Legislature(2015 - 2016)BARNES 124

02/13/2015 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 26 EXTEND CERT. DIRECT-ENTRY MIDWIVES BOARD TELECONFERENCED
Moved HB 26 Out of Committee
*+ HB 49 BENEFIT CORPORATIONS TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                        February 13, 2015                                                                                       
                            3:16 p.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Shelley Hughes, Vice Chair                                                                                       
Representative Jim Colver                                                                                                       
Representative Cathy Tilton                                                                                                     
Representative Andy Josephson                                                                                                   
Representative Sam Kito                                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Gabrielle LeDoux                                                                                                 
Representative Mike Chenault (alternate)                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 49                                                                                                               
"An   Act    relating   to    corporations,   including    benefit                                                              
corporations, and other entities; and providing for an effective                                                                
date."                                                                                                                          
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 26                                                                                                               
"An Act extending the termination date of the Board of Certified                                                                
Direct-Entry Midwives; and providing for an effective date."                                                                    
                                                                                                                                
     - MOVED HB 26 OUT OF COMMITTEE                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 49                                                                                                                   
SHORT TITLE: BENEFIT CORPORATIONS                                                                                               
SPONSOR(s): REPRESENTATIVE(s) SEATON                                                                                            
                                                                                                                                
01/21/15       (H)       PREFILE RELEASED 1/16/15                                                                               
01/21/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/21/15       (H)       L&C                                                                                                    
02/13/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB 26                                                                                                                   
SHORT TITLE: EXTEND CERT. DIRECT-ENTRY MIDWIVES BOARD                                                                           
SPONSOR(s): REPRESENTATIVE(s) OLSON                                                                                             
                                                                                                                                
01/21/15       (H)       PREFILE RELEASED 1/9/15                                                                                
01/21/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/21/15       (H)       L&C, FIN                                                                                               
02/13/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE PAUL SEATON                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified as prime sponsor of HB 49.                                                                     
                                                                                                                                
SARA CHAMBERS, Acting Director                                                                                                  
Division of Corporations, Business, and Professional Licensing                                                                  
Department of Commerce, Community,  & Economic Development (DCCED)                                                              
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:     Provided  comments   and  responded   to                                                            
questions on HB 49.                                                                                                             
                                                                                                                                
ERIK TROJIAN, Director of Policy                                                                                                
B Lab                                                                                                                           
New York, New York                                                                                                              
POSITION STATEMENT:  Testified during the discussion of HB 49.                                                                
                                                                                                                                
LAURA STIDOLPH, Staff                                                                                                           
Representative Kurt Olson                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Presented  HB  26 on  behalf  of the  prime                                                            
sponsor, Representative Kurt Olson.                                                                                             
                                                                                                                                
KRIS CURTIS, Legislative Auditor                                                                                                
Legislative Audit Division                                                                                                      
Legislative Agencies and Offices                                                                                                
Juneau, Alaska                                                                                                                  
POSITION    STATEMENT:      Presented    auditor   findings    and                                                            
recommendations  and answered questions  during the discussion  of                                                              
HB 26.                                                                                                                          
                                                                                                                                
SARA CHAMBERS, Acting Director                                                                                                  
Division of Corporations, Business, and Professional Licensing                                                                  
Department of Commerce, Community,  & Economic Development (DCCED)                                                              
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:     Provided  comments   and  responded   to                                                            
questions on HB 26.                                                                                                             
                                                                                                                                
CHERYL CORRICK, Chair                                                                                                           
Board of Certified Direct-Entry Midwives (CDM)                                                                                  
Department of Commerce, Community & Economic Development                                                                        
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:   Answered questions during the  discussion of                                                            
HB 26.                                                                                                                          
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:16:08 PM                                                                                                                    
                                                                                                                                
CHAIR  KURT OLSON  called the  House Labor  and Commerce  Standing                                                            
Committee  meeting   to  order  at  3:16  p.m.     Representatives                                                              
Josephson,  Kito, Hughes  and Olson  were present  at the call  to                                                              
order.  Representatives  Tilton and Colver arrived  as the meeting                                                              
was in progress.                                                                                                                
                                                                                                                                
                   HB 49-BENEFIT CORPORATIONS                                                                               
3:16:21 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the first  order of business  would be                                                              
HOUSE BILL  NO. 49,  "An Act relating  to corporations,  including                                                              
benefit corporations,  and  other entities;  and providing  for an                                                              
effective date."                                                                                                                
                                                                                                                                
3:16:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PAUL SEATON,  Alaska  State Legislature,  speaking                                                              
as prime  sponsor of  HB 49,  stated that  this bill would  expand                                                              
the options for  Alaskan entrepreneurs and investors  by placing a                                                              
new type of corporate  entity, a benefit corporation,  or "B Corp"                                                              
in  Alaskan statute.   He  explained  a benefit  corporation as  a                                                              
for-profit  corporation  that  incorporates  public  benefits  and                                                              
community improvements  into their  business practices,  no matter                                                              
the  principal  services  or products  provided.    Corporate  law                                                              
generally requires  corporations to consider the  financial impact                                                              
to their shareholders as the top priority when making decisions.                                                                
                                                                                                                                
REPRESENTATIVE SEATON  asked to read a short paragraph  from Dodge                                                            
v. Ford Motor Company, 170 NW 668 (Mich 1919), which read:                                                                    
                                                                                                                                
     A  business  corporation  is organized  and  carried  on                                                                   
     primarily  for  the  profit  of  the  stockholders.  The                                                                   
     powers  of the  directors are  to be  employed for  that                                                                   
     end. The discretion  of directors is to be  exercised in                                                                   
     the choice  of means  to attain that  end, and does  not                                                                   
     extend to a  change in the end itself, to  the reduction                                                                   
     of  profits,  or  to  the  non-distribution  of  profits                                                                   
     among  stockholders in  order  to devote  them to  other                                                                   
     purposes.                                                                                                                  
                                                                                                                                
REPRESENTATIVE SEATON  said that maximizing corporate  returns can                                                              
interfere  with other  corporate  goals, such  as  electing to  do                                                              
something  beneficial  for  the   community  by  enhancing  social                                                              
benefits.   By  electing  in their  articles  of incorporation  to                                                              
become  a benefit  corporation  (B-Corp),  businesses simply  gain                                                              
the flexibility  to include  mission and  social impacts  in their                                                              
business   practices.      Allowing  the   creation   of   benefit                                                              
corporations  will give  business owners  more choices  in how  to                                                              
run  their businesses  and will  bring to  Alaska a  slice of  the                                                              
$6.6 trillion invested nationally by similar corporations.                                                                      
                                                                                                                                
3:18:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON said that  benefit corporations  are formed                                                              
voluntarily and have  the same tax status as any  other for-profit                                                              
corporations.    Twenty-seven other  states  and  the District  of                                                              
Columbia  have passed  benefit  corporation  legislation and  many                                                              
more  have  benefit corporation  bills  in  process.   Over  1,440                                                              
benefit   corporations   have  incorporated   in   other   states,                                                              
including  Patagonia, Rasmussen  College,  Epic  Coffee, and  King                                                              
Arthur Flour  Company, which  is America's  oldest flour  company.                                                              
Each of  these companies  works to  benefit the  public and  their                                                              
communities in  the way that matters  most to them.  He  said that                                                              
B  Lab  is  a  non-profit  corporation   that  created  a  benefit                                                              
corporation certification, similar to the LEEDS certification.                                                                  
                                                                                                                                
3:20:59 PM                                                                                                                    
                                                                                                                                
CHAIR   OLSON  suggested   the  LEEDS   certification  is   "green                                                              
certification."                                                                                                                 
                                                                                                                                
REPRESENTATIVE SEATON agreed.                                                                                                   
                                                                                                                                
3:21:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  clarified that  this bill does  not require                                                              
certification   but    incorporates   the   benefit    corporation                                                              
provisions  into  statute.    Just   as  traditional  corporations                                                              
provides  their shareholders  with  financial  reports, a  benefit                                                              
corporation  will  additionally  create  and  publish  a  biannual                                                              
benefit  report  describing  how   the  company  has  pursued  the                                                              
general  public benefit.   This report,  which  is held against  a                                                              
third-party  standard, would  allow  shareholders, investors,  and                                                              
the  public to  confidently invest  in  benefit corporations  that                                                              
share their  values.   A two-thirds majority  vote is  required to                                                              
form or  change any  corporate status  so shareholders  will drive                                                              
the  decisions   and  the  selection  of  the   general  community                                                              
benefits that for-profit corporations might select.                                                                             
                                                                                                                                
3:22:26 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON recalled  the  last legislature  had  a similar  non-                                                              
controversial bill related to benefit corporations.                                                                             
                                                                                                                                
REPRESENTATIVE SEATON  agreed that he  had introduced a  bill last                                                              
legislature  that passed  out  of  the committee  last  year.   He                                                              
added that  this bill  will afford  shareholders flexibility,  but                                                              
potential  investors  will  be  aware of  the  benefits  prior  to                                                              
investing.                                                                                                                      
                                                                                                                                
3:23:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON provided a  section-by-section analysis  of                                                              
the  bill.     He  said  that   Section  1  would   establish  how                                                              
corporations may  be dissolved and statutory language  was amended                                                              
to  include benefit  corporations.    Section 2  would  add a  new                                                              
chapter to the corporate code for benefit corporations.                                                                         
                                                                                                                                
REPRESENTATIVE  SEATON  related  that  proposed  Article  1  would                                                              
establish how  a new business  corporation or existing  entity may                                                              
become a  benefit corporation  and it  declares that an  amendment                                                              
of  an  existing corporation  must  be  adopted  by at  least  the                                                              
minimum two-thirds vote.                                                                                                        
                                                                                                                                
3:24:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON said that  proposed AS 10.60.020  indicates                                                              
that the plan  of merger or status  change must be approved  by at                                                              
least the minimum  required vote if an existing  corporate entity,                                                              
that  was not  a benefit  corporation but  becomes a  B-Corp as  a                                                              
result of a merger or other status change.                                                                                      
                                                                                                                                
REPRESENTATIVE SEATON  stated proposed AS 10.60.030  would require                                                              
that  in addition  to  the corporate  purposes  under existing  AS                                                              
10.06.005,  a  benefit  corporation  shall  have  the  purpose  of                                                              
creating general public  benefit from all effects  of its business                                                              
and  operations.    In  addition,   creating  the  general  public                                                              
benefit must  be found to be in  the best interest of  the benefit                                                              
corporation.                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  said that proposed AS 10.60.040  will allow                                                              
a  benefit  corporation  to  identify or  amend  its  articles  to                                                              
include  specific  public  benefit  purposes in  addition  to  the                                                              
general  public  benefit  purposes,   and  it  lists  examples  of                                                              
specific public benefits.                                                                                                       
                                                                                                                                
3:25:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SEATON  related   that   proposed  AS   10.60.050                                                              
indicates a  professional corporation  formed under AS  10.45 does                                                              
not  violate  this   statute  by  being  a   benefit  corporation.                                                              
Proposed  AS 10.60.060  provides  that a  benefit corporation  may                                                              
terminate  its  benefit status  by  amending  its articles  or  by                                                              
being party to a  merger, but it must be approved  by at least the                                                              
minimum  required vote.    He stated  that  proposed AS  10.60.070                                                              
indicates   if  a   benefit  corporation   disposes   of  all   or                                                              
substantially all  of its assets the transaction  must be approved                                                              
by the minimum status vote required.                                                                                            
                                                                                                                                
3:26:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON directed attention  to proposed  Article 2,                                                              
AS  10.60.100, of  HB 49  will establish  seven  factors that  the                                                              
board  of  directors   and  individual  directors   of  a  benefit                                                              
corporation  shall   consider  while  discharging   their  duties.                                                              
However,  the  directors  of  the   benefit  corporation  are  not                                                              
required  to give  priority to  any  one of  these listed  factors                                                              
unless  the intention  to prioritize  has been  identified in  the                                                              
benefit corporation's articles of incorporation.                                                                                
                                                                                                                                
REPRESENTATIVE  SEATON referred  to proposed  AS 10.60.110,  which                                                              
states that consideration  of these factors does  not constitute a                                                              
violation  of existing Alaska  statutes regarding  the duties  and                                                              
rights of  corporate boards.   Proposed  AS 10.60.120 states  that                                                              
except as  provided in the  articles of incorporation,  a director                                                              
of a  benefit corporation  is not  personally liable for  monetary                                                              
damages  for   action,  inaction,   or  failure  of   the  benefit                                                              
corporation to  create a general  public benefit if the  duties of                                                              
the director were performed in compliance with this chapter.                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  said  AS   10.60.130  clarifies  that  the                                                              
director  of a  benefit  corporation does  not  have a  duty to  a                                                              
person  solely  because  that  person  is  a  beneficiary  of  the                                                              
benefit   corporation's  general   or   specific  public   benefit                                                              
purpose.                                                                                                                        
                                                                                                                                
3:27:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON said  proposed AS  10.60.140 declares  that                                                              
directors  of a benefit  corporation who  make business  judgments                                                              
in good  faith fulfill  their duties under  this chapter,  if they                                                              
are not  personally invested in the  subject, are informed  on the                                                              
subject  of   the  judgment,   reasonably  believe  the   business                                                              
judgment is in  the best interest of the benefit  corporation, and                                                              
have  considered  the  interests   and  factors  listed  under  AS                                                              
10.60.100.                                                                                                                      
                                                                                                                                
3:28:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON directed attention  to proposed  Article 3,                                                              
which would allow  the board to include a benefit  director who is                                                              
not financially liable if acting in good faith.                                                                                 
                                                                                                                                
REPRESENTATIVE  SEATON   related  that  proposed  Article   4,  AS                                                              
10.60.230  directs   an  officer  of  a  benefit   corporation  to                                                              
consider the  factors listed in AS  10.60.100.  It states  that an                                                              
officer  of a  benefit corporation  is not  personally liable  for                                                              
monetary  damages if  their duties  were  performed in  compliance                                                              
with Alaska statutes.                                                                                                           
                                                                                                                                
REPRESENTATIVE  SEATON directed attention  to proposed  Article 5,                                                              
AS 10.60.300  which  states that  persons may  bring an action  or                                                              
claim  against  a benefit  corporation  for  a failure  to  pursue                                                              
general or specific  public benefits as set out  in their articles                                                              
or for a  violation of duties  under this chapter, but  is limited                                                              
to  someone  within the  corporation.    Thus someone  within  the                                                              
community cannot bring  a cause of action against  the corporation                                                              
for not  fulfilling its duties.   He stated that  proposed Article                                                              
6  requires  a benefit  corporation  to  file a  biennial  benefit                                                              
report in  addition to  the biennial  report and provides  details                                                              
of what must be in the report.                                                                                                  
                                                                                                                                
3:29:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  stated  that   proposed  Article  7  would                                                              
establish  a  status  change  for  a merger  or  amendment  for  a                                                              
benefit  corporation  or domestic  entity  other  than a  business                                                              
corporation,  which must  be  approved by  at  least a  two-thirds                                                              
vote  of  all  shareholders  entitled  to vote.    It  also  would                                                              
establish statutory  guidelines for third-party standards  used as                                                              
an  assessment  tool in  the  required  annual benefit  report  to                                                              
ensure  that the  general or  specific public  benefits are  being                                                              
done.                                                                                                                           
                                                                                                                                
REPRESENTATIVE SEATON  stated that proposed Article  8 would allow                                                              
the department  to adopt  regulations to  implement the  new style                                                              
of corporation.                                                                                                                 
                                                                                                                                
3:30:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER  asked whether  this  would  be similar  to                                                              
"Newman's Own" style  of corporation instead of being  just a pure                                                              
monetary  profit  driven  corporation.     He  asked  for  further                                                              
clarification  of  the  difference  between  this  model  and  the                                                              
typical corporation model with a for-profit motive.                                                                             
                                                                                                                                
REPRESENTATIVE SEATON  answered that the corporate  categories are                                                              
nonprofit and for-profit  corporations.  He suggested  that a for-                                                              
profit  corporation  may  wish  to do  something  to  benefit  the                                                              
community or to  have a specific benefit; for  example, recreation                                                              
may be  vital to a  sporting goods company  that wants  to improve                                                              
trails in a  community.  The corporate shareholders  and investors                                                              
might  object,  but  in  a  benefit   corporation,  they  will  be                                                              
informed  of  the  general  and specific  benefits,  such  as  the                                                              
improved trail motive.   However, it doesn't mean  the corporation                                                              
is a nonprofit  corporation; however, the benefit  corporation has                                                              
a general community social goal as well as making money.                                                                        
                                                                                                                                
3:33:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COLVER  asked whether  the goals and  objectives of                                                              
the  benefit  corporation   would  lie  within  the   articles  of                                                              
incorporation  and the bylaws  or just be  strictly stated  in the                                                              
corporate articles.                                                                                                             
                                                                                                                                
REPRESENTATIVE  SEATON answered that  seven parameters  are listed                                                              
on page 4 of  the bill.  If the corporation has  a first priority,                                                              
the board of directors  would be held to that goal  as the primary                                                              
benefit,  but if  the corporation  did not  prioritize, the  board                                                              
would decide  how to  best exercise  the general  benefit for  the                                                              
community.    He  characterized   it  as  being  a  very  flexible                                                              
arrangement;  however,  third-party  standards  can  apply.    For                                                              
example,  if the  benefit  corporation's mission  was  sustainable                                                              
farming, it  would be measured  against the third-party  standards                                                              
that define sustainable  farming.  The benefit  corporation report                                                              
to  its  investors will  allow  them  to  measure if  the  benefit                                                              
corporation has accomplished its goal.                                                                                          
                                                                                                                                
3:34:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO asked whether  the primary responsibility  is                                                              
to shareholders  is subsidiary support for beneficial  purposes or                                                              
if it  was possible for  the primary component  to be  the benefit                                                              
corporation with the subsidiary being the for-profit purpose.                                                                   
                                                                                                                                
REPRESENTATIVE  SEATON  answered  that  the  mix  was  up  to  the                                                              
corporation.   He suggested  the benefit  corporation can  mix and                                                              
match   its  goals   based   on  the   board   of  directors   and                                                              
shareholders.                                                                                                                   
                                                                                                                                
3:36:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO  asked whether  it  could  be nearly  at  the                                                              
level of a  nonprofit, in which 95  percent of the revenue  is put                                                              
towards its beneficial purpose.                                                                                                 
                                                                                                                                
REPRESENTATIVE SEATON  answered that it  would be up to  the board                                                              
and the  shareholders, in  essence, since  the shareholders  elect                                                              
the board of directors.                                                                                                         
                                                                                                                                
3:36:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES   offered  her  belief  that   the  benefit                                                              
corporate  structure is  laid out  well.   She  offered that  for-                                                              
profit  corporations  already conduct  charitable  activities  and                                                              
set  up charitable  foundations.    She  asked whether  they  were                                                              
limited by  law.  She  understood the  for-profit aspect  would be                                                              
according  to   the  shareholders;   however,  she  asked   why  a                                                              
corporation  would convert  to a  benefit  corporation instead  of                                                              
funneling funds to a nonprofit to obtain a tax write-off.                                                                       
                                                                                                                                
REPRESENTATIVE   SEATON  answered   that  corporations   could  be                                                              
subject to  shareholder lawsuits since  the corporate model  for a                                                              
for-profit  corporation  provides   the  legal  framework.    Some                                                              
shareholders might  object to reductions in stock  dividends since                                                              
the  corporation   has  a  fiduciary  responsibility   to  provide                                                              
profits.  The  benefit corporation's mission is  clearly designed,                                                              
such that  the benefit corporation  will further  certain specific                                                              
beneficial  goals in the  community.   Thus, investors  understand                                                              
they won't  just receive  a return  on investment,  but will  also                                                              
promote the  community goals listed  in the benefit  corporation's                                                              
portfolio.                                                                                                                      
                                                                                                                                
3:41:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  asked  whether  any  current  corporations                                                              
want to transfer to benefit corporations.                                                                                       
                                                                                                                                
REPRESENTATIVE   SEATON  replied   that  Gordon  Blue,   Executive                                                              
Director of the  Alaska Sustainable Fisheries Trust  has expressed                                                              
interest, as  well as a  coffee company  in Homer that  would like                                                              
to improve the status  of coffee growers.  He referred  to letters                                                              
of interest  in members'  packets from  groups who have  expressed                                                              
an interest, but he indicated that there wasn't anyone yet.                                                                     
                                                                                                                                
3:43:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES said nonprofit  organizations cannot  weigh                                                              
in in  on partisan  or political  matters during  elections.   Now                                                              
that  the   [U.S.  Supreme  Court   ruled  on]  Citizens   United,                                                              
corporations  may  seek  to persuade  the  voting  public  through                                                              
other means,  including advertising.   She  asked whether  benefit                                                              
corporations could weigh in politically.                                                                                        
                                                                                                                                
REPRESENTATIVE  SEATON  answered  that  nothing  in  HB  49  would                                                              
expand  or limit that  ability.   He stated  that if  shareholders                                                              
are  agreeable money  could be  funneled from  a "C"  corporation.                                                              
He stated  that a  benefit corporation  might  decide it wants  to                                                              
improve  the  community  by  putting  part  of  its  profits  into                                                              
political  campaigns, but  regular  corporations can  also do  so.                                                              
It  doesn't "fool"  anyone since  the benefit  is transparent  and                                                              
will be  listed on the  corporate paperwork.   He said that  HB 49                                                              
doesn't  expand the  ability of  benefit corporations  to gain  or                                                              
lose tax  credits.   Therefore, benefit  corporations are  no more                                                              
restrictive  or   permissive  in  terms  of  the   structure,  but                                                              
investors will  know what the social  benefit will be  for benefit                                                              
corporations.                                                                                                                   
                                                                                                                                
3:45:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON asked if  the benefit corporation  could                                                              
surprise its  shareholders and pursue  a political path  through a                                                              
political action  committee (PAC) even  if it wasn't  the targeted                                                              
benefit.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  SEATON answered no;  that he  did not believe  so.                                                              
He  reminded members  that  benefit  corporations  also must  file                                                              
reports.                                                                                                                        
                                                                                                                                
3:47:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO  said there  might  be potential  for  Alaska                                                              
Native  Regional   Corporations  to  take  advantage   of  benefit                                                              
corporations  since some  fiduciary  firewalls currently  prohibit                                                              
the corporation  from putting funding  back into the  community or                                                              
the  tribe  affiliated  with  the corporation.    He  offered  his                                                              
belief   the   benefit  corporations   will   provide   additional                                                              
responsibility  in the  corporate bylaws  that allow  corporations                                                              
to bring benefits  back to their shareholders communities  and not                                                              
just  to shareholders  in  the form  of dividends.    He saw  some                                                              
potential, whether  or not the  Native Regional Corporations  will                                                              
choose to do  so.  He thanked  the sponsor for bringing  this bill                                                              
forward.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  SEATON  commented  that  those are  the  types  of                                                              
general  or specific  benefits  that  could be  put  forth in  the                                                              
findings of a benefit corporation.                                                                                              
                                                                                                                                
3:48:48 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON directed  attention to  the fiscal  note of  $40,000.                                                              
He stated  that the fiscal impact  was for "one  time" information                                                              
technology and legal costs.                                                                                                     
                                                                                                                              
3:49:35 PM                                                                                                                  
                                                                                                                              
REPRESENTATIVE  KITO asked whether  the division anticipates  that                                                              
the business  licensing fee would be  used to pay for some  of the                                                              
start-up costs.                                                                                                                 
                                                                                                                                
SARA  CHAMBERS,   Acting  Director,   Division  of   Corporations,                                                              
Business,  and  Professional Licensing,  Department  of  Commerce,                                                              
Community,  &  Economic  Development   (DCCED),  stated  that  the                                                              
division is  funded through program  receipts.  Thus  the division                                                              
would   need  to   recover  costs   for  filing   fees  to   those                                                              
corporations, she said.                                                                                                         
                                                                                                                                
3:50:29 PM                                                                                                                  
                                                                                                                              
CHAIR OLSON opened public testimony on HB 49.                                                                                   
                                                                                                                              
3:50:42 PM                                                                                                                    
                                                                                                                                
ERIK  TROJIAN,  Director  of  Policy,   B  Lab,  stated  that  his                                                              
organization has had  time to deliberate on how  to take companies                                                              
who  instill   beliefs  and  want   to  continuously  grow.     He                                                              
reiterated that  there is $6  trillion available in  social impact                                                              
investment  in the marketplace.   That  has actually doubled  over                                                              
the  past few  years,  he  said,  and continuously  grows  because                                                              
people don't  want to just think  about the bottom line  and their                                                              
earnings,  but  also  what  happens  with  that  money.    He  has                                                              
observed that  as young  people graduate  from college,  they want                                                              
to work  for companies with  morals and  beliefs.  He  stated that                                                              
profit must  be the central part  for all of the companies  to pay                                                              
employees  and  shareholders  or  the companies  will  go  out  of                                                              
existence  since making  profits  is central.   As  this bill  was                                                              
developed with  their corporate  attorney, the  idea was  to touch                                                              
the  areas  that impact  the  ability  for companies  to  exercise                                                              
their morals and beliefs.                                                                                                       
                                                                                                                                
3:53:27 PM                                                                                                                    
                                                                                                                                
MR. TROJIAN stated  that the first benefit corporation  law passed                                                              
about four  years ago, and in the  last four years 27  states have                                                              
passed  it, including  Delaware,  which  is seen  as  the home  of                                                              
corporate  law.   Last fall,  now  Chief Justice  Leo Strine  Jr.,                                                              
Delaware Supreme  Court, wrote  a 22-page  article in the  Harvard                                                              
Law Review  in support of  the necessity of benefit  corporations.                                                              
If a company  wants to think this  way and act this way,  this law                                                              
needs  to  be  put  in  place  or   he  must  rule  against  them.                                                              
Recently, the  U.S. Supreme  Court ruled on  the Hobby  Lobby case                                                              
[Burwell  v.  Hobby  Lobby,  573 U.S.  ___(2014)]  and  the  cited                                                              
benefit corporations,  which pertained  to the Patient  Protection                                                              
and Affordable  Care Act (PPACA)  ruling that does have  the right                                                              
to  have  morals and  beliefs.    The dissenting  view  said  that                                                              
corporations  can only  maximize profits  so how  can Hobby  Lobby                                                              
have a religious  belief in the company.  The  majority ruled that                                                              
the only reason  they can is because the beliefs  are very closely                                                              
held.   However, if  the company  had been  a general  corporation                                                              
with multiple  shareholders, it  could have  been sued  for having                                                              
this religious belief  in there company, but  benefit corporations                                                              
would allow companies  to grow and bring in  multiple shareholders                                                              
who  maintain  this belief.    Thus  the corporate  culture  could                                                              
range from a moral  belief to a community belief.   He stated that                                                              
these   are   not   quasi   nonprofit   companies,   but   benefit                                                              
corporations  are  businesses  that  want to  instill  morals  and                                                              
beliefs however  it wishes.   He characterized it  as deregulating                                                              
the  purpose of  corporations.   He stated  that corporations  are                                                              
the method that  companies use when going from small  to big since                                                              
that is the structure for multiple shareholders.                                                                                
                                                                                                                                
3:55:54 PM                                                                                                                    
                                                                                                                                
MR.   TROJIAN  offered   his  belief   that   the  structure   has                                                              
artificially  constrained  companies  with  a moral  belief  to  a                                                              
small  size.   In  four  years' time  there  are well  over  1,700                                                              
corporations  and it  just keeps  growing and  growing, with  some                                                              
states producing one  or two benefit corporations per  day.  Other                                                              
legislatures  are  working  on  benefit  corporation  legislation,                                                              
such as  Montana and Idaho.   He stated that benefit  corporations                                                              
provide  an option,  which doesn't  impact traditional  companies.                                                              
Benefit corporations  must consider  shareholders and  the general                                                              
public  benefits  equally  so  it  isn't  feasible  to  donate  95                                                              
percent   of   the   profits   to   nonprofit   organizations   or                                                              
shareholders  will have  a right  to  object.   Thus the  entities                                                              
have to be  treated equally and  the shareholders have a  right to                                                              
oust the  directors if they  are not performing  in a  proper way.                                                              
Benefit  corporations  have given  shareholders  increased  rights                                                              
that did not previously exist.                                                                                                  
                                                                                                                                
3:57:50 PM                                                                                                                    
                                                                                                                                
MR.  TROJIAN  said  the  traditional   corporation's  duty  is  to                                                              
maximize profits,  but benefit corporations allow  shareholders to                                                              
hold the  company to the standards  that were understood  when the                                                              
stock in  the company  was purchased.   Thus benefit  corporations                                                              
create  legal protections  on both  parts - for  the director  and                                                              
the  shareholders  in a  fair  and balanced  way.    He related  a                                                              
scenario  to illustrate  choices  benefit corporations  can  make.                                                              
If an  Alaska manufacturer  wanted to buy  parts and  the cheapest                                                              
ones were  in China, the corporation  normally must  purchase them                                                              
at  the  lowest  cost;  however   under  the  benefit  corporation                                                              
structure,  the  company   could  buy  locally  as   part  of  its                                                              
community  benefits   and  absorb   the  additional   costs  since                                                              
supporting the community has a value to the benefit corporation.                                                                
                                                                                                                                
3:59:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KITO  related his  understanding that the  value of                                                              
selecting the  benefit corporation model  is to provide  a benefit                                                              
to shareholders  and  to the public.   He  expressed concern  that                                                              
allowing a  corporation to  withhold or  withdraw a benefit  means                                                              
the  benefit  corporation  wouldn't   be  providing  a  beneficial                                                              
purpose.   He asked  for further  clarification under the  benefit                                                              
corporation  structure whether  corporations would  be allowed  to                                                              
deny or limit benefits to other individuals.                                                                                    
                                                                                                                                
MR. TROJIAN said  the benefit is in the "eye" of  the directors of                                                              
the shareholders,  which is the unique  part of this.   It's not a                                                              
benefit  that  government  considers  a benefit  to  society,  but                                                              
benefit corporations  let the free  market identify  that benefit.                                                              
Thus if  a benefit corporation  comes up  with some crazy  idea of                                                              
what  benefits  the  community,  it  may well  result  in  no  one                                                              
investing  and   no  one  purchasing  the   benefit  corporation's                                                              
products.   The benefit  corporation would  fail and not  succeed.                                                              
That's  the  way  the  free market  works.    Through  the  annual                                                              
benefit report  the public, shareholders, and  potential investors                                                              
obtain  transparency  and  make  a  determination  on  whether  to                                                              
support  the company.    This process  results  in  a much  better                                                              
informed public  and allows  the free market  to determine  if the                                                              
benefit corporation positively benefits the community.                                                                          
                                                                                                                                
4:01:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO  related  a   scenario  in  which  a  benefit                                                              
corporation  that holds a  specific religious  value or  belief as                                                              
its  community benefit,  only  hires  people with  that  religious                                                              
belief   and  denies   other  individuals   employment,  and   the                                                              
shareholders support  this effort, it wouldn't provide  a benefit.                                                              
Instead  it would allowing  for a  restriction  of commerce  and a                                                              
limitation for the  ability of other people to  participate in the                                                              
workforce  because the benefit  corporation  decides to only  hire                                                              
certain  people.     He  expressed  concern  that   this  type  of                                                              
structure  will  actually  allow  companies  to  discriminate  and                                                              
obtain public support from shareholders to do so.                                                                               
                                                                                                                                
MR. TROJIAN  responded that other  laws also apply,  which prevent                                                              
companies  from hiring  based  on their  religion.   In  addition,                                                              
this  bill would  not  allow benefit  corporations  to shirk  fair                                                              
hiring practice  laws.   Thus, the  aforementioned scenario  would                                                              
be  illegal.    Of  course,  the  Hobby  Lobby  demonstrates  that                                                              
companies can  currently hold values  important.  This  bill would                                                              
create a  corporate form  that allows a  company to have  multiple                                                              
shareholders without  the fear of  shareholder lawsuit.   He often                                                              
hears that corporations  can do this already and they  can so long                                                              
as they don't  bring in multiple shareholders,  which artificially                                                              
limits companies  with a  moral or community  belief to  a certain                                                              
size.  This  bill will remove  that aspect, but it's  also already                                                              
been  happening  in  many  instances  with  LLCs  or  closely-held                                                              
corporations.                                                                                                                   
                                                                                                                                
4:04:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON, with  respect to  Hobby Lobby,  said it                                                              
would  be illegal  or  unconstitutional  to ask  applicants  about                                                              
their religious  or cultural  beliefs, but  according to  the U.S.                                                              
Supreme Court  decision because  the company  was closely  held it                                                              
could  proscribe   or  prohibit  certain  types   of  health  care                                                              
coverage.  He asked whether that was what happened.                                                                             
                                                                                                                                
MR.  TROJIAN answered  yes; but  it did  not have  anything to  do                                                              
with the  benefit corporation  law.  Companies  have the  right to                                                              
do this,  if they so  wish; however,  if shareholders  object they                                                              
have the right to sue for not maximizing profit.                                                                                
                                                                                                                                
4:05:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON said  the Calvert  Investments, Inc.  is                                                              
an  investment management  firm  that he  described  as an  ethics                                                              
fund,  since  it  avoids  investments  that  would  contribute  to                                                              
tribal  war or pollution.   He  asked whether  that describes  the                                                              
benefit corporation model.                                                                                                      
                                                                                                                                
MR. TROJIAN  said that  is the beginning  of it.   He stated  that                                                              
approach is  called negative screening,  such as not  investing in                                                              
tobacco.    However, the  benefit  corporations  tend to  go  that                                                              
extra  step  and  do  positive  screens,   such  as  investing  in                                                              
companies that purchase  from local suppliers or  hire people from                                                              
within the community.   Currently, the funds are  very limited and                                                              
corporations don't  have the ability to enforce  their investments                                                              
as  they  pertain  to  general  public   benefits.    This  allows                                                              
shareholders  to hold  corporations accountable,  he said,  noting                                                              
that the  Calvert Investments, Inc.  has been very limited  in how                                                              
it  can operate.   He  characterized it  as being  very myopic  in                                                              
terms of its  view in how the  economy can utilize this.   He said                                                              
he always thinks  of the benefit corporation as  beginning a whole                                                              
new  sector of  the society.   He  acknowledged  that some  people                                                              
will still  want to  buy the  cheapest products  and will  want to                                                              
obtain the maximum return on their money.                                                                                       
                                                                                                                                
4:07:25 PM                                                                                                                    
                                                                                                                                
MR.  TROJIAN emphasized  that there  is  a sector  of the  economy                                                              
that wants  this and new and innovative  ideas will come  up.  For                                                              
example,  when  he  was  debating   this  issue  in  Colorado,  he                                                              
discovered  in  a  hearing that  NASA  [National  Aeronautics  and                                                              
Space Administration]  had expressed an interest.   He related his                                                              
understanding  that NASA  wants to commercialize  patents  but not                                                              
purely  for-profit  but  in  terms  of  how  patents  can  improve                                                              
society as  a whole.   These are ways  that these funds  will have                                                              
additional  powers, rights,  and grow  and expand  this sector  of                                                              
the economy, he said.                                                                                                           
                                                                                                                                
4:08:22 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON commented  that he is familiar with  a coffee merchant                                                              
in Kodiak  that sells  fair trade coffee  and although  the coffee                                                              
is more  expensive, customers  are willing to  pay for  it because                                                              
the growers  are paid  fairly.   He suggested  that the  company's                                                              
shareholders are interested in fair trade.                                                                                      
                                                                                                                                
MR. TROJIAN  answered yes.  He  suggested that the  second benefit                                                              
corporation created  was Blessed Coffee, a Maryland  company.  The                                                              
specific  benefit  of  Blessed  Coffee  is  that  it  gives  40-50                                                              
percent of  its profit  to Ethiopian coffee  growers.   He pointed                                                              
out this  is something  very specific  that would  not be  allowed                                                              
under a traditional corporation.                                                                                                
                                                                                                                                
[HB 49 was held over].                                                                                                          
                                                                                                                                
4:11:15 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
         HB 26-EXTEND CERT. DIRECT-ENTRY MIDWIVES BOARD                                                                     
                                                                                                                                
4:11:44 PM                                                                                                                    
                                                                                                                              
CHAIR OLSON  announced that the final  order of business  would be                                                              
HOUSE BILL NO. 26,  "An Act extending the termination  date of the                                                              
Board of  Certified Direct-Entry  Midwives;  and providing  for an                                                              
effective date."                                                                                                                
                                                                                                                                
4:11:59 PM                                                                                                                    
                                                                                                                                
LAURA  STIDOLPH, Staff,  Representative Kurt  Olson, Alaska  State                                                              
Legislature,  on behalf of  the prime sponsor,  stated that  HB 26                                                              
would extend  the sunset date for  the Board of  Certified Direct-                                                              
Entry Midwives  to June  30, 2017.   The  Division of  Legislative                                                              
Audit  conducts   audits   to  determine   if  state  boards   and                                                              
commissions should  be reestablished.   The division  reviewed the                                                              
activities  of the  Board of  Certified  Direct-Entry Midwives  to                                                              
determine if there  is a demonstrated public need  for the board's                                                              
continued  existence  and whether  it  has  been operating  in  an                                                              
effective  manner.  She  directed  attention  to  a  copy  of  the                                                              
legislative audit  in members' packets.  The  auditors recommended                                                              
that the board be extended two years until June 30, 2017.                                                                       
                                                                                                                                
MS.  STIDOLPH   explained  that   auditors  found  the   Board  of                                                              
Certified  Direct-Entry  Midwives has  been  serving the  public's                                                              
interest   by   effectively   licensing   certified   direct-entry                                                              
midwives (CDM)  and apprentices.   In addition, it was  found that                                                              
the board  continues to  improve the  profession by modifying  and                                                              
adopting  midwifery regulations  to conform  to current  standards                                                              
of care.                                                                                                                        
                                                                                                                                
MS. STIDOLPH highlighted  that the auditors had  four findings and                                                              
recommendations, including  the Department of  Commerce, Community                                                              
&   Economic  Development   (DCCED)   should  immediately   pursue                                                              
disciplinary  sanctions  for CDM  cases when  warranted;  increase                                                              
licensing fees  to eliminate the  board's operating  deficit; that                                                              
the   board  should   communicate   certificate  requirements   to                                                              
continuing  education  providers  to  facilitate  compliance  with                                                              
centralized licensing  regulations; and  the board should  approve                                                              
apprentice  permit applications  in accordance  with statute.   In                                                              
response  to a  question, she  reiterated  the chair  of Board  of                                                              
Certified Direct-Entry Midwives (CDM) is Cheryl Corrick.                                                                        
                                                                                                                                
4:15:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON referred to  page 10  of the audit.   He                                                              
expressed  concern  about the  failure  of the  certified  direct-                                                              
entry midwives  (CDM) respondents  to sign  consent orders  (CAs).                                                              
He  asked  whether   the  committee  should  be   concerned  about                                                              
anything in  terms of the nature  of the reason the  CDMs wouldn't                                                              
sign.    He said  he  was  concerned  about  this given  that  the                                                              
legislature  removed the statute  and gave  the board the  liberty                                                              
to create its own regulations.                                                                                                  
                                                                                                                                
KRIS  CURTIS,  Legislative Auditor,  Legislative  Audit  Division,                                                              
Legislative  Agencies  and  Offices, answered  that  the  division                                                              
doesn't see  any correlation or cause  and effect related  to last                                                              
legislature's  Senate Bill  136, which moved  the requirement  for                                                              
what the profession  could do from statute to  regulations to give                                                              
the board  more flexibility.   At the end  of an investigation  if                                                              
any   problems   are   found   and    sanctions   are   necessary,                                                              
investigators  draft consent  agreements and  ask the  respondents                                                              
to voluntarily  agree to the sanctions.   If that does  not occur,                                                              
the  investigators  can use  standard  procedures  to elevate  the                                                              
matter to the  commissioner, file an accusation,  and move forward                                                              
with civil licensing  action through the Office  of Administrative                                                              
Hearings (OAH).   However, it is  not uncommon for  respondents to                                                              
refuse to sign consent agreements, she said.                                                                                    
                                                                                                                                
4:17:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  suggested that he felt  less secure when                                                              
the process  changed.  He read  page 10, paragraph 2,  as follows,                                                              
"By not  pursing licensing  action, the  respondents were  allowed                                                              
to  continue practicing,  and the  public's safety  was placed  at                                                              
risk."    He  went on  to  say  that  this  referred  to 4  of  52                                                              
providers, but  he wanted to be  sure a pattern  wasn't developing                                                              
that the legislature should be concerned about.                                                                                 
                                                                                                                                
MS.  CURTIS answered  that the  audit period  covered four  years.                                                              
There  were  28  complaints  filed   and  investigated,  with  all                                                              
addressed timely except  for these four cases.   She reported that                                                              
the  four investigations  involved  two people  and  investigators                                                              
concluded the  disciplinary sanctions  should occur, but  were not                                                              
pursued timely.   She explained  that two  of the four  cases were                                                              
forwarded   to  the  Department   of  Law's   Office  of   Special                                                              
Prosecutions  and Appeals  (OSPA)  for criminal  action.   At  the                                                              
time of  the audit  the cases  had been  at OSPA  for over  a year                                                              
without  action.    OSPA  regarded   these  cases  as  the  lowest                                                              
priority  due   to  the   cases  being   classified  as   class  B                                                              
misdemeanors.   She  stated  that due  to  turnover, the  auditors                                                              
were not  able to determine why  the investigators did  not pursue                                                              
a civil  licensing action,  which at a  minimum, should  have been                                                              
pursued concurrently  with  criminal action  to ensure the  public                                                              
safety  is protected.   Auditors  characterized this  as a  fairly                                                              
serious deficiency  which is why  the audit only recommend  a two-                                                              
year extension.   She said it is unusual for the  auditors to give                                                              
such a  short extension,  but auditors felt  it was important  for                                                              
the  division  to  follow  up  on   this  matter  to  ensure  that                                                              
corrective action has been taken.                                                                                               
                                                                                                                                
4:20:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER   assumed  these  cases  were   not  simple                                                              
licensing  actions, but  were due  to cases driven  by mothers  or                                                              
families who  experienced problems  with the  midwifes.   He asked                                                              
for  further   clarification  on   the  cases  without   breaching                                                              
anything that is confidential.                                                                                                  
                                                                                                                                
MS. CURTIS  answered  that one or  two of  the consent  agreements                                                              
asked  for  voluntary license  revocation,  which  would  indicate                                                              
severe  problems  were encountered.    She recalled  that  another                                                              
consent  agreement  asked for  continuing  education,  which is  a                                                              
common  outcome for  an investigation.   She  declined to  provide                                                              
any details about the cases.                                                                                                    
                                                                                                                                
4:21:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   COLVER  related   his  understanding   that  some                                                              
direct-entry  midwives practice  at a birthing  center and  others                                                              
assist  with home  births.   He said  that  he and  his wife  used                                                              
midwives with  the birth of both  of his children, and  the births                                                              
went  very well.   In  their experience,  the  midwives were  very                                                              
professional.   He asked  whether the  mother or child  endangered                                                              
by  the procedures  or care  since, at  some point,  he has  found                                                              
that midwives  are very clear to  determine when the  mother needs                                                              
to go  to a  hospital.   He thought  it would  be helpful for  the                                                              
committee to have a better understanding of what happened.                                                                      
                                                                                                                                
MS.  CURTIS responded  that  the  audit does  not  comment on  the                                                              
profession  as   a  whole,  but  does  comment   on  investigative                                                              
practices,  which  are in  place  to  protect  the public  and  to                                                              
ensure  quality of  care.   She  said  that the  allegations  were                                                              
pretty  serious  and  the  auditors   found  the  lack  of  timely                                                              
disciplinary sanctions  as fairly significant.   In response  to a                                                              
question,  she   reiterated  that  there  were  four   cases  that                                                              
involved two people.                                                                                                            
                                                                                                                                
4:23:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KITO referred to  page 10 of  the audit  and read,                                                              
"A year  after the  cases were  forwarded to  OSPA, no  action had                                                              
been taken."   He asked whether it was the  board's responsibility                                                              
or of OSPA.                                                                                                                     
                                                                                                                                
MS.  CURTIS  stated  that  board   members  were  asking  for  and                                                              
receiving  updates  on  the investigations.    Thus,  there  isn't                                                              
anything in  the auditor recommendations  on the board  not taking                                                              
appropriate  action.    She  stated that  the  board  must  recuse                                                              
themselves   since  the   board  must   weigh  in   later  as   an                                                              
adjudicative  entity.    Therefore  the  board  typically  is  not                                                              
furnished  details.   The board  was  advised that  the cases  had                                                              
been  referred  to the  Department  of  Law.   She  described  the                                                              
typical process  is that cases are  referred to the  Department of                                                              
Law for review  of sufficiency of evidence prior  to an accusation                                                              
being filed for  civil licensing action.  However,  the cases were                                                              
at OSPA, in an effort to pursue a criminal case.                                                                                
                                                                                                                                
4:25:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TILTON referred  to page 10,  to recommendation  2                                                              
in the audit.   She related her understanding that  this board has                                                              
a small number of  people who pay a large licensing  fee, but face                                                              
a deficit.   She  acknowledged that  she personally used  midwives                                                              
when she  gave birth  to her  children, so  her questions  are not                                                              
about care,  but relate to the  fiscal impact.   Recommendation 2,                                                              
which  read,  "DCBPL,  in  consultation  with  the  board,  should                                                              
increase  licensing  fees  to  eliminate   the  board's  operating                                                              
deficit."  She asked whether there is a plan for that action.                                                                   
                                                                                                                                
MS. CURTIS  answered that the  license fees for  certified direct-                                                              
entry midwives  have been  a continual problem.   In  2006, during                                                              
the sunset  review, the licensing  fees were over $2,000  and they                                                              
paid the highest  fees of any occupation.  Thus this  issue is not                                                              
new to  the occupation.   She directed attention  to the  table on                                                              
page 15 that lists  license fees.  She stated that  in fiscal year                                                              
[FY]  10, the  initial  certification  fee was  $500.   Fees  were                                                              
increased in  FY 11 and  again in FY 13,  at which time  fees were                                                              
$1,450.   However, the  fees were not  sufficient enough  to cover                                                              
increased  costs, which  were associated  with regulation  changes                                                              
and  investigative  costs.    As  of March  2014,  the  number  of                                                              
licensees  was 35,  plus 13  apprentices.   Thus  to shoulder  the                                                              
cost  for  such a  small  group  of licensees  results  in  higher                                                              
license fees.  In  terms of the future plan, the  department would                                                              
need to address how it plans to reduce the deficit.                                                                             
                                                                                                                                
4:27:15 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON  stated   that  the  Legislative  Budget   and  Audit                                                              
Committee (LB&A)  started a  year ago to  grapple with  the issue.                                                              
He  recalled one  board  had $150,000  in  legal  costs and  other                                                              
boards have  large numbers of licensees  to spread out  the costs.                                                              
He explained  the difficulty  in establishing  standards that  can                                                              
be applied to all  of the boards.  He said the  LB&A committee and                                                              
the division spent the interim working on these issues.                                                                         
                                                                                                                                
4:28:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   TILTON  expressed   thanks  for   the  work   the                                                              
Legislative Budget  & Audit (LB&A)  and the division have  done on                                                              
this matter.                                                                                                                    
                                                                                                                                
4:28:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES asked  for the typical  extension time  for                                                              
boards.                                                                                                                         
                                                                                                                                
MS.  CURTIS   answered  that  the   statutes  provide   a  maximum                                                              
extension of eight years.                                                                                                       
                                                                                                                                
4:28:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   HUGHES  related   her   understanding  that   the                                                              
auditors  questioned  why the  board  didn't pursue  civil  action                                                              
simultaneously  with the referral  of cases to  OSPA and  that the                                                              
board wasn't criticized because OSPA didn't take action.                                                                        
                                                                                                                                
MS. CURTIS said  she expected to see civil licensing  action to be                                                              
taken to  be sure  a negligent or  incompetent practitioner  isn't                                                              
allowed to practice.                                                                                                            
                                                                                                                                
REPRESENTATIVE  HUGHES  asked  for further  clarification  on  who                                                              
would initiate the civil action.                                                                                                
                                                                                                                                
MS. CURTIS  answered that  it would be  filed by the  commissioner                                                              
in conjunction  with the  board.  The  respondents are  allowed to                                                              
file   a  response   to  the   accusation,  and   the  Office   of                                                              
Administrative  Hearings  (OAH)  has  120 days  to  conduct  their                                                              
hearings after which the board has time to make a decision.                                                                     
                                                                                                                                
4:30:17 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON remarked  that two years is short extension  time.  He                                                              
recalled that  the Alaska Bar  Association was extended  for three                                                              
years in a row.                                                                                                                 
                                                                                                                                
MS. CURTIS replied that she did not specifically recall.                                                                        
                                                                                                                                
4:31:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  referred to  the repeal of  AS 08.65.140                                                              
since  he was  unsure  of  what fills  that  gap.   He  asked  for                                                              
further clarification  on part of  the statutes that at  a minimum                                                              
the  regulations  must  require that  the  certified  direct-entry                                                              
midwife  not  knowingly deliver  a  woman  with certain  types  of                                                              
health  conditions, prior  history or  complications as  specified                                                              
by the board.   He suggested that the language was  ambiguous.  He                                                              
asked for  clarification that  safeguards are  in place  before he                                                              
could vote  to extend  the board.   He said  he was curious  about                                                              
the  status of  the  regulations.   He  asked  for an  explanation                                                              
since the legislature deferred to the board to make the rules.                                                                  
                                                                                                                                
SARA  CHAMBERS,   Acting  Director,   Division  of   Corporations,                                                              
Business,  and  Professional Licensing,  Department  of  Commerce,                                                              
Community,  &  Economic  Development (DCCED),  answered  that  the                                                              
board  has  been  conscientious   in  working  to  adopt  its  new                                                              
regulations.   The department has  been working with the  board to                                                              
minimize  the  window   between  the  statutory   repeal  and  the                                                              
effective  date  of  new  regulations.   The  Board  of  Certified                                                              
Direct-Entry  Midwives (CDM)  met  over the  past two  days.   She                                                              
related her  understanding that the  board planned to  continue to                                                              
work  on regulations  and  if they  adopted  the regulations,  the                                                              
division  would  expedite  the  public  comment  within  the  next                                                              
month.  She  said Ms. Corrick  could provide more details  but the                                                              
board and division are very aware of the concern.                                                                               
                                                                                                                                
4:34:12 PM                                                                                                                    
                                                                                                                                
CHAIR   OLSON   pointed   out   that    Representative   Josephson                                                              
participated this  summer during the Legislative  Budget and Audit                                                              
Committee hearings on the board issues.                                                                                         
                                                                                                                                
4:34:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   JOSEPHSON   asked  about   the   status  of   the                                                              
regulations.    He  further  asked what  part  of  the  prohibited                                                              
statutes that  was particularly unfair  that the board  wanted the                                                              
authority over regulations for prohibited actions.                                                                              
                                                                                                                                
CHERYL CORRICK,  Chair, Board  of Certified Direct-Entry  Midwives                                                              
(CDM), Department  of Commerce,  Community & Economic  Development                                                              
(DCCED), replied  she serves as one  of two midwifes on  the board                                                              
that also includes  a certified nurse midwife and  a physician who                                                              
practices in obstetrics/gynecology.   She said the  board felt the                                                              
prohibitions were  somewhat out of  date, particularly  since they                                                              
had not been  addressed in over 20  years.  She reported  that the                                                              
board  just  finished  its regulations  project  today  that  will                                                              
further guide midwives.   Up until that point, the  board has made                                                              
it  clear to  practitioners  through board  actions  that the  old                                                              
regulations still apply until the new ones were promulgated.                                                                    
                                                                                                                                
4:36:28 PM                                                                                                                    
                                                                                                                                
MS. CORRICK  recalled one  in terms  of prohibitions for  treating                                                              
with women  with gestational  diabetes.   The new regulation  will                                                              
allow  midwives, in  consultation with  a physician,  to manage  a                                                              
woman  as  long   as  she  can  be  managed   without  medication,                                                              
basically through  diet and  exercise, and  can deliver  the baby.                                                              
Midwives can  now co-manage the  patients with the  physician, but                                                              
the physician will deliver the baby.                                                                                            
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  related that  she  has provided  enough                                                              
information that gives him comfort and he appreciated her time.                                                                 
                                                                                                                                
4:38:35 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON,  after first  determining no  one wished to  testify,                                                              
closed public testimony on HB 26.                                                                                               
                                                                                                                                
4:38:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER  deferred to  the  Chair,  but he  wondered                                                              
whether  it  might be  possible  to  extend  the board  for  three                                                              
years.  He expressed  a concern that the legislature  will have to                                                              
revisit this again.                                                                                                             
                                                                                                                                
CHAIR OLSON deferred  to the legislative auditor  on the extension                                                              
time and  said he completely  trusts her  judgment.  He  could not                                                              
think of  any time that  he disagree  with the auditor's  judgment                                                              
on extension times.                                                                                                             
                                                                                                                                
4:40:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES  commented  that  she  personally  has  had                                                              
wonderful  experiences with  midwifes  and was  grateful that  the                                                              
state has very  competent midwives who provide  wonderful services                                                              
to families.   She  viewed the  two-year extension  for the  board                                                              
was more a  reflection on the division  and not the midwives  as a                                                              
profession.    She  commended  the midwives  who  provide  a  very                                                              
wholesome and wonderful experience delivering babies.                                                                           
                                                                                                                                
CHAIR OLSON commented  that most of the boards  the committee will                                                              
review  request  a   four  to  eight  year  extension,   but  this                                                              
represents  an  exception.   He  acknowledged  the  importance  of                                                              
protecting Alaskans.                                                                                                            
                                                                                                                                
4:42:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COLVER  echoed  earlier  comments  that  midwifery                                                              
provides a valuable  service that allow families  to make choices.                                                              
He  emphasized  the  importance   of  allowing  families  to  make                                                              
choices, especially  since this  is their  baby and their  family.                                                              
He offered  his belief that it  is important in medical  care that                                                              
government  does not mandate  women must  to go  to a hospital  to                                                              
have  her baby.   He  stressed  that it  is  up to  the family  to                                                              
decide what  works for  them.   He imagined  that using  a midwife                                                              
also has  an economic role  since women  can have their  babies at                                                              
home, which  is especially important  for the uninsured.   He said                                                              
that  it is  important  to help  families.   He  hoped that  there                                                              
won't be  any complications  that will  cause an expensive  birth,                                                              
but again,  it offers a  means to deliver  health care  without an                                                              
expensive trip  to the hospital.   He offered that this  bill will                                                              
accomplish a  number of goals and  objectives in our society.   He                                                              
said he  is very  supportive of  the profession  and he  hoped the                                                              
punitive issues would soon be resolved.                                                                                         
                                                                                                                                
4:43:55 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON remarked  that boards are comprised  of volunteers and                                                              
most of the  time things go well.   The only time  the legislature                                                              
hears  about  it  is  when  something  goes  wrong  and  in  those                                                              
instances  often the  whole profession  is blamed.   He  commended                                                              
the volunteers  who serve  on boards, stating  his "hat  goes off"                                                              
to them.                                                                                                                        
                                                                                                                                
4:44:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HUGHES moved  to  report HB  26  out of  committee                                                              
with  individual  recommendations   and  the  accompanying  fiscal                                                              
note.   There  being no  objection, HB  26 was  reported from  the                                                              
House Labor and Commerce Standing Committee.                                                                                    
                                                                                                                                
4:45:14 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being  no further business  before the committee,  the House                                                              
Labor and  Commerce Standing  Committee meeting  was adjourned  at                                                              
4:45 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB49 ver H.pdf HL&C 2/13/2015 3:15:00 PM
HB 49
HB49 Sponsor Statement.pdf HL&C 2/13/2015 3:15:00 PM
HB 49
HB49 Sectional Analysis.pdf HL&C 2/13/2015 3:15:00 PM
HB 49
HB49 Fiscal Note-DCCED-CBPL-02-06-15.pdf HL&C 2/13/2015 3:15:00 PM
HB 49
HB49 Supporting Document-2015 Legal FAQS-B Lab.pdf HL&C 2/13/2015 3:15:00 PM
HB 49
HB49 Supporting Document-2015 Sampling of Benefit Corporations.pdf HL&C 2/13/2015 3:15:00 PM
HB 49
HB49 Supporting Document-2015 States with Benefit Corporations.pdf HL&C 2/13/2015 3:15:00 PM
HB 49
HB49 Supporting Document-Letter ASFT 2-2-2015.pdf HL&C 2/13/2015 3:15:00 PM
HB 49
HB49 Supporting Document-Letter Diane E. Hughes 2-4-2014.pdf HL&C 2/13/2015 3:15:00 PM
HB 49
HB26 ver A.pdf HL&C 2/13/2015 3:15:00 PM
HB 26
HB26 Sponsor Statement.pdf HL&C 2/13/2015 3:15:00 PM
HB 26
HB26 Fiscal Note-DCCED-CBPL-02-06-15.pdf HL&C 2/13/2015 3:15:00 PM
HB 26
HB26 Supporting Documents-Legislative Audit 6-30-2014.pdf HL&C 2/13/2015 3:15:00 PM
HB 26
HB49 Draft Proposed Amendment H.1.pdf HL&C 2/13/2015 3:15:00 PM
HB 49