Legislature(2001 - 2002)

04/11/2001 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         April 11, 2001                                                                                         
                           3:25 p.m.                                                                                            
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Lisa Murkowski, Chair                                                                                            
Representative Andrew Halcro, Vice Chair                                                                                        
Representative Kevin Meyer                                                                                                      
Representative Pete Kott                                                                                                        
Representative Norman Rokeberg                                                                                                  
Representative Harry Crawford                                                                                                   
Representative Joe Hayes                                                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Representative Vic Kohring                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
HOUSE BILL NO. 182                                                                                                              
"An Act relating to motor vehicles; and providing for an                                                                        
effective date."                                                                                                                
                                                                                                                                
     - HEARD AND HELD; ASSIGNED TO SUBCOMMITTEE                                                                                 
                                                                                                                                
HOUSE BILL NO. 225                                                                                                              
"An Act relating to municipal taxation of alcoholic beverages                                                                   
and increasing the alcoholic beverage tax rates."                                                                               
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
BILL: HB 182                                                                                                                  
SHORT TITLE:MOTOR VEHICLE SALES AND DEALERS                                                                                     
SPONSOR(S): REPRESENTATIVE(S)MURKOWSKI                                                                                          
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/14/01     0586       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/14/01     0586       (H)        L&C, FIN                                                                                     
03/14/01     0586       (H)        REFERRED TO LABOR & COMMERCE                                                                 
04/11/01     0970       (H)        COSPONSOR(S): HALCRO                                                                         
04/11/01                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
                                                                                                                                
BILL: HB 225                                                                                                                  
SHORT TITLE:ALCOHOLIC BEVERAGE TAX                                                                                              
SPONSOR(S): REPRESENTATIVE(S)MURKOWSKI                                                                                          
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/30/01     0789       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/30/01     0789       (H)        L&C, FIN                                                                                     
04/03/01     0830       (H)        COSPONSOR(S): HUDSON                                                                         
04/09/01                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
04/09/01                (H)        Heard & Held                                                                                 
                                   MINUTE(L&C)                                                                                  
04/10/01                (H)        L&C AT 3:00 PM CAPITOL 120                                                                   
04/10/01                (H)        Heard & Held                                                                                 
                                   MINUTE(L&C)                                                                                  
04/11/01                (H)        L&C AT 3:15 PM CAPITOL 17                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
RALPH SEEKINS, President                                                                                                        
Seekins-Ford-Lincoln-Mercury, Inc.                                                                                              
1625 Old Steese Highway                                                                                                         
Fairbanks, Alaska 99701                                                                                                         
POSITION STATEMENT:  Testified on behalf of the Alaska                                                                          
Automobile Dealership Association on HB 182.                                                                                    
                                                                                                                                
JOHN MECKE, Legislative Director                                                                                                
Franchise Affairs                                                                                                               
Ford Motor Company                                                                                                              
16800 Executive Plaza Drive                                                                                                     
Dearborn, Michigan 48126                                                                                                        
POSITION STATEMENT:  Testified on HB 182.                                                                                       
                                                                                                                                
MARK MUELLER, Manager                                                                                                           
Retail Relationship                                                                                                             
Daimler Motors                                                                                                                  
100 Renaissance Center                                                                                                          
Detroit, Michigan 48265                                                                                                         
POSITION STATEMENT:  Testified on HB 182.                                                                                       
                                                                                                                                
JIM MOORS                                                                                                                       
National Automobile Dealer Association                                                                                          
8400 Westpark Drive                                                                                                             
McLeon, Virginia 99518                                                                                                          
POSITION STATEMENT:  Testified on HB 182.                                                                                       
                                                                                                                                
WILLIAM HURST, Director                                                                                                         
State Franchise Legislation and Strategy                                                                                        
Daimler Chrysler                                                                                                                
1000 Chrysler Drive                                                                                                             
Auburn Hills, Michigan 48326                                                                                                    
POSITION STATEMENT:  Answered a question on HB 182.                                                                             
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 01-57, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CHAIR  LISA  MURKOWSKI  called   the  House  Labor  and  Commerce                                                               
Standing   Committee    meeting   to    order   at    3:25   p.m.                                                               
Representatives  Murkowski,  Halcro,   Kott,  and  Crawford  were                                                               
present at the  call to order.   Representatives Meyer, Rokeberg,                                                               
and Hayes arrived as the meeting was in progress.                                                                               
                                                                                                                                
HB 182-MOTOR VEHICLE SALES AND DEALERS                                                                                        
                                                                                                                                
CHAIR MURKOWSKI announced that the  first order of business would                                                               
be HOUSE  BILL NO. 182, "An  Act relating to motor  vehicles; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 0209                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO  made  a  motion  to  adopt  the  proposed                                                               
committee  substitute (CS)  for HB  182, 22-LS0239\F,  Bannister,                                                               
4/6/01, as the working draft.   There being no objection, Version                                                               
F was before the committee.                                                                                                     
                                                                                                                                
RALPH  SEEKINS,  President,  Seekins-Ford-Lincoln-Mercury,  Inc.,                                                               
came  forth  on  behalf  of   the  Alaska  Automobile  Dealership                                                               
Association  (AADA).   He stated  that (AADA)  had been  a fairly                                                               
loosely organized group until about five  years ago.  Some of the                                                               
members are  also involved in the  National Automobile Dealership                                                               
Association (NADA).   Over time, as [the  AADA] became organized,                                                               
members  started  to  say  they  wished  they  had  some  of  the                                                               
protections that the  other states have as far  as franchise laws                                                               
and consumer  issues were concerned; concurrently,  he said, [the                                                               
AADA] started  getting letters  from the  Office of  the Attorney                                                               
General.                                                                                                                        
                                                                                                                                
MR. SEEKINS stated  that [members of the AADA]  became aware that                                                               
they did  not have any  legislation that existed in  other states                                                               
regarding consumer issues  and manufacturer-dealer relationships.                                                               
As  a result,  they  asked the  NADA if  it  had some  background                                                               
information.   [Mr. Seekins referred  to a packet  of information                                                               
the AADA  had received  from the  NADA.]   The AADA  started then                                                               
asking its  members what they  thought they needed  to strengthen                                                               
the  relationships   among  the  consumers,   manufacturers,  and                                                               
dealers.  They began bringing  in piecemeal deals, and [the AADA]                                                               
started  searching for  the basic  laws that  exist in  the other                                                               
states.  Finally, the [AADA] began compiling the legislation.                                                                   
                                                                                                                                
Number 0459                                                                                                                     
                                                                                                                                
MR. SEEKINS  stated that this  legislation has been  in formation                                                               
for two and a  half years.  He stated that  [the AADA] started to                                                               
see  an unfolding  of  a  multitude of  different  concerns.   It                                                               
started looking, with the assistance  of the attorney general, at                                                               
those areas where consumers needed  to have more clear guidelines                                                               
when dealing  with their  local dealers  in terms  of advertising                                                               
and  installment sales  contracts.   Therefore, there  is a  huge                                                               
section  [in the  bill] dealing  with advertising  terms, because                                                               
with  many  of  the  terms   used  regularly  in  the  automobile                                                               
industry, the  buying public has  no clue what they  really mean.                                                               
For example, he said:                                                                                                           
                                                                                                                                
     When you  use the  term MSRP ...  it should  be clearly                                                                    
     defined - what ...  that manufacturers suggested retail                                                                    
     price  [is].   And it  should maybe  say, "This  is not                                                                    
     necessarily  the price  the vehicle  sells for  in this                                                                    
     marketplace."  So,  we've tried to roll in  some of the                                                                    
     those  suggestions from  across the  country. ...  It's                                                                    
     not uncommon for  ... [young people] to  have gone into                                                                    
     a dealership and be there  until 11 o'clock at night to                                                                    
     sign  a contract  that says,  "Well, take  it home  and                                                                    
     we'll talk  about the  terms tomorrow"  - only  to come                                                                    
     back  and   find  that  they'd  signed   a  one-payment                                                                    
     contract and  they were subject  to huge swings  in the                                                                    
     interest rates.                                                                                                            
                                                                                                                                
MR.  SEEKINS continued,  stating that  in reviewing  the laws  in                                                               
other states  [the AADA]  found out  that it  is very  common for                                                               
family-owned dealerships to  seek some kind of  guarantee that if                                                               
the dealer  principal were to  pass on,  the family would  have a                                                               
fair  shot at  being able  to  own and  operate the  family-owned                                                               
business  without  the  manufacturer's  being able  to  pull  the                                                               
franchise.   He said there are  also things that have  to do with                                                               
[Alaska's] unique  geographic location.  Some  manufacturers have                                                               
recognized that and have dealt  with that, while others have not.                                                               
For example, he said  [the AADA] felt it was only  fair that if a                                                               
manufacturer  had an  equalized destination  and delivery  charge                                                               
for vehicles  in the lower  48 states,  it should be  extended to                                                               
Alaska.                                                                                                                         
                                                                                                                                
Number 0716                                                                                                                     
                                                                                                                                
MR. SEEKINS  stated that there  are some further  defining things                                                               
in [the  bill].  For  example, some  dealers really want  to know                                                               
when someone  ships an  automobile to  the dealer,  whether there                                                               
are  potentially hazardous  materials on  the vehicle.   He  said                                                               
[the  AADA]  thought it  was  only  fair that  the  manufacturers                                                               
provide  the   dealers  with  suggested  handling   and  disposal                                                               
processes.   If those [disposal  processes] were later  found out                                                               
to be improper, the manufacturer  would indemnify the dealers for                                                               
having  followed them.   He  stressed that  [the AADA]  felt that                                                               
clarifying the  relationships between manufacturer and  dealer is                                                               
good for the manufacturers, the  dealers, and the consumers.  For                                                               
example, in  areas of  warranty repair where  a dealer  is pushed                                                               
into  a  situation  regarding  the   amount  of  money  that  the                                                               
manufacturer  will  pay  the  dealer  to  perform  a  repair,  it                                                               
encourages the dealer  to rush the repair and maybe  not give the                                                               
same quality that he or she otherwise would have.                                                                               
                                                                                                                                
MR.  SEEKINS  said there  are  areas  where  it has  become  more                                                               
complex to be in the  automobile business, especially in the area                                                               
of  high technology  that comes  in the  package of  the vehicle.                                                               
Therefore, he stated,  training is more important.   For example,                                                               
Rick  Morrison,  an Alaska  automobile  dealer,  will spend  over                                                               
$100,000 in  training his employees this  year.  In order  to get                                                               
that training,  he will  have to  send his  employees out  of the                                                               
state.  Mr. Seekins noted that  [the AADA] thinks it is only fair                                                               
when  manufacturers provide  training in  other states  for their                                                               
dealers  that  they  provide  that same  level  of  training  for                                                               
dealers  in  [Alaska] in  order  to  get the  same  certification                                                               
requirements.   He stated  that [Alaskan  dealers] are  judged on                                                               
the  same performance  standards as  dealers in  the rest  of the                                                               
United States in terms of the customer-satisfaction index.                                                                      
                                                                                                                                
MR.  SEEKINS remarked  that the  harsh  weather in  Alaska has  a                                                               
greater effect  on mechanical parts in  an automobile; therefore,                                                               
it is very common for  manufacturers to put Alaskan dealers under                                                               
a  program called  prior approval.   If  expenses are  high in  a                                                               
particular area,  [the manufacturers]  could require  the dealers                                                               
to call them and get prior  approval in order to perform a repair                                                               
that a dealer in  the lower 48 states might not have  to get.  He                                                               
noted that  the manufacturers typically  don't staff  those prior                                                               
approval phone lines  to the extent that the dealers  can get the                                                               
prior  approval in  reasonable  time.   The  dealers are  saying,                                                               
"We're not  objecting to you asking  us to a prior  approval, but                                                               
our  mechanic is  waiting  on  the line  20  minutes  to talk  to                                                               
somebody; pay him  for the time that  it takes him to do  it.  If                                                               
it's a non-voluntary prior-approval  program and you're requiring                                                               
us to do  that, well then, reimburse that  technician, because he                                                               
has to feed his family too."                                                                                                    
                                                                                                                                
Number 1129                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD  asked whether  there was any  state [the                                                               
AADA] particularly patterned [the bill] after.                                                                                  
                                                                                                                                
MR. SEEKINS  responded that a lot  of [the bill] came  from North                                                               
Carolina and Idaho.                                                                                                             
                                                                                                                                
JOHN MECKE,  Legislative Director, Franchise Affairs,  Ford Motor                                                               
Company,  came forth  on behalf  of  Ford Motor  Company and  the                                                               
Alliance of  Automobile Manufacturers, and stated  that there has                                                               
been a  lot of change in  the business, and in  recent years Ford                                                               
has  purchased  Land  Rover,  Volvo, and  Jaguar.    [Ford  Motor                                                               
Company] also  has a large  captive credit company,  Ford Credit,                                                               
that does  about 75 percent of  its dealers' retail sales.   Ford                                                               
Motor Company also owns Hertz  Rental Car Company, which has some                                                               
implications in the bill as  well.  Finally, [Ford Motor Company]                                                               
also  owns Collision  Team  of America,  which  consists of  body                                                               
shops;  Green  Leaf,  which  is   a  recycling  company;  and  an                                                               
extended-service plan company.   He added that  [the alliance] is                                                               
made  up of  all the  automobile manufacturers  in the  company -                                                               
about 13 in total.                                                                                                              
                                                                                                                                
MR. MECKE remarked that [the  alliance] agrees that Alaska should                                                               
not be the  only state that doesn't have a  franchise law to some                                                               
degree.  [The alliance] also  agrees that these provisions should                                                               
be weighed  by the type of  public policy impact that  they have.                                                               
Conversely, he  said, there  are some  things [the  alliance] has                                                               
concerns  about in  the bill  as  they pertain  to public  policy                                                               
issues.   He said they  are probably more purely  business issues                                                               
or contractual issues that are  already dealt with in other ways.                                                               
[Manufacturers] all  have sales agreements with  the dealers that                                                               
are  contractual arrangements  that  specify quite  a few  things                                                               
that  Mr. Seekins  had talked  about.   For  example, Ford  Motor                                                               
Company acknowledges  and stipulates  that in a  family situation                                                               
the surviving family members get  the dealership.  He stated that                                                               
the alliance  and the manufacturers  have a very  strong interest                                                               
in working with  the dealers on coming up with  the right kind of                                                               
franchise bill.  He emphasized that  the consumer needs to be the                                                               
"litmus test,"  and that  there need to  be some  protections for                                                               
the Alaskan business people.                                                                                                    
                                                                                                                                
Number 1630                                                                                                                     
                                                                                                                                
MR. MECKE stated  that he would ask the committee  to assure that                                                               
any  focus  of  any  franchise  provisions  that  are  considered                                                               
restricted to  the business  activities are  in accord  with [the                                                               
manufacturers'] relationship with their  dealers.  He pointed out                                                               
that [Ford Motor Company] depends  on its dealers and the dealers                                                               
depend on [Ford  Motor Company].  [Ford  Motor Company] willingly                                                               
has its dealers  do all of its warranty work  with the customers,                                                               
and  thinks  the  franchise  laws  should  concentrate  on  those                                                               
primary dependent relationships.  He  stated that a whole list of                                                               
things  are related  to the  automobile business  of selling  new                                                               
vehicles, but [Ford Motor Company]  isn't the exclusive supplier.                                                               
In those areas,  he said, he doesn't think  franchise laws should                                                               
restrict [Ford  Motor Company], when  other competitors  that are                                                               
not manufacturers  and also compete  in that arena are  not being                                                               
restricted by franchise laws.                                                                                                   
                                                                                                                                
Number 1735                                                                                                                     
                                                                                                                                
MR.  MECKE remarked  that there  are a  couple of  areas that  he                                                               
would like  to sensitize  the committee to.   For  example, [Ford                                                               
Motor Company] sells extended-service  plans through its dealers,                                                               
but also  solicits customers directly  if they  haven't purchased                                                               
them  through the  dealerships.   This bill,  he said,  prohibits                                                               
that from  occurring.   He noted  that there  are some  things in                                                               
[the bill]  that change the  basic way [Ford Motor  Company] does                                                               
business with  its dealers on  the distribution of vehicles.   He                                                               
said he has a system whereby  dealers earn the supply of vehicles                                                               
based on  how they  turn their inventory  over and  how efficient                                                               
they  are  in  selling  their  vehicles.   This  bill,  he  said,                                                               
suggests that [manufacturers] "chuck"  that system and just build                                                               
vehicles that  are retailed for  consumers without any  regard to                                                               
how  those   inventories  are  being   turned  over   by  various                                                               
dealerships.  He  added that he also has  incentive programs that                                                               
would  make  it easier  for  a  smaller  dealer  to get  into  an                                                               
incentive  program  versus   a  larger  dealer.     Some  of  the                                                               
provisions of  the bill would  eliminate the ability for  a small                                                               
dealer  to get  a certain  amount of  payment at  a 3-  or 4-unit                                                               
level versus a  bigger dealer that could  get it at a  15- or 20-                                                               
unit level.                                                                                                                     
                                                                                                                                
MR. MECKE  noted that some  manufacturers have  mandatory binding                                                               
arbitration  in  their  sales agreements,  and  this  bill  would                                                               
negate that element.  He pointed  out that there is a federal law                                                               
that  encourages mandatory  binding arbitration.   He  added that                                                               
there are an awful lot of  prescriptive provisions in the bill in                                                               
the  area of  warranty.   He stated  that there  are a  number of                                                               
unique  circumstances   in  [Alaska]  relative  to   things  like                                                               
training and certification; however,  there are other areas where                                                               
the  bill gets  a little  bit too  directive.   He remarked  that                                                               
[Ford  Motor  Company]  has  a  situation  whereby  its  dealers,                                                               
through this law,  are exclusive providers of  warranty, which is                                                               
fine; however, it is suggested in  the bill to dictate the amount                                                               
of profit margin paid to the dealer of the different procedures.                                                                
                                                                                                                                
Number 2074                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI asked  why Alaska has been the last  state to put                                                               
dealer protections and provisions in place.                                                                                     
                                                                                                                                
MR. MECKE  answered that he  thinks it is probably  because there                                                               
are  not that  many dealers  and the  market areas  are not  that                                                               
large.  The original franchise  laws were to protect dealers from                                                               
arbitrary  termination.   From  there,  franchise  law went  into                                                               
creating protected areas  around which a dealer  could protest if                                                               
another dealer  is added.   Based on  population, he  said, there                                                               
has  never been  the need  [for franchise  laws in  Alaska].   He                                                               
noted that  a number  of years  ago Ford  Motor Company  bought a                                                               
number of dealerships.  This caused  an immense amount of fear in                                                               
the minds  of its  dealers throughout  the country,  because they                                                               
thought [Ford Motor Company] would put them out of business.                                                                    
                                                                                                                                
REPRESENTATIVE HALCRO  asked Mr.  Mecke whether  he has  a fairly                                                               
standard franchise agreement or if it varies per market.                                                                        
                                                                                                                                
MR.  MECKE  responded  that  every Ford  dealer  in  the  country                                                               
basically has the same sales agreement.   He said there are a few                                                               
that may have a term  agreement, but 99.9 percent have continuing                                                               
agreements.   Other manufacturers have term  agreements, but they                                                               
are the same for all the dealers.                                                                                               
                                                                                                                                
REPRESENTATIVE  HALCRO   asked  how   those  relate  as   far  as                                                               
competition clauses.   For example,  if he  has agreed to  have a                                                               
Ford franchise and has invested  millions of dollars establishing                                                               
an infrastructure, but five years later  his term runs out and he                                                               
has  to negotiate  an  extension,  he asked  whether  there is  a                                                               
standard  method  by  which  dealers  are  protected  as  far  as                                                               
competition.                                                                                                                    
                                                                                                                                
Number 2320                                                                                                                     
                                                                                                                                
MR.  MECKE   responded  that  [the  dealer]   would  get  another                                                               
agreement  at  the  end  of  the  term,  unless  there  was  some                                                               
violation  of the  agreement.   In the  sales agreements  at Ford                                                               
there is  a laid-out explanation of  what a market study  is.  He                                                               
explained  that  [Ford  Motor Company]  does  market  studies  on                                                               
metropolitan areas  every two  to five years.   They  would first                                                               
see  a trend  toward  a particular  area.   It  starts  out as  a                                                               
monitored area growth, then goes  to a future preferred location,                                                               
and then  it may  or may not  go to an  "add point"  (addition of                                                               
dealership).                                                                                                                    
                                                                                                                                
REPRESENTATIVE HALCRO  asked Mr. Mecke  whether he has  a formula                                                               
that says, "It's time to add another dealership."                                                                               
                                                                                                                                
MR. MECKE answered that it is very complex.                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO asked  whether there  is ever  a situation                                                               
wherein  a dealer  is protected  at all  costs from  competition.                                                               
For  example, he  said,  in  Anchorage there  has  been one  Ford                                                               
dealership for 25 years.  He  asked at what point in time another                                                               
one would be added.                                                                                                             
                                                                                                                                
MR. MECKE  responded that it is  not a simple answer.   The worst                                                               
thing he could  do, he said, is cause a  situation whereby adding                                                               
a second dealer weakened the first dealer or both.                                                                              
                                                                                                                                
TAPE 01-57, SIDE B                                                                                                              
Number 2468                                                                                                                     
                                                                                                                                
MR. SEEKINS  remarked that this  bill basically states  that even                                                               
when  manufacturers  determine  these  things,  there's  still  a                                                               
checklist that  they have to go  through in Alaska.   He remarked                                                               
that [the AADA] is not precluding  that; dealers would like a day                                                               
in court,  not to  allow an  arbitrary decision to  be made.   He                                                               
remarked that Anchorage Chrysler filed  a lawsuit within the last                                                               
week because it  was allegedly encouraged to  add additional real                                                               
estate, and  another Chrysler dealership  was granted  to another                                                               
party to come  into the Anchorage market.  That  dealer, he said,                                                               
would have  liked to have had  a checklist to say  whether or not                                                               
it was necessary.                                                                                                               
                                                                                                                                
MARK MUELLER, Manager, Retail  Relationship, Daimler Motors, came                                                               
forth and stated  that he is concerned with the  Internet and the                                                               
brokerage area,  because there  are third  parties trying  to get                                                               
into   his  business   and  work   around  the   system.     Most                                                               
manufacturers, he said,  have joint programs with  web sites that                                                               
are driving  both sales and  service customers to  their dealers.                                                               
[Manufacturers] are trying to develop  those at little or no cost                                                               
to  the dealers,  and are  concerned  that some  of the  proposed                                                               
legislation  might  hinder them  from  using  their internal  web                                                               
sites to drive customers into the dealers' showrooms.                                                                           
                                                                                                                                
Number 2260                                                                                                                     
                                                                                                                                
JIM  MOORS, National  Automobile Dealer  Association, came  forth                                                               
and stated that NADA represents new  car and truck dealers in the                                                               
50 states,  and has about 90  percent of the dealers  as members.                                                               
Dealers and  manufacturers, he said, want  the best relationship.                                                               
He said  there is  a history  that led  to the  franchise's being                                                               
enacted.   It started  in 1936  in Wisconsin,  and the  issue was                                                               
termination  of the  franchise  agreement.   At  the time,  these                                                               
agreements  could  be terminated  at  will;  the dealers  made  a                                                               
sizable investment.   The agreement,  he said, and who  holds the                                                               
pen  is  in the  manufacturers'  hands.   The  dealer  agreements                                                               
contain a lot of the provisions  that are in these franchise laws                                                               
that are protections for the dealers.   He stated that he doesn't                                                               
think the manufacturers are opposed  to a lot of the protections,                                                               
but they can change them.   Many of the protections are basic and                                                               
call for good cause.   None of the laws say  that a dealer cannot                                                               
be terminated.  He  remarked that in the bill there  is a list of                                                               
criteria  that asks,  "Is the  addition of  a new  dealer in  the                                                               
public interest?   What's the impact on competition?   What's the                                                               
impact on the existing dealer's investment?"                                                                                    
                                                                                                                                
MR. MOORS  stated that for  the most part these  are family-owned                                                               
businesses around the  country.  When an "add  point" is proposed                                                               
[the  dealers] have  the right  to say  to the  manufacturer, "We                                                               
want   a  third   party  to   decide  whether   that  [additional                                                               
dealership] is justified."  The  manufacturers come in with their                                                               
statistics and  their demographics, and  they make their  case to                                                               
the hearing body.   If they can show that  Anchorage has grown in                                                               
population and there  needs to be another Ford  dealership, it is                                                               
approved.  He remarked that in  the protests that have been filed                                                               
for additional dealer  points, maybe 10 percent  have resulted in                                                               
the additional dealer's being denied.                                                                                           
                                                                                                                                
Number 2099                                                                                                                     
                                                                                                                                
MR. MOORS  explained that  the successor  issue is  another issue                                                               
that is very important.  This has  been agreed upon, and it is in                                                               
the contract that  the dealership should be passed on  to the son                                                               
or  daughter  or  to  management, provided  that  the  person  is                                                               
qualified.   This bill would  codify this protection.   He stated                                                               
that there is a lot of pressure  put on dealers from time to time                                                               
for exclusive  facilities or to  upgrade facilities.    He stated                                                               
that  this is  an  incredibly  competitive market;  manufacturers                                                               
compete, and the competitive pressures  at that level filter down                                                               
to the  dealers, which can  result in requests  and encouragement                                                               
to  build brand-new  facilities because  other manufacturers  are                                                               
doing so.   Under  the bill there  is limited  protection whereby                                                               
the dealer has the right to  protest those types of requests.  He                                                               
noted that this bill is  not much different other states' [bills]                                                               
on  the   core  areas  such  as   termination,  exclusivity,  and                                                               
successorship.                                                                                                                  
                                                                                                                                
REPRESENTATIVE  HAYES asked  what the  [the committee's]  plan is                                                               
with this bill.                                                                                                                 
                                                                                                                                
CHAIR  MURKOWSKI responded  that  it would  be  her intention  to                                                               
appoint a subcommittee.                                                                                                         
                                                                                                                                
MR.  SEEKINS  stated that  [the  AADA]  thinks  there is  a  good                                                               
foundation [with the bill], and would like to keep it moving.                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked how this bill  addresses the issue                                                               
of consolidation.                                                                                                               
                                                                                                                                
MR.  SEEKINS   responded  that  the   bill  does  not   give  the                                                               
manufacturers any  force to  consolidate, nor  does it  give them                                                               
any ability to restrict consolidation.                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG  stated that  he thinks the  best example                                                               
would be when Daimler Benz  purchased Chrysler, where there was a                                                               
Mercedes  dealer,  a  Chrysler  dealer,  and  then  the  residual                                                               
company.  There could then  be three potential dealerships in one                                                               
marketplace.  He asked whether  the manufacturer would be able to                                                               
kick out  the additional  product lines  because they  would come                                                               
under the umbrella of that manufacturer.                                                                                        
                                                                                                                                
Number 1713                                                                                                                     
                                                                                                                                
WILLIAM   HURST,  Director,   State  Franchise   Legislation  and                                                               
Strategy,  Daimler  Chrysler,  came  forth and  stated  that  his                                                               
company has a  program called Project 2000, which  is designed to                                                               
put the Chrysler-Plymouth  stores with the Jeep stores.   That is                                                               
done through negotiations agreements with  the dealers.  In terms                                                               
of  the  Mercedes  situation,  the  market plan  is  to  not  put                                                               
Mercedes and Chrysler-Jeep  together.  He added that  there are a                                                               
lot of  significant problems  with the bill,  but he  thinks they                                                               
can be worked out.                                                                                                              
                                                                                                                                
REPRESENTATIVE  HALCRO remarked  that he  wouldn't mind  chairing                                                               
the subcommittee.                                                                                                               
                                                                                                                                
CHAIR MURKOWSKI  stated that she  and Representative  Hayes would                                                               
work on the subcommittee as well.                                                                                               
                                                                                                                                
[HB 85 was held over.]                                                                                                          
                                                                                                                                
CHAIR MURKOWSKI announced  at 4:32 p.m. that the  House Labor and                                                               
Commerce Standing Committee was recessed to a call of the chair.                                                                
                                                                                                                                
TAPE 01-58, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI reconvened the House  Labor and Commerce Standing                                                               
Committee at  7:13 p.m.   Members  present at  the call  to order                                                               
were   Representatives   Murkowski,  Halcro,   Meyer,   Rokeberg,                                                               
Crawford,  and  Hayes.    Representative   Kohring  was  also  in                                                               
attendance.                                                                                                                     
                                                                                                                                
HB 225-ALCOHOLIC BEVERAGE TAX                                                                                                 
                                                                                                                                
[Contains discussion of HB 3, HB 132, and HB 4.]                                                                                
                                                                                                                                
CHAIR MURKOWSKI  announced that the  committee would now  take up                                                               
HOUSE BILL  NO. 225,  "An Act relating  to municipal  taxation of                                                               
alcoholic  beverages and  increasing the  alcoholic beverage  tax                                                               
rates."     [Before  the  committee  was   a  proposed  committee                                                               
substitute (CS) Version L, 22-LS0806\L,  Cook, 4/9/01, adopted as                                                               
a work draft on 4/9/01.]                                                                                                        
                                                                                                                                
CHAIR  MURKOWSKI  speaking  also  as the  sponsor,  informed  the                                                               
committee that  the public hearing on  HB 225 had been  closed at                                                               
the  April 10,  2001, hearing.   She  announced her  intention to                                                               
move this bill from committee  today.  She reminded the committee                                                               
that Representative  Rokeberg had  an amendment that  he intended                                                               
to introduce.   She pointed  out that the committee  had received                                                               
an  outline   entitled  "Economic  Costs  Estimate   for  Alaska:                                                               
Negative  Consequences of  Alcohol Abuse  and Dependence,"  which                                                               
specifies where the  $250 million comes from.   Additionally, the                                                               
committee  should have  a packet  of written  testimony that  was                                                               
received since the last hearing.                                                                                                
                                                                                                                                
Number 0240                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG made  a motion to adopt  Amendment 1 [22-                                                               
LS0806\L.2, Cook, 4/11/01], which read:                                                                                         
                                                                                                                                
     Page 2, line 9:                                                                                                            
          Delete "Every"                                                                                                        
          Insert "Except as provided in (c) of this                                                                         
     section, every [EVERY]"                                                                                                
                                                                                                                                
     Page 2, following line 20:                                                                                                 
          Insert a new bill section to read:                                                                                    
             "* Sec. 4.   AS 43.60.010 is amended by adding                                                                   
     a new subsection to read:                                                                                                  
          (c)  A brewer shall pay a tax at the rate of 35                                                                       
     cents a  gallon on sales  of the first  120,000 barrels                                                                    
     of beer  sold in the  state each fiscal  year beginning                                                                    
     July 1, 2001,  for beer produced  in the  United States                                                                    
     if the  producing brewery  meets the  qualifications of                                                                    
     26  U.S.C. 5051(a)(2).   To  qualify for  the tax  rate                                                                  
     under this  subsection, the brewer  must file  with the                                                                    
     department a copy  of a Bureau of  Alcohol, Tobacco and                                                                    
     Firearms acknowledged  copy of  the brewer's  Notice of                                                                    
     Brewer to  Pay Reduced  Rate of  Tax required  under 27                                                                    
     C.F.R.  25.167  for  the calendar  year  in  which  the                                                                    
     fiscal year  begins for which the  partial exemption is                                                                    
     sought.   If  proof  of eligibility is not  received by                                                                    
     the department  before June 1, the tax  rate under this                                                                    
     subsection does  not apply until  the first day  of the                                                                    
     second month after the month  the notice is received by                                                                    
     the  department.     For  purposes  of   applying  this                                                                    
     subsection, a barrel  of beer may contain  no more than                                                                    
     31 gallons."                                                                                                               
                                                                                                                                
REPRESENTATIVE HALCRO objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  ROKEBERG explained  that Amendment  1 includes  a                                                               
provision that  would allow for  an exemption of any  increase in                                                               
tax above  the current  35 cents  a gallon  on the  first 120,000                                                               
barrels of  beer sold be a  local manufacturer or brewery.   This                                                               
amendment is  consistent with federal  law and the  provisions in                                                               
the  Bureau of  Alcohol, Tobacco,  and Firearms  regulations that                                                               
allow  a  partial  exemption  for   a  local  manufacturer  while                                                               
requiring  that  anyone considered  a  small  brewery, 2  million                                                               
barrels,  be  allowed the  same  exemption  for importation  into                                                               
Alaska  from  the  other  49  states.   This  would  exclude  any                                                               
foreign-brewed beer.                                                                                                            
                                                                                                                                
Number 0360                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  explained that the purpose  of Amendment                                                               
1  is to  foster the  development  of breweries  and brewpubs  in                                                               
Alaska.     This  provision  is   modeled  after  the   State  of                                                               
Washington's  provision, except  that the  Washington statute  as                                                               
well  as the  standard provision  in  federal law  is limited  to                                                               
60,000 barrels  of beer.  Representative  Rokeberg explained that                                                               
he chose to  limit this to 120,000 barrels because  it relates to                                                               
the largest manufacturer of beer  in Alaska.  The Alaskan Brewing                                                               
Company, with  its new  expansion, is  projected to  either reach                                                               
[120,000  barrels]  or  come   close.    Representative  Rokeberg                                                               
commented that the  Alaskan Brewing Company has  done a marvelous                                                               
job  of  identifying  Alaska  [with its  beer]  and  has  created                                                               
significant  economic  activity  in  Juneau  and  throughout  the                                                               
state.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG  related  his  understanding  that  this                                                               
would comprise less than 15  percent of the total importation and                                                               
consumption of  malt beverages  in Alaska.   Therefore,  it would                                                               
have  a   modest  effect  on   any  revenue  derived   from  this                                                               
legislation.  Furthermore, this  acknowledges the state policy of                                                               
fostering economic development in the state.                                                                                    
                                                                                                                                
REPRESENTATIVE HALCRO  related his understanding that  this would                                                               
refer  to Alaskan  brewers as  well as  those outside  the state.                                                               
Therefore, he inquired as to whom that would include.                                                                           
                                                                                                                                
REPRESENTATIVE  ROKEBERG  answered  that  he  believes  it  would                                                               
include,  for example,  the Seattle  microbreweries that  already                                                               
sell  in  Alaska.    Therefore,   those  that  meet  the  federal                                                               
regulation of less than 2  million barrels would qualify and thus                                                               
be exempt from any increase in tax above 35 cents.                                                                              
                                                                                                                                
REPRESENTATIVE  HALCRO inquired  as to  how one  would apply  for                                                               
this tax exemption.   Furthermore, he inquired as  to what checks                                                               
and balances are  in place to ensure that one  doesn't exceed the                                                               
limit.                                                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG  surmised that  there is  an application.                                                               
He related his  belief that the Department of  Revenue would have                                                               
to establish that policy.                                                                                                       
                                                                                                                                
Number 0579                                                                                                                     
                                                                                                                                
CHAIR MURKOWSKI  remarked that the  60,000-barrel [limit]  in the                                                               
federal statute seems  to have some justification.   However, she                                                               
said that  she wasn't able to  make the leap [under  Amendment 1]                                                               
to  the 120,000  [barrel limit]  other than  [the fact  that] the                                                               
Alaskan Brewing  Company, the largest  brewer, is almost  at that                                                               
figure.  She asked whether her understanding was correct.                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG answered it was.                                                                                        
                                                                                                                                
CHAIR MURKOWSKI  inquired as to  the next-largest brewers  in the                                                               
state and the levels they are at.                                                                                               
                                                                                                                                
REPRESENTATIVE  ROKEBERG surmised  from the  testimony that  [the                                                               
largest  brewers] are  the Moose's  Tooth and  the Silver  Gulch,                                                               
both of which are not even approaching 150,000 gallons.                                                                         
                                                                                                                                
REPRESENTATIVE  HALCRO specified  that  the  Moose's Tooth  brews                                                               
about 65,000 to  70,000 gallons and the Silver  Gulch brews about                                                               
60,000 gallons.                                                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG recalled that  [a representative from the                                                               
Moose's  Tooth]  testified  that  if  it  could  service  outside                                                               
accounts  under  a beverage  dispensary  license,  then it  would                                                               
approach 120,000 gallons.                                                                                                       
                                                                                                                                
REPRESENTATIVE HALCRO  said that [the next-largest  brewers] were                                                               
the Moose's Tooth, Glacier Brewhouse,  and then the Silver Gulch.                                                               
The  next-largest  brewer  [after   those]  brewed  about  20,000                                                               
gallons, and thus there is a fairly big difference.                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG remarked that  the only brewer that would                                                               
benefit at  this juncture would  be the Alaskan  Brewing Company.                                                               
However, he noted that one can't predict the future.                                                                            
                                                                                                                                
CHAIR MURKOWSKI expressed her wish  that [the legislation] didn't                                                               
have to provide "this reciprocity"  but rather could specifically                                                               
address  beer produced  in Alaska.   She  agreed that  this is  a                                                               
fledgling  industry  that  is  growing  and  employing  Alaskans.                                                               
Although she  didn't object to  helping with that,  she expressed                                                               
the need to  recognize that this also  helps those microbreweries                                                               
from outside  the state.   Therefore, Chair  Murkowski questioned                                                               
whether  the increase  to 120,000  barrels  really helps  Alaskan                                                               
brewers or  the outside microbrewers.   Chair Murkowski announced                                                               
that she  objected to  Amendment 1 with  the 120,000  barrels and                                                               
thus  noted she  would be  amenable  to amending  Amendment 1  to                                                               
refer to 60,000 barrels in order to reflect the federal statute.                                                                
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  that  he stood  by his  amendment,                                                               
although  he acknowledged  that a  smaller cap  might be  helpful                                                               
from  an economic  standpoint because  it would  give a  distinct                                                               
advantage  to some  other outside  microbreweries.   The argument                                                               
can be made in both directions.                                                                                                 
                                                                                                                                
REPRESENTATIVE  HAYES asked  Representative  Rokeberg whether  he                                                               
was agreeing  that 60,000 barrels  would be more  competitive for                                                               
Alaskan companies.                                                                                                              
                                                                                                                                
Number 0912                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI moved  that the  committee  adopt the  following                                                               
amendment  to  Amendment  1,  which  would  change  "120,000"  to                                                               
"60,000" in the new subsection (c).                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG objected.                                                                                               
                                                                                                                                
A roll  call vote was  taken.  Representatives  Halcro, Crawford,                                                               
Hayes,  and Murkowski  voted for  the amendment  to Amendment  1.                                                               
Representatives   Meyer   and    Rokeberg   voted   against   it.                                                               
[Representative Kott  was absent for  the vote.]   Therefore, the                                                               
amendment to Amendment 1 was adopted by a vote of 4-2.                                                                          
                                                                                                                                
CHAIR MURKOWSKI asked  if there was any objection  to Amendment 1                                                               
as amended.   There  being no objection,  Amendment 1  as amended                                                               
was adopted.                                                                                                                    
                                                                                                                                
Number 1052                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HAYES   moved  that   the  committee   adopt  the                                                               
following conceptual Amendment 2:                                                                                               
                                                                                                                                
     Page 2, line 15, after "beverages",                                                                                        
          Insert "and hard cider"                                                                                               
                                                                                                                                
CHAIR  MURKOWSKI related  her understanding  that malt  beverages                                                               
and hard cider would be in the same category.                                                                                   
                                                                                                                                
REPRESENTATIVE MEYER objected.                                                                                                  
                                                                                                                                
REPRESENTATIVE  HAYES,  in  response  to  Representative  Meyer's                                                               
objection, explained  that hard cider  is packaged like  beer and                                                               
looks like  beer.  However, it  is classified as a  wine and thus                                                               
he felt  that hard cider should  be classified the same  as beer.                                                               
Hard cider has the same alcohol content as malt beverages.                                                                      
                                                                                                                                
CHAIR  MURKOWSKI   noted  that  committee  members   should  have                                                               
received  information  regarding  what   is  happening  in  other                                                               
states.   Apparently, the trend  is to change  the classification                                                               
of hard  cider from wine  to beer.   Chair Murkowski  related her                                                               
belief that  the tax probably  doesn't matter because it's  not a                                                               
very potable drink.                                                                                                             
                                                                                                                                
Number 1196                                                                                                                     
                                                                                                                                
REPRESENTATIVE MEYER withdrew his objection.                                                                                    
                                                                                                                                
REPRESENTATIVE HALCRO asked if the  drafters should be provided a                                                               
definition of hard cider to  include in statute because without a                                                               
definition it could be debatable.                                                                                               
                                                                                                                                
CHAIR  MURKOWSKI remarked  that  she was  certain  there is  some                                                               
definition for  malt beverage.   She pointed  out that this  is a                                                               
conceptual  amendment,  which  should   afford  the  drafter  the                                                               
ability to pen clarifying language, if necessary.                                                                               
                                                                                                                                
REPRESENTATIVE HAYES  mentioned that he  had language, if  it was                                                               
needed.                                                                                                                         
                                                                                                                                
CHAIR  MURKOWSKI asked  if there  was any  further discussion  or                                                               
objection  to   conceptual  Amendment  2.     There  being  none,                                                               
conceptual Amendment 2 was adopted.                                                                                             
                                                                                                                                
Number 1280                                                                                                                     
                                                                                                                                
REPRESENTATIVE   ROKEBERG   moved   that  the   committee   adopt                                                               
conceptual  Amendment 3,  to would  delete  Sections 1  and 2  of                                                               
[version L].                                                                                                                    
                                                                                                                                
CHAIR MURKOWSKI objected.                                                                                                       
                                                                                                                                
REPRESENTATIVE  ROKEBERG  related  his   belief  that  these  two                                                               
provisions  do  several things  that  are  contrary to  the  best                                                               
interest  of  state  policy.   For  example,  these  [provisions]                                                               
remove the state's  ability to directly tax  the wholesale levels                                                               
of  alcohol, which  he  believes should  fall  under the  state's                                                               
purview.   Representative  Rokeberg expressed  his concern  about                                                               
giving municipal  governments greater  freedom to  impose special                                                               
alcohol  taxes.    He  pointed   out  that  the  Municipality  of                                                               
Anchorage rejected this concept by  election and has continued to                                                               
illustrate   its  [opposition]   to  any   type  of   sales  tax.                                                               
Representative  Rokeberg reiterated  that  it's not  in the  best                                                               
interest of  the state to  devolve its taxing power  to municipal                                                               
governments.                                                                                                                    
                                                                                                                                
CHAIR  MURKOWSKI  noted  that  a couple  years  ago  the  portion                                                               
Representative  Rokeberg is  seeking  to delete  came before  the                                                               
House   Community  and   Regional   Affairs  Standing   Committee                                                               
[through] Representative  Davis, and  at that time  she supported                                                               
it.  Although she still feels  that it makes sense, she expressed                                                               
concern "that  you're going to  have this dime-a-drink  thing and                                                               
then  the municipalities  or the  city can  then turn  around and                                                               
give us a double whammy, and  then we really, really, really will                                                               
be hurt."   She  emphasized that  it is not  her intent  to drive                                                               
anyone out of  business or leave hard-working  Alaskans without a                                                               
job.  Although  she still feels that this  provision makes sense,                                                               
perhaps the  timing of it  is creating  too much paranoia  in the                                                               
minds  of  the  Alaskans  in  this  industry,  to  which  she  is                                                               
sensitive.  Therefore, although she  would like for everything to                                                               
remain [in  the bill],  she reiterated that  she is  conscious of                                                               
messages  that  would  place  fear   in  the  hearts  of  working                                                               
Alaskans.    She concluded  by  saying  that she  would  probably                                                               
support conceptual Amendment 3.                                                                                                 
                                                                                                                                
REPRESENTATIVE HALCRO agreed with  Chair Murkowski.  As discussed                                                               
at the  prior hearing,  this tax  is not  an attempt  to demonize                                                               
those who sell  alcohol but rather it attempts  to recoup revenue                                                               
in order to defer some of  the costs that this product causes for                                                               
state government.   Since the state  is paying most of  the costs                                                               
of alcohol-related  problems, Representative Halcro said  that he                                                               
would   not  have   a  problem   eliminating   the  ability   for                                                               
municipalities to take  it upon themselves to  tax without proper                                                               
precautions.  Therefore, Representative  Halcro announced that he                                                               
would also support conceptual Amendment 3.                                                                                      
                                                                                                                                
CHAIR MURKOWSKI  withdrew her  objection and  asked if  there was                                                               
any further objection to conceptual  Amendment 3.  In response to                                                               
Representative  Meyer, Chair  Murkowski explained  that with  the                                                               
adoption of  conceptual Amendment 3,  only Section 3 and  the new                                                               
Section 4 would remain, which would be renumbered.                                                                              
                                                                                                                                
REPRESENTATIVE  ROKEBERG   pointed  out  that  the   adoption  of                                                               
conceptual Amendment 3 would require a title change.                                                                            
                                                                                                                                
CHAIR  MURKOWSKI   announced  that  the  committee   had  adopted                                                               
conceptual Amendment 3.                                                                                                         
                                                                                                                                
Number 1769                                                                                                                     
                                                                                                                                
REPRESENTATIVE MEYER inquired as to  where the dollar amounts for                                                               
each type of beverage were derived.                                                                                             
                                                                                                                                
CHAIR MURKOWSKI explained that 10 cents  a drink was added to the                                                               
existing  tax; that  was done  for all  three categories.   Chair                                                               
Murkowski noted  that [the legislature]  has no control  over the                                                               
markup that the  industry would impose.  This is  the tax imposed                                                               
when the  product leaves  the bonded  warehouse.   Therefore, she                                                               
agreed that  the retailer may  absorb that tax  or pass it  on to                                                               
the consumer.                                                                                                                   
                                                                                                                                
Number 1829                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HAYES expressed  his  desire to  see a  statutory                                                               
designation  for   this  new  money   to  be  used   for  alcohol                                                               
rehabilitation programs  or as  a piece  in the  long-term fiscal                                                               
plan.     From  the  testimony,  Representative   Hayes  said  he                                                               
understood  that people  don't want  this money  to go  into [the                                                               
general fund].   Therefore, he  felt it would behoove  the [House                                                               
Finance  Committee  members]  to  use this  revenue  for  alcohol                                                               
rehabilitation  programs or  to  openly admit  that this  revenue                                                               
will go towards the long-term fiscal plan.                                                                                      
                                                                                                                                
CHAIR  MURKOWSKI pointed  out that  without an  amendment to  the                                                               
Alaska  State   Constitution,  the  legislature   can't  dedicate                                                               
revenue.                                                                                                                        
                                                                                                                                
REPRESENTATIVE HAYES interjected that  there could be a statutory                                                               
designation.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG mentioned  that  this  revenue could  be                                                               
treated as  was the tobacco tax,  which was placed in  the school                                                               
fund that  is one  of the  few remaining  pre-statehood dedicated                                                               
funds.   He related his  belief that  the tobacco tax  was placed                                                               
into  the  school   fund  largely  to  garner   support  for  the                                                               
legislation.  However,  this is a tax.  He  pointed out that this                                                               
isn't  a tax  to increase  treatment for  those in  Alaska or  to                                                               
enforce  a  0.08 blood  alcohol  level  or  deal with  minors  in                                                               
possession.   He said,  "The nexus  between our  constitution and                                                               
our  general fund,  if we  raise  this tax,  is not  there."   He                                                               
remarked  that   this  bill,  even   as  amended,   is  extremely                                                               
regressive.  He said that  300 percent increase in all categories                                                               
is too much.   It makes no sense from  a business standpoint, and                                                               
it is a tax.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG informed  the committee  that the  House                                                               
Finance  Committee  had  passed  HB  3,  which  will  provide  an                                                               
additional  $40  million  in  general  funds  this  fiscal  year.                                                               
Therefore, the  money for the  alcohol package can be  taken from                                                               
that as  well as money  for treatment.   He recalled that  one of                                                               
the  argument  the  committee  has heard  is  the  elasticity  of                                                               
demand, which is that as  prices increase, consumption decreases.                                                               
However, the  committee heard that  alcohol prices  had increased                                                               
to extraordinary  amounts when  they heard  the bootleg  bill, HB                                                               
132.    He related  his  belief  that  in  the areas  where  many                                                               
problems occur, there is not  much elasticity.  He didn't believe                                                               
that  the  price  elasticity argument  worked  when  speaking  of                                                               
[alcoholics].   Representative  Rokeberg  remarked that  Alaska's                                                               
drinking patterns are a little  different from those in the Lower                                                               
48.  He expressed the need  for more treatment and more money for                                                               
treatment.    However,  he  has   trouble  supporting  this  tax,                                                               
although  he  announced that  he  would  support legislation  for                                                               
increased taxation on the alcohol  industry but not a 300 percent                                                               
increase, which  is too high.   He  likened this to  the Volstead                                                               
Act and the endeavor to prevent the consumption of alcohol.                                                                     
                                                                                                                                
Number 2065                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG informed the  committee that he voted for                                                               
the tobacco tax because he  didn't believe there was no redeeming                                                               
value  for  tobacco.    However,  the use  of  alcohol  can  have                                                               
medicinal  and   healthful  benefits  if  it   used  responsibly.                                                               
Therefore, the problem  in Alaska is that alcohol is  abused.  He                                                               
recalled that in  75 or 80 dry communities  in Alaska bootlegging                                                               
goes on.   In those communities,  raising the price will  have no                                                               
impact.    He  expressed  his concern  with  the  possibility  of                                                               
shifting alcohol [problems] to drug  [problems] because the drugs                                                               
are cheaper than the alcohol.                                                                                                   
                                                                                                                                
REPRESENTATIVE  ROKEBERG  reiterated  that  he  would  support  a                                                               
reasonable  tax.   However,  he  didn't  believe that  this  bill                                                               
embodied  a  reasonable tax  due  to  the 300  percent  increase.                                                               
Furthermore,  he  believes  that  the  industry's  testimony  has                                                               
indicated  that  it,  too,  would agree  to  a  modest  increase.                                                               
Representative  Rokeberg pointed  out  that  the information  the                                                               
committee  has  received  indicates  that  an  inflation-adjusted                                                               
amount  from  the  last  increase   equals  about  $5.3  million.                                                               
Therefore,  he said  that he  would be  more comfortable  with [a                                                               
tax]  in  that range.    In  conclusion, Representative  Rokeberg                                                               
reiterated that he  would have to oppose this bill  because it is                                                               
bad  public   policy  at  this   time,  and  furthermore,   as  a                                                               
Republican, he doesn't like taxes.                                                                                              
                                                                                                                                
Number 2149                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HALCRO   noted  that  he  didn't   disagree  with                                                               
anything  Representative   Rokeberg  said.    However,   some  of                                                               
Representative Rokeberg's comments actually  made the case for an                                                               
increase in  this tax.  This  tax hasn't been raised  since 1983,                                                               
18 years,  which alone isn't reason  to raise the tax.   However,                                                               
the money that the state  spends on alcohol-related problems does                                                               
justify an  increase in  the tax.   Furthermore,  if there  is no                                                               
effect on the  increase in price, then the  point for [increasing                                                               
the tax]  has been made  because [binge drinkers] cost  the state                                                               
more.   He pointed out  that if the  elasticity has an  effect on                                                               
underage drinking, it would be beneficial to raise this tax.                                                                    
                                                                                                                                
REPRESENTATIVE  HALCRO  said that  he  understood  where some  of                                                               
these bar  owners are coming  from because  he is in  an industry                                                               
that was faced  with a tax [increase] last year.   He said, "It's                                                               
not  fair for  my  customers to  pay a  tax  simply so  unrelated                                                               
people can have  the benefits.  But the fact  is, there's no such                                                               
thing as  a perfect tax."   However, there  is the fact  that the                                                               
state spends more money each  year on the cost of alcohol-related                                                               
illnesses.   He  stressed that  everyone  in the  state pays  for                                                               
these, and thus he didn't believe it  is too unfair to ask for an                                                               
additional  contribution.   Even  with  this tax,  Representative                                                               
Halcro  said he  had difficulty  believing that  anyone would  be                                                               
driven  out of  business; he  did  believe that  it would  affect                                                               
underage drinkers and perhaps even  deter them as well as provide                                                               
additional  revenue  to help  fund  some  of the  social  service                                                               
programs that  are used to  pay for the  effects of alcohol.   In                                                               
conclusion, he emphasized that this is a user tax.                                                                              
                                                                                                                                
Number 2349                                                                                                                     
                                                                                                                                
REPRESENTATIVE  MEYER  inquired  as  to  how  much  revenue  this                                                               
legislation, with the new Section 4, would generate.                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG  answered that  he didn't think  it would                                                               
be  significant and  estimated that  it wouldn't  be more  than a                                                               
couple hundred thousand dollars a year.                                                                                         
                                                                                                                                
CHAIR MURKOWSKI,  in response to Representative  Meyer, said that                                                               
before the  amendment, the Department  of Revenue  estimated that                                                               
the revenue would be between $28 and $30 [thousand].                                                                            
                                                                                                                                
REPRESENTATIVE MEYER agreed  that alcohol creates a  lot of costs                                                               
to  government.   However, he  believes  that 10  percent of  the                                                               
people  are  causing  90  percent  of  the  problems  related  to                                                               
alcohol.  Therefore, he indicated the  need to deal with those 10                                                               
percent,  which he  believes  would  be dealt  with  under HB  4.                                                               
Frankly, the  only way to decrease  these costs to society  is to                                                               
get  those   with  serious  drinking  problems   into  treatment.                                                               
Therefore,  he stated  that he  favors  wellness and  therapeutic                                                               
courts,  and tough  DWI (driving  while intoxicated)  laws rather                                                               
than taxation.  He did express  concern that the tax would effect                                                               
[social]  drinkers, who  aren't the  people causing  the problem.                                                               
He agreed that  an increase was needed, but he,  too, wasn't sure                                                               
that a 300 percent increase was necessary.                                                                                      
                                                                                                                                
TAPE 01-58, SIDE B                                                                                                              
                                                                                                                                
REPRESENTATIVE HAYES  remarked that  the House  Finance Committee                                                               
will make the  actual dollar call.  Therefore,  he suggested that                                                               
people discuss  financial concerns  with House  Finance Committee                                                               
members.                                                                                                                        
                                                                                                                                
REPRESENTATIVE CRAWFORD  related his belief  that this is  a step                                                               
in the  right direction, because  there are many  problems caused                                                               
by the consumption  of alcohol.  He emphasized  that he concurred                                                               
with raising the alcohol tax  because he believes it is necessary                                                               
for treatment, education, and prevention.                                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG  said that  it's important for  people to                                                               
realize that  if he purchases a  bottle at a local  liquor store,                                                               
75  cents of  that will  go  to the  Department of  Environmental                                                               
Conservation to  close down the  Red Dog Mine, because  where the                                                               
money goes  can't be  controlled.   He said  that he  didn't like                                                               
that.                                                                                                                           
                                                                                                                                
Number 2339                                                                                                                     
                                                                                                                                
CHAIR  MURKOWSKI noted  that she  has  "taken some  hits" on  the                                                               
amount [of this  tax].  Therefore, she pointed out  that there is                                                               
logic   behind   the   number,   which   has   been   compromised                                                               
considerably.   She  noted that  a Criminal  study said  that the                                                               
number  one thing  to do  would  be to  raise the  excise tax  on                                                               
alcohol.   Chair Murkowski  pointed out that  alcohol is  a legal                                                               
drug and  there are  reasons why it  is treated  differently than                                                               
soda.                                                                                                                           
                                                                                                                                
CHAIR MURKOWSKI  acknowledged what the alcohol  industry is doing                                                               
in order  to be responsible  with its  product.  She  did believe                                                               
the industry  is doing a  good job in  dealing with a  legal drug                                                               
that  causes people  to  do  dangerous things  when  they use  it                                                               
irresponsibly.                                                                                                                  
                                                                                                                                
CHAIR MURKOWSKI,  in conclusion, said  those who choose  to drink                                                               
have an  obligation and possible consequences,  which may include                                                               
a greater financial burden.  She  recalled a witness who spoke of                                                               
the Hickel  philosophy of "owner  state".  That  witness reminded                                                               
Chair Murkowski  that currently everyone  is paying the  price of                                                               
alcohol.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  HALCRO  recalled  an   overriding  theme  of  the                                                               
testimony, which was  that this tax won't solve the  problem.  To                                                               
that, he  emphasized that the tax  is to help address  paying for                                                               
the  problem.   For  example, there  is a  gas  tax that  doesn't                                                               
prevent potholes but rather goes into  a fund to help pay for the                                                               
repair of  roads.  Therefore,  although the alcohol  tax increase                                                               
won't solve all the problems, it will help pay for the costs.                                                                   
                                                                                                                                
Number 2080                                                                                                                     
                                                                                                                                
REPRESENTATIVE  HAYES  made  a  motion  to  move  CSHB  225  [22-                                                               
LS0806\L,  Cook,  4/9/01],  as  amended, out  of  committee  with                                                               
individual recommendations and the accompanying fiscal note.                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG objected.                                                                                               
                                                                                                                                
A  roll call  vote  was taken.    Representatives Hayes,  Halcro,                                                               
Crawford,  and Murkowski  voted  to move  CSHB 225  [22-LS0806\L,                                                               
Cook,  4/9/01],  as  amended, from  committee.    Representatives                                                               
Meyer and  Rokeberg voted against  it.  [Representative  Kott was                                                               
absent  for  the vote.]    Therefore,  the  motion to  move  CSHB                                                               
225(L&C)  from the  House Labor  and Commerce  Standing Committee                                                               
carried by a vote of 4-2.                                                                                                       
                                                                                                                                
REPRESENTATIVE  ROKEBERG gave  notice of  reconsideration of  his                                                               
vote on HB 225.                                                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG moved that the committee adjourn.                                                                       
                                                                                                                                
[HB 225  was held over.   It was later determined  that notice of                                                               
reconsideration cannot be served in  a committee, and thus at the                                                               
April 18, 2001, hearing CSHB  225(L&C) moved from the House Labor                                                               
and Commerce Standing Committee.]                                                                                               
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Labor and Commerce Standing Committee meeting was adjourned at                                                                  
8:11 p.m.                                                                                                                       

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