Legislature(1995 - 1996)
03/18/1996 03:12 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 18, 1996
3:12 p.m.
MEMBERS PRESENT
Representative Pete Kott, Chairman
Representative Norman Rokeberg, Vice Chairman
Representative Beverly Masek
Representative Jerry Sanders
Representative Brian Porter
Representative Kim Elton
MEMBERS ABSENT
Representative Gene Kubina
COMMITTEE CALENDAR
HOUSE BILL NO. 482
"An Act relating to state procurement practices and procedures; and
providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 439
"An Act relating to minerals, including coal, to the statewide
bonding pool for the reclamation activities imposed on mining
operations, and to the statewide bonding pool's use for surface
coal mining projects."
- PASSED CSHB 439(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 533
"An Act relating to the board of directors of the Alaska Aerospace
Development Corporation."
- HEARD AND HELD
CS FOR SENATE BILL NO. 197(L&C)
"An Act relating to insurance covering an insured who is a victim
of domestic violence and requiring certain disclosures by an
insurer."
Confirmation of Governors Appointments: Real Estate Commission
PREVIOUS ACTION
BILL: HB 482
SHORT TITLE: STATE PROCUREMENT PRACTICES & PROCEDURES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
02/09/96 2686 (H) READ THE FIRST TIME - REFERRAL(S)
02/09/96 2686 (H) L&C, STATE AFFAIRS, FINANCE
02/09/96 2687 (H) 2 FISCAL NOTES (ADM, DOT)
02/09/96 2687 (H) 5 ZERO FNS (2-ADM, DCED, DCRA, CORR)
02/09/96 2687 (H) 5 ZERO FNS (DOE, DEC, F&G, GOV, DHSS)
02/09/96 2687 (H) 5 ZERO FNS (LABOR, LAW, DMVA, DNR, DPS)
02/09/96 2687 (H) 2 ZERO FNS (REV, UA)
02/09/96 2687 (H) GOVERNOR'S TRANSMITTAL LETTER
03/18/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 439
SHORT TITLE: MINING BONDING POOL & ADVISORY COM'N
SPONSOR(S): REPRESENTATIVE(S) BRICE,Kelly
JRN-DATE JRN-PG ACTION
01/22/96 2507 (H) READ THE FIRST TIME - REFERRAL(S)
01/22/96 2507 (H) RESOURCES, LABOR & COMMERCE, FINANCE
01/31/96 2587 (H) COSPONSOR(S): KELLY
02/05/96 (H) RES AT 8:00 AM CAPITOL 124
02/05/96 (H) MINUTE(RES)
02/05/96 2626 (H) RES RPT 2DP 2NR 2AM
02/05/96 2627 (H) DP: NICHOLIA, AUSTERMAN
02/05/96 2627 (H) NR: WILLIAMS, GREEN
02/05/96 2627 (H) AM: OGAN, KOTT
02/05/96 2627 (H) FISCAL NOTE (DNR)
03/18/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: HB 533
SHORT TITLE: ALASKA AEROSPACE DEVELOPMENT CORP. BOARD
SPONSOR(S): COMMUNITY AND REGIONAL AFFAIRS
JRN-DATE JRN-PG ACTION
02/28/96 2913 (H) READ THE FIRST TIME - REFERRAL(S)
02/28/96 2913 (H) LABOR & COMMERCE
03/18/96 (H) L&C AT 3:00 PM CAPITOL 17
BILL: SB 197
SHORT TITLE: INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES
SPONSOR(S): SENATOR(S) DONLEY, Ellis, Salo, Duncan, Pearce,
Zharoff, Lincoln; REPRESENTATIVE(S) Davies
JRN-DATE JRN-PG ACTION
01/05/96 2058 (S) PREFILE RELEASED - 1/5/96
01/08/96 2058 (S) READ THE FIRST TIME - REFERRAL(S)
01/08/96 2058 (S) LABOR & COMMERCE
01/16/96 2144 (S) COSPONSOR(S): DUNCAN
02/15/96 (S) L&C AT 1:30 PM BELTZ ROOM 211
02/15/96 (S) MINUTE(L&C)
02/20/96 (S) MINUTE(L&C)
02/23/96 2512 (S) L&C RPT CS 5DP NEW TITLE
02/23/96 2513 (S) ZERO FISCAL NOTE TO SB & CS (DCED)
02/26/96 (S) RLS AT 12:45 PM FAHRENKMAP RM 203
02/26/96 (S) MINUTE(RLS)
02/28/96 2568 (S) RULES TO CALENDAR & 1NR 2/28/96
02/28/96 2571 (S) READ THE SECOND TIME
02/28/96 2572 (S) L&C CS ADOPTED UNAN CONSENT
02/28/96 2572 (S) COSPONSOR(S): PEARCE, ZHAROFF, LINCOLN
02/28/96 2572 (S) ADVANCED TO THIRD READING UNAN CONSENT
02/28/96 2572 (S) READ THE THIRD TIME CSSB 197(L&C)
02/28/96 2572 (S) PASSED Y18 N- E2
02/28/96 2579 (S) TRANSMITTED TO (H)
02/29/96 2955 (H) READ THE FIRST TIME - REFERRAL(S)
02/29/96 2956 (H) LABOR & COMMERCE, FINANCE
03/18/96 (H) L&C AT 3:00 PM CAPITOL 17
03/18/96 3186 (H) CROSS SPONSOR(S): DAVIES
03/20/96 (H) L&C AT 3:00 PM CAPITOL 17
03/20/96 (H) MINUTE(L&C)
03/22/96 (H) L&C AT 3:00 PM CAPITOL 17
WITNESS REGISTER
DUGAN PETTY, Director
Division of General Services
Department of Commerce and
Economic Development
P.O. Box 110204
Juneau, Alaska 99811-0204
Telephone: (907) 465-2250
POSITION STATEMENT: Testified on HB 482.
FRED PASCO, Legislative Secretary
to Representative Tom Brice
Alaska State Legislature
Capitol Building, Room 426
Juneau, Alaska 99801
Telephone: (907) 465-3466
POSITION STATEMENT: Gave sponsor statement on HB 439.
CHARLIE BODDY
Usibelli Coal Mine, Incorporated
Fairbanks, Alaska
Telephone: Not provided
POSITION STATEMENT: Testified on HB 439.
JULES TILESTON, Director
Division of Mining and Water Management
Department of Natural Resources
3601 "C" Street, Suite 800
Anchorage, Alaska 99503-5935
Telephone: (907) 269-8624
POSITION STATEMENT: Testified in HB 439.
CLIFF STONE, Legislative Assistant
to Representative Alan Austerman
Alaska State Legislature
Capitol Building, Room 434
Juneau, Alaska 99801
Telephone: (907) 465-6588
POSITION STATEMENT: Gave sponsor statement on HB 533.
JEFF BUSH, Deputy Commissioner
Department of Commerce and Economic Development
P.O. Box 110800
Juneau, Alaska 99811
Telephone: (907) 465-2500
POSITION STATEMENT: Testified in support of the concept of HB 533.
PAT LADNER, Executive Director
Alaska Aerospace Development Corporation
3601 "C" Street
Anchorage, Alaska 99503
Telephone: (907) 561-3338
POSITION STATEMENT: Testified in support of HB 533.
SENATOR DAVE DONLEY
Alaska State Legislature
Capitol Building, Room 11
Juneau, Alaska 99801
Telephone: (907) 465-3892
POSITION STATEMENT: Sponsor of SB 197.
MICHAEL LESSMEIER, Attorney
Lessmeier and Winters
One Sealaska Plaza, Suite 303
Juneau, Alaska 99801-1249
Telephone: (907) 586-5912
POSITION STATEMENT: Testified against SB 197.
BEVERLY BOWERS
Bering Sea Womens Group
Box 1596
Nome, Alaska 99762
Telephone: (907) 443-5491
POSITION STATEMENT: Testified in support of SB 197.
JOHN GEORGE, Lobbyist
American Council of Life Insurance
3328 Fritz Cove Road
Juneau, Alaska 99801
Telephone: (907) 789-0172
POSITION STATEMENT: Testified against SB 197.
LAUREE HUGONIN, Executive Director
Alaska Network on Domestic Violence
and Sexual Assault
130 Seward Street, Number 501
Juneau, Alaska 99801
Telephone: (907) 586-3650
POSITION STATEMENT: Testified in support of CSSB 197(L&C).
ACTION NARRATIVE
TAPE 96-23, SIDE A
Number 001
The House Labor and Commerce Standing Committee was called to order
by Chairman Pete Kott at 3:12 p.m. Members present at the call to
order were Representatives Masek, Sanders, Elton, Rokeberg and
Kott. Representative Porter arrived at 3:14 p.m.
HB 482 - STATE PROCUREMENT PRACTICES & PROCEDURES
CHAIRMAN KOTT announced the first order of business would be HB
482, "An Act relating to state procurement practices and
procedures; and providing for an effective date."
Number 083
DUGAN PETTY, Director, Division of General Services, Department of
Commerce and Economic Development, came before the committee to
address HB 482. He explained that at the conclusion of the last
legislative session, Commissioner Boyer gave him a packet of
information which was the 1994 Federal Acquisition Streamlining
Act. He was asked to review the information and note things that
we could do in our state procurement practices to make them more
efficient and a more results oriented process. He was also asked
to incorporate some of the reform measures that have taken place in
the 1994 Act. Mr. Petty informed the commissioner that HB 116 had
just passed through the legislature which removed the Alaska
Seafood Marketing Institute (ASME) from the procurement code. In
each committee the bill went through somebody raised a concern as
to whether or not ASME should be removed from the procurement code
or whether something should be done to reform and make the
procurement code more streamlined and responsive. Mr. Petty
explained he told the commissioner that he believed this was a good
time to look at reform in the procurement code. He said he also
told the commissioner we are fortunate to have a relatively new
procurement law which is based on the model procurement code, and
many of the changes the federal government had to make, we didn't
have to do because we enjoy the benefit of a more straight forward
and simpler process. Mr. Petty pointed out that we live in complex
times and the market is changing. We live in a rapidly evolving
market with electronic interconnects which really changed our
procurement process in many ways. He said he believes we need to
look at our processes and how we do them to make them responsive to
today's changing market. We also need to look at the resources we
have available to see what can be done to bring about a more
effective procurement given the resources we have and given the
fact that we are not likely to get more resources in the future.
MR. PETTY said in an effort to bring about those efficiencies,
Commissioner Boyer began a streamline initiative during the summer.
One of the major impetuses of that initiative was to form a
procurement advisory council. This council is made up of
stakeholders, procurement practitioners within and outside of state
government, people from ARCO, vendors and representatives of small
business advocacy groups. He said they started looking at
practices from their regulations, from statute, from policy as well
as nonresponsive procurement processes and see if they couldn't
situationally re-engineer those to be more responsible to today's
state procurement needs. He said the council has met a number of
times and came forward with a list of about 34 recommendations to
Commissioner Perkins and Commissioner Boyer. They reviewed the
recommendations. They took some out and they made some
suggestions. What the committee has before it is suggested changes
by the procurement advisory council and the two commissioners,
which is advanced to try and build a foundation for beginning to
streamline our procurement process.
Number 384
MR. PETTY said he would review changes by hitting the significant
sections. He said this is not inclusive of all sections; however,
there are a number of the changes in statutes that move one section
of existing statute to another location or, because of changes that
are proposed, affect other sections.
MR. PETTY referred to Section 3 and Section 38 and said they simply
permit the commissioner of the Department of Administration to
delete names of vendors that are suspended or debarred. If they
are suspended or debarred, which is currently provided for in
statute, this eliminates an inconsistency in statute.
MR. PETTY said Section 4 would allow the department to acquire
small leased office space, which would be identified as 5,000
square feet or less, under small procurement rules. This means you
could get three proposals and award to the low responsive
responsible bidder, taking into account Alaska bidder preferences.
MR. PETTY explained Section 5 would authorize extensions of leases
up to ten years in return for rent concessions. He said this may
seem similar to a bill that passed the legislature a couple of
years ago. There was about an 18 month window where the department
was authorized to extend leases for five years in return for rent
concessions of up to 10 percent. That proved to be very successful
in driving down the costs of the leasing budget. The bill would
ask to basically do the same thing on a permanent basis in statute,
but give the department the ability to go up to ten years rather
than five. Mr. Petty pointed out that many lessors have said five
years didn't offer them the opportunity to refinance. They felt
they could drive better prices by refinancing on a longer term and
the state might take advantage of better savings.
MR. PETTY referred to Sections 6 and 7 and said they would allow
for the lease/purchase acquisition of real property when the annual
payments did not exceed $500,000 or the total value of the
lease/purchase agreement does not exceed $2.5 million. Currently,
any acquisition of real property through a lease financing
arrangement requires notice to the legislature and the enactment of
the law.
Number 553
MR. PETTY explained Sections 8 and 12 would allow bidders for
services and supply contracts to not list their subcontractors
within five days of bid opening and would give them more
flexibility to change subcontractors. He said he would note that
the provision, as it relates to current construction contracts,
would not change. This would only change the subcontractor notice
requirement for services and supplies.
MR. PETTY said Section 9 would permit the procurement officer
issuing a request for proposal (RFP) or a bid to shorten the
circulation period. The statute requires a 21 day notice. It may
currently be shortened under a determination by the chief
procurement officer. This would empower the person who is actually
issuing the bid or proposal to make the decision as to what
adequate circulation is for notice and they would have to do a
determination that it is advantageous to the state and adequate
competition is anticipated.
MR. PETTY explained Section 10 is an amendment of a section that
actually had it genesis in this committee last year.
Representative James had a bill extending the procurement
preference to certain entities. As the bill came through the House
Labor and Commerce Committee, there was some discussion about a
trend in (indisc.) bidder preferences. The department actually
worked with the sponsor on a committee substitute to try and ensure
that the bidder, if they were to receive the bidder preference, had
maintained a place of business for six months of the bid selling
the kind of product and service for which the state was issuing the
bid for. This provision is intended to resolve a current issue
that they have with brokering of the bidders preference. It is
effectively the same provision that was amended in HB 288 last year
in the House Labor and Commerce Committee.
Number 695
MR. PETTY explained Section 11 would make the use of RFPs an easier
threshold to meet. Currently, the chief procurement officer must
make the determination if the use of competitive sealed proposals
is appropriate. This would allow the commissioner of the
Department of Transportation and Public Facilities to make that
determination for construction and would allow the procurement
officer to make a determination when the RFP process is most
advantageous to the state. Mr. Petty explained this is one of the
ways current reform trend in public procurement seeks to try and
include past vender performance as a criteria in making an award
and also seeks to make awards best value procurement rather than
low bid procurement.
MR. PETTY referred to Section 14 and said when a RFP is cancelled
prior to notice of intent, the state would maintain a list of
proposals received, but would return the proposals to the bidder.
Currently, when an RFP is cancelled, those bids and proposals must
remain with the procurement officer, which after the procurement is
cancelled, becomes public information. Bidders can get this
information and then view another bidders proposal. He said they
would want, if an RFP is cancelled, to return the proposals back to
the bidders.
MR. PETTY explained Section 16 would make the term "sole source
requirement" more flexible. There has been circumstances with a
relatively rigid requirement where there must be clear and
convincing evidence that only one source exists where agencies will
spend a tremendous amount of time and effort documenting that there
is only one source that appears reasonable because the other source
is out of state or is out of the country and it is much more
expensive. That doesn't meet the test as it currently exists in
statute. He said they have had situations where they'll spend a
lot of time and effort trying to document it, not meet it, go out
to bid and wind up doing business with the one bidder that they
assumed they'd be doing business with. This seeks to free that up
and would allow you to enter into a single source after there was
a determination that it was not practical to go through the normal
competitive bid process in a determination that a single source
contract would be in the state's best interest. Mr. Petty said it
also permits the chief procurement officer to delegate this to
other procurement officers.
MR. PETTY said Section 17 would allow the chief procurement officer
to delegate the limited competition requirement as a method of
source selection when it is contrary to the state's best interest
to enter into a contract under the normal procurement process. The
chief procurement officer may determine that a limited competition
situation exists. This would allow the chief procurement officer
to delegate it. Mr. Petty pointed out another feature of Section
17 is that for legal services contracts, the attorney general would
be named as the person determining when it was appropriate to enter
into a legal source for just legal services contracts.
Number 909
MR. PETTY referred to Section 19 and said it would create another
method of source selection which is called the innovative
procurement method. There is a recognition that in today's rapidly
evolving procurement environment in the marketplace that the
invitation to bid process, which has been the mainstay of public
procurement for 100 years or better, and the RFP process doesn't
always work. We need to have innovative thinking to figure out
better ways of getting the job done. This would establish an
innovative procurement track which would challenge procurement
officials in the state to do some "outside the box thinking." He
said they would have to have the procurement plan reviewed, as to
form, by the Department of Law. They would have to have the chief
procurement officer determine that it is advantageous to the state
to use an innovative procurement process. Mr. Petty said the idea
is if we can document some successful uses that innovate
procurement processes, we could come back and institutional it.
Public procurement throughout the United States is struggling with
trying to make the procurement process responsive. This is one way
that we could build innovation into the system, but it is
controlled and they would be expected to report on it to compile
those successes and failures as well.
Number 985
MR. PETTY said Section 22 would expand the requirement of
independently examining material facts when determining that a
limited competition procurement or a sole source for emergency
competition procurement is required. He said Section 22 fits with
Section 16 and 17. If we're going to give procurement officers
more empowerment and authority under 16 and 17, then 22 also makes
them accountable for the independent verification of the material
facts and also would extend the penalties of a class A misdemeanor
to those state officials who might make that determination and not
just the chief procurement officer.
MR. PETTY explained Section 23 would increase the threshold
requirements for use of the small procurement process, which is a
simplified process compared to the invitation to bid (ITB) and
RFP process. Currently, ITBs and RFPs must be used if the
material, construction or service is to be over $25,000. This
would expand, for services and supplies, the requirement to use an
ITB or RFP when it trips $50,000, and for construction when it
trips $100,000. He said that is the threshold that has been
established under the 1994 Federal Streamlining Act. Theirs, if
you use electronic commerce, would go higher than those thresholds.
Number 1072
MR. PETTY said Section 29 allows the commissioner of the Department
of Administration to establish, by regulation, a simplified
procurement process. Currently, we have a two tiered process which
brings the initial protest to the contracting officer with the
ability to appeal that decision to the commissioner of
Administration as a second tier. The third tier would be to appeal
the commissioner's decision to the court. That process takes time
and effort not only by the state but also by the contractors that
use it. It is the only process we have in statute even if it's a
small procurement that is being protested. He said they would want
to establish a more streamline simplified protest process that
would be consistent with whatever the threshold would be set in
statute for the use of small procurement.
MR. PETTY informed the committee that Section 30 would require that
an invitation that is a protest for solicitation of an RFP or an
ITB be brought to the state within ten days before bid opening. He
said that is currently a practice of what is done in regulation.
Mr. Petty said they want to require bidders to make sure they read
it and bring that forward at an early stage where something can be
done with the bids to make changes without causing a delay such as
extending the bid opening because it was a late protest. Those
delays not only affect the state, but they affect the vendors that
are submitting bids on it as well.
Number 1196
MR. PETTY said Sections 31, 32, 34 and 35 all have to do with the
protest process. Currently, we have sort of nonstandard time
frames for responses for when the protest report has to be
submitted by either the procurement officer or the protester. This
seeks to make them more standard with a 10-15-30 day scenario. It
is more consistent with court rules and it would be easier for the
procurement officials as well as the vendors who are involved in
the protest to follow. There is no advantage gained one way or the
other with that. It is just a matter of trying to standardize
these rules.
MR. PETTY explained Sections 36 and 37 would require a contract
claim to be brought against the state under a contract controversy
within 30 days from the date that the contractor becomes aware of
it or the date that they should have become aware of it.
Currently, under their contract controversies, there is no statute
of limitations for bringing a claim against the state. Mr. Petty
said there are lessors who have brought claims as much three years
after the award of the lease which makes it difficult for the state
to protect its interests.
Number 1268
MR. PETTY said Section 33 would limit the protestors' damages to
reasonable bid preparation costs or proposal preparation costs.
That has been consistent with court settlements for a number of
years. He noted they have been advised that was a bit different
and the Department of Law has recommended that we protect ourselves
by including this in the statute.
MR. PETTY informed the committee that Section 39 would exempt the
operation, protection and disposal of assets acquired from the
agricultural revolving loan fund that go to the Department of
Natural Resources. Mr. Petty said an example he is aware of is
Matanuska Maid which is operating under a foreclosure. Arguably,
it could be said that the operation should be under the procurement
law and any disposal of that would be under the procurement process
the way the law currently reads.
MR. PETTY explained Section 40 exempts lobbying public relations
and advertising contracts by the Office of the Governor. That is
a recognition that there are times when it is necessary to get
people that can be effective in lobbying, either in Washington,
D.C., or advertising in local markets, where the RFP or ITB process
simply breaks down and doesn't work. He noted this would not
extend to line agencies of government. Mr. Petty said another part
of Section 40 exempts the acquisition of livestock by Alaska
Correctional Industries. The Mount McKinley meat packing plant in
the Matanuska Valley, operated by Alaska Correctional Industries,
has an obligation to buy livestock that farmers bring into them.
It is not possible for them to put out an invitation to bid or
quotes for that livestock coming in. It is a barter type
situation. This would try to rectify that inaccuracy.
Number 1370
MR. PETTY explained Section 41 clarifies that it is specifically
permissible to use general services' administration supply
schedules for purchases. In the Federal Acquisition Streamlining
Act of 1994, the federal government made available for the first
time, under their cooperative purchases, the use of federal GSA
supply schedules by state and local governments. Mr. Petty said
many state and local governments aren't particularly excited about
that if they are big and do a lot of high volume purchasing because
they can drive pretty good pricing if they have the resources. He
said the state needs to take a look at that because we don't have
the volume purchasing that a lot of the larger states have. These
prices could actually be better prices than what we get on our term
contracts. Mr. Petty said he would see that working in such a way
that we would be gatekeeper for those contracts. Where we have
existing term contracts in place for the items, we wouldn't use
those contracts. But where we don't and we go out to bid, we'd
like to be able to use those contracts as benchmarks and say, "Here
is what the GSA pricing schedule is and if you can't beat that
price, we'd want to go with the GSA pricing schedule." Mr. Petty
said he would be happy to answer questions.
Number 1444
REPRESENTATIVE BRIAN PORTER referred to the lease/purchase change
and said he was under the impression that the legislature had to
approve lease/purchases over $10 million. He asked if it is
something different for those under that amount.
MR. PETTY explained that there has been a number of changes to
statute over the past five or six years in that area. If it is
simply an operational lease, the legislature has to approve it if
it is over $500,000 a year or $2.5 million over the term of the
lease. He said that information is provided in their budget
process. The statute says that approval of the budget covers that.
Mr. Petty said on the lease/purchase agreement side, where the
lessor would go out and issue certificates for participation or if
there is some method of lease financing, the difference at the end
is we would have an ownership interest in it. Currently, the
threshold is zero. If we are to do any lease/purchase of real
estate, it requires notice to legislature and a law to be passed
authorizing it.
Number 1528
REPRESENTATIVE NORMAN ROKEBERG asked Mr. Petty for the citation of
the statue as it relates to the legislative approval for any
operating lease.
MR. PETTY responded it is 36.30.080.
REPRESENTATIVE ROKEBERG questioned what the rationale was about
being exempt from legislative approval if there is a $2.5 million
lease/purchase agreement.
MR. PETTY explained that they need the ability, if there is a lease
that they are into that can be converted to a lease/purchase
agreement and it makes sense to purchase and is good business for
the state, there needs to be some ability to seize those
opportunities.
REPRESENTATIVE ROKEBERG said, "Seize on the opportunity - I mean
these things are -- these windows are to me very narrow. I don't
think that is necessarily the case. I'm not sure why you can't go
through the existing statutory procedure. If there is a good
enough deal you can bring it to the LBA Committee and ask them for
authority to proceed - can you not?
MR. PETTY indicated it requires a law and LB&A wouldn't meet the
requirement to actually pass the law.
Number 1615
REPRESENTATIVE ROKEBERG said, "In Section 5 on page 2 you have the
lease extension authorization. I'm really concerned about this
entire clause. Number 1, the maximum extension of ten years and
then these thresholds of savings of only 5 and 10 percent. I mean
I think these are really not the proper numbers frankly, based on
my experience in the commercial real estate.... The 10 percent is
not, you know, in the real world is relatively a marginal savings
and I can see this being abused or has a possibility of abuse,
cause there doesn't seem to be a deep enough discount (indisc.) the
reason for an extension. Plus the other thing about the ten year
extension is that if you are in a falling marketplace, as we are
now, if you go in and tie up a leasehold interest for ten years,
you're not going to be in a position to benefit from any other
reductions that may be coming in the future. The converse
obviously is true for the business sense and it is very unusual for
the state of Alaska -- in the state of Alaska even for commercial
enterprises to enter into a ten year leasehold interest unless it
is build-to-suit type situation. Very very unusual. At this point
I'm going to be very outspokenly against this particular section.
Also, you mentioned Section 36. You said that the -- 30 days the
claim must be filed within 30 days. It's on page 14. You said
that -- you brought up an example about lessees or leasehold
interests here again where there would be claims. Would this be
like for the claim on the part of a landlord for escalation
adjustments for utilities and things like that. Or what were you
referring to? Do you know?"
Number 1715
MR. PETTY said what he was referring to in a three year issue,
although he believes it probably could cover Representative
Rokeberg's issues, was it is just a claim where the contractor came
in and said, "You owed me more money because I built this building
this way instead of that way in response to your lease." Mr. Petty
said it's not that they don't believe that they should be addressed
but they should be addressed timely.
REPRESENTATIVE ROKEBERG said there could be a dispute about the
specifications and sometimes that doesn't come to light until the
project is significantly underway. He said 30 days seems like an
awfully short period of time.
MR. PETTY said he believes it could be extended. The point is to
have some statute of limitations. He said as they read the bill,
an argument could be made that the contractor should be aware of
that claim, at least within the contract period. They would have
a right during that contract period or as much as 30 days after the
exploration of the contract to bring it. He said what they are
trying to prevent is a situation where a contractor brings a claim
two or three years after the contractual relationship ended.
Number 1911
MR. PETTY said he would address Representative Rokeberg's earlier
concern about the lease extension. He said they were able to use
the flexibility they had in the lease extension for the 18 month
window effectively. Mr. Petty pointed out they did not, in all
cases, agree to extend the lease for five years for a 10 percent
reduction. In some cases they said, "Ten percent doesn't work for
you, Mr. Lessor, because the market dictates a stronger savings
than that," and negotiated higher savings. He said they have
applied this in a way that it has to make good business sense.
Just because it meets the requirements of the law and doesn't make
good business sense, doesn't mean that they ought to enter into it.
He said he believes the department has been responsible on how they
dealt with this in the past and he wouldn't see that changing even
though the bill would allow them to enter into agreements.
Number 1958
REPRESENTATIVE KIM ELTON said he made an assumption that may have
been an erroneous assumption and that is that a lot of the real
property leases that the department may enter into are for three
year periods with the possibility of additional one year
extensions. He said he didn't read this in terms of signing a ten
year real property lease. He asked if a ten year real property
lease is common or is it more common to have a real property lease
of three or five years with the possibility of one year extensions.
MR. PETTY said ten years ago they would say that three years and
five years is about as long as they would go. The fact of the
matter is that if they bid on those short turnaround basis today,
the moving, cabling and loss of productivity costs would simply eat
them alive. He said particularly in the office lease area we have
to try and go for longer term leases to prevent the costs of the
moves which are becoming more and more expensive. Years ago it
used to be relatively cheap to box up stuff and move. That is not
the case today. Mr. Petty referred to a decline in market and said
while that is true, we can drive good prices on long term leases.
He said the average is probably five years for a lease, but if they
were going out for a 20,000 square foot lease in today's market, he
would look for at least a ten year lease agreement.
Number 2045
REPRESENTATIVE ELTON said Section 4 allows for the use of a small
procurement process for leases of 5,000 square feet and said he
would have expected that the standard would be cost and not
necessarily the number of square feet. If you are doing a ten year
lease, the cost could be considerable even though you've got 5,000
or less. He asked for an explanation of why the size of the foot
print of the real property is the standard rather than the cost.
MR. PETTY said if you define leases in terms of size, they are
hoping that keeps the size down on leases and is an easier way to
deal them. The cost issue escalates up if we're saying that small
leases of a certain size makes sense to do in an expedited
procurement process regardless of the relative values going up or
down over the years. He said this is the threshold the department
has proposed. There may be a threshold that makes better sense to
the committee. There ought to be a more streamline approach to
acquiring small offices. Mr. Petty said he believes that the
department does an excellent job at what they do and it tends to be
a very contentious environment. He said this will go a long way to
give them the flexibility to get the job done with the resources
they have available to use.
Number 2129
REPRESENTATIVE ROKEBERG referred to Section 5 and said the impact
of the marketplace is very substantial particularly if there is a
leasehold interest coming through a natural expiration. To use
this particular thing and put it in statute on an ongoing basis
would have a very devastating impact on the nature of the
marketplace within an area like Anchorage. He said this is like
granting yourself a renewal option in statute. Renewal option are
100 percent in favor of the tenant. He said he will be adamantly
opposed to this. Representative Rokeberg said he thinks these
types of clauses are good when conditions are such that the state
can take advantage of them, but he believes they should be limited
in scope and only for a short period of time. The lease should
come to the end of its natural expiration and (indisc.) marketplace
and let competition and other landlords and building owners bid on
it.
MR. PETTY said he wishes they had the staff resources to be
replacing all their leases timely when they expire.
REPRESENTATIVE ROKEBERG suggest lengthening the leases. He said
there is a lot of things they could do.
MR. PETTY explained the statute does not permit them to extend a
lease beyond its expiration. He said he believes Representative
Rokeberg has valid points and that he understands the real estate
and the commercial leasing market. Mr. Petty said one of the
problems they have when there is an expiring lease is most lessees
enjoy the benefit of being able to go back and negotiate with the
current lessor to gain rent concessions rather than to go back out
in the marketplace. He explained there is a significant cost to go
back out into the marketplace. Mr. Petty said the state could be
caught in a situation when they go back out in the marketplace,
lose a lot of productivity and spend a lot of money to move down
the street for a small savings. If they could effectively
negotiate a better deal than what they believe the market would
yield, they ought to be able to do that. Under the current
statute, it is not possible.
Number 2263
CHAIRMAN KOTT said in a rising market this would give Mr. Petty the
opportunity to extend that lease at a 5 or 10 percent savings
depending on the case. He said in response to Representative
Rokeberg's comment, the operative word if "may." There is no
guarantee that the state won't try to go out there and enter into
a 10 percent savings if there is a (indisc.) drop in the real
estate market.
REPRESENTATIVE ROKEBERG referred to Section 30, relating to the
protest of ten days and said he has concerns with the way it is
drafted where if there are an improprieties you have to give ten
days notice. As a practical matter, it is difficult. He said he
understands the reasoning for the clause. One of the major
concerns and problems with the procurement code is how disruptive
it gets when you have certain vendors who specialize in state
(indisc.) because they know the (indisc.) and they delight in
things that can hold up the process or slow it down if it doesn't
go their way. He said he doesn't understand the use of "alleged
improprieties."
MR. PETTY said that language, in his view, means that if the bidder
believes that we've done something wrong in the bid document or in
the process or if there is an ambiguity in the solicitation that
they would bring that within ten days before the bid opening. It
distinguishes between the protest award. They would clearly have
the right to protest the award afterwards because it was a separate
issue. If there is something wrong with a bid or an RFP, they
certainly have the right to protest it. They are just trying to
get them to bring it forward within ten days of the bid opening.
Number 2299
REPRESENTATIVE ROKEBERG questioned how the new additional language
is consistent with the existing language. He asked if they are
exclusive.
MR. PETTY said they are not exclusive. He referred to the current
language and said they have to protest that award within ten days
after the notice of intent to award. The current statute doesn't
address the time frame for bringing a protest, a solicitation or
the document itself. This attempts to use that same ten day
standard.
CHAIRMAN KOTT referred to Section 30 and said the ten day
requirement is something that is currently being practiced based on
regulations.
MR. PETTY confirmed they currently do have that in their
regulations.
Number 2411
REPRESENTATIVE ELTON questioned the time period is between the
request for a proposal and the time a proposal must be submitted.
MR. PETTY said, "That is a 21 day period by statute from the time
that the proposal is put out on the street or the ITB is awarded or
put out on the street, the time we open the bid or the due date on
the submission of the proposal is 21 days. To shorten that,
currently the law requires a determination by the chief procurement
officer to reduce that period." [END OF TAPE]
TAPE 96-23, SIDE B
Number 036
CHAIRMAN KOTT referred to wording in Section 43, "If the
procurement officer determine in writing that a shorter notice
period is advantageous." He said that 21 day period could be cut
down to something less if adequate competition is anticipated. He
asked if there would ever be a case where that period of time could
be shortened to 11 days and affect Section 30 where it says we must
have a filing within ten days.
MR. PETTY said that issue was raised in the Senate State Affairs
Committee. He explained the department's inclination to deal with
that is to have that ten day rule only when the pool solicitation
notice is in effect, but if there has been a shortened circulation
period simply to require a protest of solicitation to be brought
before the bid opening. It would simply have to be brought before
the bid opening. That would seem to give somebody as much
opportunity as possible to protest the solicitation in advance and
give the department a chance to delay the process.
Number 093
REPRESENTATIVE PORTER asked if in some cases do they pre-bid
conferences that all bidders go to.
MR. PETTY said that is a practice used primarily for more complex
or high dollar volume term contracts or bids. He said they do use
the proposal of the pre-bid conference process.
REPRESENTATIVE PORTER referred to Section 30 and said if this
conference were scheduled more than ten days after the bid had been
let, they would not be precluded from trying to square away
ambiguities. That is what that conference is for.
MR. PETTY said that is true; however, what they typically find is
the shortened circulation bids are usually for the off-the-shelf
less controversial type items. If there is a proposal or pre-bid
conference, it would be unusual that it would be a short
circulation type situation. He said Section 30, as it is written,
would apply to any bidder proposal. Usually those more complicated
ones have a longer period.
REPRESENTATIVE PORTER said Section 30 says that if you have a
concern about ambiguity that you must file that ten days before the
due date. He asked if the statute would preclude the ability to
clear up an ambiguity at a pre-bid conference that was something
less than ten days.
MR. PETTY said he doesn't believe it would because if that came out
in a pre-bid conference at a mark less than ten days, it would be
knowledge that the contracting officer would have and it would be
hard for them to ignore that knowledge and not act on it. He
explained that his reading of the Cliff Berg decision is that the
contracting officer must act on the knowledge he has. He said he
doesn't think that would be any kind of a basis to not deal with
the protest on its merit. He said if that was an issue the
committee wanted to address, he is sure they could look at amending
this to have a pre-bid conference exception to that rule.
REPRESENTATIVE PORTER indicated that would be helpful to him.
Number 201
REPRESENTATIVE ROKEBERG told Mr. Petty he thinks the department is
doing a good job in terms of trying to come to grips with the
procurement code. The vendors and business people of the state
hate it. He explained his concern is with the innovative
procurement idea and asked Mr. Petty to give an example.
MR. PETTY said, "I can give you an example. The two live examples
that it is my understanding that the Procurement Advisory Council
would be addressed by this. One of them is the Exxon Valdez oil
spill procurements that have taken place for their research and
project studies. We met with a group of procurement officers
several years back to try and figure out, within the state
procurement laws, a way that we could go out and competitively
acquire, in accordance with 36.30, these unique requirements that
they had for studies. And we couldn't figure out a way that
satisfied the Exxon Valdez Trustee Oil Spill Council because they
wanted, at one point, before awarding and before completing the
evaluation on the RFPs, to make the proposals public. Our
procurement process, for a good reason prevents that. It prevent
that because if we disclose a proposal to another proposer before
we have had a discussion stage, that would give them an unfair
advantage. So it's appropriate that it should prevent that from
happening. But in this case, we could not figure out a way to
acquire what they needed and meet the requirements. In the end,
the federal contracting officers wound up buying those studies
under a federal procurement practice known as a broad agency
announcement which allowed them to do what they needed to get the
job accomplished and still had a (indisc.) procurement process. I
felt, frankly, frustrated because one of our goals is to help
agencies get their job done in accordance with the law and we just
simply weren't able to make that happen. That is a case where we
could have developed an innovative procurement process that would
have accomplished the end result. We wouldn't have heard, `Well
the procurement law won't let us do it,' and had the accountability
and the competition that we believe the law intended to have.
MR. PETTY said, "Another case and point that I have been advised of
is that the actual procurement of the new ferry was exempted by the
legislature some years back would have actually fit under this
innovative procurement process but couldn't technically have been
done under the ITB or the RFP rules in the procurement process."
MR. PETTY said he wouldn't suggest that this should be used all the
time, but it is an avenue where procurement professionals can
figure out a better approach to getting the job done. He said in
state government, we need to encourage some innovative thought
processes when we can, yet maintain the controls and the
accountability. He said it allows them, when there is a unique
requirement or when there is a value that can be achieved, to
employ that kind of process. He said he would not think they would
undertake this lightly.
Number 357
REPRESENTATIVE ELTON said the purpose is to permit latitudes that
allow professions to do their jobs. He said he thinks when you try
to apply a cookie cutter recipe to each of the individual
situations that a procurement officer is going to face, that is
very very difficult. While there may be individual parts that can
be fine tuned on this bill, the purpose of the bill is really
noble. He said this does allow the professionals in the field
latitude to accomplish some things that are very difficult to
otherwise achieve with a cookie cutter approach. He said he would
also note that the latitude always comes with danger and the
danger, in this instance, would be legislative audits and other
things that may sway legislative opinion on the way an agency
(indisc.). Representative Elton said professional latitude gets
right to the heart of this.
Number 438
CHAIRMAN KOTT said HB 482 would be held until Wednesday.
HB 439 - MINING BONDING POOL & ADVISORY COM'N
Number 470
CHAIRMAN KOTT announced the committee would address HB 439,
"An Act relating to minerals, including coal, to the statewide
bonding pool for the reclamation activities imposed on mining
operations, and to the statewide bonding pool's use for surface
coal mining projects."
FRED PASCO, Legislative Secretary to Representative Tom Brice,
Alaska State Legislature, read the following statement on behalf of
Representative Brice:
"House Bill 439 originally sought to open the statewide bonding
pool participation of Alaska's coal industry, in addition to
creating a commission to evaluate the Alaska coal program. The
matter of the bonding pool was addressed in a subsequent piece of
legislation initiated in the other body and now in the House.
However, there are issues beyond the statewide bonding pool
affecting the coal industry in Alaska
"The Alaska coal program is currently included in the proposed
operating budget for FY 97, but Representative Brice strongly feels
that the issues surrounding surface coal mining in Alaska with
state regulatory primacy is the most effective approach to them,
compel us to look to the long term impact of the state coal program
with respect to federal primacy of over this resource.
"The CS proposes to establish a temporary commission tasked with
evaluating the Alaska coal program under the state Surface Coal
Mining Control and Reclamation Act as it relates to the federal act
and the Office of Surface Mining. This will open discussion on the
issue during the life of the commission and enlarge the base for
future decisions regarding state primacy with respect to regulation
of surface coal mining in Alaska.
"Once again, Representative Brice thanks you, Mr. Chairman, and the
members of the Labor and Commerce Committee for the opportunity to
present this legislation."
Number 542
REPRESENTATIVE ELTON referred to page 1, line 8, of the proposed
committee substitute which said, "The commission shall be composed
of individuals not employed by government at any level..." He
asked what the rationale is of having a commission that is
(indisc.) commission exclusively rather than a commission that also
has a representative or two on a nine member commission that
understands the application of regulations as well as serving under
the regulations. He questioned why they can't be employed by
government at any level.
MR. PASCO said when the commission we first discussed, they were
looking at an original fiscal note of $75,000. Partially, an
approach to this was looked at from the standpoint of the industry
hoping to finance some of the undertaking of the commission. With
an arrangement that the Department of Natural Resources, Division
of Mining and the Coal Association had discussed, they came to an
understanding that through private sector members of the commission
being funded, per diem and travel costs by the industry, this is
one mechanism which would lower the cost to the state. In
addition, the publishing of the report would make it available to
the division for its analysis.
REPRESENTATIVE ELTON said he would be a little bit bothered,
whether they're members of the commission or not, if they don't
show up they are not going to be assets to the commission from
(indisc.).
CHAIRMAN KOTT noted there may be somebody on teleconference that
could address that issue.
Number 661
REPRESENTATIVE SANDERS moved to adopt the proposed committee
substitute for HB 439, Version K, dated 2/22/96.
CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB
439 was before the committee.
Number 685
CHARLIE BODDY, Usibelli Coal Mine, Incorporated, testified via
teleconference. He informed the committee he is also
Secretary/Treasurer of the Alaska Coal Association. Mr. Boddy
informed the committee that the bill before the committee is a bill
the Alaska Coal Association has worked on through the Minerals
Commission for about six years. The importance of the legislation
at this time is that there has been major legislation at the
federal level. One piece of federal legislation is HR 2372,
sponsored by Wyoming Representative Barbara Cubin. He said there
is another piece of legislation in the Senate. This legislation
would turn control of the surface coal mining and reclamation in
states that have primacy programs, which Alaska has, back to the
state. Mr. Boddy noted Usibelli would get together with the state
and federal agencies to work through exactly how that role change
would occur. He referred to the composition of the commission and
how the appointments would go and said they believe there should be
certain members selected from the House and Senate, and the
Governor will have (indisc.) appointed.
Number 827
REPRESENTATIVE ROKEBERG asked why the pooling was taken out of the
committee substitute.
CHAIRMAN KOTT said he believes the pooling has been removed because
SB 240 is now in the House. He referred to the selection of the
members of the commission and said the current bill indicates that
the Governor shall make the appointments to the commission.
Chairman Kott said he doesn't see anything that indicates some of
the members will be from the Senate or House.
MR. BODDY clarified that as those individuals are selected,
possibly there should be a division in that the Governor should not
be selecting all nine members. He suggested that maybe the
Governor, the House and the Senate should all select three members.
Number 909
JULES TILESTON, Director, Division of Mining and Water Management,
Department of Natural Resources, was next to testify via
teleconference from Anchorage. He said he has reviewed the
committee substitute. The Administration has proposed returning
primacy of the Alaska Coal Program to the federal government. As
a result of that DNR has been working very closely with
representatives of the Alaska Coal Association and the federal
government to make sure something doesn't drop through the cracks
should that primacy shift actually take place. This included a
series of informal discussions at which time they identified
several processing of decision points that needed fine tuning. He
said they held a two day coal reclamation workshop with members of
the industry, consultants and Alaskan scientists who are familiar
with reclamation practices in Alaska. There is a follow up meeting
scheduled for next week. Mr. Tileston explained that last week the
Administration amended its proposed fiscal 97 budget to retain in
the state primacy of the coal program. He said he would give the
committee a "What if" scenario. If you assume that the Alaska Coal
Program is to be retained, then we have already underway a series
of steps that would do that and then the issue becomes one of what
do we gain in relationship and there is a modest cost that goes
with it. However, if you assume that the Alaska Coal Program
cannot be funded, and that is a budget decision, then a sunsetted
organization appointed by the Governor would serve a useful
mechanism to ensure that the federal government listens to and
fairly considers the specific challenges of producing coal in
Arctic and SubArctic environments. Alaska is not like Canada or
West Virginia and that is how the federal program is presently
structured.
Number 1032
REPRESENTATIVE ELTON said it seems odd to him that we are creating
a commission of nine members to study this issue and to deal with
primacy issues, none of whom would end up being agency people who
were the applicators of the regulation. He asked if it would be
helpful to have one or two members of this nine member commission
actually be the people who apply regulations instead of industry
people.
MR. TILESTON said the basic thing they did in concert with the
Alaska Coal Association at Representative Brice's request is take
a very hard look at the fiscal note. A large percentage of that
cost is when you start adding commissioners or these sorts of
levels of staff. He said they were looking at a program that would
assure industry the opportunity to pull together what they thought.
He noted this is very similar to the way the way the Alaska
Minerals Commission now operates. The costs go up as you add state
government officials to the commission.
REPRESENTATIVE ELTON questioned whether there would be agency
people in attendance when the commission meets.
MR. TILESTON said the fiscal note does contemplate that there would
be staff support. He said he anticipates that one month of staff
support would be required for each of the two years that the
commission would be in operation. Mr. Tileston said they are
working daily and his presumption at this point is that the coal
program primacy will remain in the state. He said the department
works daily with the various coal organizations and lessees.
Number 1143
REPRESENTATIVE ELTON said it has been noted that this is a two year
project. The committee substitute says it sunsets on July 1, 1999.
He said the way he reads it, it would be three years.
MR. TILESTON said Representative Elton is correct.
Number 1256
REPRESENTATIVE ROKEBERG said in the sponsor statement there is an
indication that there would be as much as $1.6 million with a
$123,000 match. He asked what is happening in terms of the funds
and what impact the bill has on those funds as well as the
Governor's amended budget recommendation.
MR. TILESTON said the Administration originally deleted the coal
program and that was for general funding. There was a very
substantial federal (indisc.) program that went with it. He said
Representative Brice's figures were indeed in the Administration's
original budget. Last week, the Administration adjusted that
budget and the adjustments were made from other agencies within the
Department of Natural Resources to come up with the general fund
match money. The coal program, as far as the Administration, has
been restored to its budget. The general fund amount was
approximately $123,000 and in return, there was a combination of
funds not only from federal match but from another entirely
separate program called the Abandon Mine Lions Program. That has
about $4 million, 100 percent federal kitty that is currently
available to the state. He said right now they'll be contracting
for "dirt work" to reclaim former areas mined by coal, (indisc.)
track will be up in the Sutton area.
REPRESENTATIVE ROKEBERG said this isn't all related to the Healey
area.
MR. TILESTON explained that the only producing coal mine today is
at healey, the reclamation is not.
REPRESENTATIVE ROKEBERG questioned whether Usibelli benefit from
this federal money.
MR. TILESTON said he would say the state as a whole benefits from
it because part of it deals with the permitting, which is done in
his shop, as opposed to Denver if the federal government takes it
on. The fact that areas which are currently being used for
recreation in the Sutton area have high walls that do indeed pose
health hazards. They'll be reduced as a result of the AML program.
Number 1352
CHAIRMAN KOTT referred to the issue of the sunsetting clause and
asked if that was a typographical error.
MR. TILESTON said it was an improper addition on his part.
CHAIRMAN KOTT said we're giving them two years and on the third
year, if they need it, they're on their own. He referred to
testimony given in the House Resources Committee, and said
according those who testified in the industry, two years was
sufficient enough.
MR. TILESTON said the wrong fiscal year was inadvertently inserted.
Number 1394
REPRESENTATIVE ELTON moved on page 2, line 6, substitute 1998 for
1999.
REPRESENTATIVE PORTER objected for the purpose of discussion. He
said if it is that the committee wants to entertain the notion of
putting three, three and three rather than all nine coming from
Governor, they might need this time for that process to fully be
completed. He said we wouldn't be able to make our appointments
until next year.
REPRESENTATIVE ROKEBERG questioned why the Senate President and
House Speaker make the appointment.
REPRESENTATIVE PORTER said, "Because they generally would like to
check with us."
Number 1394
REPRESENTATIVE ELTON said if there is going to be an amendment to
change the appointment process, he would withdraw his amendment.
CHAIRMAN KOTT said the amendment is withdrawn and asked if there
was further discussion.
Number 1465
REPRESENTATIVE PORTER moved that on page 1, line 11, the committee
delete the phrase, "The governor shall appoint the member of the
commission. Each member serves at the pleasure of the governor."
and insert "Three members of the commission shall be appointed by
the governor, three by the Speaker of the of the House and three by
the Present of the Senate whose members shall serve at the pleasure
of their appointer."
REPRESENTATIVE ELTON objected for the purpose of discussion. He
said, "A guess the only concern that I have, I don't know frankly
if it is a valid concern or not, but we've got a commission in
which we're requiring that the people all have knowledge of the
surface coal mining industry. My guess is there is not an awful
lot of -- not a large pool of people out there that may be
available. I guess we're making an assumption also that this will
bring balance to it. I don't know that it does. I guess somebody
would have to convince me that we're going to end up with
appointees that are better or worse under the old system. It just
doesn't make an awful -- essentially what we're saying is we don't
trust the Governor to do this so we're going to complicate the
process and I don't know if that's a fair assumption."
REPRESENTATIVE PORTER said what he is saying by the amendment is
that regardless of who is in office at this particular time when
these kinds of commissions are appointed, they are either confirmed
or made by the legislature in balance with appointments made by the
Executive Branch. Since there are no provisions for confirmation,
he would offer the alternative of appointments from both groups.
These kinds of commissions should, as much as possible, represent
a balance of philosophies and points of view in addition to the
requirement of a particular expertise.
CHAIRMAN KOTT asked Mr. Boddy to comment as to how many applicants
we really have out there and how difficult it would be to acquire
the nine members.
Number 1650
MR. BODDY said he believes that there would be a sufficient number
of people probably to commission three or four times depending on
the expertise you wanted to draw from.
REPRESENTATIVE ROKEBERG said he still isn't clear on the amendment
in terms of the appointments by the House and Senate. He asked if
that is the Speaker and President, and then without confirmation so
there wouldn't be a problem with that.
REPRESENTATIVE PORTER said as the bill currently stands, it would
be a three year commission.
REPRESENTATIVE ROKEBERG said given the short duration of this
commission, they should be appointed and get to work right away
rather than wait for the next session to be confirmed.
Number 1734
REPRESENTATIVE ELTON said we're recreating a situation where we're
recreating the same problem we've had with other appointments.
Representative Elton pointed out the effective date of the bill is
July 1, and asked if the existing Speaker and the existing Senate
President would the ones that are going to be allowed to appoint
six members of the committee despite the fact that their term in
office goes for another three or four months. He said he isn't
sure that makes sense, yet he doesn't want get into the situation
where we wait until there is a new Speaker and Senate President to
do the appointments.
REPRESENTATIVE ROKEBERG said he wasn't aware that they lost their
titles and positions until the end of the year.
REPRESENTATIVE ELTON pointed out the new legislature will elect the
new presiding officers.
CHAIRMAN KOTT said there is still a motion before the committee and
asked for a roll call vote. Representatives Sanders, Masek, Porter
Rokeberg and Kott were in favor of the motion. Representative
Elton was against the motion. Representative Kubina was absent.
So the amendment was adopted.
REPRESENTATIVE PORTER explained he was anticipating that there
would be discussion about confirmation and we'd end up that way.
He said that is why he wanted to leave that option open.
Representative Porter said he wouldn't be opposed to an amendment
to shorten this time period considering the method for appointment
the committee just adopted.
REPRESENTATIVE ROKEBERG said he would support Representative
Elton's motion.
REPRESENTATIVE ELTON said he just withdrew it. He said if somebody
offers it, he may vote for it. He said we've created a situation
in which we may have delayed the appointment process.
Number 1897
REPRESENTATIVE ROKEBERG moved on page 2, line 6, to substitute 1998
for 1999.
CHAIRMAN KOTT said there is a motion to change the sunset date from
July 1, 1998, to 1999. He asked if there was objection. Hearing
none, the motion was adopted.
Number 1931
REPRESENTATIVE ELTON made a motion to move HB 439, as amended, with
the attached new fiscal note, out of committee with individual
recommendations.
CHAIRMAN KOTT said there is a motion before the committee to move
CSHB 439 out of committee with individual recommendations and the
attached fiscal note. He said the motion needs to be amended as
there is a draft fiscal note. Chairman Kott said the committee has
to adopt the draft fiscal note.
REPRESENTATIVE ROKEBERG made a motion to adopt the fiscal note
attached to CSHB 439(L&C), as amended, before the committee.
CHAIRMAN KOTT said there is a motion to adopt the draft fiscal note
as the fiscal note that will be forwarded to House Finance. He
asked if there was an objection. Hearing none, the draft fiscal
note was adopted.
Number 1143
REPRESENTATIVE ELTON moved that CSHB 439, as amended, with the new
fiscal note, out of committee. Hearing no objection, CSHB 439, as
amended, was moved out of the House Labor and Commerce Committee.
HB 533 - ALASKA AEROSPACE DEVELOPMENT CORP. BOARD
Number 2061
CHAIRMAN KOTT announced the committee would address HB 533, "An Act
relating to the board of directors of the Alaska Aerospace
Development Corporation."
CLIFF STONE, Legislative Assistant to Representative Alan
Austerman, sponsor of HB 533, read the following statement into the
record:
"The Alaska Aerospace Development Corporation (AADC) is a young
organization that has energetically pursued its charge to bring a
new industry and new opportunities to Alaska. Its first task was
to bring talented people with significant experience in the
aerospace industry to Alaska as employees and consultants. It has
done that. Through their efforts, the AADC has won federal
contracts, generated significant industrial interest, and brought
Alaska international recognition as a potential center for a major
growth industry. The probability for success is extremely high and
the prospects for Alaska's economy are exceptional.
"AADC's focus has been on two projects. The development of a
rocket launch complex in Kodiak and the location of satellite
ground stations in the Fairbanks area. AADC has also pursued
educational opportunities throughout the state and global
warehousing and manufacturing possibilities in Anchorage.
"The present board of directors of the AADC has served the state of
Alaska extremely well, in directing the purposes of the
corporation. The professional, technical and scientific expertise
provided by the University of Alaska members of the board, have
guided the start up phase of this endeavor.
"As we move into the construction phase of this operation and
beyond, it is imperative that the board be restructured to include
specific members of the business community. These individuals
should have experience in and an understanding of economic
development and marketing analysis, based on their existing or
previous participation in private enterprise.
"Additionally, the CS and new comparison charts that you have
before you would allow two more individuals who have or currently
hold positions in the commercial space industry to serve on the
board."
MR. STONE said as an ex officio member, Representative Austerman
feels this would lend credence to the space industry and puts more
expertise on the board as we move into the operational phase of
this project.
Number 2270
REPRESENTATIVE ROKEBERG asked if the legislative ex officio is
already included in the statute.
MR. STONE said he believes that is in statute, under the education
section, 14.40.830, subsection (d), "In addition to the members of
the board or directors described in (a) of this section, two
members of the legislature shall serve as ex officio nonvoting
members..." He said the Speaker of the House made a decision to
appoint Representatives Austerman and Therriault. Senator Frank
was appointed as the nonvoting member.
Number 2355
REPRESENTATIVE SANDERS made a motion to adopt CSHB 533, work draft
9-LS1737/C.
CHAIRMAN KOTT asked if there was an objection. Hearing none, the
committee substitute was adopted.
Number 2403
REPRESENTATIVE PORTER indicated concern regarding a board having an
even amount of members.
MR. STONE said the addition of the tenth member is a nonvoting
member. He said Mr. Ladner with Alaska Aerospace felt that it
would be a good addition to the board to have an international
member so there would be connections to the Pacific Rim and beyond.
He said the board would be a nine voting member board. [END OF
TAPE]
TAPE 96-24, SIDE A
Number 037
MR. STONE noted Representative Austerman would like the committee
to consider three amendments.
Number 051
REPRESENTATIVE ROKEBERG moved Amendment 1, which follows:
Page 2, line 1 and 2, following "(4)":
Delete "the executive director of the Alaska Science and
Technology Foundation;"
Renumber the following subsections on page 2:
Line 3; (5) becomes (4)
Line 5; (6) becomes (5)
Line 12; (7) becomes (6).
Number 070
CHAIRMAN KOTT objected for the purpose of hearing Representative
Rokeberg describe the amendment.
REPRESENTATIVE ROKEBERG said the amendment would delete director of
the Alaska Science and Technology Foundation (ASTF). He said he
would defer to Mr. Stone.
Number 106
MR. STONE said it was felt that because of HB 315, which passed
last year, ASTF now has the authority to grant Alaska Aerospace up
to $5 million to get the project off the ground. Although legal
counsel says there is no conflict of interest with the executive
director of that entity sitting on the board, Representative
Austerman felt it might be in the best interest to delete the
executive director of ASTF and allow some more expertise from
either the business world or from the commercial space industry.
REPRESENTATIVE ELTON said the ASTF executive director would be
deleted and substituted with an additional person from a commercial
space industry.
MR. STONE explained the executive director of ASTF would be
deleted, then two corporate officers would be added to the top of
the list. He noted that is in the proposed Amendment 2.
Number 277
CHAIRMAN KOTT withdrew his objection to Amendment 1.
Number 296
REPRESENTATIVE ROKEBERG moved that Amendment 2 be adopted which
follows:
Page 1, line 8 and 9, following "(1)":
Delete "one state resident who have recently held or who
are currently holding positions in a private corporation
as a president, "
Insert "two state residents who have recently held or who
are currently holding positions in a private corporation
as a president,"
Renumber the following:
Page 2, line 20, following "in":
Delete "(a)(1), (6), and (7)"
Insert "(a)(1), (5), and (6)"
Page 2, lines 23 and 24, following "in":
Delete "(a)(1), (6), and (7)"
Insert "(a)(1), (5), and (6)"
CHAIRMAN KOTT said hearing no further objection to Amendment 1, it
has been adopted. He said there has been a motion to adopt
Amendment 2, and asked if there was objection.
REPRESENTATIVE ELTON objected for the purpose of a question. He
said this means we now would have two state residents who probably
won't have any expertise at all in the field. He asked for an
explanation. He referred to a University of Alaska facility member
that is involved in research and asked why that wouldn't be just as
valuable a second corporate officer.
MR. STONE said in his mind, it certainly is. The person who sits
on the existing board has been a valuable asset to the Aerospace
Board. When his rotation came up, it was felt that going into the
construction and then the eventual operational phase of the launch
facility and the satellite down link, people with the business
sense - marketing analysis, economic development expertise, could
better guide us to bring in the customers to further the mission of
the corporation.
Number 408
REPRESENTATIVE ELTON said he would lift his objection with the
observation that 50 percent of the people that direct private
corporations are in the lower half of their field. He noted he is
not sure that he is totally comfortable with the notion that one is
better than the other.
REPRESENTATIVE ROKEBERG asked if perhaps the addition of the word
"chairman" or "president" may be appropriate.
MR. STONE said it goes on to say, "private corporation as
president, vice-president, corporate officer, financial officer..."
It is broad and lists four or five individuals. He said to address
Representative Elton's concerns, the thinking was that at least
people in those positions should have a good working knowledge of
what it takes to run a corporation.
Number 511
REPRESENTATIVE ELTON reiterated his intent to withdraw his
objection.
CHAIRMAN KOTT said there being no further objection, Amendment 2
was adopted.
Number 552
REPRESENTATIVE ROKEBERG moved Amendment 3, which follows:
Page 2, following line 25:
Insert "Sec. 4. AS 14.40.831 is amended to read:"
Chair and vice-chair. [THE PRESIDENT OF THE UNIVERSITY
OF ALASKA OR THE DESIGNEE OF THE PRESIDENT SHALL BE THE
CHAIR OF THE BOARD OF DIRECTORS OF THE CORPORATION. THE
COMMISSIONER OF COMMERCE AND ECONOMIC DEVELOPMENT OR THE
DESIGNEE OF THE COMMISSIONER SHALL BE VICE-CHAIR.] The
board of directors of the corporation shall select a
chair and vice-chair from among all voting members of the
board of directors of the corporation.
Renumber the following section on Page 2:
Change "Sec. 4. TRANSITIONAL PROVISION. to Sec. 5.
TRANSITIONAL PROVISION."
CHAIRMAN KOTT asked if there was an objection to the adoption of
Amendment 3.
REPRESENTATIVE ELTON said, "I hate to object because it sounds like
that's what I really am." He referred to Amendment 3 and said he
doesn't understand the "Chair and vice-chair." Representative
Elton said he doesn't see how the language would fit.
Number 643
MR. STONE said Section 4 is almost the statute in total. He noted
he should have provided a copy of the statute to the committee
members. The president of the University of Alaska or the designee
of the president shall be the chair of the board of directors of
the corporation. The commissioner of Commerce and Economic
Development or the designee of the commissioner shall be vice-chair
of the board of directors of the corporation. Mr. Stone indicated
that there is one more sentence that he can't bring to mind. He
said the feeling was if you lost president Jerome Komisar to one
event or anther, somebody else coming in could be from out-of-state
or could be an in-state person. Representative Austerman's feeling
was that in discussions with Mr. Ladner, the board of directors of
the corporation could then, amongst themselves, pick the best
qualified individual.
Number 711
REPRESENTATIVE ELTON withdrew his objection to Amendment 3.
CHAIRMAN KOTT said hearing no further objection, Amendment 3 has
been adopted.
Number 750
JEFF BUSH, Deputy Commissioner, Department of Commerce and Economic
Development, said the Administration generally and basically
supports the concept behind the bill. He stated the department
generally concurs with the approach taken and the amendments that
were just adopted. He noted they were amendments outlined in his
proposed testimony. Mr. Bush said the board and the department
foresaw they would have the commissioner of Commerce and Economic
Development, the president of the university or his designee. The
department then would recommend that there be seven public members
appointed. Of those seven members, the department would recommend
that at least three would have space expertise. The language in
the committee substitute is fine except he would recommend one
change, and that is the removal of the word, "commercial" in the
phrase "commercial space industry." He said it concerns them only
because there may be people with expertise in the space industry
but not necessarily in the commercial space industry who may be
qualified to be on the board. Mr. Bush said they would recommend
it be changed to the number of at least three.
MR. BUSH said another change would be the removal of the director
of the Geophysical Institute of the University of Alaska, and make
that another public appointee as well. He said the board would be
seven public appointees, at least three of which would have space
expertise and two of which would have expertise on financial
matters. Mr. Bush said that would leave two positions that are not
specifically designated at this point in time. The reason is the
Governor has indicated he would like to appoint someone from the
local community that is most affected by the project so that there
is local interest.
Number 987
PAT LADNER, Executive Director, Alaska Aerospace Development
Corporation, testified via teleconference from Anchorage. He said
his board should be congratulated for the fine work it has done.
Mr. Ladner said the launch site was originally supposed to be at
Poker Flat, but due to flight safety considerations, they had to do
an evaluation and find another site. Originally, the board had a
large contingency from the university and rightfully
so. He said they are now moving into the next phase and he thinks
they now need more corporate input. Mr. Ladner said his chairman
believes that there are two options. You can leave the board the
way it is because of all the things that are going on right now.
You could ask the board to come up with a recommended change
structure or you can change the board.
MR. LADNER said if it is the determination of the legislature to
change the board, then the board should be changed and have a
quantum leap upgrade from the outstanding people that currently
serve. To do that, a good portion of the people need to have
commercial space experience. He said he thinks the commercial
space area is what they need as they are doing commercial ground
stations in Fairbanks. They are looking at a vast majority of the
launches and Kodiak is (indisc.) commercial space and not military.
Mr. Ladner said by bringing the people from the commercial space
industry on to the board, they would bring a lot of expertise and
recognizable credibility to what they are doing. Also, some of the
people they were working with to create partnerships and possibly
equity financial investments, you'd want to have a position on the
board for those people.
REPRESENTATIVE ROKEBERG said Mr. Ladner had indicated the
"commercial" space industry and said there had been concerns about
the "commercial" space industry. He said the existing statute has
the words, "experience understanding the aerospace or commercial
space industry." He asked if there are enough commercial space
industry companies in operation that they could draw from.
Representative Rokeberg asked if there isn't also the potentiality
of some competitive advantages or disadvantages if these people
were on the board.
Number 1197
MR. LADNER said it could be that way but there are a lot of real
notable aerospace or commercial space people. He said you would
have people like Tom Stafford, who was on Apollo 14 and 15, and is
very well respected, but is not associated with any one company.
He is recognized throughout the world and would bring extreme
credibility to any organization he is associated with. He said he
thinks the option should be made. Mr. Ladner said if somebody came
in and said, "Hey, I'll put in $15 million but I want a seat on the
board," the right answer would be, "You have a seat on the board."
REPRESENTATIVE ROKEBERG asked if it is his intention to try to use
the board seats as marketing tools.
MR. LADNER said absolutely not. He pointed out there are currently
people on the board who are not connected with any major space
industry but they bring a lot to the board. Mr. Ladner said they
need more of those types of people on the board, along with the
corporate people, the financial officers, and chief executive
officers.
REPRESENTATIVE ROKEBERG asked Mr. Ladner if he has seen the
committee substitute.
MR. LADNER indicated he didn't have the committee substitute or the
amendments.
REPRESENTATIVE ROKEBERG said rather than delete "commercial space
industry" it should read "aerospace or commercial space industry."
MR. LADNER indicated that would be fine with him. Mr. Ladner
explained on February 29, they held their final design review for
the Kodiak launch complex in Washington, D.C. He said over 105
people attended from the aerospace industry, and government people
from the Air Force and NASA. Mr. Ladner noted there was a midway
point design review September, a year ago. At the most recent
design review Senator Stevens gave the welcoming and opening
remarks, followed by Senator Murkowski. Representative Young's
chief of staff provided some comments. The Governor provided an
excellent VHS video that welcomed everyone to the meeting and
expressed his support and willingness to work with the industry.
MR. LADNER referred to the satellite ground stations in Fairbanks
and said one company has purchased or leased land on Chena Hot
Springs road called "Earth watch" and they should be starting their
ground station shortly. Space Imaging International is in the
process of finalizing their lease agreement on the Richardson
Highway. Mr. Ladner said they are also working with Orvil (Sp.?)
Science - Orv Image, for another ground station in the Fairbanks
area. The Air Force has also identified a place in Fairbanks. He
referred to the cottage industry possibilities and said they are
really good. Space Imaging could employ anywhere from 10 to 30
people depending on what type of operation they establish.
MR. LADNER said a lot of this is the remote sensing which they
would have access to within the state to satisfy a lot of our
natural resources mapping and planning for governmental agencies.
MR. LADNER referred to the Kodiak launch complex and said they are
putting together the construction request for proposals package.
They are also finishing up the environmental process. Hopefully,
construction will start before the end of the construction season.
Number 1515
There being no further questions or testimony, CHAIRMAN KOTT closed
public testimony on HB 533.
REPRESENTATIVE ROKEBERG moved Amendment 4. He explained the
amendment would be on page 2, line 5, add the words "aerospace or".
It would then read, "four members who have held or currently hold
positions in the aerospace or commercial space industry..."
CHAIRMAN KOTT asked if there was an objection to the amendment.
Hearing none, Amendment 4 was adopted.
Number 1559
REPRESENTATIVE ROKEBERG made a motion to move CSHB 533(L&C), as
amended, Version C, with individual recommendations and a zero
fiscal note, out of committee.
REPRESENTATIVE ELTON objected. He asked which committee the bill
would go to next.
CHAIRMAN KOTT indicated Labor and Commerce is the last committee of
referral.
Number 1593
REPRESENTATIVE ELTON said the committee dealt with a bill earlier
which reduces state costs by eliminating state positions. Now
there is a bill before the committee where they could also reduce
costs. With the adoption of Amendment 4, on page 2, line 12, we
provide for one nonvoting member who has recognized prominence and
influence within the international aerospace industry. He said he
doesn't feel strongly about this because he thinks that sometimes
cost is initially (indisc.). Now that people can be added from the
noncommercial part of the aerospace industry, why not just add four
people, provided that one is a person who has recognized prominence
and influence within the international aerospace industry. That
way nine people would be brought to the board meetings rather than
ten and that person, with that stated area of expertise, would be
allowed to vote. He said the person could be someone we're
bringing in from Great Britain, Germany or Seattle. We don't know
who or where, but why fly somebody from some place down south for
these meetings when they don't get a chance to vote.
CHAIRMAN KOTT asked Representative Elton if he still maintains his
objection.
REPRESENTATIVE ELTON said he will maintain his objection. He
indicated he will think about this and maybe bring an amendment to
the floor.
CHAIRMAN KOTT asked Representative Rokeberg to withdraw his motion.
He then asked Representative Elton to think about it over the next
two days and bring something back to the committee at the next
meeting.
REPRESENTATIVE ELTON said he would draft an amendment for the
committee's consideration.
CHAIRMAN KOTT said the bill would be held over until the following
Wednesday.
REPRESENTATIVE ROKEBERG suggested that the committee might want to
consider if the Kodiak public member also....
SB 197 - INS:DOMESTIC VIOL. VICTIMS & DISCLOSURES
Number 1745
CHAIRMAN KOTT announced the committee would address CSSB 197(L&C),
"An Act relating to insurance covering an insured who is a victim
of domestic violence and requiring certain disclosures by an
insurer."
Number 1750
SENATOR DAVE DONLEY, sponsor of the measure, said SB 197 would
prohibit discrimination against victims of domestic violence by
insurance carriers in Alaska. This has been a very serious problem
in the Lower 48, and although insurance companies assure us that
they don't currently practice this in Alaska and we don't have any
evidence of it being in Alaska, we want to keep it from becoming a
problem like it has outside Alaska. Representative Donley said
there has been such a serious problem that seven to ten other
states have already adopted similar legislation that is pending
before Congress. He said he thinks four other states currently
have legislation pending before them. Representative Donley said
the bill has the support of many many public interest groups around
the state.
Number 1795
REPRESENTATIVE ROKEBERG questioned what the bill does.
SENATOR DONLEY explained the bill says that if you're an insurance
company you cannot deny insurance, increase rates or otherwise
discriminate against a victim of domestic violence if that is your
only reason for doing so. He said the bill has been carefully
drafted in consultation with the Division of Insurance to make sure
that the word "only" is included. So if they didn't know that a
person was the victim of domestic violence, they wouldn't be in
violation for any of those things because it wouldn't be the only
reason they were making the decision they made if they were
adjusting the rates. Senator Donley said some of the testimony in
the record regarding some of the concerns from insurance companies,
the division feels they are totally addressed by making sure the
word "only" is kept in the bill.
REPRESENTATIVE ROKEBERG asked what type of insurance. He asked
what an example of the problem.
SENATOR DONLEY explained the bill extends to all types of
insurance. The biggest problem currently in the Lower 48 is what
our statutes refer to as disability insurance which is commonly
referred to as health insurance. He noted in the committee files
there are some examples of what has happened in other areas. He
indicated he has been asked, "If this hasn't been a problem in
Alaska, why do you want to do it?" He said it is basically to keep
it from happening in Alaska.
Number 1925
REPRESENTATIVE SANDERS asked if it is possible that by the passage
of the bill, it will encourage victims of domestic violence to
remain in that situation rather than to encourage them to get out
of the situation.
SENATOR DONLEY said one thing that happens today is people are
afraid to report domestic violence because they fear they would
jeopardizing their access to insurance. He said he has heard that
from men and women's groups and the shelters around the state.
They actually think there could be a problem in the state right
now, but the victims are afraid to report it because they are
afraid they'll lose their insurance. That is another reason it
would be difficult for them to get out of their situation.
Number 1966
REPRESENTATIVE ROKEBERG referred to a letter in his committee file
from Lessmeier and Winters regarding State Farm's position. He
asked Senator Donley to comment.
SENATOR DONLEY said he believes they recommended some different
language.
CHAIRMAN KOTT informed Representative Rokeberg that somebody from
Lessmeier and Winters was on teleconference.
Number 2004
CHAIRMAN KOTT asked Senator Donley how you would determine whether
or not a person was a victim of domestic violence. He noted the
question is in regards to releasing the records by the insurer. He
read from the bill page 1, line 13, "except with the permission of
the applicant or the insured as required by a court of competent
jurisdiction." He asked how a company would know whether or not
this would be record that would fall within this category.
SENATOR DONLEY said he would like to have the Division of Insurance
answer that question as he worked with them in coming up with the
language. He said it was a specific request from the Network on
Domestic Violence and Sexual Assault. Senator Donley said he was
asked by Representative Masek's staff how it would be enforced. He
explained it would be the same provision as any other insurance
provisions. The division would identify that something is going on
or they'd be responding to a complaint from a consumer. They would
then have to do some sort of finding of fact that there was a
domestic violence situation and then we'd proceed from that point.
Number 2097
MICHAEL LESSMEIER, Attorney, Lessmeier and Winters, testified via
teleconference. He informed the committee he was testifying on
behalf of State Farm. Mr. Lessmeier explained State Farm has a
serious concern about domestic violence and as a result of that
concern, they've done a number of things across the country. One
is to support tougher penalties for partner violence. Another thing
that State Farm has done is they have initiated the corporate
alliance to end partner violence which is a program of (indisc.)
companies that is intended to increase public awareness for
domestic violence. Another thing they have done is supported
legislation that prohibits discrimination against victims of
domestic violence. Mr. Lessmeier said they support what Senator
Donley is trying to do, but they don't agree with how he is going
about doing it.
MR. LESSMEIER explained a concern is that the current version of SB
197 doesn't clearly state that an insurer must be allowed to
underwrite or rate for a medical condition, the same as they would
for someone who is not a victim of domestic abuse. Our concern is
that it should be a non-factor; it shouldn't be a positive or
negative factor. The language in the bill is not clear on that
issue. He said they suggested some language that would solve that
problem.
MR. LESSMEIER said the second is that SB 197 is, in their view, are
very unnecessary and very burdensome, for example subsection (b),
which addresses the records disclosure. In many instances they
don't know if somebody is a victim of domestic violence because
there is nothing in their applications that so indicates. It is
not one of their underwriting criteria. The question is, "What are
we supposed to do in that situation." There are currently court
rules, (indisc.) rules, that deal with physician/patient privilege.
Mr. Lessmeier said their concern is they don't know how one would
read, in years down the road, the provision that is set forth in
subsection (b).
MR. LESSMEIER said another problem is the subsection dealing with
required disclosure. That is a major underwriting change that
would literally apply across all lines of insurance. If the intent
is a concern about domestic violence, this provision is extremely
broad and goes far beyond that. Mr. Lessmeier said one of the
questions they have is, "What are the needs for this?" If there is
a need for it, why not try to accomplish this in another less
burdensome way. For example, have required disclosure only if
there is a request for it.
MR. LESSMEIER said their final concern is the bill applies to all
lines of insurance. It doesn't just apply to the lines where there
have been problems. Those lines of insurance are life, health and
disability. Mr. Lessmeier said that to their knowledge, there have
been no complaints about any problems in Alaska. Mr. Lessmeier
referred to the legislature passing a bill and said to use language
that is specific and is applicable to the problems that have
occurred. He noted the committee has their written comments.
Number 2268
REPRESENTATIVE ELTON noted he was provided with the written
comments. He referred to Mr. Lessmeier's concern with subparagraph
(b) and said he doesn't understand what the problem is. He said if
you don't know, then you can't violate provisions of subparagraph
(b) because you can't release information that you don't know
about. Representative said he doesn't understand the problem Mr.
Lessmeier has with that paragraph.
MR. LESSMEIER explained the difficulty is that indeed they may not
know and may not have reason to know, but that still might not
prevent somebody from taking action against (indisc.) that we
shouldn't know. Those are the kinds of things that occur in the
legal arena all day long. Mr. Lessmeier said the point they want
to make is there is a legitimate concern about discrimination in
this area. In attempting to solve that problem, lets not create so
many other problems that we've created a larger problem than we
saw.
Number 2320
REPRESENTATIVE ELTON said he remains unconvinced because the
subparagraph says that you may not disclose that information. He
said he is having a difficult time understanding that if it is a
prohibitive subparagraph that you may not disclose information, he
has a tough time understanding why there is a problem Mr. Lessmeier
may have with not disclosing information he knows nothing about.
MR. LESSMEIER said that is not what the language says. The
language says, "Records that reflect the fact." It doesn't say,
for example, "a statement by someone that is a victim of domestic
violence." He stated another concern they have, as a result of
that, is they oftentimes in litigation may see, for example,
different issues where there was a question about the causation of
a particular injury; and, in looking back at the causation of a
particular injury, they come upon records that indicate that there
had been a preexisting injury and that the preexisting injury was
allegedly caused by an instance of domestic violence. In that
instance, one of the questions they would have is if you have
(indisc.) license, could they go back and use that prior
information. Mr. Lessmeier explained what he is saying is that we
are creating an area where there is certainly potential for
litigation. He said it is their belief that it is happening
unnecessarily.
MR. LESSMEIER said when you look (indisc.) domestic violence and
you look at the concept, what you will see is an insurer,
particularly a property and causality insurer, is the least likely
to know about an instance of domestic violence. People in the work
place, neighbors, family and friends are more likely to know than
the insurance company is. They are also the least likely to
disclose it.
Number 2320
REPRESENTATIVE ELTON asked Mr. Lessmeier to expand on the arguments
regarding the types of lines of insurance offered and expand on the
fact that if there is no problem in some lines, then why would we
need exclusion language in the bill.
MR. LESSMEIER said if the bill is to solve a specific problem that
is (indisc.), why not go after the problem where everybody thinks
it is most likely to occur. He noted in Alaska, we're dealing with
an abstract problem. Mr. Lessmeier said he doesn't think there has
been any evidence that there has even been a complaint about this
in Alaska. [END OF TAPE]
TAPE 96-24, SIDE B
Number 047
REPRESENTATIVE ELTON referred to the first paragraph of the letter
from Mr. Lessmeier and said he notes that although State Farm
strongly supports legislation that prohibits discrimination, you
want to be sure that any legislative prohibition doesn't prevent an
insurer from underwriting a rating for a medication condition, he
assumed, not related to domestic violence.
MR. LESSMEIER stated that it doesn't matter what it is related to.
He said they just want to be able to underwrite for the medical
industry. If they can't do that what happens is they end up in a
situation where they may be discriminating for a condition as
opposed to treating them neutrally. Once that happens, then they
discriminate against other people that may have a condition that is
unrelated to this particular condition.
REPRESENTATIVE ELTON said he understands the concern, but the
difficulty he is having is a portion of the bill provides for a
required disclosure on what elements constitute the refusal of
offering the insurance. He said it would seem to him that if you
go through and make a decision based on other medical facts, you
would disclose that, therefore, precluding any assertion that the
denial was based on the fact this person was victim of domestic
violence.
MR. LESSMEIER said he thinks there is a concern about that being an
issue with or without the required disclosure. There either is or
there isn't evidence of underwriting based on a status separate and
apart from this issue. He said if that is going on it would be
easy to detect. If that is a legitimate concern, you solve that
problem based on a specific situation rather then what this bill
does which requires disclosure anytime there is a denial of
coverage.
REPRESENTATIVE ROKEBERG referred to the letter which included
suggested language from Mr. Lessmeier, "(3) An insurer is granted
immunity for criminal or civil liability resulting from compliance
with this statute." He asked Mr. Lessmeier if he thinks he is
putting himself in harms way of being sued because he would try to
enforce the provisions of the statute.
MR. LESSMEIER said that is one of the concerns he has and that is
why he wanted that language in the bill.
REPRESENTATIVE ROKEBERG asked Mr. Lessmeier to give him an example
of how that would occur.
MR. LESSMEIER explained a possible example would be someone
claiming that this information should have been disclosed to
someone else in order to protect someone.
Number 150
REPRESENTATIVE ROKEBERG said he isn't sure he understand the entire
concept of customary business practice in the insurance industry as
far as disclosures of records and the files on a client. He asked
what the industry standard is for this type of thing.
MR. LESSMEIER said he doesn't know of any disclosure that occurs in
the matter of course except, for example, the property and casualty
business. He explained the only disclosure he is aware of that
would occur would be in the context of litigation and once someone
litigates an issue, then things are disclosed as a matter of course
in the context of that litigation. He stated he isn't aware of any
other disclosures.
REPRESENTATIVE ROKEBERG asked if anybody can make inquiries about
what is in his client's files.
MR. LESSMEIER said they can make inquiries, but that information is
typically not released. The only exception he knows of would be
inquiries that are made by the Division of Insurance. He explained
they are required to keep records and certain documentation to
satisfy the Division of Insurance. The other exception to that
would occur in instances of fraud where there is suspicion of
fraud.
REPRESENTATIVE ROKEBERG asked if the requirement in the bill is to
provide confidentiality for those records. He also asked if that
is a burden on the industry.
MR. LESSMEIER explained part of the problem is that it is unclear
to him as to what this would mean. He asked if they would be
required to search records. For example, if there is a concern
about fraud, would they be prevented from providing records to the
national bureau that investigates those things or shares
information. If they are involved in a civil case, would they be
prevented from somehow using cases in the civil case. He stated
that, as a matter of practice, people treat these records as
confidential.
CHAIRMAN KOTT announced the next person to testify would be Beverly
Bowers.
Number 294
BEVERLY BOWERS, Bering Sea Womens Group, was next to testify via
teleconferece from Nome. She said in listening to Mr. Lessmeier's
testimony she can appreciate what he is saying, but he is talking
almost as though his very reasons are reasons to pass the bill. He
said there hasn't been any complaints in Alaska but there are
complaints in other places. This discrimination against victims of
domestic violence is being done in other states and we know it can
be done here in Alaska. Discrimination is very widespread in many
different ways. As we talk of insurance we forget it also covers
medical care and in going to get medical care, the reason for the
injury is stated when a woman comes to the emergency room. The
insurance company is aware of this. Nothing is ever kept a
secrete, we know this is going to come out in some way. Ms. Bowers
said this is a very widespread problem and we need to take this
step to prevent this very thing from coming to Alaska. Alaska has
a reputation of protecting its women and doing things in advance.
Ms. Bowers urged passage of the legislation.
Number 397
JOHN GEORGE, Lobbyist, American Council of Life Insurance, was next
to address SB 197. He explained the American Council of Life
Insurance is a life insurance trade association representing
virtually all of the life insurance companies that do business in
the state of Alaska. He informed the committee his clients have
provided him with about a four page list of changes they would like
made to the bill. Mr. George said he has also reviewed Mr.
Lessmeier's shorter version of recommended changes and those
changes accomplish virtually everything his clients have tried to
do in their four pages of suggested changes. He said he is
prepared to throw their support totally behind State Farm's
proposal.
REPRESENTATIVE ROKEBERG asked Mr. George how the concept of the
bill would affect the life insurance underwriting industry in
Alaska.
MR. GEORGE said there are several ways. For instance, we know that
there are cases where a spouse has procured insurance on their
spouse in order to collect should that person die, which could be
from domestic violence. There are cases where the policy was
purchased years ago, but now we have this insurance policy out
there and we could collect a lot of money if our spouse were to
die. He said there may actually be a case where an insurer could
be sued for writing a policy because that encouraged a murder. Mr.
George noted the life insurers are also writers of health
insurance. Mr. George said the things Mr. Lessmeier talked about
being supportive of a domestic violence bill, something that is
going to preclude insurers from discriminating. He said they have
no problem and encourage that.
Number 510
REPRESENTATIVE ELTON apologized for having to leave the meeting
earlier for a few minutes. He indicated that when he came back it
seemed he walked in on an argument against life insurance. He said
it seems to him there are many reasons not to issue or even have a
life insurance (indisc.) if we stretch as far as saying that may be
a cause for murder. Representative Elton asked if he missed
something.
MR. GEORGE said there are a number of reasons the life insurance
industry is commenting on this bill. That is one of the things.
As he recalls, there is a probate bill that deals with that and
precludes a spouse from collecting benefits under a life insurance
policy if they were the cause of the death. The disclosure of
information is a concern to them as well. They don't generally
know about these things, they don't go and ask the question, but
the way the bill is worded it might infer from a pattern of prior
injuries that they were a result of abuse. Mr. George referred to
disclosing that information and said there are not exceptions in
law for who you can disclose it to unless you have permission of
the insured or a court order. So arguably, if the Division of
Insurance wanted to see those, and he believes they have a right to
look at any record an insurance company has, then there is the
question of whether they can have it or not. You better go get a
court order.
MR. GEORGE explained insurance companies reinsure risks. So they
might take their entire book of business and ask another insurance
company to take a portion of it. The other insurance company might
say, "We want to see your underwriting files." They're possibly
going to become an insurer but they're not the insurer on the
business. He asked if it permissible to share that underwriting
information or do you have to go through the entire book of
business and pull those pieces out. Mr. George said the State Farm
proposal is simple, it's straight forward, and it protects the
victims of domestic violence from discrimination.
Number 666
LAUREE HUGONIN, Executive Director, Alaska Network on Domestic
Violence and Sexual Assault, was next to address SB 197. Ms.
Hugonin explained that advocates working to end violence against
women encourage battered women to document their injuries by
seeking medical care and by requesting that the violent incident be
noted in their medical records. She said health care providers are
usually the first service professional and sometime non-family
member to have contact with women who have been abused and are in
a unique position to identify victims of domestic violence. If we
are able to identify abused women through routine screening and
accurate diagnosis, this can help in breaking the cycle of
violence. Early prevention can prevent or ameliorate many of the
long-term health and social consequences associated with
victimization. Ms. Hugonin explained that she would review what
they are doing in Alaska to help medical providers recognize
domestic violence and to be able to identify it.
MS. HUGONIN gave committee members a pamphlet called "One in Five
Women," which is a pamphlet for health care providers to be able to
know about domestic violence. She explained in 1995, the Division
of Public Health, Maternal, Child and Family Health Section,
receive a three year federal grant to train medical professionals
and to develop a sustainable training team in the state. She said
this is only one of two projects that were funded in the country
and the only state project that was funded.
MS. HUGONIN informed the committee that nationally, the American
Medical Association, the American College of Obstetrics and
Gynecology, the American College of Physicians, the American Trauma
Society, the American Association of Emergency Physicians, and
several other organizations are working to reduce injuries, prevent
domestic violence and save lives by development of other
professional medical educational materials. National health
initiatives require medical institutions to develop domestic
violence protocols, plans for training and improving their
facilities response to domestic violence. She said battered women
are finding the courage to reach out for their medical care and
documentation. Medical care givers have now become committed to
prevention of this lethal crime through identification and
documentation. Unfortunately, in the Lower 48 medical care givers
now know that doing the right and responsible thing of identifying
and documenting abuse may result not only in the loss of health
insurance coverage, but other important protection such as life,
disability and home owners insurance. The reality is that every
women is at risk of becoming a victim of domestic violence. Just
as there is no excuse for that violence, legal or otherwise, there
is no excuse for the insurance industry to justify this
discriminatory practice. Ms. Hugonin said her organization is
aware that currently it has not been identified as a problem in
Alaska. We don't know that that means it doesn't exist. There is
considerable concern that people are not coming forward with it as
a problem because of a consequence of losing their insurance.
Several states have passed legislation prohibiting discrimination
and several other states have legislation pending. She urged
support of SB 197 in its current form.
Number 928
REPRESENTATIVE ELTON made a motion to adopt HCSCSSB 197(L&C).
CHAIRMAN KOTT asked if there was an objection.
REPRESENTATIVE ROKEBERG objected.
Number 962
REPRESENTATIVE ELTON withdrew his motion.
CHAIRMAN KOTT said the committee would address the committee
substitute the following Wednesday.
Number 975
CHAIRMAN KOTT said the committee would address the appointment of
Clair Ramsey to the Real Estate Commission. He noted the Governor
has also added Gorden Severson, from Anchorage, to another one of
the vacant positions. He said he would like to move these names
forward if there is no objection to the two member.
REPRESENTATIVE ROKEBERG said there is no objection.
CHAIRMAN KOTT said those two names would be moved out of committee
with the recommendation that they go forward before the whole body.
ADJOURNMENT
Number 1010
CHAIRMAN KOTT adjourned the meeting at 5:57 p.m.
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