides ski patrol services on a voluntary basis. MR. PERKINS commented, in addition, the department has broadened the entire issue regarding nonprofits in the language before the committee [Section 1, subsection (6)]. He indicated he believes Version H both accomplishes the department's goals regarding the problem of nonprofits and assists with the ski patrol issue. Number 0211 CHAIRMAN ROKEBERG confirmed the language in subsection (6) is unchanged from the previous version [Version G], and the ski patrollers have been added as a new portion rather than as a new subsection. Chairman Rokeberg mentioned he felt particularly proud having this bill in hand after events the previous Friday at Alyeska Ski Resort [avalanche, March 12, 1999]. The chairman asked if there were further questions or comments, noting he would entertain a motion. REPRESENTATIVE HARRIS confirmed from Mr. Perkins that the Department of Labor is in full support of the legislation. Number 0287 CHAIRMAN ROKEBERG confirmed Mr. Ross in Anchorage has seen Version H of HB 123 and finds it acceptable [Chris Ross, Alaska Division Director, National Ski Patrol]. Chairman Rokeberg confirmed Mr. Carr in Anchorage [Department of Labor] did not feel the need to testify. Confirming there was no other testimony, the chairman closed the public hearing on HB 123. Number 0359 REPRESENTATIVE HALCRO made a motion to move the proposed CS for HB 123 out of committee with the attached zero fiscal note and individual recommendations. There being objections, CSHB 123(L&C) moved out of the House Labor and Commerce Standing Committee. Number 0382 CHAIRMAN ROKEBERG called a brief at-ease at 3:24 p.m. The committee came back to order at 3:25 p.m. HB 128 - LEASE-PURCHASE OF PERSONAL PROPERTY Number 0395 CHAIRMAN ROKEBERG announced the committee's next order of business is HB 128, "An Act relating to lease-purchases of personal property." He invited the bill sponsor, Representative Murkowski, to introduce the legislation. Number 0415 REPRESENTATIVE MURKOWSKI said the committee members might wonder why this subject is being addressed. The rent-to-own or lease-purchase business is relatively new to the state and there are not that many businesses here. However, it is a strongly growing business nationwide; there are approximately 8,000 stores across the country. Representative Murkowski surmised that it is just a matter of time before more such businesses are seen in Alaska. Currently there is no uniformity for those consumers interested in renting personal property through a rent-to-own store in terms of disclosures. Representative Murkowski explained the rent-to-own business mainly consists of consumer products like stereo equipment or washers and dryers. It is typically a less-than-four-month rental allowing the consumer some flexibility in terms of obtaining something immediately without a significant initial cost. House Bill 128 specifically requires up-front disclosure from the lease-purchase business so that the consumer knows in advance what the required payments would be, the number of payments, and when ownership would be achieved. The legislation before the committee is patterned after model legislation from other states; 44 states have adopted legislation. Representative Murkowski indicated an industry member was present to answer specific industry-related questions. She additionally noted this legislation would be a new chapter in the Alaska Statutes; these purchases do not fall within the Alaska Retail Installment Sales Act [AS 45.10] or within the leases section of the statutes. There really are not any statutory guidelines if a person needs to bring an action against someone in the rent-to-own business. Number 0647 CHAIRMAN ROKEBERG asked why this doesn't fit into the Alaska Retail Installment Sales Act. REPRESENTATIVE MURKOWSKI replied that a lease-purchase is basically a four-month or less rental agreement allowing the person the option to purchase at the end of the agreement. With retail installment, someone is basically purchasing on credit; with lease-purchase, it is a rental until the person makes the decision that he or she wants to purchase at the end. Number 0720 BRADLEY W. DENISON, Senior Vice President and General Counsel, Rent-a-Center, Incorporated, came forward to testify. He said Rent-a-Center is the largest rent-to-own company in the United States; it has approximately 2,100 stores with stores in all 50 states. Mr. Denison described that leases of one week or one month are most common, although the definition of rent-to-own in this legislation and most other states' is a lease of four months or less. A customer at a rent-to-own store fills out a very short application that mainly asks for name, address, employer and several personal references. If approved, the person pays one week's rent which would be, for example, between $5 and $10 for a 20-inch television. The company delivers the item to the customer. He noted Rent-a-Center does not charge for delivery. At the end of the first week the customer can either continue to rent or return the item. If returned, Rent-a-Center picks up the item without charge. If the person continues to rent, Rent-a-Center provides all service for the merchandise during the terms of the rental including "loaner" merchandise if necessary. At the end of a predetermined rental period the customer automatically becomes the owner of the goods. This period might be 70 or 78 weeks. Mr. Denison noted Rent-a-Center has a very diverse customer base ranging from executives on temporary assignment to working people unsure of the future. In some cases Rent-a-Center provides a service to people without credit or access to credit, allowing them to obtain a major appliance. Number 0870 MR. DENISON indicated Rent-a-Center's customers always have other alternatives like saving or buying used, but may have had bad experiences with purchasing used items. Thirty-one percent of their customers have household incomes of $36,000-plus on a nationwide average. Mr. Denison commented their "bread and butter" customer is generally a blue collar worker who wants something extra like a big screen television in his or her life. In Alaska, Rent-a-Center's transactions are considered leases, not retail installment sales because Rent-a-Center's customers are never obligated to pay past that first period. The Alaska Retail Installment Sales Act and most other states' Acts have a basically two-pronged approach to determining whether a lease is a sale: 1) a customer signs an agreement obligating him or her to pay the value of the goods; 2) the customer can get the goods at the end for no or nominal consideration. Even though it's structured as lease, it would be considered a sale. Because Rent-a-Center's customers never obligate themselves to pay more than one week or one month, these are not considered retail installment sales under Alaska law. Mr. Denison noted, as Representative Murkowski had said, that HB 128 provides a number of consumer protections. The disclosure provision is probably the most important; it would ensure that all rental dealers are providing customers with the information needed to make informed decisions. The legislation also provides for advertising disclosures so that companies have to disclose certain information about the transaction in any advertising. Number 0997 MR. DENISON indicated, additionally, certain prohibitions are placed on rental dealers. They would be prohibited from taking confessions of judgement, negotiable instruments that could be cashed later, wage assignments, or Alaska Permanent Fund Dividend assignments. Dealers would also be prohibited from breaching the peace or obtaining an agreement to enter the customer's home. Mr. Denison indicated most of Rent-a-Center's customers don't use their services to buy merchandise. He stated a typical lease averages four months and that only 25 percent of their leases go full term. On average, his business's inventory goes out 2.5 times. Mr. Denison agreed they do charge more than retail. They do so because their expenses are higher: delivery costs, service costs, the cost of allowing someone to take merchandise for six months and return it no questions asked. He indicated Rent-a-Center thinks Alaskan consumers, in order to make this practice consumer-friendly, need legislation detailing what information and services dealers are required to provide. He stated Rent-a-Center thinks HB 128 does this, and does it adequately. Number 1085 REPRESENTATIVE HALCRO referred to Section 45.35.030(b)(3) of HB 128 ["(3) the reasonable costs of picking up and redelivering the property if the lessor has picked up the property from the consumer; and"]. He asked what Mr. Denison's company charged to pick something up. MR. DENISON stated his company did not charge. He commented there is a measure of practicality that enters into any transaction. If a customer doesn't want the item or can't afford the next payment, Rent-a-Center wants to pick up the merchandise and be done with it so that the customer would be comfortable entering into a future transaction. Number 1135 CHAIRMAN ROKEBERG asked about the level of delinquency. MR. DENISON replied it is very, very small. He noted it is done by store and he does not have those exact numbers. Below 10 percent of their accounts are delinquent. In response to the chairman's comment about the stereotyped "thug" image of Mr. Denison's industry, Mr. Denison said he supposes that may have been true of some dealers at some point in the industry's history but he thinks the vast majority of rental dealers have realized the right way to do business, and the way to keep a business going perpetually and profitably, is to absolutely take care of one's customers. Mr. Denison stated he is very proud of his company's customer record: his company and most of the other companies belonging to their national association representing almost 4,000 stores voluntarily follow the Fair Debt Collection Practices Act [15 U.S.C. Sec. 1692] even though that doesn't apply to their industry. He commented some bad media regarding a few cases exists, but noted that ignores thousands and thousands of transactions with very satisfied customers. Number 1248 REPRESENTATIVE HARRIS asked how long the rent-to-own business has been operating in Alaska. MR. DENISON apologized that he didn't know. He explained Rent-a-Center has been recently acquired by a company owning a store in Alaska. REPRESENTATIVE HARRIS indicated he had referred to the lease-purchase philosophy, not a specific business, commenting he has certainly dealt with lease-purchase in the equipment business. Representative Harris confirmed from Mr. Denison that this legislation would give some legal parameters to this type of business as far as state law goes, to deal with repossessions or just business practices. He further confirmed that Rent-a-Center is simply looking for some uniformity nationwide. Number 1308 REPRESENTATIVE MURKOWSKI added that the lease-purchase companies in Alaska have been receptive to what is being proposed here: that there be some uniformity within the disclosures. It not only provides protection for the consumer, but also for those in the industry. CHAIRMAN ROKEBERG confirmed that Mr. Denison, as general counsel, had looked at the contract used by his company's firm in Alaska. The chairman asked how this legislation would modify that current contract. MR. DENISON indicated he had not done a line by line analysis, but said he didn't believe the legislation would substantially modify that agreement, except that it would allow them to provide automatic ownership of the merchandise at the end. In response to the chairman's comment about the grace period, Mr. Denison said he had omitted the reinstatement provision from his testimony. He explained the legislation provides a reinstatement provision: a customer can terminate the agreement, giving up the goods, but has the option to resume within certain time frames. The company would have to disclose these parameters in its rental agreement, as well as the early purchase option formula. Number 1423 CHAIRMAN ROKEBERG asked if he was correct in thinking there is no statutory grace period required in the state of Alaska. MR. DENISON agreed; he believes there is no law specifically regulating rental-purchase. CHAIRMAN ROKEBERG asked Mr. Denison to explain the grace periods of two and five days. MR. DENISON replied that if a customer calls the rental store requesting the merchandise be picked up within that time period, then the customer has the right to reinstate his or her agreement for 21 or 45 days without losing his or her place. The 21 or 45 days is determined by how long the customer has rented the goods. If someone has rented for six months and calls within the five day period on a monthly agreement, Rent-a-Center will pick up the merchandise and the customer can pick up on a newer rental agreement, receiving six month's worth of credit, so to speak. CHAIRMAN ROKEBERG confirmed this bill provides a grace period that is not currently in law, although it could be company policy. Number 1487 MR. DENISON agreed. All the company is asking is that the customer inform the company and allow it to pick up the merchandise, and the company will let the customer pick up where he or she left off. Economically, it is a good deal for the customer. CHAIRMAN ROKEBERG asked how Mr. Denison would characterize this legislation: Is this a consumer protection bill or a pro-business bill? The chairman questioned why Mr. Denison's company is supporting the legislation. MR. DENISON responded he believes it is a very pro-consumer bill. The reason Rent-a-Center is promoting this legislation is because it and members of the Association of Progressive Rental Organizations believe taking care of the customers is the way for a business to last and prosper. They believe having uniformity in the information available to the customer between different rental businesses, so the customer can compare, is the right way to do business and will ultimately benefit the industry. CHAIRMAN ROKEBERG noted the committee would next hear testimony from John Wagner. Number 1573 JOHN W. WAGNER, President, Far North Venture, Limited, d.b.a. Premier Rental Purchase, testified via teleconference off-net from Anchorage in support of HB 128. Mr. Wagner stated he has had rental stores in Anchorage and Fairbanks since October 1985. CHAIRMAN ROKEBERG questioned how this would affect Mr. Wagner's operation. MR. WAGNER replied the only thing he noticed different from his business's current practices is the holding the items for 45 days - his business holds it longer. He indicated he echoed Mr. Denison's comments about retaining the customers, stating, "The last thing I want to do is go to someone's house and pick up the merchandise and not let them have it back. ... We definitely work with people, especially with Alaska being a transient state - seasonal workers, paychecks sporadic, ... people that work in the fishing industry, the construction industry ... We hold stuff for people until they get back on their feet, you know, that sort of thing." Mr. Wagner commented he still has customers today that he had the first month he opened, noting his business has a pretty loyal following. Number 1639 REPRESENTATIVE SANDERS asked if there is a current problem in Alaska bringing forward this legislation or if this is just a preemptive strike. MR. WAGNER responded he knew of nothing derogatory regarding this legislation, at least in his operation. He commented Rent-a-Center is a large and very good operation, noting its stockholders have been around the business for a long time. Mr. Wagner indicated he thinks it is just good business practices; something he would like to see, but did not have the resources to put together himself. REPRESENTATIVE MURKOWSKI addressed Representative Sanders' concern, stating there is not a current problem within the industry from what they understand; it is more of a preemptive strike recognizing the likelihood that the numbers of these business will be increasing in Alaska as they already have in the Lower 48. She noted the up-front full disclosure requirement is the primary reason for the legislation's introduction. Number 1703 CHAIRMAN ROKEBERG asked Mr. Wagner if the large military population in both Anchorage and Fairbanks is a significant part of his clientele. MR. WAGNER replied it had been when he opened up in Fairbanks. He described, however, that the military base now allows "in-home layaway," so his store there no longer has the military presence it used to. Mr. Wagner noted he thinks this is one of the only military bases in the country with this practice. He clarified for the chairman that "in-home layaway" allows military personnel to purchase goods from the "PX" or base store, take the goods home, and payments are automatically taken out of the military member's check. In response to the chairman's comments, he noted his business's name is Premier Rental Purchase and that the committee has received a letter from him and a copy of his rental agreement. CHAIRMAN ROKEBERG confirmed Mr. Wagner would not have to modify his rental agreement as a result of this legislation. The chairman questioned how Mr. Wagner currently handled the grace period with his clients. MR. WAGNER replied it depends on the situation. Normally their delinquency runs anywhere from 6 to 11 percent. They play "catch-up" during January because people tend to overspend during the holidays. He commented his business works with the customers. Mr. Wagner indicated his business would not have to change anything if this legislation passes. Number 1799 CHAIRMAN ROKEBERG questioned whether anyone else wished to testify on HB 128. The chairman asked Representative Murkowski if she had contacted any of the music stores in the Anchorage area to see if they had any interest in this legislation. REPRESENTATIVE MURKOWSKI responded she did not believe so. MR. WAGNER indicated he believed Mr. Denison had referred to APRO, the Association of Progressive Rental Organizations. He commented some local music stores are renting musical instruments to own but he does not believe the stores are members of APRO, and it is a very small percentage. CHAIRMAN ROKEBERG stated his intention to close the public hearing on HB 128, noting to Representative Murkowski he had a concern that these music stores would be impacted and might not be aware of that. He commented this is the legislation's only committee of referral. REPRESENTATIVE MURKOWSKI stated she would be happy to contact music stores that are rent-to-own businesses and solicit their comments. Number 1866 CHAIRMAN ROKEBERG indicated he was in agreement with that. He asked the will of the committee. REPRESENTATIVE HALCRO indicated he was satisfied with Representative Murkowski's presentation of the legislation, felt there was time in the legislation's progress for possible input from those music stores, and was in favor of moving the legislation because he thinks it is a good, pro-consumer bill that creates a level playing field. CHAIRMAN ROKEBERG confirmed there were no further comments. Number 1910 REPRESENTATIVE HALCRO made a motion to move HB 128 out of committee with two attached zero fiscal notes and individual recommendations. There being no objections, HB 128 moved out of the House Labor and Commerce Standing Committee. Number 1918 CHAIRMAN ROKEBERG called an at-ease at 3:53 p.m. The committee came back to order at 3:57 p.m. HB 110 - SALE/LABELING OF MEAT/MILK PRODUCTS Number 1923 CHAIRMAN ROKEBERG announced the committee's next order of business is HB 110, "An Act relating to the sale, offer to sell, and labeling of fluid milk, meat, and meat products." Number 1929 REPRESENTATIVE HARRIS, as the bill sponsor, said he has been asked to introduce this legislation by Alaskan dairy farmers. The bill does two things: 1) it institutes a pull date on milk for shelf life in Alaska; 2) it gives a niche market for milk produced without hormones in Alaska. He commented he thinks all milk produced in the state is produced without the use of synthetic hormones, unlike a lot of milk produced outside Alaska and sold in the state. The bill provides a penalty if milk is labeled as produced without hormones but does contain them; it would be false advertising. He understands that there is a market for non-hormone-induced milk and this provides a penalty if producers, especially Alaskan producers, label their milk falsely in this respect. Representative Harris indicated Pete Fellman would provide the committee with more detail. He commented Mr. Fellman has been working with the dairy farmers and is a dairy farmer himself. Number 2016 PETE FELLMAN, Researcher for Representative John Harris, Alaska State Legislature, came forward to explain HB 110. He commented Representative Harris had said everything he had intended to say. Mr. Fellman noted a March 15, 1999, Monsanto Company letter in the bill packet indicates voluntary labeling of milk as non-hormone-induced is legal and is happening in the Lower 48. The letter further indicates Monsanto supports the labeling as long as it meets the guidelines set forth. Mr. Fellman said there is milk labeled non-hormone-induced for sale in Alaska, in Juneau. The authority to regulate this comes from the state where the milk is produced. He believes the milk sold in Juneau comes from Minnesota, therefore Minnesota sets the standard for the regulations and enforcement. Alaska has no such law. Mr. Fellman indicated the intent is to support Alaskan agriculture which is small and 40 years behind the Lower 48. The hope is to put this legislation through as a consumer-choice bill. Whether bST [bovine somatotropin, also called bovine growth hormone] is harmful or not is not the issue, the issue is the choice to not drink milk produced by a synthetic hormone. Consumers currently have that choice from milk produced outside the state; the intent is to allow the same choice with milk produced in the state. This will create niche markets. Mr. Fellman stated he personally is attempting to build a cheese plant and would like to be able to label his cheese non-hormone-induced. He commented they cannot compete with Lower 48 thousand-cow dairy farms, and noted he believes about 72 percent [of these farms] use bST to increase milk production. By creating markets for milk and meat producers, HB 110 will help protect Alaska's already substantial investment in agriculture. Mr. Fellman said they are looking for ways to secure agriculture and the state's investment. Number 2168 CHAIRMAN ROKEBERG asked where Mr. Fellman's dairy farm is located. MR. FELLMAN replied Delta Junction. REPRESENTATIVE HARRIS asked Mr. Fellman if he has read the letter from Monsanto and has any answers to their questions. [The March 15, 1999, letter from Michael J. Diamond, Associate Director, Monsanto State Government Affairs, to Chairman Rokeberg reads: On behalf of Monsanto, I am pleased to provide you with some additional information concerning the voluntary labeling of milk, dairy and other meat products as proposed by HB 110. While Monsanto does not oppose voluntary labeling, we do express our concerns over the way in which labeling is addressed. Attached, please find some information which I think you will find helpful in discussing the issue of milk/dairy safety. I would, however, like to point out the following points, which I believe merit serious consideration: 1. The federal Food and Drug Administration determined there is no significant difference between dairy products produced by cows administered with rBGH and cows not administered with rBGH. The products are essentially the same, and in fact, no differentiation can be made. 2. In a 1997 court ruling in Illinois, Ben & Jerry's Homemade Inc. was prohibited from placing a "no rBGH" label on their product because it was deemed misleading to consumers. 3. The FDA has reaffirmed its 1993 finding that rBGH is safe for human consumption. A letter from Health Secretary Donna Shalala to House Minority Leader Gephardt stated that "the lack of oral activity of rBST/rBGH and insulin [-like] growth factor 1 (IGF-1) and the low level and non-toxic nature of the residues of these compounds, even at exaggerated doses, results in an extremely large margin of safety for humans consuming dairy produced from rBST-treated cows.["?] In 1998, the Joint Food and Agricultural Organization/World Health Organization Expert Committee on Food Additives (JECFA) reaffirmed the safety of milk and meat from treated cows. 4. Current law already permits producers to engage in voluntary labeling, provided their claims are truthful and not misleading, nor do they make a claim they cannot support. Additional concerns, which should be considered, include: 1. Are the state's Agricultural Department or Health agencies capable of testing milk, meat, or dairy products for the presence of rBGH? Unlikely, since the products are essentially identical and BST is a naturally occurring protein found in cows - hence, it would be impossible to support a claim that any product is, in effect, "BST-Free." 2. What kind of affidavit would be needed to guarantee compliance by dairy producers? 3. Finally, who is liable in a situation where a producer sells a milk/dairy product from a treated cow, despite claiming that his product is rBGH free? The producer? The packager? Or the State? Monsanto does not oppose voluntary labeling, since it is already legally permissible - however, we do maintain that any voluntary labeling must follow FDA guidelines, and be entirely truthful and verifiable.] Number 2178 MR. FELLMAN replied he received this information about an hour before the hearing and commented he has spoken with Mr. Diamond. Monsanto is not against this labeling, the company is concerned the bill itself meets the criteria. Mr. Fellman indicated he believes it might be possible to address this language in the Alaska Administrative Code if such legislation is enacted. REPRESENTATIVE HALCRO referred to a letter in opposition to HB 110 in the bill packet from the National Food Processors Association (NFPA). He noted part of the letter says that HB 110 is unnecessary because voluntary disclosure is already permitted under FDA [Food and Drug Administration] rules. He asked if Mr. Fellman is aware of this. MR. FELLMAN answered in the affirmative, but his research shows that individual states have the right to regulate milk and milk labeling. There is a federal milk quality guideline that must be met for bacteria, pasteurization, et cetera, but the state sets certain limits and can set certain guidelines. Number 2255 REPRESENTATIVE HALCRO pointed out that criminal sanctions are being proposed when bST is a naturally-occurring hormone and it might be in any given cow. He asked if Mr. Fellman could address this. MR. FELLMAN replied he has talked to Monsanto's veterinarians at length and has entertained the idea himself over the years of injecting his cows because it is profitable. The bST in the milk cannot be distinguished from naturally-occurring bST, although the levels are higher. However, a veterinarian can examine the known injection sites: at the tail-head or in the shoulders. Mr. Fellman indicted the cows develop a small cyst because the product is oil-based and is slowly released into the bloodstream. If there was a consumer complaint, the state veterinarian could exhume that cyst and, if all or many of a farmer's cows had these cysts, make a reasonable determination or correlation that the cattle were being given bST. Number 2328 CHAIRMAN ROKEBERG stated he believes the question is: If it is naturally occurring, how do you differentiate and why make it criminal? MR. FELLMAN referred to information in the bill packet on the milk-cancer connection ["Milk and the Cancer Connection," Hans R. Larsen, MSc ChE, International Health News, Editor/Publisher: Hans R. Larsen]. Mr. Fellman stated there is evidence the higher levels change some of the components in milk. He said when that happens, "IGF" [IGF-1, insulin-like growth factor 1] changes. Mr. Fellman indicated there may be possible connections to breast cancer. All they are speaking of is giving people the right to choose. REPRESENTATIVE HALCRO questioned whether Alaska has a state veterinarian that would actually go out and enforce this. MR. FELLMAN indicated the farms are inspected on a regular basis by the state veterinarian. He confirmed for Representative Halcro that there is an enforcement mechanism in place; the state vet could be called in if there would be a complaint. Number 2384 REPRESENTATIVE SANDERS asked if Mr. Fellman markets his milk through Matanuska Maid [Matanuska Maid, Incorporated]. MR. FELLMAN replied they market their milk through Northern Lights Dairy in Delta Junction; their milk goes to Fairbanks. He confirmed for Representative Sanders that the labeling would be on the carton and would be voluntary. Mr. Fellman mentioned that a small producer in the "Valley" [Trytten Farms, Wasilla, Matanuska Valley, letter of support in bill packet] would like to start its own processing plant. Since the owner milks his own cows and is there for all aspects of the process, he would be able to purchase a carton stating he does not use hormones in his milk. However, "Mat-Maid" [Matanuska Maid, Incorporated] could not use the label because 70 percent of its milk comes from out-of-state. This milk is pooled with Alaskan-produced milk. There is no way to tell if that 70 percent has been produced with bST; therefore Mat-Maid would not be able to use the label. Mr. Fellman noted it is essentially a voluntary label for small family farmers. Number 2433 CHAIRMAN ROKEBERG asked if North Star Dairy imported milk. MR. FELLMAN stated all of their milk is produced in Delta from five dairy farms. Everything they have goes into fluid milk right into the market. Mr. Fellman noted the decision to use the label would be up to Don Lintelman, the owner of Northern Lights Dairy. If so, Mr. Lintelman and all the farmers would have to sign a statement guaranteeing they are not using the hormone. Mr. Fellman noted he doesn't think Mr. Lintelman is interested in using the label, but he himself and others in the state are interested in attacking the small niche markets. Number 2479 REPRESENTATIVE MURKOWSKI returned to the enforcement aspect and the associated criminal negligence penalties. She asked, "If you have a small dairy, say you only have five cows, and you inject four of them, and you get caught, all you..." [TESTIMONY INTERRUPTED BY TAPE CHANGE] TAPE 99-23, SIDE B Number 0001 REPRESENTATIVE MURKOWSKI continued, "... hang over somebody's head without the enforcement aspect being clear. So if you can help me out with that I'd appreciate it." MR. FELLMAN commented there is going to be an element of honesty here. He doesn't know anyone milking five cows who is selling their milk legally. Normally, anybody who is milking five cows is not pasteurizing or homogenizing their milk, and does not have a "Grade A" permit to start with. Number 0024 CHAIRMAN ROKEBERG noted Department of Environmental Conservation (DEC) personnel were available via teleconference for questions. REPRESENTATIVE BRICE said they might want to move from a Class A misdemeanor to a violation, to possibly address Representative Murkowski's concern and for Representative Harris's consideration. With a violation, a ticket could be written and the farmer could be penalized economically. CHAIRMAN ROKEBERG announced the committee would go to teleconference testimony. Number 0076 JANICE ADAIR, Director, Division of Environmental Health, Department of Environmental Conservation testified via teleconference from Anchorage. She noted Bert Gore is the state veterinarian and Belinda Clifton is the division's dairy specialist. Both are present for technical questions. CHAIRMAN ROKEBERG pointed out that HB 110 includes meat and products as well as milk. The chairman asked Mr. Fellman why this had been expanded to meat products. MR. FELLMAN replied that rBGH [synthetic bovine growth hormone] is being used to induce growth in beef cattle. Instead of an injection, the hormone is most commonly introduced through an implant in the steer's ear for sustained release, enhancing the cow's growth. Number 0129 REPRESENTATIVE BRICE asked if Mr. Fellman could show him where cheese would be included in the legislation regarding the labeling. He noted it appeared to speak to fluid milk. MR. FELLMAN said he thought it covered cheese, and with Representative Halcro's assistance noted page 2, line 6. [This subsection reads: * Section 1. AS 17.20.005 is amended to read: Sec. 17.20.005. Powers and duties of commissioner. To carry out the requirements of this chapter, the commissioner may issue orders, regulations, permits, quarantines, and embargoes relating to ... (4) labeling, subject to AS 17.20.013 and 17.20.015, and grading of milk and milk products and standards of sanitation for dairies offering to the public or selling milk or milk products to at least he minimum of current recommendations of the United States Public Health Service pasteurized milk ordinance as it may be periodically revised;] Number 0167 CHAIRMAN ROKEBERG asked if Ms. Adair or her support staff wished to comment on the legislation. Number 0171 MS. ADAIR answered in the affirmative and began her formal testimony as director of the Division of Environmental Health, Department of Environmental Conservation. Food safety issues fall within this division. She said the legislation essentially has two aspects: 1) the pull date for milk, 2) the bST labeling. The division finds the milk pull date problematic: there are new pasteurization techniques that can give milk a 65 to 70 day shelf life. There are also pasteurization techniques that give shelf-stable product not requiring refrigeration. A scenario could be set up where a lot of good milk would be thrown away because it would not be bad after 18 days. The division also wonders how this would affect shipment into rural Alaska, where the milk products could be arriving in villages around the pull date. Number 0212 MS. ADAIR noted there is guidance from the FDA regarding synthetic hormone labeling. This is something which has been the subject of many court suits and has generated a lot of consumer interest. The FDA does not oppose labeling of milk or meat products as not being produced using bST. It does oppose the labeling "bST-free" but that is not being proposed here, to Ms. Adair's understanding. However, the FDA says labeling must be truthful and not misleading in any way. Ms. Adair stated there is no health effect from bST; the milk from bST-supplemented cows is the same in every way - safety, composition, (indisc.) nutrition - as milk from other cows. She indicated very low levels of bST occur naturally in milk. The division would have no way to test a milk product and determine whether or not it was obtained from a bST-induced cow. Bovine somatotropin (bST) has no effect on people; it is destroyed during digestion just like any other protein. Ms. Adair noted, therefore, no safety reason has been found to label products as not being from bST-induced cows. Number 0275 MS. ADAIR confirmed it would be possible for Dr. Gore to determine whether or not a living cow had been induced with bST. Because the injection location is part of the animal discarded during slaughtering, according to Ms. Adair's understanding, it is unlikely Dr. Gore could make this determination for a nonliving animal. Ms. Adair stated, therefore, the division is unsure it could fairly enforce this. Because of these problems, the FDA recommends that states require firms using such claims to establish a plan, maintain records to substantiate the claim, and make those records available for inspection. Ms. Adair said she would hate to see them establish a large recordkeeping requirement for a voluntary label but she is not sure they would be able to ensure the label was accurately used any other way. CHAIRMAN ROKEBERG confirmed that concluded Ms. Adair's testimony. He asked about the zero fiscal note and its relation to her last statement. Number 0327 MS. ADAIR indicated the fiscal note is zero because she is not really sure how the division could deal with the legislation. She confirmed to the chairman that an indeterminate [fiscal note] might be a better characterization. Ms. Adair added that the Department of Law had been considering submitting a fiscal note because of potential legal challenges based on some issues with interstate commerce. She was not sure what that department had decided, if it had decided. CHAIRMAN ROKEBERG asked about the problems regarding the issue of meat and meat products. MS. ADAIR replied that, as she understands it, they would not be able to tell if the meat was from cattle "injected with bST." She stated, "The injection site on the animal is not saved, and, as was testified previously, that is one of the things the state vet would need to look for in order to tell if a cow had been injected, and that wouldn't be available to him." Number 0385 REPRESENTATIVE HALCRO asked if it is correct that in other states with these voluntary labeling requirements, it is basically up to the individual farmer or cattle raiser to keep records that would be audited if there is a question. MS. ADAIR replied she understands that is what the FDA recommends but the division has not checked into other states' practices. To Representative Halcro's further question, Ms. Adair answered that she is not aware of any other states with criminal penalties for false labeling on this issue, but she has not checked with all 49 other states. Number 0441 MR. FELLMAN said he wanted to address the pasteurization issue. He noted there are two types of pasteurization: ultrapasteurization and high-temperature pasteurization. Ultrapasteurization is fairly new technology. Regarding the issue of interstate commerce, he brought up Florida's 12-day milk pull date and Georgia's 18-day pull date. The only problem occurs if Georgia wants to send milk to Florida; in this situation Georgia must label its milk accordingly. Most of the milk Alaska imports comes from Washington State; Washington is presently at 18 days. Mr. Fellman indicated the 18-day labeling requirement in the legislation is set because of Washington's date. Mr. Fellman noted, "But we did include high-temperature pasteurization [ultrapasteurization?]. Like I stated before, we are 40 years behind here in Alaska and it will be a long time before any producers can afford the technology for high-temperature pasteurization [ultrapasteurization?]. So, if we don't support the small farmer now, ... if the small farmer cannot compete with longer shelf life, then the state of Alaska has lost everything that it has invested in agriculture." REPRESENTATIVE MURKOWSKI indicated that almost completely answered her question regarding ultrapasteurization, the technology improvements, et cetera. However, the language in Section 2 of the bill speaks about 18 days after the date of ultrapasteurization or high-temperature pasteurization. She thought Mr. Fellman had said because it was 40 years behind Alaska was not to that ultrapasteurization point. Number 0538 MR. FELLMAN replied this is correct but some of the milk coming from Washington State has been ultrapasteurized. The largest percentage is still high-temperature pasteurization and has an 18-day shelf life. Mr. Fellman cited that he has been given anywhere from 25 to 90 days for ultrapasteurization shelf life. REPRESENTATIVE MURKOWSKI questioned whether it is reasonable to pull ultrapasteurized milk off the shelf when it still has another 25 or 50 good days left. She asked if there couldn't be two different categories, one for regular pasteurized and one for ultrapasteurized. MR. FELLMAN said there are two categories, but the problem is that as ultrapasteurization becomes more and more prevalent, the Alaskan farmer is going to be pushed out of the market. Alaskan milk will only have an 18-day shelf life, but out-of-state ultrapasterized milk will have a much longer shelf life. Mr. Fellman commented it is a tough position but said the state has the right to set the standard although the technology may be different. Number 0619 CHAIRMAN ROKEBERG indicated there are a number of people who wish to testify. REPRESENTATIVE CISSNA asked if any portion of the bill has problems with interstate commerce provisions. CHAIRMAN ROKEBERG noted the question was good. He emphasized there were witnesses waiting to testify for both this and the following bill. MR. FELLMAN said, regarding interstate commerce, there isn't a problem as long as Alaska's standard for imported milk is the same as wherever the milk is being imported from. CHAIRMAN ROKEBERG asked if Mr. Gore and Ms. Clifton wished to add anything before the committee proceeded to local testimony. Number 0673 BERT GORE, DVM, State Veterinarian, Animal Industries, Division of Environmental Health, Department of Environmental Conservation, testified next via teleconference from Anchorage. He is located in Palmer and gets out to the farms probably two to four times a year. Dr. Gore said he does not understand the controversy with bST regarding called a synthetic hormone. It is usual and customary practice for the farmers to use the following synthetic hormones in their cows on a regular basis. These hormones are exempt drugs that do not require a veterinary prescription and have no withholding period for the milk or the meat. Oxytocin - the most commonly used one; it is used to let the milk down and can cause increased uterine contractions during labor. Lutalyse - the second most prevalent hormone used. It is used for estrus synchronization in heifers, induces ovulation in cows, causes uterine contractions to expel the afterbirth and fluids associated with endometritis. It is an abortifacient in cattle and can cause abortion if handled by pregnant women. Cystorelin - used to lyse cysts in cows that have nymphomaniac ovaries [used to lyse ovarian follicles which cause nymphomania in dairy cattle]. ECP [estradiol cypionate] - a synthetic estrogen used to tone the uterus. Dexamethasone - a synthetic steroid used quite frequently. It is for use in horses and dogs but also given to cattle. Dr. Gore noted these are few of the synthetic hormones and steroids used in our milk cows. He does not understand what makes bST different, and he guesses the big problem is that bST is manufactured in a biochemistry lab not the chemistry lab. He commented bST is a naturally occurring protein secreted in the pituitary, it has no residue in the milk or meat. Like its naturally-occurring counterpart, rbST [bST produced using fermentation technology] has the same characteristics. Dr. Gore indicated it is not detectable. Its purpose is to allow the cow to produce more milk. Dr. Gore further indicated it seems this would be desirable if the state is supposed to become more self-sufficient in agriculture. Number 0787 BELINDA CLIFTON, Environmental Health Officer II, Animal Industries, Division of Environmental Health, Department of Environmental Conservation, testified next via teleconference from Anchorage. Ms. Clifton stated there are four pasteurization processes used in the Lower 48 allowed by the "pasteurized milk ordinance" which Alaska has adopted. 1) High-temperature short-time pasteurization which usually starts at 161 degrees for 15 seconds. 2) High-heat short-time pasteurization which allows milk to be pasteurized at a minimum of 191 degrees for 1 second. 3) Ultrapasteurization short-time which requires temperatures of 290 degrees for 2 seconds. 4) Ultrapasteurized short-time temperature with an aseptic process filler; this is a packaging process where the product goes into a hermetically-sealed container that keeps the milk sterile and shelf-stable for non-refrigerated conditions. Ms. Clifton mentioned this last product is used quite a bit by the United States Army and also probably goes out to Bush Alaska. Ms. Clifton said these pasteurization processes used in the Lower 48 are highly technical and she agreed with Mr. Fellman that Alaska is about 40 or more years behind in these processes. CHAIRMAN ROKEBERG asked if state regulations currently determine the pull date of milk. MS. CLIFTON answered in the negative. CHAIRMAN ROKEBERG asked what determines the pull date in Alaska. Number 0871 MS. CLIFTON replied that in Alaska it is left up to the processing facility. This is pretty much how it is handled throughout the entire United States. The facility determines what type of quality it wants at the end of its pull date. For the majority of the facilities, the pull date will usually be about a week before the milk will spoil. Ms. Clifton said a lot of the Texas processing plants have a 14-day pull date; that is simply because they want their milk to be good a full week after. The pull date depends on the quality the plant wants to give to the consumer. CHAIRMAN ROKEBERG asked if the plant dictates where the milk is shipped. MS. CLIFTON answered in the positive. CHAIRMAN ROKEBERG commented, then, there is a lack of state regulation and statute in regard to pull dates. MS. CLIFTON replied, "I'm not aware of any that actually require certain states to have mandated pull dates, especially with the higher pasteurization process, like the ultrapasteurization process and the aseptic processing." Number 0938 CHAIRMAN ROKEBERG announced the committee would take testimony in Juneau on HB 110. Number 0961 JULIE KOEHLER came forward to testify in Juneau in support of HB 110. Ms. Koehler stated she lives in Juneau and is testifying on her own behalf. She believes this bill is an important step in the public's right to know about what ingredients are, or are not, in our food products. This labeling gives her the information necessary to make purchasing decisions as an individual about foods, products, and brands. Ms. Koehler mentioned known carcinogens in today's world. She is concerned because she has heard differing information about whether or not this hormone is a carcinogen. She buys organic as much as possible to protect herself and her family, reading labels to find out whether or not things are added and specifically checking for that hormone. Ms. Koehler noted the government never addresses the cumulative amounts of all these small amounts of carcinogens, so she, as an individual, can address the cumulative effects of all of those things in her foods by reading the labels and making purchasing decisions. She asked the committee to amend the bill to make the punishment to the farmer for false labeling a fine large enough to hurt. She commented a small fine, a misdemeanor of $1,000 or whatever, could just be considered a cost of business. All the organic products are sold at a higher price; this is why the farmers want to be able to say it is free of the hormone. Ms. Koehler indicated a higher fine that couldn't be considered a cost of doing business would protect the individual. She mentioned that the enforcement is a matter of honesty. Ms. Koehler stated she is willing to pay that higher price and she hoped the committee would pass the legislation. Number 1102 DONALD LINTELMAN, Northern Lights Dairy, testified next via teleconference from Delta Junction in support of HB 110. He stated they pick up milk from five farms and, at this point, do not use these hormones in the milk and would like to be able to label the milk that way because he thinks they could end up with more sales. Mr. Lintelman indicated at some time the Fairbanks newspaper had mentioned bST was coming up and there were some legal problems with the state of Minnesota. He indicated people had called his dairy saying they wouldn't buy the milk because it contained bST. Mr. Lintelman said he needs every customer he has, so he assures these people it is not in there. He reiterated his support for the legislation. CHAIRMAN ROKEBERG asked what restricts him from labeling that now. MR. LINTELMAN replied that he did not know. He indicated there aren't any laws in Alaska regarding this and he would be worried about being sued. He added, " And I would like to see this hormones (indisc.) for this area, at least for this present time." CHAIRMAN ROKEBERG said he understands and appreciates Mr. Lintelman's point, noting some people think we have too many laws. Number 1187 REPRESENTATIVE HALCRO confirmed Mr. Lintelman buys milk from five independent farms. He further confirmed Mr. Lintelman had heard the state veterinarian's testimony about the enforcement problems with the legislation and the veterinarian's own disagreement with the concern over bST. Representative Halcro then asked Mr. Lintelman if he wouldn't have some liability, some exposure, if, giving an example, one of his farmers is caught misrepresenting his milk. MR. LINTELMAN agreed. He said it would probably put him out of business. CHAIRMAN ROKEBERG commented he has been following the Matanuska Valley dairy industry for a long time. He asked how many dairy farmers are left in the "Mat Valley." MR. LINTELMAN guessed five, noting he has no idea at this point. Number 1263 MARGARET CARR came forward to testify in Juneau in support of HB 110. Ms. Carr noted she lives in Anchorage and is testifying on her own behalf. She thinks this bill is a step in the right direction for both the consumers and the farmers in Alaska. First, it supports her right to know and choose as a consumer. There are too many instances where we do not know what is going into the products we eat and drink. Encouraging the labeling of milk that does not contain bovine growth hormone, for example, allows us to make decisions regarding which products we would like to purchase. In addition, Ms. Carr thinks those Alaskan farms not using the bovine growth hormone can create a positive niche and attract a greater consumer base. She indicated she personally would like to support the business of these farmers. Ms. Carr echoed Ms. Koehler's request for an amendment providing a more severe penalty to those mislabelling their products. She urged the committee to support the legislation. CHAIRMAN ROKEBERG confirmed Ms. Carr is a natural foods consumer, not a marketer. Number 1360 MICHELLE WILSON, Alaska Conservation Voice, came forward to testify next in Juneau in support of HB 110. Ms. Wilson stated she was representing both the Alaska Conservation Voice and herself as a new mother. She is part of that market niche being discussed today. Ms. Wilson emotionally expressed her concern that it had not been that long ago that committees discussed "DDT" and said there were no long-term health problems with "DDT" and other chemicals. Ms. Wilson is learning that there are many studies showing that this hormone is affecting cows. Cows are having more heart attacks. It worries her that all these people are being exposed to this hormone, the long-term effects are not known, and there are all these cancers currently in our society linked to the food we are eating. Ms. Wilson said Alaskans have to celebrate that small Alaskan family farmers are not using this hormone yet. She indicated small Alaskan family farmers need the kind of support the legislature can give so that they can keep their farms healthy, allowing Alaskans to buy Alaskan-grown food and healthy food. Ms. Wilson indicated she saw some contradictions in the DEC's Ms. Adair first saying there are no known health effects of bST and Ms. Adair's later statement that her knowledge is not necessarily complete. Ms. Wilson emphasized that the long-term effects [of bST] are not known. Number 1547 BOB SHAVELSON came forward to testify next in Juneau in support of HB 110. Mr. Shavelson stated he is representing himself and he is from Homer. He said some of the earlier testimony made him think he was listening to a Monsanto commercial. He thinks it is accurate to depict the debates going on here as a raging debate going on throughout the country as to whether rbGH, or bovine growth hormone, is safe to use. Mr. Shavelson commented he thinks it is safe to say a lot of the Monsanto-supported research shows this. Recently there has been a very serious debate in the Vermont legislature and elsewhere in that state, and evidence is coming out that it is not safe. Mr. Shavelson noted Ms. Wilson's testimony that the cows get sicker; as a result of that, increases in antibiotic use are seen. Mr. Shavelson said there are also problems in our society with the influx of those chemicals in the environment, and in our bodies. He perceives a dichotomy between the zero fiscal note and "then all of a sudden it becomes ... this great burden." He does not know what transpired at DEC to cause this great shift in the administrative burden. One possible solution is that anyone distributing rbGH in the state be required to report who it is being sold to. Mr. Shavelson does not think that would create a great administrative burden for anyone to handle. He indicated the legislation supports the consumer's right to know and right to choose between his or her food products. He added, "Just because some large, multinational chemical corporation is telling us it's safe based on their studies, I don't think Alaskans need to bow to that pressure. I think we should have the right to choose and support our local farmers." Number 1656 MR. SHAVELSON commented on a couple of items not mentioned, but that he considers relevant. Monsanto is moving forward with a "terminator" seed: genetically-altered products meant to be sterile after one or two seasons. There is great concern there that this will affect wild seed stocks across the world. Monsanto is also developing a special chemically-resistant strain of cotton and other products to be marketed with its pesticide Roundup. Mr. Shavelson concluded that Monsanto has a vested interest in making a profit and selling these items to consumers; the company will not want to reveal there may be some problems with this. Monsanto vigorously litigates anybody that opposes them. There was extended litigation in the situation with Ben and Jerry's mentioned earlier [3/15/99 Monsanto letter]. Mr. Shavelson indicated the issues of the terminator seed and the Roundup-dependent crops comes back to the rbGH labeling. He stated, "This is just common-sense stuff. We have a right to know what's in our food and we have a right to choose, and I would encourage you to pass this bill out of the committee." Number 1738 REPRESENTATIVE HALCRO commented Mr. Shavelson had raised a good question as far as disclosure, but there is the state veterinarian's testimony that several "synthetics" [hormones] can be purchased without a veterinarian's assistance. Representative Halcro asked how disclosure could be mandated when any farmer could just buy these things over the counter. MR. SHAVELSON replied he does not pretend to know all the mechanisms of the distribution of these hormones. He imagines it is a fairly discrete market and the distribution within the state could be tracked. Mr. Shavelson continued, "The other idea where typically in a policy matter where we have a difficulty enforcing something, we do tend to elevate the penalty for it ... The disincentive increases as the monetary penalty increases ...." CHAIRMAN ROKEBERG confirmed there were no further questions for Mr. Shavelson. The chairman stated the public testimony on HB 110 is concluded for this hearing but would be kept open. He indicated he is concerned about the pull date requirement because of the new technology, and is wondering if, since the private sector has been doing this, why it can't be left to them. The chairman indicated the committee might want to hear from Matanuska Maid and some of the others involved in the Alaska dairy business. Number 1868 REPRESENTATIVE CISSNA commented she sees a variety of Alaskan markets, some wanting to know there are no artificial hormones, et cetera, preferring an Alaskan product and something that is not ultrapasterized; others, especially in more remote areas of the state, seeking a product with as long a shelf life as possible. She indicated she thinks it is important they ensure that Alaskan consumers have a variety of choices and that is her problem with the legislation's pull date requirement. Number 1927 REPRESENTATIVE BRICE noted for Representative Harris that the labeling statutes in Section 1 are subject to AS 17.20.013 and AS 17.20.015 which refer specifically to fluid milk. This would not allow for the labeling of cheese products or other milk products. Representative Brice commented there has been conflicting testimony, asking the sponsor to check into this because he (Representative Brice) thinks there is a niche market for these products. He indicated he would like to make sure the legislation includes these products. CHAIRMAN ROKEBERG commended the bill to the sponsor for further work, noting the committee would hear the legislation again when the sponsor is ready. The chairman said he is supportive of anything that can help the state's small businesses and farmers. He indicated the labeling issue has certain merit, but said there are a lot of problems that need to be worked out with the DEC, the dairy industry, et cetera. The chairman commented the meat aspects of the legislation had not been addressed except by Mr. Fellman. Number 2097 CHAIRMAN ROKEBERG called an at-ease at 4:54 p.m. The committee came back to order at 4:57 p.m. TAPE 99-24, SIDE A HB 17 - PERS CREDIT FOR NONCERTIFICATED EMPLOYEES Number 0001 CHAIRMAN ROKEBERG announced the committee's next order of business is HB 17, "An Act relating to the calculation of employee contributions and credited service in the public employees' retirement system for noncertificated employees of school districts, regional educational attendance areas, the Alaska Vocational Technical Center, and the state boarding schools; and providing for an effective date." The chairman confirmed from Representative Brice that the legislation had been heard the previous legislative session as "HB 223" [HB 323]. He noted the bill had been completely rewritten in the House Finance Standing Committee. Number 0087 REPRESENTATIVE BRICE indicated the changes had been made to address AVTEC [Alaska Vocational Technical Center] but the bill had not been completely rewritten. Representative Brice stated HB 17 addresses an inequity within the Alaska's school districts between certificated and noncertificated employees. Certificated employees, teachers and principals, receive a year's credit for a nine-month contract year. This additional cost is split between the school district and the employee. Noncertificated employees such as janitors and secretaries receive a day-for-day credit in their retirement system. This means they have to work 40 years to receive a 30-year retirement if they are on a nine-month contract. House Bill 17 would allow the employees the option of buying that extra three months of credit, covering the entire cost themselves. It is applicable to state boarding schools, school districts, REAAs [Rural Education Attendance Areas] and "Alaska Voc-Tech Centers." It is voluntary, the employee chooses to participate. In response to questions from Representatives Halcro and Murkowski based on NEA-Alaska's position paper in the bill packet, Representative Brice noted that position paper also refers to other legislation. [The sponsor statement for HB 17 reads: Alaska has many noncertificated employees in its schools who work nine, ten or eleven months out of the year along with their certificated counterparts. The certificated employees receive full year credit for the part of the year they work while the noncertificated employee only get credit for the actual time worked. Because of this, a nine month employee has to work 40 years to receive a 30-year retirement. This bill addresses the inequity in state law and PERS system [Public Employees' Retirement System] by giving noncertificated school employees who work a comparable amount of days the option to use the same retirement formula that certificated employees use. This bill will allow those noncertificated school district employees to receive the same amount of credit toward retirement as those certificated employees who work the same amount of time and receive a full year of credit toward retirement. The cost of changing the PERS system, under this bill, will be supported by the employees, rather than increasing the burden to school districts. Employees currently active in the system will have 180 days to opt into the new program. New employees will have the option to participate within 90 days of inception. That is within beginning employment within the system.] Number 0381 REPRESENTATIVE HARRIS referred to the comment in the fiscal note, "The $72.4 [$72,400] is needed to hire contractors to update the division's computer system to accommodate the proposed changes." Representative Harris questioned what the obligation of the education units described here would be to these employees for their retirement. He asked if there would be added financial responsibility for those institutions. REPRESENTATIVE BRICE responded there is no added financial responsibility in terms of the retirement system itself. He indicated there might be a cost of a couple hundred to a thousand dollars to provide the paperwork for an employee to elect in. He stated there is no financial obligation to the school district; the school employee shoulders the entire burden of the change to ensure actuarial soundness of the system. In response to the chairman's question about the whether the fiscal note was a disappointment and/or surprise, Representative Brice indicated there is some question with the Department of Administration about the costs of developing the tracking and estimating computer programming. On the other hand, he noted those are non-general fund dollars; the employees would pay for the cost of those changes. Representative Brice agreed with the chairman that that could be discussed in the House Finance Standing Committee. Number 0548 RICK HELMS, Southeast Political Alternate, Board of Directors, Alaska Public Employees Association/Alaska Federation of Teachers (APEA/AFT), came forward to testify in support of HB 17. He asked for the committee's support, noting this legislation would benefit the approximately 600 APEA/AFT members who work nine months out of the year. These members are professionals just like the teachers and administrators; they should not be penalized for choosing this career. Referring to Representative Brice's comments, Mr. Helms said it takes 37.5 years of work for 30 years of service. He commented a companion Senate bill, SB 9, has already passed out of the Senate Labor and Commerce Standing Committee, and he encouraged this committee to do the same. Mr. Helms noted, as Representative Brice had also mentioned, this legislation had passed the previous session as HB 323, which died on the Senate floor due to late action. Mr. Helms expressed the hope that with sooner action, HB 17 or SB 9 might be passed into law this year. Number 0667 JOHN CYR, President, NEA-Alaska, came forward to testify in support of HB 17. He noted NEA-Alaska, the National Education Association of Alaska, represents about 11,000 employees. Three thousand of these are classified employees: janitors, classroom aides, food service workers. House Bill 17 would directly affect these employees' lives. Mr. Cyr noted the committee has NEA-Alaska's position statement. He said this has been a priority of NEA and its members for a number of years. They believe they have finally worked out a way to do this where the employees would bear the total costs and he reiterated NEA-Alaska's support for the legislation. REPRESENTATIVE MURKOWSKI asked who would actually be covered under this plan. Number 0722 MR. CYR replied that it covers anyone who works in a school who is not certified. Teachers, principles and administrators are certified employees and are in TRS [Teachers' Retirement System]. CHAIRMAN ROKEBERG confirmed with Mr. Cyr that the classified employees would be under the state program, PERS. The chairman asked if they receive any SBS [Supplemental Benefits System] and whether it varies by district. MR. CYR replied some districts get SBS and some do not. For example, the classified employees in "Mat-Su" [Matanuska-Susitna Borough] are eligible. He believes that was a one-time opt-in provision districts had. CHAIRMAN ROKEBERG questioned if the employees have social security, or if they are not allowed. MR. CYR replied he thinks they do not have social security, indicating he is not really familiar with PERS. Referring to the previous questions about the NEA-Alaska position statement, Mr. Cyr indicated he believes the inability of classified employees to collect unemployment during layoff does have a bearing on HB 17 because custodians and secretarial staff used to be year-round employees in Alaska. However now because of budget cuts, et cetera, they are nine-month, and some even less. The employees are laid off, cannot collect unemployment, and do not receive retirement for that period. Mr. Cyr stated that to NEA-Alaska this really is equity: if the classified employees are willing to pay their own way, the state should allow them to do so. CHAIRMAN ROKEBERG invited Guy Bell and Bill Church forward [Bill Church, Retirement Supervisor, Division of Retirement and Benefits, Department of Administration]. Number 0885 GUY BELL, Director, Division of Retirement and Benefits, Department of Administration, came forward to testify on HB 17. Mr. Bell said he has little to add to Representative Brice's testimony. He noted a couple of small points: this will be prospective only; it would apply from the date of passage forward. Those people in the system today would be able to, within six months of the bill's effective date, elect to pay a higher charge for the future service they would accrue. New employees would have 90 days to make that determination. In working on the bill last year with Representative Brice, Mr. Bell indicated the concern was expressed to the division that this be a fixed charge to the employee, so the employee would know the charge from year to year. This concern was brought to the division's actuaries in the development of the rate calculation. The revised number given last week by the actuaries is approximately 1.25 percent. Mr. Bell explained that if a person wants this service they would be paying approximately 8 percent of their salary as opposed to 6.75 percent, the current PERS contribution. He confirmed to the chairman that it is an irrevocable election; once the decision is made it cannot be changed. In response to the chairman's further question about what kinds of problems a revocable decision would add to the administration, Mr. Bell said he thinks technically it would become more difficult to administer because each year the employee would have to be asked his or choice for that year; he thinks that why it was drafted as irrevocable. Number 1011 CHAIRMAN ROKEBERG said this is done all the time with benefits and health insurance, noting elections and open periods. MR. BELL stated, "Our thought was to try to keep this as benign as possible and the way we thought about administering it is develop a form in our division [and] send it out to the school districts. When the people come in on the job at the beginning of the school year, they would provide that form with some basic education, sign the form and that's the time they make their decision. Certainly it could be done otherwise, it would -- the bill would need to be changed if that were the decision." Number 1044 REPRESENTATIVE BRICE indicated that there have been other systems where a move was made from a 30-year retirement plan to a 20-year plan, specifically correctional officers. This vote [election] has been patterned along that same irrevocable system to insure that the administrative costs would stay very low. The intention is to minimize the impact as much as possible. CHAIRMAN ROKEBERG asked Mr. Bell if there are problems with Section 1 regarding the contribution surcharge. He mentioned the stipulated amount. MR. BELL indicated that, since it will be a fixed cost, the alternative could be the deletion of the second sentence in Section 1 which discusses the way the calculation would be made and the insertion "of 1.25 percent" on page 1, line 11, after "surcharge". It does the same thing, it just says it more directly. In response to the chairman's question about where the 1.25 percent comes from, Mr. Bell noted it comes from the language in the second sentence. It is the actuarial cost of that additional benefit the employees would receive if they made the selection. CHAIRMAN ROKEBERG asked if it could vary by contract. MR. BELL explained that the actuary did it on a universal charge basis, which means it may vary slightly from individual to individual. However, in the aggregate, that is the cost arrived at if a fixed rate which would apply to the entire group is being sought. Doing it on an individual-by-individual basis would produce something similar but it would also be much more costly because characteristics and status - age, salary, et cetera - would have to be examined for each individual. Number 1190 REPRESENTATIVE BRICE indicated there has been some discussion on whether a specific percentage should be included, or not included "but ... have one number generated that every employee would have to kick in if they wanted to opt to discuss." It comes down to the possibility of a future change that might affect the actuarial soundness of the system, whether an increase or decrease in contribution. Representative Brice noted he wants to ensure that a number is not set in statute and then left to the political whims of the legislature: if that number were to increase and the administration has no authority to increase that number. He commented he is willing enter into this discussion, and added that the fiscal note had not surprised him, it is the same or very close to the previous session's. CHAIRMAN ROKEBERG commented on the apparent size of the fiscal note this year as compared to the previous year. MR. BELL said the fiscal note is smaller this year. Number 1289 REPRESENTATIVE MURKOWSKI asked if HB 17 is basically the same bill that went through last year. REPRESENTATIVE BRICE answered it is very substantially the same. He thinks there was one change on page 1, line 10, and that the first word, "and", should probably be "or" for complete clarity. Representative Brice indicated "or" was used in the previous legislation but legislative legal counsel feels it can be either one. [HB 17, page 1, lines 9 and 10, "of a state boarding school, of a school district or regional educational attendance area, and of the Alaska Vocational Technical Center determined by reference to".] CHAIRMAN ROKEBERG stated that AVTEC was added. REPRESENTATIVE BRICE explained that the addition of AVTEC was the primary change from last year's House Labor and Commerce Standing Committee version. He indicated the changes were made last year in the House Finance Standing Committee. CHAIRMAN ROKEBERG commented lightly he probably shouldn't take it personally that the entire bill had been changed after leaving House Labor and Commerce the previous session. REPRESENTATIVE BRICE replied that the election of participation had come from discussions with the Administration, and the addition of AVTEC from other discussions. He indicated it was the continuation of the committee process. Number 1390 BARBARA HUFF TUCKNESS, Director, Governmental and Legislative Affairs, General Teamsters Local 959 State of Alaska, came forward to testify in support of HB 17. She referred to a letter of support in the bill packet in lieu of giving more detailed testimony. Ms. Huff Tuckness noted HB 17 would have an impact on several hundred members within the Anchorage School District including food service employees, bus drivers, and a few maintenance workers. [The March 8, 1999, letter mentioned is to the committee from Gerald L. Hood, Secretary-Treasurer, Teamsters Local 959, and reads: Teamsters Local 959 represents non-certified employees most predominantly in the Anchorage School District. Several hundred of those members actually work less than twelve months of the year due to the nature of their jobs. As we understand HB 17, it would allow those members, by individual choice, the opportunity to receive the same credited year as their certified counterparts for purposes of retirement. Any increased cost under this bill would be born by the employee, not the employer (Anchorage School District). We urge your support and passage of this bill to allow, by employee choice, the opportunity to increase their credited service time as is currently the option for the certified employees.] Number 1426 CHAIRMAN ROKEBERG indicated to Representative Brice that there had been conversations about some special education personnel. REPRESENTATIVE BRICE replied there had been some talk by SESA, the Special Education Service Agency [stated as "Special Education Support Agency"], at the end of the previous session. He noted SESA is a function of state government [Department of Education], not necessarily of a school district. Representative Brice said he had been contacted after the end of the previous session but had not heard from the organization in three months. He indicated he would be happy to follow this up if the chairman wished. Number 1493 CHAIRMAN ROKEBERG responded it was just something that had been brought to his attention and that he did not have an opinion on. Confirming there were no further witnesses, Chairman Rokeberg announced the public testimony on HB 17 was closed. He commented on the absence of a supporting letter from the Anchorage School District (ASD) in the bill packet. REPRESENTATIVE BRICE replied that Larry Wiget [Director, Government Relations, Anchorage School District] had said there is no problem with the bill during an informal discussion. Representative Brice noted this discussion had been after the strike. However, he indicated he does not know if the Anchorage School District has taken a formal position on HB 17. CHAIRMAN ROKEBERG indicated ASD was not in opposition to the legislation. Number 1606 REPRESENTATIVE HARRIS made a motion to move HB 17 out of committee with individual recommendation and the attached fiscal note. There being no objection, HB 17 moved out of the House Labor and Commerce Standing Committee. ADJOURNMENT Number 1632 CHAIRMAN ROKEBERG adjourned the House Labor and Commerce Standing Committee at 5:22 p.m.