Legislature(2003 - 2004)

04/02/2004 03:35 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 2, 2004                                                                                          
                           3:35 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Tom Anderson, Chair                                                                                              
Representative Carl Gatto, Vice Chair                                                                                           
Representative Nancy Dahlstrom                                                                                                  
Representative Bob Lynn                                                                                                         
Representative Norman Rokeberg                                                                                                  
Representative Harry Crawford                                                                                                   
Representative David Guttenberg                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 426                                                                                                              
"An Act relating  to the levy and collection of  an assessment on                                                               
certain   tourism-related   and  recreation-related   goods   and                                                               
services, to  tourism marketing contracts, and  to vehicle rental                                                               
taxes; and providing for an effective date."                                                                                    
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 540                                                                                                              
"An Act  relating to workers'  compensation insurance  rates; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 488                                                                                                              
"An Act  relating to actionable  claims against  state employees;                                                               
relating  to  the  state's defense  and  indemnification  of  its                                                               
employees  and former  employees with  respect to  claims arising                                                               
out of conduct  that is within the scope  of employment; amending                                                               
the Public Employment Relations  Act regarding claims against the                                                               
state or state employees; and providing for an effective date."                                                                 
                                                                                                                                
     - MOVED CSHB 488(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 502                                                                                                              
"An Act relating to dispensing opticians and dispensing optician                                                                
apprentices."                                                                                                                   
                                                                                                                                
     - MOVED HB 502 OUT OF COMMITTEE                                                                                            
                                                                                                                                
HOUSE BILL NO. 542                                                                                                              
"An Act relating to specialty construction contractors and to                                                                   
construction contractor exemptions."                                                                                            
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 426                                                                                                                  
SHORT TITLE: TOURISM & RECREATION ASSESSMENT/CAR TAX                                                                            
SPONSOR(S): REPRESENTATIVE(S) KOTT                                                                                              
                                                                                                                                
02/04/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/04/04       (H)       EDT, L&C, FIN                                                                                          
02/12/04       (H)       EDT AT 10:00 AM CAPITOL 120                                                                            
02/12/04       (H)       Heard & Held                                                                                           
02/12/04       (H)       MINUTE(EDT)                                                                                            
02/17/04       (H)       EDT AT 10:00 AM CAPITOL 120                                                                            
02/17/04       (H)       -- Meeting Canceled --                                                                                 
03/16/04       (H)       EDT AT 5:15 PM CAPITOL 120                                                                             
03/16/04       (H)       Moved CSHB 426(EDT) Out of Committee                                                                   
03/16/04       (H)       MINUTE(EDT)                                                                                            
03/18/04       (H)       EDT RPT CS(EDT) NT 5DP 1NR 1AM                                                                         
03/18/04       (H)       DP: DAHLSTROM, KOTT, CISSNA, MCGUIRE,                                                                  
03/18/04       (H)       HEINZE; NR: CRAWFORD; AM: KOHRING                                                                      
04/02/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
                                                                                                                                
BILL: HB 540                                                                                                                  
SHORT TITLE: WORKERS' COMPENSATION INSURANCE RATES                                                                              
SPONSOR(S): LABOR & COMMERCE                                                                                                    
                                                                                                                                
03/22/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/22/04       (H)       L&C                                                                                                    
03/31/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
03/31/04       (H)       <Bill Hearing Postponed to Fri. 4/2/04>                                                                
04/02/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
                                                                                                                                
BILL: HB 488                                                                                                                  
SHORT TITLE: CLAIMS AGAINST STATE EMPLOYEES                                                                                     
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       L&C, JUD                                                                                               
03/01/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
03/01/04       (H)       Heard & Held <Assigned to Subcmte>                                                                     
03/01/04       (H)       MINUTE(L&C)                                                                                            
04/02/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
                                                                                                                                
BILL: HB 502                                                                                                                  
SHORT TITLE: DISPENSING OPTICIANS: BOARD & REGULATION                                                                           
SPONSOR(S): REPRESENTATIVE(S) HOLM                                                                                              
                                                                                                                                
02/16/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/16/04       (H)       L&C, HES                                                                                               
03/31/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
03/31/04       (H)       Heard & Held                                                                                           
03/31/04       (H)       MINUTE(L&C)                                                                                            
04/02/04       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                              
SUE STANCLIFF                                                                                                                   
House Majority Office                                                                                                           
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 426 on behalf of Speaker Kott,                                                                
sponsor of the bill.                                                                                                            
                                                                                                                                
CHIP THOMA                                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in opposition to HB 426.                                                                         
                                                                                                                                
JOSHUA ADAMS, Manager                                                                                                           
Alaska Hotel and Bar                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in opposition to HB 426.                                                                         
                                                                                                                                
BETTYE ADAMS, Owner                                                                                                             
Alaska Hotel and Bar                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in opposition to HB 426.                                                                         
                                                                                                                                
MIKE WINDRED, Director of Operations                                                                                            
Alaska Travel Adventures (ATA)                                                                                                  
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in favor of HB 426.                                                                              
                                                                                                                                
DENNIS McDONNELL                                                                                                                
ERA Helicopters                                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in favor of HB 426.                                                                              
                                                                                                                                
SCOTT REISLAND, Owner                                                                                                           
Denali Grizzly Bear Park                                                                                                        
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in favor of HB 426.                                                                              
                                                                                                                                
RON PECK, President and Chief Executive Officer                                                                                 
Alaska Travel Industry Association (ATIA)                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 426.                                                                            
                                                                                                                                
ERIC DOWNEY, Member                                                                                                             
Board of Directors                                                                                                              
Alaska Wilderness Recreation & Tourism Association (AWRTA)                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in  support of HB 462,  but noted                                                               
concerns as well.                                                                                                               
                                                                                                                                
DAVE KARP, Vice President and Chief Operating Officer                                                                           
Hawaiian Vacations                                                                                                              
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Testified that  HB 426  is a  step in  the                                                               
right direction.                                                                                                                
                                                                                                                                
KAREN ROGINA, President/CEO                                                                                                     
Alaska Hospitality Alliance (AHA)                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in  support of the concept  for a                                                               
broad-based hospitality  and visitor industry  self-assessment to                                                               
be used exclusively for tourism marketing.                                                                                      
                                                                                                                                
CRAIG NOOTTVEDT                                                                                                                 
Alaska National Insurance Company                                                                                               
Seattle, Washington                                                                                                             
POSITION STATEMENT:   Testified that HB 540 is  designed to bring                                                               
insurers  and  other  key  parties   with  strong  local  Alaskan                                                               
knowledge  back  into the  process  as  well  as create  a  mini-                                                               
hearing.                                                                                                                        
                                                                                                                                
BARBARA THURSTON, Independent Consulting Actuary                                                                                
Alaska National Insurance Company                                                                                               
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    During discussion  of  HB  540,  answered                                                               
questions.                                                                                                                      
                                                                                                                                
LINDA HALL, Director                                                                                                            
Division of Insurance                                                                                                           
Department of Community & Economic Development                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified  that she  didn't have  a problem                                                               
conceptually with  the bill, but mentioned  serious concerns with                                                               
timelines and other areas in the legislation.                                                                                   
                                                                                                                                
GAIL VOIGTLANDER,  Chief Assistant  Attorney General  - Statewide                                                               
Section Supervisor,                                                                                                             
Torts and Worker's Compensation Section                                                                                         
Civil Division (Anchorage)                                                                                                      
Department of Law                                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Explained  the changes encompassed  in CSHB                                                               
488, Version 23-GH2, 3/30/2004.                                                                                                 
                                                                                                                                
KRISTY BRAND, President                                                                                                         
Opticians Association of Alaska                                                                                                 
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 502.                                                                            
                                                                                                                                
JAMES D. ROTHMEYER, Chairman                                                                                                    
State Board of Dispensing Opticians                                                                                             
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 502.                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 04-38, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
VICE  CHAIR  CARL  GATTO  called the  House  Labor  and  Commerce                                                             
Standing Committee meeting to order  at 3:35 p.m. Representatives                                                               
Gatto, Dahlstrom,  Lynn, Rokeberg, Crawford, and  Guttenberg were                                                               
present at  the call to  order.  Representative  Anderson arrived                                                               
as the meeting was in progress.                                                                                                 
                                                                                                                                
HB 426-TOURISM & RECREATION ASSESSMENT/CAR TAX                                                                                
                                                                                                                                
VICE  CHAIR GATTO  announced  that the  first  order of  business                                                               
would be  HOUSE BILL NO.  426, "An Act  relating to the  levy and                                                               
collection  of  an  assessment  on  certain  tourism-related  and                                                               
recreation-related  goods  and  services,  to  tourism  marketing                                                               
contracts,  and to  vehicle rental  taxes; and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
Number 0078                                                                                                                     
                                                                                                                                
SUE STANCLIFF,  Staff to Speaker  of the House Pete  Kott, Alaska                                                               
State Legislature,  presented HB 426  on behalf of  Speaker Kott,                                                               
sponsor of  the bill.   She  noted that  before the  committee is                                                               
CSHB 426(EDT).  The bill  provides for the levying and collection                                                               
of  an  assessment  on certain  tourism-related  and  recreation-                                                               
related goods and  services, she explained.  The  bill would levy                                                               
a 2 percent assessment on the  tourism industry in order to raise                                                               
the funds for  tourism marketing and is a  self-assessed tax, she                                                               
said.   It is at the  request of the tourism  industry, which has                                                               
been  asked many  times  previously by  the  legislature to  come                                                               
forward  with  a  self-assessed  mechanism to  be  able  to  fund                                                               
tourism marketing, she noted.                                                                                                   
                                                                                                                                
[CHAIR ANDERSON arrived.]                                                                                                       
                                                                                                                                
MS. STANCLIFF  mentioned that this  modified version of  the bill                                                               
is a  2 percent tax, which  does leave in the  vehicle rental tax                                                               
that the  legislature passed  last year.   She said  that several                                                               
issues have  been raised  about the tax  related to  hotel taxes,                                                               
especially seasonal rates.  Ms.  Stancliff noted that this tax is                                                               
modeled  after  the  Alaska Seafood  Marketing  Institute  (ASMI)                                                               
model, which has worked very successfully.                                                                                      
                                                                                                                                
MS. STANCLIFF  said that  she plans  to offer  several conceptual                                                               
amendments and  asked when the  committee prefers to have  her do                                                               
that.                                                                                                                           
                                                                                                                                
CHAIR ANDERSON suggested that Ms.  Stancliff decide when to offer                                                               
them.                                                                                                                           
                                                                                                                                
MS.  STANCLIFF  said  she  prefers   to  offer  them  before  the                                                               
testimony.                                                                                                                      
                                                                                                                                
Number 0320                                                                                                                     
                                                                                                                                
MS. STANCLIFF  explained that Conceptual  Amendment 1  would take                                                               
the  2  percent   assessment  and  reduce  it  to   a  1  percent                                                               
assessment, which is per the industry's request.                                                                                
                                                                                                                                
Number 0400                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GATTO  moved  to adopt  Conceptual  Amendment  1,                                                               
which would,  on page 3,  line 10,  change "two percent"  to "one                                                               
percent".                                                                                                                       
                                                                                                                                
REPRESENTATIVE  LYNN objected  in order  to ask  a question.   He                                                               
wondered why  that change is  being made.   He stated that  he is                                                               
not opposed to it, just wondering why.                                                                                          
                                                                                                                                
MS. STANCLIFF replied that the  industry requested that amount so                                                               
that it would be more palatable across the board.                                                                               
                                                                                                                                
REPRESENTATIVE GATTO asked if that  amount is adequate to promote                                                               
the travel  industry association,  and if it's  not should  it be                                                               
kept at 2  percent.                                                                                                             
                                                                                                                                
MS. STANCLIFF said  Representative Gatto is right.   The goal was                                                               
set to  raise $20 million and  1 percent would only  bring in $10                                                               
million.   She said she  does not know  if that amount  will meet                                                               
the  needs of  the travel  industry and  she deferred  to someone                                                               
from the Alaska Travel Industry Association (ATIA).                                                                             
                                                                                                                                
REPRESENTATIVE GATTO reported that he  has talked to ATIA on this                                                               
issue and they said they needed $20 million.                                                                                    
                                                                                                                                
REPRESENTATIVE   LYNN   suggested   hearing  from   an   industry                                                               
representative before acting on the amendment.                                                                                  
                                                                                                                                
Number 0607                                                                                                                     
                                                                                                                                
CHAIR   ANDERSON   asked   Representative  Gatto   to   withdrawn                                                               
Conceptual Amendment 1.                                                                                                         
                                                                                                                                
REPRESENTATIVE GATTO withdrew Conceptual Amendment 1.                                                                           
                                                                                                                                
Number 0620                                                                                                                     
                                                                                                                                
MS.  STANCLIFF  continued  her   testimony,  and  explained  that                                                               
another  amendment  would  reduce  the  industry  match  from  60                                                               
percent to  50 percent.   Therefore,  she requested  that members                                                               
from ATIA speak  about their concerns before it is  offered as an                                                               
amendment.                                                                                                                      
                                                                                                                                
CHAIR ANDERSON asked  if there are any further  questions for Ms.                                                               
Stancliff.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  GUTTENBERG asked  if  there are  segments of  the                                                               
industry that aren't supporting this bill.                                                                                      
                                                                                                                                
MS. STANCLIFF  replied yes,  and specified  that many  hotels and                                                               
some small recreation  companies oppose [HB 426].   She said that                                                               
she has heard from other states that  when there is a tax such as                                                               
a hotel tax,  the hotel will report the rate  as, "$75, plus tax"                                                               
and that has been an issue for  some folks.  "Tourism is down and                                                               
now we're  going to saddle our  visitors with more of  a burden,"                                                               
is a  concern she has  heard, she reported.   She said she  has a                                                               
request into Legislative Legal and  Research Services to find out                                                               
if it is true that Alaska is the  only state that does not have a                                                               
tourism tax.                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked if there  is an analysis of hotel                                                               
taxes  in  Alaska  compared  to   other  states  in  the  Pacific                                                               
Northwest.                                                                                                                      
                                                                                                                                
MS. STANCLIFF said she did not know, but offered to find out.                                                                   
                                                                                                                                
REPRESENTATIVE  GATTO asked  if  ferry and  airplane tickets  are                                                               
taxable.                                                                                                                        
                                                                                                                                
Number 0828                                                                                                                     
                                                                                                                                
MS.  STANCLIFF  said that  was  addressed  in the  House  Special                                                               
Committee  on  Economic   Development,  International  Trade  and                                                               
Tourism.    One of  the  concerns  is that  a  lot  of people  in                                                               
Southeast Alaska use  the Alaska Marine Highway  System (AMHS) as                                                               
their  main  mode of  transportation.    There was  a  conceptual                                                               
amendment adopted  to exempt  Alaska residents,  but there  was a                                                               
constitutional issue, so it was agreed  that AMHS could offer a 2                                                               
percent discount  to Alaska residents.   As far as  airlines, Ms.                                                               
Stancliff opined  that because of federal  regulations a discount                                                               
cannot be offered, except on small aircraft.                                                                                    
                                                                                                                                
Number 0907                                                                                                                     
                                                                                                                                
REPRESENTATIVE  LYNN  inquired  as  to  the  kind  of  recreation                                                               
business with which Ms. Stancliff is involved.                                                                                  
                                                                                                                                
MS.  STANCLIFF  replied  that  in  her private  life  she  has  a                                                               
backcountry excursion business.                                                                                                 
                                                                                                                                
REPRESENTATIVE LYNN asked  if the money from the tax  would go to                                                               
market the tourism industry.                                                                                                    
                                                                                                                                
MS. STANCLIFF said yes.                                                                                                         
                                                                                                                                
REPRESENTATIVE  LYNN  suggested  that   by  going  too  far  with                                                               
marketing, a diminishing return results.                                                                                        
                                                                                                                                
MS. STANCLIFF  responded that if  this does  not work there  is a                                                               
mechanism  built into  the bill  that  would turn  off the  self-                                                               
assessment tax.                                                                                                                 
                                                                                                                                
REPRESENTATIVE LYNN noted  that it is a  balance between spending                                                               
money on marketing  and on having reasonable  prices for [tourism                                                               
packages].                                                                                                                      
                                                                                                                                
MS. STANCLIFF agreed, and added  that it's dependent on effective                                                               
marketing, which has been the case so far.                                                                                      
                                                                                                                                
Number 1016                                                                                                                     
                                                                                                                                
CHIP THOMA testified  in opposition to HB 426.   His testimony is                                                               
as follows:                                                                                                                     
                                                                                                                                
     Imagine  being told  by the  government  that you  must                                                                    
     advertise  your product,  even if  you  don't want  to.                                                                    
     That's the issue before us  today.  So, consequently, I                                                                    
     maintain  my opposition  to  HB  426 on  constitutional                                                                    
     grounds; the  effect of  this bill  is to  compel those                                                                    
     being assessed  a tourism tax to  subsidize speech with                                                                    
     which they may disagree.                                                                                                   
                                                                                                                                
     According  to very  well-documented, federal  case law,                                                                    
     this  bill violates  the  First  Amendment, which  both                                                                    
     prevents government  from prohibiting  individuals from                                                                    
     speaking, and  also prevents government  from requiring                                                                    
     them to speak.                                                                                                             
                                                                                                                                
MR. THOMA provided examples of  many cases from the Supreme Court                                                               
and the  9th Circuit Court  of Appeals in his  written testimony.                                                               
He said  it comes down  to, "We can't have  government collecting                                                               
taxes and  going to an  industry-sponsored group that's  going to                                                               
be  advertising."   He pointed  out that  it does  not jeopardize                                                               
ASMI because  no one  has ever  filed suit  against it,  but that                                                               
"this kind  of a  group that's just  being formulated  right now,                                                               
though, will  be challenged  and it will  probably be  brought to                                                               
summary  judgment."   He  said he  wanted to  bring  that to  the                                                               
committee's attention.                                                                                                          
                                                                                                                                
Number 1145                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GATTO  asked if  Mr.  Thoma  is representing  any                                                               
specific group.                                                                                                                 
                                                                                                                                
MR. THOMA replied that he is testifying as an individual.                                                                       
                                                                                                                                
REPRESENTATIVE GATTO asked  if Mr. Thoma has  any vested interest                                                               
in this legislation.                                                                                                            
                                                                                                                                
MR. THOMA replied that he does not.                                                                                             
                                                                                                                                
REPRESENTATIVE  LYNN said  that there  are certain  social issues                                                               
that  the government  favors, but  that  he opposes,  and yet  he                                                               
still pays taxes.  He asked if this issue is not the same thing.                                                                
                                                                                                                                
MR. THOMA said it  is a hybrid of that.   "You're taxing a select                                                               
group of people and you're taking  that money and you're using it                                                               
for speech, so it's government-supported  speech."  He maintained                                                               
that so far the court has come down against it.                                                                                 
                                                                                                                                
REPRESENTATIVE LYNN said that the  government is collecting a lot                                                               
of taxes in areas with which he disagrees.                                                                                      
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked if  the program  was challenged,                                                               
would  it  be  challenged  from someone  inside  or  outside  the                                                               
program.                                                                                                                        
                                                                                                                                
MR. THOMA said outside.                                                                                                         
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked if anyone inside  ATIA disagrees                                                               
with this or if it speaks as one voice.                                                                                         
                                                                                                                                
MR.  THOMA  said he  did  not  know if  he  wanted  to make  that                                                               
assumption  and suggested  that  there would  be testimony  today                                                               
from members  of ATIA.   He  added that  he does  not plan  on it                                                               
being Thoma vs. the State of Alaska.                                                                                            
                                                                                                                                
Number 1258                                                                                                                     
                                                                                                                                
JOSHUA ADAMS,  Manager, Alaska  Hotel and Bar,  said that  he and                                                               
his   staff  will   be  victimized   by  this   legislation,  not                                                               
represented.  He said that  his advertising budget is minimal and                                                               
local as  75 percent of his  clientele are Alaska residents.   He                                                               
opined  that [HB  426]  is philosophically  wrong  because he  is                                                               
being forced to  speak and to pay someone else  to speak for him,                                                               
which  is  contrary  to  the  First  Amendment.    He  called  it                                                               
regressive  to  force  this  class  of  people,  mostly  "weekly"                                                               
working people, to pay the tax.                                                                                                 
                                                                                                                                
CHAIR ANDERSON asked how much hotel tax is in Juneau.                                                                           
                                                                                                                                
MR. ADAMS  said 12  percent; 5  percent sales  tax and  7 percent                                                               
hotel tax.                                                                                                                      
                                                                                                                                
REPRESENTATIVE GATTO stated  that he has to think  about what Mr.                                                               
Adams said.   He  guessed that  this tax would  do very  well for                                                               
Anchorage  and the  [Matanuska-Susitna Valley],  that don't  have                                                               
tourists arriving on a cruise ship.   He suggested that Mr. Adams                                                               
would be paying a tax to  promote tourism in the remainder of the                                                               
state.  He asked if that is the way Mr. Adams sees it.                                                                          
                                                                                                                                
MR. ADAMS replied that is the way  he sees it.  He questioned the                                                               
benefit of advertising hotels in  Juneau when the cruise ships do                                                               
not stay overnight.                                                                                                             
                                                                                                                                
CHAIR  ANDERSON surmised  that Mr.  Adams'  point is  that he  is                                                               
opposed to the  tax because the hotel clients  are already paying                                                               
enough tax, and  he would not be getting any  direct benefit from                                                               
the advertisement  it purchases  compared to larger  companies in                                                               
different cities.                                                                                                               
                                                                                                                                
MR.  ADAMS said  he  also  personally opposes  it  because it  is                                                               
regressive, it punishes  the small businesses and  forces them to                                                               
pay for the big businesses, and it is constitutionally wrong.                                                                   
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked  if Mr. Adams' hotel  is a member                                                               
of the trade association.                                                                                                       
                                                                                                                                
MR. ADAMS replied yes.                                                                                                          
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked  if he feels that he  has a voice                                                               
in that organization.                                                                                                           
                                                                                                                                
Number 1448                                                                                                                     
                                                                                                                                
BETTYE ADAMS, Owner,  Alaska Hotel and Bar, opined  that [HB 426]                                                               
is a "big  Trojan horse."  She pointed out  that the industry did                                                               
not ask for  this; ATIA, which is an organization  that only some                                                               
in the industry can afford to be  a member of, asked for it.  She                                                               
noted that  she is  a member of  ATIA, but has  no impact  in it.                                                               
Ms.  Adams  pointed out  that  she  was  not notified  that  this                                                               
legislation was  coming up, and she  was told that a  majority of                                                               
the people  at the convention  agreed to  this.  She  opined that                                                               
ATIA  represents the  cruise industry,  big business,  and people                                                               
who do not have to pay the tax.                                                                                                 
                                                                                                                                
MS.   ADAMS  characterized   the   bill   as  "taxation   without                                                               
representation," and noted  that it would help  the Railbelt, not                                                               
Southeast.   She wondered what  the administrative costs  will be                                                               
and  opined  that  1  percent  is only  a  way  [for  the  cruise                                                               
industry] to get its the "a foot in the door."                                                                                  
                                                                                                                                
MS.  ADAMS  questioned  the  dedication  of  state  funds  for  a                                                               
specific purpose  and the surrendering  of the power  of taxation                                                               
contained in this bill.  She  referred to a memo from Legislative                                                               
Legal and Research Services.                                                                                                    
                                                                                                                                
Number 1767                                                                                                                     
                                                                                                                                
CHAIR ANDERSON clarified the description  of dedicating funds and                                                               
having no direct accountability for them.                                                                                       
                                                                                                                                
MS.  ADAMS maintained  that ASMI's  model is  not constitutional,                                                               
either, and it will come to the court.                                                                                          
                                                                                                                                
REPRESENTATIVE  DAHLSTROM  requested  a  copy of  the  memo  from                                                               
Legislative  Legal  and  Research  Services to  which  Ms.  Adams                                                               
referred.                                                                                                                       
                                                                                                                                
Number 1837                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  asked  for  clarification  about  the                                                               
state not being able to give away its authority to tax.                                                                         
                                                                                                                                
MS. ADAMS replied  that is in the Legislative  Legal and Research                                                               
Services' memo that  is being duplicated for the  committee.  She                                                               
explained that  if ATIA's board  assesses the 1 percent  tax, and                                                               
then says,  "Oh, it went  into the general  fund and not  to us."                                                               
And then  if they stop assessing  the tax, or change  it, that is                                                               
the  legislature delegating  its right  to tax  to someone  else,                                                               
which is unconstitutional, she opined.                                                                                          
                                                                                                                                
REPRESENTATIVE  GATTO asked  if it's  Ms. Adams'  impression that                                                               
would happen.                                                                                                                   
                                                                                                                                
MS.  ADAMS replied  yes.   There is  a clause  that if  the money                                                               
should  somehow  go into  the  general  fund,  the tax  would  be                                                               
stopped.  She called that "legislating."                                                                                        
                                                                                                                                
REPRESENTATIVE  GATTO pointed  out that  all taxes  are typically                                                               
regressive.  He  asked if Ms. Adams would be  so concerned if the                                                               
tax  was  based   on  the  exact  amount   of  benefit  obtained.                                                               
Restating the question  he asked, "If you got a  fair deal, would                                                               
you object?"                                                                                                                    
                                                                                                                                
MS.  ADAMS  replied that  she  does  not  think  a fair  deal  is                                                               
possible  because the  private sector  can do  a better  job than                                                               
government can.  She pointed out  that the tax is also regressive                                                               
toward  the  people who  stay  in  her  hotel, which  are  mostly                                                               
Alaskans and people who work for the tourist industry.                                                                          
                                                                                                                                
REPRESENTATIVE GATTO noted that the Railbelt is not tax-free.                                                                   
                                                                                                                                
Number 1992                                                                                                                     
                                                                                                                                
MIKE WINDRED,  Director of  Operations, Alaska  Travel Adventures                                                               
(ATA), said  that one of the  reasons the change was  made from 1                                                               
percent to 2 percent is because  Juneau has a fairly high bed and                                                               
sales tax combination  already.  He reported that  most bed taxes                                                               
already  work  exactly as  this  assessment  would, to  bring  in                                                               
marketing  dollars.    He  maintained  that  the  ATIA  board  is                                                               
representative of a  good cross section of businesses.   He spoke                                                               
in favor  of HB 426,  saying it would  be a good  opportunity for                                                               
business to fund marketing.                                                                                                     
                                                                                                                                
Number 2178                                                                                                                     
                                                                                                                                
REPRESENTATIVE GATTO pointed out that  the cruise industry is not                                                               
paying much in  taxes at all.   He asked if they  are exempt from                                                               
this tax.                                                                                                                       
                                                                                                                                
MR. WINDRED replied  that they are exempt for the  portion of the                                                               
cruise.  He  said there is a commitment from  the cruise industry                                                               
to help with the match for this tax.                                                                                            
                                                                                                                                
CHAIR  ANDERSON  asked  if  ATIA had  polled  its  membership  on                                                               
issues.                                                                                                                         
                                                                                                                                
MR. WINDRED  said that it depends  on the issue.   This issue has                                                               
gone through different  phases as to what it is  going to be, and                                                               
it was brought up at the  convention and everyone got a chance to                                                               
speak  on it.   There  wasn't  a vote,  and the  ability to  stay                                                               
flexible has been important, he said.                                                                                           
                                                                                                                                
CHAIR  ANDERSON spoke  about his  parents  who own  an RV  rental                                                               
company in Anchorage, who, along  with other car rental agencies,                                                               
make  up a  large group  that opposes  the city  rental tax.   He                                                               
related that there is  a fear that any tax would  be the start of                                                               
the "slippery slope."  The hope  that any advertising as a result                                                               
of the  tax would  come back  to help  the company,  although the                                                               
concern is that it might not.                                                                                                   
                                                                                                                                
MR.  WINDRED highlighted  that the  bill is  written so  that the                                                               
board has  control over what happens,  so that if the  money went                                                               
away from the marketing into the  general fund, a 51 percent vote                                                               
could change that.                                                                                                              
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked about  the legality of  what Mr.                                                               
Windred just said and if anyone could address it.                                                                               
                                                                                                                                
CHAIR ANDERSON named  the witnesses and determined  that none are                                                               
able to discuss the legal aspects of the issue.                                                                                 
                                                                                                                                
TAPE 04-38, SIDE B                                                                                                            
                                                                                                                              
REPRESENTATIVE LYNN asked  Mr. Windred which RV park  ATA owns in                                                               
Anchorage.                                                                                                                      
                                                                                                                                
MR. WINDRED replied Ship Creek Landing RV Park.                                                                                 
                                                                                                                                
REPRESENTATIVE LYNN asked what it costs to belong to ATIA.                                                                      
                                                                                                                                
MR.  WINDRED said  $350  and up,  depending on  the  size of  the                                                               
business.                                                                                                                       
                                                                                                                                
Number 2364                                                                                                                     
                                                                                                                                
MR. WINDRED suggested changing "two  percent" to "one percent" on                                                               
page 3, line  14 of the bill, to agree  with Conceptual Amendment                                                               
1.                                                                                                                              
                                                                                                                                
Number 2325                                                                                                                     
                                                                                                                                
DENNIS McDONNELL, ERA Helicopters, related  that he has had a lot                                                               
of  experience in  the tourist  industry.   He said  it has  been                                                               
increasingly difficult to market  to foreign countries because of                                                               
the  expense, an  area in  which  ATIA can  help, especially  for                                                               
smaller businesses.   He said he feels the 1  percent tax is good                                                               
for aviation  businesses.   He pointed out  that even  though the                                                               
cruise industry  does not pay  the tax, it  brings up all  of the                                                               
people who do.  He spoke strongly  in favor of the 1 percent tax,                                                               
but not the 5 percent tax listed in another bill.                                                                               
                                                                                                                                
Number 2198                                                                                                                     
                                                                                                                                
SCOTT REISLAND,  Owner, Denali Grizzly  Bear Park,  reported that                                                               
business has not been good for  the independent traveler.  In the                                                               
past  three years  there  has  been a  13-17  percent decline  in                                                               
occupation rate,  which is  representative of  campgrounds around                                                               
the state, and is  of major concern, he said.   He noted that he,                                                               
as a  small business  owner, has a  limited marketing  budget and                                                               
depends on  ATIA to  help out  with marketing  needs such  as the                                                               
German tourist  market.   He reported  that in  the Lower  48 the                                                               
campground  business is  booming, whereas  Alaska's market  needs                                                               
help.   He  said he  would be  happy to  collect an  additional 1                                                               
percent tax if it goes toward tourism marketing.                                                                                
                                                                                                                                
Number 1964                                                                                                                     
                                                                                                                                
REPRESENTATIVE  LYNN noted  that in  the Lower  48 there  are few                                                               
places  where it  is safe  or  advisable to  "boon dock"  without                                                               
going  to an  established park.   In  Alaska there  are a  lot of                                                               
places to camp.   He wondered if  that could be a  reason why the                                                               
campgrounds and RV parks are not as  full here as they are in the                                                               
Lower 48.                                                                                                                       
                                                                                                                                
MR. REISLAND  replied that  boon docking has  been an  issue, and                                                               
currently 16  percent of independent  campers who come  to Alaska                                                               
boon dock, which does have an  impact on occupancy rate.  He said                                                               
that  problem  was  closed  down  in  Denali  National  Park  and                                                               
Preserve by putting  up signs.  He attributed the  decline of 13-                                                               
17 percent as a result of people not coming to Alaska.                                                                          
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked what  Mr. Reisland's  budget for                                                               
advertising would be if ATIA was not in existence.                                                                              
                                                                                                                                
MR. REISLAND said his family took  a 50 percent cut in salary and                                                               
was  making  less  than  a  first year  teacher.    He  said  his                                                               
marketing budget is  about $4,000.  The price for  one nice ad in                                                               
the Lower 48 is $45,000, he added.                                                                                              
                                                                                                                                
Number 1757                                                                                                                     
                                                                                                                                
RON PECK,  President and Chief  Executive Officer,  Alaska Travel                                                               
Industry Association (ATIA), reported  that ATIA has been working                                                               
very  closely  recently  with various  travel  organizations  and                                                               
visitors' bureaus around the state  to jointly craft a compromise                                                               
to  bring  before the  legislature,  which  has garnered  broader                                                               
industry  support.   The modified  recommendations call  for a  1                                                               
percent assessment on the following  tourism-related sales:  sale                                                               
of  land  and water  transportation  services  such as  same  day                                                               
scenic and  sightseeing tours, sale  of recreation  and adventure                                                               
services  including guided  rafting, kayaking,  canoeing, hiking,                                                               
walking tours,  and fishing charters, lease  rentals of passenger                                                               
RV  vehicles, accommodations  including hotels,  motels, and  B &                                                               
Bs,  sale  of  marine  highway   and  railroad  passenger  fares,                                                               
lodging, and tourism-related gifts.                                                                                             
                                                                                                                                
MR.  PECK   continued  to   say  that   this  revenue   would  be                                                               
supplemented  by   continuing  contributions  that   are  already                                                               
received, but  at a  lesser amount  from the  following: matching                                                               
funding from the state, domestic  marketing in organizations such                                                               
as conventions and visitors'  bureaus, ATIA cooperative marketing                                                               
program  revenues raised  by advertising  and marketing,  and the                                                               
cruise  industry.   The  ATIA board  supports  this approach  for                                                               
several reasons:   it makes Alaska's market  more competitive; it                                                               
is less  burdensome on small  businesses; and it  is broad-based,                                                               
he  said.    Mr.  Peck  concluded  by  saying  that  the  revenue                                                               
collected will stay with the industry for marketing support.                                                                    
                                                                                                                                
Number 1624                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG said that one  of his concerns is that he                                                               
has been  told by members of  ATIA that a surcharge  would not be                                                               
workable.  He asked Mr. Peck to respond.                                                                                        
                                                                                                                                
MR. PECK said he does not understand the question.                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG  pointed out  that the bill  provides for                                                               
taxation through  the Department of  Revenue and it seems  to him                                                               
that  the  legislature could  authorize  ATIA  to provide  for  a                                                               
surcharge  and have  it  collected by  ATIA  and made  voluntary.                                                               
Therefore,  the  state  would  not   have  to  be  involved  with                                                               
collecting the tax and would not  have to pay $2.4 - $2.6 million                                                               
in order to collect $4.8 million.  He called that crazy.                                                                        
                                                                                                                                
MR. PECK  related his  belief that people  won't pay  a voluntary                                                               
surcharge.                                                                                                                      
                                                                                                                                
Number 1541                                                                                                                     
                                                                                                                                
ERIC  DOWNEY,  Member,  Board  of  Directors,  Alaska  Wilderness                                                               
Recreation & Tourism Association  (AWRTA), noted that although he                                                               
is also the Vice President of  Marketing for Denali Lodges, he is                                                               
representing AWRTA today.   He informed the  committee that AWRTA                                                               
is an association  of almost 200 small tourism  business, most of                                                               
which  are wilderness  dependent.   Mr.  Downey  said that  AWRTA                                                               
supports the  revised 1 percent  assessment as proposed  by ATIA.                                                               
However,  AWTRA  would  prefer  that  this  existing  legislation                                                               
include a vote  to turn on and off the  assessment.  Furthermore,                                                               
AWRTA would prefer the vote to  be based on one vote per business                                                               
rather  than  one vote  per  dollar.    Mr. Downey  related  that                                                               
although AWRTA  doesn't believe  that it's  fair that  the cruise                                                               
industry isn't subject to this  assessment, the assessment is too                                                               
critical for the industry as a  whole to be delayed by the cruise                                                               
industry's exemption.   He further related that  AWRTA is pleased                                                               
that  the  cruise  industry  has  volunteered  to  contribute  $1                                                               
million annually, but  AWRTA urges the legislature  to consider a                                                               
separate but similar 1 percent  tax on the cruise industry, which                                                               
would generate about $5 million annually.                                                                                       
                                                                                                                                
Number 1468                                                                                                                     
                                                                                                                                
DAVE KARP,  Vice President and Chief  Operating Officer, Hawaiian                                                               
Vacations, informed the  committee that he is  a lifetime Alaskan                                                               
and  the former  executive director  of Alaska  Tourism Marketing                                                               
Council, the predecessor  organization to the ATIA.   With regard                                                               
to the compromise  that has taken the legislation  from 2 percent                                                               
to 1  percent, Mr.  Karp specified  that the  compromise happened                                                               
over the last  10 days and through the efforts  of many different                                                               
organizations coming  together and having  constructive dialogue.                                                               
"It  is  ...  fairly rare  that  we  all  come  to the  table  in                                                               
agreement on something,  and I think that  it's representative of                                                               
a  good-faith  effort  that  was  put  forth,"  he  said.    This                                                               
legislation  is  about  the  tourism  industry  paying  it's  own                                                               
marketing  costs.   He noted  that  this year,  his company  will                                                               
bring 13 airplane  loads of Japanese tourists to  Alaska and each                                                               
of those  visitors will  pay this new  assessment.   He submitted                                                               
that this assessment is a step in the right direction.                                                                          
                                                                                                                                
Number 1322                                                                                                                     
                                                                                                                                
KAREN ROGINA,  President/CEO, Alaska Hospitality  Alliance (AHA),                                                               
informed  the committee  that  AHA includes  the  Alaska Hotel  &                                                               
Lodging  Association   and  the  Alaska  Restaurant   &  Beverage                                                               
Association.   Ms. Rogina related  support for the concept  for a                                                               
broad-based hospitality  and visitor industry  self-assessment to                                                               
be used  exclusively for tourism  marketing.   The aforementioned                                                               
is accomplished  by HB  426 at  the 1 percent  level.   She noted                                                               
that originally AHA opposed HB 426  at the 2 percent level.  This                                                               
1  percent assessment  and other  anticipated contributions  from                                                               
the industry, as  mentioned by Mr. Peck, is viewed  as the broad-                                                               
based  solution that  has been  sought.   Over  the last  several                                                               
years, the  rate of growth  of the visitor industry  has declined                                                               
commiserate  with the  amount of  tourism marketing  funding from                                                               
the state.  It has long  been recognized that in order to compete                                                               
in  the national  and international  market place,  a significant                                                               
increase in  advertising must occur.   She acknowledged  that any                                                               
plan  will   have  varying  degrees   of  benefits   for  various                                                               
businesses,  the  goal  was to  establish  the  most  broad-based                                                               
solution possible.   As stated  earlier, that seems to  have been                                                               
accomplished at  the 1 percent  level along with the  other named                                                               
funding sources from the industry groups.                                                                                       
                                                                                                                                
Number 1219                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG  requested that Ms. Rogina  explain the                                                               
difference between  the 1  percent and  the 2  percent assessment                                                               
and how divisive that is.                                                                                                       
                                                                                                                                
MS.  ROGINA  explained that  the  1  percent compromise  occurred                                                               
partly  due   to  the  fact   that  statewide   hotels  currently                                                               
contribute  over $46  million in  bed  tax, sales  tax, and  real                                                               
property  tax.    In  light of  the  aforementioned  $46  million                                                               
contribution,  the  2  percent  was  viewed  as  too  much  of  a                                                               
contribution and  thus led to  a more broad-based solution.   The                                                               
legislation  and   the  compromise,  which  includes   the  other                                                               
contributions, made the 1 percent a fair broad-based solution.                                                                  
                                                                                                                                
Number 1147                                                                                                                     
                                                                                                                                
CHAIR ANDERSON announced that the  public hearing on HB 426 would                                                               
be held open and would be  brought back before the committee next                                                               
week.   In response to Representative  Guttenberg, Chair Anderson                                                               
agreed to have staff request  from Legislative Legal and Research                                                               
Services  information regarding  taxes  and  distribution of  the                                                               
pending cases.                                                                                                                  
                                                                                                                                
[HB 426 was held over.]                                                                                                         
                                                                                                                                
HB 540-WORKERS' COMPENSATION INSURANCE RATES                                                                                  
                                                                                                                                
CHAIR ANDERSON  announced that the  next order of  business would                                                               
be HOUSE BILL NO. 540,  "An Act relating to workers' compensation                                                               
insurance rates; and providing for an effective date."                                                                          
                                                                                                                                
Number 1057                                                                                                                     
                                                                                                                                
CRAIG  NOOTTVEDT, Alaska  National  Insurance Company,  explained                                                               
that HB 540  establishes a mini-hearing and  other procedures for                                                               
the  filing, reviewing,  and  approval  of workers'  compensation                                                               
loss  cost.   Loss  costs  are the  projected  costs of  workers'                                                               
compensation claim benefits in Alaska  and constitute the largest                                                               
component of  workers' compensation rates.   Loss costs  apply to                                                               
all insurers  and the Alaska  assigned risk pool.   Mr. Noottvedt                                                               
provided  the  following  analogy,  "Workers'  compensation  loss                                                               
costs are  the raw  material costs  of the  workers' compensation                                                               
system."    He  noted  that Alaska  law  requires  that  workers'                                                               
compensation  loss costs  be  neither  excessive nor  inadequate.                                                               
The  current system  for filing,  reviewing,  and approving  loss                                                               
costs involves  the following two  parties:  National  Council on                                                               
Compensation  Insurance (NCCI),  a  national filing  organization                                                               
based in Florida, and the Alaska Division of Insurance.                                                                         
                                                                                                                                
MR.  NOOTTVEDT  explained  that   NCCI  compiles  data  into  its                                                               
computers, reviews the  data with actuaries based  in Florida and                                                               
Southern California, and then makes  its filing with the director                                                               
[of   the  Alaska   Division  of   Insurance]  who   approves  or                                                               
disapproves the  filing.  He  specified that the  current process                                                               
doesn't provide for  any active involvement of  insurers or other                                                               
interested  parties  actually  doing  business in  Alaska.    The                                                               
aforementioned, he noted,  was not always the system.   Until the                                                               
early  1990s  other  key parties  with  local  Alaska  knowledge,                                                               
including   insurers,   employers,   and  brokers   were   active                                                               
participants  in  the review  and  approval  process through  the                                                               
Classification  and   Rating  (C&R)  Committee.     However,  the                                                               
aforementioned system was abandoned  due to heightened anti-trust                                                               
concerns.   This legislation  is designed  to bring  insurers and                                                               
other key parties  with strong local Alaskan  knowledge back into                                                               
the process.                                                                                                                    
                                                                                                                                
Number 0922                                                                                                                     
                                                                                                                                
MR. NOOTTVEDT  turned to  the question of  what's wrong  with the                                                               
current system.   The  system hasn't been  working for  some time                                                               
and   workers'  compensation   loss  cost   has  been   seriously                                                               
inadequate and has contributed to  a growing crisis in the Alaska                                                               
workers' compensation  system, he  explained.  He  specified that                                                               
inadequate  loss cost  results in  the following  three problems.                                                               
One, insurers lose money.  In  fact, the director of the Division                                                               
of Insurance has recently been  showing legislators that workers'                                                               
compensation insurers have  been losing a lot of  money in Alaska                                                               
for a  number of years.   He noted that although  inadequate loss                                                               
costs aren't the sole reason  for recent carrier insolvencies and                                                               
the Alaska Insurance Guaranty Association  (AIGA) mess, they have                                                               
been a contributor.                                                                                                             
                                                                                                                                
MR.  NOOTTVEDT turned  to a  homebuilder analogy.   He  explained                                                               
that the homebuilder first determines  the raw material cost, the                                                               
labor  costs,   and  profit.     After  the   aforementioned  the                                                               
homebuilder sells the  home and makes the profit.   However, what                                                               
if the material  supplier comes to the homebuilder  the next year                                                               
saying that  the raw  material costs increased  by 3  percent and                                                               
thus  tells the  homebuilder that  he or  she has  to pay  that 3                                                               
percent increase, and the same  scenario is played out year after                                                               
year.  The  aforementioned is how inadequate loss  cost can work.                                                               
In the  year the loss  cost is charged,  one is told  those costs                                                               
are adequate.   However, if they're determined  to be inadequate,                                                               
the charges can continue.   From the workers' compensation public                                                               
filings  of 2001-2004  a chart  was  developed demonstrating  the                                                               
loss costs  for medical indemnity  components of loss cost.   The                                                               
aforementioned,  entitled  "Comparison  of the  Ultimate  Average                                                               
Indemnity per Time  Loss Claim Between 2001, 2002,  and 2004 NCCI                                                               
Filings," was  shared with  the Division of  Insurance.   Each of                                                               
the lines on  the chart simply took the filings  made by NCCI and                                                               
the  data points  for the  indemnity cost  and the  medical cost.                                                               
"What  happens to  the insurers  then is  they go  back and  say,                                                               
'Oops' each  year that those  items cost  more.  Even  though you                                                               
already  charged all  the premium  you  can get  for those  prior                                                               
years, we  got it  wrong; you've got  greater losses  that you're                                                               
having  to pay  for and  you cannot  get additional  premium," he                                                               
explained.   The  aforementioned is  a serious  financial problem                                                               
for insurance companies  and it has played a role  in why AIGA is                                                               
struggling with workers' compensation insolvencies today.                                                                       
                                                                                                                                
Number 0690                                                                                                                     
                                                                                                                                
MR. NOOTTVEDT  turned to the  second problem caused by  loss cost                                                               
inadequacy,  which is  that when  carriers lose  money they  slow                                                               
down  and even  stop  writing workers'  compensation business  in                                                               
Alaska.    The  aforementioned  results in  employers  having  no                                                               
choice  but  to  move  into   the  more  costly  Alaska  Workers'                                                               
Compensation Assigned Risk Pool, which  has exploded in growth by                                                               
over five fold to nearly $50 million  in the last few years.  The                                                               
[Alaska Workers' Compensation Assigned  Risk Pool] is approaching                                                               
25 percent of Alaska's total  workers' compensation market, which                                                               
is one of  the largest and worst market share  percentages in the                                                               
nation for an assigned risk  pool.  Moreover, because the [Alaska                                                               
Workers'  Compensation  Assigned Risk  Pool]  must  use the  same                                                               
inadequate  loss  cost   for  its  rates,  it   has  been  losing                                                               
tremendous amounts of money over  recent years.  Those losses are                                                               
passed on to insurers, which worsens the negative spiral.                                                                       
                                                                                                                                
MR. NOOTTVEDT  turned to the  third problem caused  by inadequate                                                               
loss  cost, which  is that  employers are  eventually hit  with a                                                               
large shock  rate increase in  one year.  Employers  can't easily                                                               
pass through shock  rate increases into their costs  of goods and                                                               
services.  [Passing through shock  rate increases] could probably                                                               
be  achieved if  there were  modest  increases over  a number  of                                                               
years.                                                                                                                          
                                                                                                                                
MR. NOOTTVEDT explained  that HB 540 works to  remedy the problem                                                               
by  improving  the  public information  exchange  among  all  the                                                               
workers'   compensation    stakeholders.       Furthermore,   the                                                               
legislation  makes  NCCI  more accessible  and  more  accountable                                                               
through  a  mini-hearing  process  that is  attended  by  Alaskan                                                               
insurers,  employers, and  others who  better understand  what is                                                               
occurring in Alaska.  This  legislation works because it requires                                                               
the division to  detail all of its findings and  conclusions in a                                                               
written  order when  a filing  is approved  or disapproved.   Mr.                                                               
Noottvedt acknowledged  that determining loss cost  isn't easy to                                                               
do because the division and  NCCI are predicting tomorrow's costs                                                               
using yesterday's data.   In fact, the 2005 filing  will be based                                                               
on 2000-2002 policy  year data.  This legislation  will help them                                                               
do  a better  job.   He  noted that  to  use 2002  data to  [make                                                               
predictions  for 2005]  means that  NCCI  must make  a number  of                                                               
assumptions  and  select  key  trends.   However,  NCCI  is  only                                                               
comfortable  making assumptions  and  selecting  trends based  on                                                               
what it considers to be visible  from the data, data that is old.                                                               
By contrast, Alaska insurers have  much more than what is visible                                                               
in 2002 and older  policy years.  By the time  of the filing next                                                               
fall, Alaska  insurers will have  already lived through  2003 and                                                               
most  of 2004.   There  will have  been experience  in new  claim                                                               
trends,  such as  new medical  treatments and  new drugs  and the                                                               
costs for both; new rulings  from the Workers' Compensation Board                                                               
and  the courts  and  the affects  on  the workers'  compensation                                                               
system.   Alaska  insurers will  have seen  many of  developments                                                               
that impact  the current loss  cost in Alaska.   As with  the old                                                               
C&R  Committee,  insurers  operating  in Alaska  are  in  a  good                                                               
position  to provide  extremely  valuable input  to the  workers'                                                               
compensation   loss    cost   review   and    analysis   process.                                                               
Furthermore,  Mr.  Noottvedt  opined  that  employers  and  other                                                               
interested parties  can contribute useful trend  information into                                                               
the   workers'    compensation   loss   cost    review   process.                                                               
Additionally,   the  mini-hearing   process  and   timely  public                                                               
disclosure  of   all  workers'  compensation  loss   cost  filing                                                               
information will  raise the  general awareness  and understanding                                                               
of the  true cost benefits  under Alaska's  workers' compensation                                                               
system.   The aforementioned will  create a greater  resource for                                                               
considering   any  needed   improvements  to   Alaska's  workers'                                                               
compensation system by everyone, including the legislature.                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG inquired  as to  the definition  of loss                                                               
cost.                                                                                                                           
                                                                                                                                
Number 0318                                                                                                                     
                                                                                                                                
BARBARA   THURSTON,   Independent  Consulting   Actuary,   Alaska                                                               
National  Insurance  Company, explained  that  loss  cost is  the                                                               
portion of  the premium that goes  to pay claims.   The loss cost                                                               
is exclusive  of the portion  of the premium that  pays insurance                                                               
company expenses, commission, or  profit.  She, too, acknowledged                                                               
that the claim  portion is the hardest part to  predict, which is                                                               
why  the data  from  many insurance  companies  is aggregated  by                                                               
NCCI.    In  further  response to  Representative  Rokeberg,  Ms.                                                               
Thurston  addressed  the  graph   entitled,  "Comparison  of  the                                                               
Ultimate  Average Indemnity  per  Time Loss  Claim Between  2001,                                                               
2002, and  2004 NCCI Filings."   She highlighted that  above 1994                                                               
there  are four  different  points  on the  graph  and those  are                                                               
different estimates, ultimate average  cost per claim, from NCCI.                                                               
The term "ultimate"  means once everything is paid,  which may be                                                               
many years  for workers'  compensation.   She clarified  that the                                                               
triangle in the bottom is the  estimate of the final average loss                                                               
cost per claim  for 1994, which was made in  2001.  She confirmed                                                               
that the  aforementioned is  used to build  up the  rate filings.                                                               
The other  objects refer to  each year  after 2001 when  the NCCI                                                               
says  that the  1994 estimates  were wrong  and should  have been                                                               
higher.  Ms. Thurston said that  it's expected that there will be                                                               
errors  in these  estimates.   Theoretically,  the errors  should                                                               
jump  around and  be a  little  high one  year and  a little  low                                                               
another  year.   However,  this  graph  illustrates a  consistent                                                               
underestimation.                                                                                                                
                                                                                                                                
MR. NOOTTVEDT  remarked that although the  graph illustrates that                                                               
it's  leveling off  in 1999-2001,  if this  trend continues,  the                                                               
next filings  will be corrected up  even more.  The  leveling off                                                               
only occurs because that's where the prediction is now.                                                                         
                                                                                                                                
REPRESENTATIVE ROKEBERG turned  to the 2004 filing  on the graph,                                                               
and asked if the back years estimate the actual cost.                                                                           
                                                                                                                                
MS. THURSTON replied yes, and clarified  that as part of the 2004                                                               
filing the old  years are reviewed and the average  cost in those                                                               
old years is  estimated.  She confirmed that the  numbers for the                                                               
past years are more accurate because more time has passed.                                                                      
                                                                                                                                
MR. NOOTTVEDT  highlighted that unfortunately the  premium has to                                                               
be charged based the year [the loss cost estimate] is set.                                                                      
                                                                                                                                
REPRESENTATIVE  ROKEBERG  related   his  understanding  that  Mr.                                                               
Noottvedt's testimony was  that next year only the  data from the                                                               
past three years will be reviewed and there's a big gap.                                                                        
                                                                                                                                
MS. THURSTON confirmed that there is a delay.                                                                                   
                                                                                                                                
Number 0059                                                                                                                     
                                                                                                                                
REPRESENTATIVE   GUTTENBERG   surmised   then  that   these   are                                                               
guesstimates with regard to what will  be paid out in claims over                                                               
the  years.   Some  claims  can  be  many  years old,  he  noted.                                                               
Therefore, these rates don't seem  to be self-correcting and thus                                                               
one can't, the next year, make  a charge because the estimate has                                                               
increased rather  "you get recharged  on something  that happened                                                               
last year."                                                                                                                     
                                                                                                                                
MS. THURSTON  clarified that in  insurance it's not  permitted to                                                               
recoup past losses.                                                                                                             
                                                                                                                                
TAPE 04-39, SIDE A                                                                                                            
                                                                                                                                
MR.  NOOTTVEDT reiterated  the  need to  have  more current  data                                                               
[from] people living  in Alaska who see the trends  in Alaska and                                                               
to put  that in the review  process for NCCI and  the director to                                                               
consider.  He reminded the  committee that the aforementioned was                                                               
done under the C&R Committee  system, which hasn't been available                                                               
to the industry and the division  for over a decade.  In response                                                               
to Representative Guttenberg, he  confirmed that [putting the C&R                                                               
Committee system] back  in place is what is  being [proposed with                                                               
this legislation].                                                                                                              
                                                                                                                                
Number 0063                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  pointed out  that the C&R  Committee was                                                               
disbanded due  to fears of anti-trust  actions.  He asked  if the                                                               
aforementioned fears "will  out in case law."  He  inquired as to                                                               
why this could be accomplished now.                                                                                             
                                                                                                                                
MR. NOOTTVEDT clarified  that it's a different system  due to the                                                               
inclusion  of   the  public  hearing  and   question  and  answer                                                               
[period].   He pointed out  that the C&R Committee  was different                                                               
in its process,  including NCCI bringing a range of  rates to the                                                               
C&R Committee, which would set the filing for the division.                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG surmised  then  that  the C&R  Committee                                                               
actually   participated  in   the   ratemaking  process   through                                                               
recommendation.                                                                                                                 
                                                                                                                                
MR. NOOTTVEDT agreed and emphasized  that due to anti-trust fears                                                               
Alaska  has shifted  from a  ratemaking  process to  a loss  cost                                                               
filing practice.  Therefore, "we"  are no longer dealing with the                                                               
actual  setting  of   the  final  rates,  but   rather  with  the                                                               
underlying raw material costs.                                                                                                  
                                                                                                                                
Number 0235                                                                                                                     
                                                                                                                                
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Community  &  Economic  Development,  said that  she  would  only                                                               
address the process in this  legislation, not the complexities of                                                               
ratemaking.   However, she noted  her belief that  the ratemaking                                                               
process  could become  more open.    Therefore, she  said she  is                                                               
willing  to  accommodate a  method  of  allowing more  input  and                                                               
review.  "So, on the surface  I don't have a problem conceptually                                                               
with  the bill,"  she  stated.   However,  she mentioned  serious                                                               
concerns with timelines and other areas in the legislation.                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  suggested that Ms. Hall  could make some                                                               
recommendations to the committee and the sponsor.                                                                               
                                                                                                                                
MS. HALL agreed to do so.                                                                                                       
                                                                                                                                
CHAIR ANDERSON announced that HB 540 would be held over.                                                                        
                                                                                                                                
HB 488-CLAIMS AGAINST STATE EMPLOYEES                                                                                         
                                                                                                                                
CHAIR ANDERSON  announced that the  next order of  business would                                                               
be  HOUSE BILL  NO. 488,  "An Act  relating to  actionable claims                                                               
against  state employees;  relating  to the  state's defense  and                                                               
indemnification  of  its  employees  and  former  employees  with                                                               
respect  to claims  arising out  of  conduct that  is within  the                                                               
scope  of employment;  amending the  Public Employment  Relations                                                               
Act regarding  claims against the  state or state  employees; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 0392                                                                                                                     
                                                                                                                                
REPRESENTATIVE  DAHLSTROM moved  to adopt  CSHB 488,  Version 23-                                                               
GH2,  3/30/2004,  as  the  working  document.    There  being  no                                                               
objection, Version 23-GH2, 3/30/2004, was before the committee.                                                                 
                                                                                                                                
Number 0429                                                                                                                     
                                                                                                                                
GAIL VOIGTLANDER,  Chief Assistant  Attorney General  - Statewide                                                               
Section  Supervisor,  Torts  and Worker's  Compensation  Section,                                                               
Civil  Division (Anchorage),  Department of  Law, explained  that                                                               
when the  committee last heard  this legislation, March  1, 2004,                                                               
there were basically two aspects  to this legislation.  The first                                                               
was  the  certification  process that  converted  claims  against                                                               
state  employees  into claims  against  the  state.   The  second                                                               
aspect was  to have one  standardized statute that  addressed the                                                               
state's obligation  for defense and indemnity  of state employees                                                               
when  individually sued.   The  legislation before  the committee                                                               
now  removes the  second aspect  because of  objections from  the                                                               
Public  Safety  Employees  Association   (PSEA)  with  regard  to                                                               
differences   between  the   [legislation's]  language   and  the                                                               
language in PSEA's collective  bargaining agreements.  Therefore,                                                               
the  legislation before  the committee  only addresses  the first                                                               
aspect, as  described earlier.   She noted that the  first aspect                                                               
is in addition to an  employee's rights for defense and indemnity                                                               
that may be included in the collective bargaining agreements.                                                                   
                                                                                                                                
CHAIR ANDERSON  recalled that a PSEA  representative had concerns                                                               
with regard to that and wanted  to work with Ms. Voigtlander.  He                                                               
also recalled that Senator Bunde made  an amendment.  He asked if                                                               
this version is comparable to that Senate change.                                                                               
                                                                                                                                
MS. VOIGTLANDER said the version  before the committee is exactly                                                               
the  same [as  the Senate  companion, CSSB  338(STA)].   The PSEA                                                               
withdrew its objection to [CSSB  338(STA)], which is reflected in                                                               
a March 23, 2004, letter from  Mr. D'Amico, PSEA, to the chair of                                                               
the Senate Judiciary Standing Committee.                                                                                        
                                                                                                                                
CHAIR  ANDERSON  opined  that  CSHB   488  works  out  the  state                                                               
employees'  and the  public safety  employees' concern,  which he                                                               
said satisfied him.                                                                                                             
                                                                                                                                
Number 0600                                                                                                                     
                                                                                                                                
REPRESENTATIVE  DAHLSTROM  moved  to  report  CSHB  488,  23-GH2,                                                               
3/30/2004, out  of committee with individual  recommendations and                                                               
the accompanying  fiscal notes.   There being no  objection, CSHB                                                               
488(L&C) was reported from the  House Labor and Commerce Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
HB 502-DISPENSING OPTICIANS: BOARD & REGULATION                                                                               
                                                                                                                                
CHAIR ANDERSON announced  that the final order  of business would                                                               
be HOUSE BILL  NO. 502, "An Act relating  to dispensing opticians                                                               
and dispensing optician apprentices."                                                                                           
                                                                                                                                
Number 0653                                                                                                                     
                                                                                                                                
KRISTY BRAND, President, Opticians Association of Alaska,                                                                       
testified that she was licensed in both glasses and contact                                                                     
lenses.  She stated:                                                                                                            
                                                                                                                                
     A  few years  ago the  legislature passed  a bill  that                                                                    
     changed  a system  that had  worked for  30 years,  and                                                                    
     that  system was  the training  of  apprentices in  the                                                                    
     field  of opticianry.   From  1973 until  2002 we  were                                                                    
     required  to  study  for  6,000   hours  to  become  an                                                                    
     optician.  In  2001 that standard was  lowered to 1,800                                                                    
     hours.   At 1,800 we  would be  one, if not  the lowest                                                                    
     state, in the union in terms of training.                                                                                  
                                                                                                                                
     The  bill  before  you  rectifies  this  problem.    It                                                                    
     increases the requirements for  training; it adopts the                                                                    
     United  States  Department  of  Labor's  apprenticeship                                                                    
     program  as   the  formal  educational   component  for                                                                    
     training apprentices in Alaska.   This program sets out                                                                    
     specific  guidelines  for  training;   it  sets  out  a                                                                    
     progressively increasing wage scale  based on the hours                                                                    
     completed   and  based   on  the   percentage  of   the                                                                    
     journeyman level,  which was calculated by  the federal                                                                    
     Department of Labor.                                                                                                       
                                                                                                                                
     Upon  completion  of  the training  program,  the  U.S.                                                                    
     Department  of  Labor  would  issue  a  certificate  of                                                                    
     completion to be  presented to the state  of Alaska for                                                                    
     licensing.  Once licensed, the  credentials can then be                                                                    
     taken  to the  University  of Alaska,  where they  will                                                                    
     allow credit for each portion  of the license, that can                                                                    
     be  used  towards  an  Associate's  Degree  in  applied                                                                    
     optics.                                                                                                                    
                                                                                                                                
     This  program  is  also  beneficial  to  employers,  as                                                                    
     there's  a financial  incentive  for hiring  unemployed                                                                    
     people and  training them in  our field, and  there are                                                                    
     also  federal grants  that employers  can apply  for to                                                                    
     help offset  the costs for  apprenticeship wages.   The                                                                    
     U.S.  Department of  Labor  also  has a  school-to-work                                                                    
     linkage  program where  high school  seniors can  train                                                                    
     part-time in opticianry to bridge  the gap between high                                                                    
     school and work.                                                                                                           
                                                                                                                                
     Our association has a motto  and that motto is that "we                                                                    
     are  Alaska's opticians,  united  in  vision" and  that                                                                    
     vision  is  a  system  where we  can  all  continue  to                                                                    
     provide the quality of  services to Alaska's consumers,                                                                    
      and that we set an example for all the other states,                                                                      
      whether they are licensed or not.  Alaskan consumers                                                                      
     deserve the best. ...                                                                                                      
                                                                                                                                
REPRESENTATIVE CRAWFORD recalled  previous testimony stating that                                                               
very few of the apprentices  in Alaska become licensed opticians.                                                               
He  wondered  how  to  get  more  people  to  graduate  from  the                                                               
apprenticeship program.                                                                                                         
                                                                                                                                
MS. BRAND said the problem could  be seen as anyone working in an                                                               
optician's  office,  including  clerks  and  sales  people,  were                                                               
required to  sign up  for the  apprenticeship program  whether or                                                               
not this was  their career goal.  Senate Bill  270 corrected this                                                               
problem by creating the  classification of optician's assistants.                                                               
She  felt  that after  the  statutes  reflect these  changes  the                                                               
people  signed  up  as  apprentices in  the  U.S.  Department  of                                                               
Labor's  apprenticeship program  will  be  the career  opticians.                                                               
She commented  that the system  has been  broken for a  long time                                                               
and her association is helping to mend it.                                                                                      
                                                                                                                                
REPRESENTATIVE GUTTENBERG  complimented Ms.  Brand for  her clear                                                               
testimony.                                                                                                                      
                                                                                                                                
Number 0929                                                                                                                     
                                                                                                                                
JAMES  D.   ROTHMEYER,  Chairman,   State  Board   of  Dispensing                                                               
Opticians, testified  in support  of HB 502.   He  listed several                                                               
benefits   for  the   public,  including   increasing  the   time                                                               
requirements for apprenticeship training  back up to the national                                                               
average for  this profession.   HB  502 brings  Alaska opticianry                                                               
statute  into agreement  with existing  statutes,  and clears  up                                                               
conflicting  definitions of  a contact  lenses prescription.   He                                                               
stated  that  this  bill  allows   for  a  mechanism  to  license                                                               
experienced  opticians  coming  from  other states  if  they  can                                                               
present their license or proof of advanced certification.                                                                       
                                                                                                                                
MR. ROTHMEYER  stated that  this bill  mandates that  the federal                                                               
Department  of Labor  assume the  administration of  the optician                                                               
apprenticeship program,  thereby reducing the state's  costs.  He                                                               
noted  that the  Board  of Dispensing  Opticians  was created  in                                                               
1973, but they have been  unable to test for technical competency                                                               
since  SB 270  passed  in  2002.   House  Bill  502 would  create                                                               
trained,  licensed,  competent,   professionals  who  would  take                                                               
responsibility for dispensing eyeglasses and contact lenses. ...                                                                
                                                                                                                                
Number 1048                                                                                                                     
                                                                                                                                
CHAIR ANDERSON  noted there  were salient  arguments from  out of                                                               
state but  that he  was going to  defer to  Alaskan associations,                                                               
the  Alaska  Board  of Dispensing  Opticians  and  the  Opticians                                                               
Association of Alaska.                                                                                                          
                                                                                                                                
Number 1072                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG moved  to report HB 502  out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.   There being no objection,  HB 502 was reported  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                                                               
5:20 p.m.                                                                                                                       

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