04/29/2002 03:20 PM House L&C
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 29, 2002
3:20 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
Representative Pete Kott
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 274(L&C)
"An Act relating to issuance of a locum tenens permit for a
physician or osteopath; and providing for an effective date."
- MOVED HCS CSSB 274(L&C) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 215(FIN)
"An Act relating to licensing common carriers to dispense
alcoholic beverages; and providing for an effective date."
- HEARD AND HELD
HOUSE BILL NO. 512
"An Act relating to cigarette sales; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: SB 274
SHORT TITLE:PHYSICIANS' LOCUM TENENS PERMITS
SPONSOR(S): SENATOR(S) OLSON
Jrn-Date Jrn-Page Action
02/01/02 2090 (S) READ THE FIRST TIME -
REFERRALS
02/01/02 2090 (S) L&C
02/12/02 (S) L&C AT 1:30 PM BELTZ 211
02/12/02 (S) Heard & Held
02/12/02 (S) MINUTE(L&C)
02/28/02 (S) L&C AT 1:30 PM BELTZ 211
02/28/02 (S) Moved CS(L&C) Out of
Committee
02/28/02 (S) MINUTE(L&C)
03/01/02 2338 (S) L&C RPT CS 5DP SAME TITLE
03/01/02 2338 (S) DP: STEVENS, AUSTERMAN,
DAVIS, LEMAN,
03/01/02 2338 (S) TORGERSON
03/01/02 2338 (S) FN1: ZERO(CED)
04/10/02 2710 (S) RULES TO CALENDAR 4/10/02
04/10/02 2712 (S) READ THE SECOND TIME
04/10/02 2712 (S) L&C CS ADOPTED UNAN CONSENT
04/10/02 2712 (S) ADVANCED TO THIRD READING
UNAN CONSENT
04/10/02 2712 (S) READ THE THIRD TIME CSSB
274(L&C)
04/10/02 2713 (S) PASSED Y19 N- E1
04/10/02 2713 (S) EFFECTIVE DATE(S) SAME AS
PASSAGE
04/10/02 2718 (S) TRANSMITTED TO (H)
04/10/02 2718 (S) VERSION: CSSB 274(L&C)
04/10/02 (S) RLS AT 10:30 AM FAHRENKAMP
203
04/10/02 (S) MINUTE(RLS)
04/11/02 2877 (H) READ THE FIRST TIME -
REFERRALS
04/11/02 2877 (H) L&C
04/26/02 (H) L&C AT 3:15 PM CAPITOL 17
04/26/02 (H) Heard & Held
04/26/02 (H) MINUTE(L&C)
04/29/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: SB 215
SHORT TITLE:COMMON CARRIER LIQUOR LICENSE
SPONSOR(S): SENATOR(S) COWDERY
Jrn-Date Jrn-Page Action
04/30/01 1357 (S) READ THE FIRST TIME -
REFERRALS
04/30/01 1357 (S) TRA, FIN
01/22/02 (S) TRA AT 1:30 PM BUTROVICH 205
01/22/02 (S) Moved CS(TRA) Out of
Committee
01/22/02 (S) MINUTE(TRA)
01/23/02 2017 (S) TRA RPT CS 3DP 2NR SAME TITLE
01/23/02 2017 (S) DP: COWDERY, WILKEN, TAYLOR;
01/23/02 2017 (S) NR: WARD, ELTON
01/23/02 2017 (S) FN1: (REV)
03/04/02 (S) FIN AT 9:00 AM SENATE FINANCE
532
03/04/02 (S) Scheduled But Not Heard
03/05/02 (S) FIN AT 9:00 AM SENATE FINANCE
532
03/05/02 (S) Moved CS(FIN) Out of
Committee
03/05/02 (S) MINUTE(FIN)
03/06/02 2382 (S) FIN RPT CS 5DP 3NR SAME TITLE
03/06/02 2382 (S) DP: KELLY, HOFFMAN, WILKEN,
WARD,
03/06/02 2382 (S) LEMAN; NR: DONLEY, GREEN,
OLSON
03/06/02 2383 (S) FN2: (REV)
03/26/02 (S) RLS AT 11:00 AM FAHRENKAMP
203
03/26/02 (S) MINUTE(RLS)
04/19/02 2858 (S) RULES TO CALENDAR 4/19/02
04/19/02 2859 (S) READ THE SECOND TIME
04/19/02 2859 (S) FIN CS ADOPTED UNAN CONSENT
04/19/02 2859 (S) ADVANCED TO THIRD READING
UNAN CONSENT
04/19/02 2860 (S) READ THE THIRD TIME CSSB
215(FIN)
04/19/02 2860 (S) PASSED Y14 N4 E1 A1
04/19/02 2860 (S) EFFECTIVE DATE(S) SAME AS
PASSAGE
04/19/02 2863 (S) TRANSMITTED TO (H)
04/19/02 2863 (S) VERSION: CSSB 215(FIN)
04/22/02 3058 (H) READ THE FIRST TIME -
REFERRALS
04/22/02 3058 (H) L&C, FIN
04/29/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 512
SHORT TITLE:UNFAIR CIGARETTE SALES
SPONSOR(S): FINANCE
Jrn-Date Jrn-Page Action
03/26/02 2684 (H) READ THE FIRST TIME -
REFERRALS
03/26/02 2684 (H) L&C, JUD, FIN
03/26/02 2684 (H) REFERRED TO LABOR & COMMERCE
04/26/02 (H) L&C AT 3:15 PM CAPITOL 17
04/26/02 (H) Heard & Held
MINUTE(L&C)
04/26/02 (H) MINUTE(L&C)
04/29/02 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
JEFF BULLOCH
Alaska State Medical Association
4107 Laurel Street
Anchorage, Alaska 99508
POSITION STATEMENT: During discussion of SB 274, offered a
language change for the committee's consideration.
SENATOR DONNY OLSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of SB 274.
CATHERINE REARDON, Director
Division of Occupational Licensing
Department of Community & Economic Development
PO Box 110806
Juneau, Alaska 99811-0806
POSITION STATEMENT: During discussion of CSSB 274(L&C),
answered questions.
DON SMITH, Staff
to Senator John Cowdery
Senate Transportation Standing Committee
Alaska State Legislature
Capitol Building, Room 101
Juneau, Alaska 99801
POSITION STATEMENT: Presented CSSB 215(FIN) on behalf of the
sponsor, Senator Cowdery.
BILL MACKAY, Vice President
Public and Government Affairs
Alaska Airlines - Seattle
(No address provided)
POSITION STATEMENT: Discussed the reasons why Alaska Airlines
urges passage of [CSSB 215(FIN)].
DOUGLAS GRIFFIN, Director
Alcoholic Beverage Control Board
Department of Revenue
550 W 7th Avenue, Suite 540
Anchorage, Alaska 99501-3510
POSITION STATEMENT: Urged the committee to pass [CSSB
215(FIN)].
NEIL SLOTNICK, Deputy Commissioner
Office of the Commissioner
Department of Revenue
PO Box 110405
Juneau, Alaska 99811-0405
POSITION STATEMENT: Testified on CSSB 512, Version F, and
related that the department does not urge the committee to pass
it out of committee.
MIKE ELERDING, President
Northern Sales Company of Alaska, Inc.
PO Box 8112
Ketchikan, Alaska 99901
POSITION STATEMENT: Testified in support of HB 512.
BOB GALOSICH, Vice President
Wholesale Operations
Alaska Commercial Company
Frontier Expediters
3555 E 76th Avenue
Anchorage, Alaska 99518
POSITION STATEMENT: During discussion of HB 512, related the
differences one must consider between retail and wholesale.
BOBBY SCOTT
Jan's Distributors
1802 W 47th
Anchorage, Alaska 99517
POSITION STATEMENT: Testified on HB 512.
CYNTHIA DRINKWATER, Assistant Attorney General
Fair Business Practices Section
Civil Division (Anchorage)
Department of Law
1031 W 4th Avenue, Suite 200
Anchorage, Alaska 99501-1994
POSITION STATEMENT: Expressed concern that HB 512 is anti-
competitive and unnecessary.
ACTION NARRATIVE
TAPE 02-68, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:20 p.m.
Representatives Murkowski, Halcro, Meyer, and Crawford were
present at the call to order. Representatives Rokeberg and
Hayes arrived as the meeting was in progress.
SB 274-PHYSICIANS' LOCUM TENENS PERMITS
CHAIR MURKOWSKI announced that the first order of business would
be CS FOR SENATE BILL NO. 274(L&C), "An Act relating to issuance
of a locum tenens permit for a physician or osteopath; and
providing for an effective date."
Number 0158
REPRESENTATIVE HALCRO moved to adopt Version 22-LS1393\L,
Lauterbach, 4/29/02, as the working document. There being no
objection, Version L was before the committee.
CHAIR MURKOWSKI reminded committee members that at the last
hearing of CSSB 274(L&C) there was concern with regard to the
language in Section 2 requiring that the locum tenens permits
"shall" be extended for an additional 60 days. The language in
Section 2 has been expanded in Version L so that it says: "the
board may refuse to grant a license under AS 08.64.240".
Version L also adds paragraphs (2)-(4) under Section 3 in order
to provide greater public safety by specifying the items to be
obtained in a background check.
Number 0325
JEFF BULLOCH, Alaska State Medical Association, informed the
committee that representatives from the association spoke with
the sponsor and suggested that on page 2, line 10, the language
"or its designee" be deleted. Therefore, a denial would go
before the full board where due process would occur and the
person being denied would be allowed to be present.
CHAIR MURKOWSKI asked if the sponsor is comfortable with the
amendments encompassed in Version L.
Number 0399
SENATOR DONNY OLSON, Alaska State Legislature, speaking as the
sponsor of SB 274, said that he agreed with the majority of
Version L. However, the [focus] of the bill is directed at
rural Alaska where there have been difficulties obtaining and
holding replacement physicians. With regard to the language on
page 2, line 10, Senator Olson expressed concern with denials
for extensions. Therefore, he suggested that the language "or
its designee" be deleted from page 2, line 10. In response to
Representative Halcro, Senator Olson specified that normally the
designee is the executive director. Deleting the aforementioned
language would move away from personality difficulties.
CHAIR MURKOWSKI pointed out that the language "or its designee"
is also found on line 17 of page 2. Therefore, she asked if
Senator Olson would like the language deleted in that location
as well.
SENATOR OLSON answered, "Not at this point."
CHAIR MURKOWSKI directed attention to page 2, line 26, which
requires a "completed application form and the fee required for
licensure under this chapter." She recalled that at the last
hearing there was discussion regarding at what point should the
locum tenens physician obtain licensure in Alaska versus relying
on the locum tenens permit. She asked if the language on page
2, line 26, is acceptable.
SENATOR OLSON said that he agrees that those staying in Alaska
indefinitely or permanently should have a permanent license.
However, there are exceptions. For instance, there may be cases
in which individuals may have difficulties obtaining a fully
certified diploma.
Number 0920
REPRESENTATIVE ROKEBERG asked if the language on page 2, line 26
was part of the amendment he made at the last hearing.
CHAIR MURKOWSKI replied yes. She recalled that Representative
Rokeberg had requested that references to various background
checks should be included. The clearance report from the U.S.
Drug Enforcement Administration (DEA) was added because [the
Division of Occupational Licensing] sent an e-mail saying that
it [wasn't mentioned because the representative from the
division didn't think of it at the time]. In further response
to Representative Rokeberg, Chair Murkowski said that her notes
reflect discussion of [inserting] the language on page 2, line
26.
REPRESENTATIVE ROKEBERG remarked that paragraph (4) forces the
[locum tenens permit holder] to make the application.
CHAIR MURKOWSKI said that her notes reflect that [the committee]
wanted to encourage full-time active licensure after 180 days
[in state on a locum tenens permit].
REPRESENTATIVE ROKEBERG pointed out that there is a 240-day
limitation now, which [with the language in Version L] seems to
exceed the 240-day limitation. If one wanted a 30-day extension
beyond the 240 days, then the individual would have to apply for
licensure.
CHAIR MURKOWSKI said she believes that is correct.
REPRESENTATIVE ROKEBERG remarked that he wasn't sure why that
would be done.
SENATOR OLSON commented that if a person is in the state for 240
days and requests an extension, then the individual should apply
for full licensure.
REPRESENTATIVE ROKEBERG questioned whether paragraphs (1)-(3)
are necessary if [paragraph (4)] is included.
CHAIR MURKOWSKI reminded everyone that [at the last hearing]
there was discussion of an individual who had been [practicing]
in the state for almost 240 days and the individual had decided
to practice in Alaska. However, the individual was going to
miss a window for application and would not be able to practice
[while obtaining full licensure] without the inclusion of
Section 3. Chair Murkowski recalled that Representative
Rokeberg had wanted to ensure that the necessary checks had
occurred if indefinite extensions were going to be allowed.
REPRESENTATIVE ROKEBERG agreed. He said that if subsection (f)
is limited to what Chair Murkowski described, then that would be
acceptable so long as the sponsor viewed it as acceptable.
SENATOR OLSON said that he didn't have a problem with that.
However, he suggested checking with the executive director [of
ASMA] or someone from the Division of Occupational Licensing in
order to be sure that there isn't something he is unaware of.
MR. BULLOCH related that after reviewing the CS, ASMA felt that
Section 3 was fine.
Number 1300
REPRESENTATIVE HALCRO moved that the committee adopt Amendment
1, which reads as follows:
Page 2, line 10,
Delete "or its designee"
REPRESENTATIVE ROKEBERG objected. He pointed out that on page
1, line 5, the legislation refers to a "member of the board"
whereas Section 2 (e) refers to "the board", which he viewed as
problematic.
REPRESENTATIVE HALCRO pointed out that because the legislation
outlines that only the board can grant a request for an
extension. He related his belief that only the board should be
allowed to grant a temporary permit. In response to
Representative Meyer, Representative Halcro confirmed that the
language "executive secretary" on page 1, line 5, would have to
be deleted.
CHAIR MURKOWSKI reminded the committee that there was a due
process concern in that if there was going to be a denial of an
extension, then the individual who made the request should have
the opportunity to present to the board the reasons why the
permit should be continued. That concern was the reasoning
behind deleting "or its designee", she explained. In response
to Representative Rokeberg, Chair Murkowski confirmed that the
board or its designee could make the initial extension. Only
upon denial was due process a concern.
REPRESENTATIVE ROKEBERG maintained his objection. He related
his understanding that the initial permit under Sections 1 and 2
can be granted by the board, a member of the board, or its
executive secretary. The 60-day extension can be granted by the
board or its designee. However, only the board can hand down a
refusal to grant an extension.
REPRESENTATIVE HALCRO asked if there is any due process
protecting an individual who is denied an initial permit.
SENATOR OLSON related his understanding that denial of [an
initial permit application] can be taken to the full board for
reconsideration.
CHAIR MURKOWSKI surmised then that this language would be
consistent with what's currently in statute. She specified that
the intent is to provide due process when there is denial of a
permit during any point in the process. She explained that the
board can deny an extension but a designee of the board cannot
because denial of the permit gets into the previously discussed
issue of due process.
REPRESENTATIVE HALCRO, in response to comments by Representative
Rokeberg, explained that Amendment 1 accomplishes what
Representative Rokeberg wants because only the board can refuse
to grant a request for an extension. Once one is given a
license and returns for renewal or extension, the board or its
designee can grant the extension. However, if the designee
denies the extension request, then the due process is going
before the board at its next meeting.
REPRESENTATIVE ROKEBERG disagreed.
Number 1905
CATHERINE REARDON, Director, Division of Occupational Licensing,
Department of Community & Economic Development, testified via
teleconference. Ms. Reardon explained that the Alaska State
Medical Board and the Division of Occupational Licensing are
under the Administrative Procedures Act. Therefore, both
entities are required to provide the right to appeal or contest
a board action. A denial of a permit, license, or right always
triggers the right to appeal.
REPRESENTATIVE ROKEBERG asked if the [locum tenens physician]
would be allowed to practice pending the appeal.
MS. REARDON said the [locum tenens physician] would not be
allowed to practice pending the appeal if the initial permit had
expired. In further response to Representative Rokeberg, Ms.
Reardon explained that the appeal would be to the board, which
almost always delegates the actual hearing to the hearing
officer and considers the hearing officer's proposed decision.
Although the board has the option of hearing the case, it rarely
does so. Ms. Reardon turned to Sections 2 and 3 of [Version L]
and stressed that two different types of extensions are being
addressed.
REPRESENTATIVE ROKEBERG pointed out that Section 3 refers to the
essential medical services extension. Representative Rokeberg
questioned why the language "or its designee" would need to be
deleted on page 2, line 10, when there is already a statutory
right of appeal to the board.
CHAIR MURKOWSKI related her understanding that leaving in the
aforementioned language would place the designee in the position
of granting or denying a permit, although the permittee would
have the right to appeal to the board.
MS. REARDON agreed with Chair Murkowski's understanding. She
surmised that the policy question is whether to delegate or
designate a denial or whether such a decision should be made by
the board itself. She pointed out that the boards don't have to
delegate or designate these decisions.
REPRESENTATIVE ROKEBERG maintained his objection because the
language is adequate and waiting for an actual board meetings
could take some time. The designee of the board is specified
because the [denial] is an administrative function.
CHAIR MURKOWSKI asked if the sponsor, having heard Ms. Reardon's
comments, had anything to add.
SENATOR OLSON acknowledged that Representative Rokeberg has some
valid concerns. However, deletion of the language "or its
designee" moves away from frivolous rejections and allows the
board to make the decision for the refusal. Although the board
holds quarterly meetings, there are provisions to hold
teleconferences when someone feels strongly that someone should
be refused. The difficulty with [waiting for quarterly
meetings] is that there is a period of time in which the
applicant or permittee isn't of use to anyone because of the
inability to work and thus is an added burden on the facility
with which the individual works.
The committee took an at-ease in order for Chair Murkowski to
pass the gavel to Vice Chair Halcro.
VICE CHAIR HALCRO asked Senator Olson if he supported the
deletion of the language "or its designee" from the legislation.
SENATOR OLSON replied yes.
Number 2260
REPRESENTATIVE ROKEBERG pointed out that a telephonic board
meeting would be required for a 60-day extension. He asked if
this board can take action on a telephonic basis when the issue
is a refusal of a permit.
MS. REARDON replied yes. In further response to Representative
Rokeberg, Ms. Reardon said that she was comfortable with the
removal of the aforementioned language.
REPRESENTATIVE ROKEBERG asked if Ms. Reardon would like to
provide the drafter freedom to craft the language rather than
having a limited amendment.
MS. REARDON said she wasn't sure what the language would look
like.
TAPE 02-68, SIDE B
MS. REARDON expressed concern that if language describing the
permit denial process is inserted, there could be unforeseen
consequences.
REPRESENTATIVE ROKEBERG removed his objection but maintained his
discomfort with the language, which he said should be cleaned
up.
There being no objection, Amendment 1 was adopted.
Number 2327
REPRESENTATIVE MEYER moved to report HCS CSSB 274, Version 22-
LS1393\L, Lauterbach, 4/29/03, as amended out of committee with
individual recommendations and the accompanying zero fiscal
note. There being no objection, HCS CSSB 274(L&C) was reported
from the House Labor and Commerce Standing Committee.
The committee took a brief at-ease.
SB 215-COMMON CARRIER LIQUOR LICENSE
VICE CHAIR HALCRO announced that the next order of business
would be CS FOR SENATE BILL NO. 215(FIN), "An Act relating to
licensing common carriers to dispense alcoholic beverages; and
providing for an effective date."
DON SMITH, Staff to Senator John Cowdery, Senate Transportation
Standing Committee, Alaska State Legislature, informed the
committee that Senator Cowdery introduced SB 215 primarily at
the request of Alaska Airlines. The committee packet should
include documents that outlines the current process. Mr. Smith
related the belief that this legislation would reduce
administrative and clerical burden to the common carriers and
would lower the fees. The major user of this legislation has
now up to 102 licensed aircraft, although the vast majority of
those airplanes aren't flying in Alaska air space. Mr. Smith
explained that CSSB 215(FIN) would change the procedure such
that the first ten licenses would cost $1,000 each, after which
each license would be $100 per license. He concluded by urging
the committee's support of CSSB 215(FIN).
Number 2205
BILL MACKAY, Vice President, Public and Government Affairs,
Alaska Airlines - Seattle, testified via teleconference. Mr.
MacKay provided the following testimony:
Alaska Airlines has requested the current licensing
requirements for common carrier beverage dispensary
licenses be modified for two reasons. First, to
simplify the requirement so that additional aircraft
will not require an entirely new application process
involving filing out the application, supplying
supporting exhibits, posting and publishing the
application for a license. Alaska [Airlines] and the
[Alcohol Beverage Control] Board agree that modifying
the statute to simplify obtaining additional common
carry licenses will reduce the clerical and
administrative work for both Alaska Airlines and the
board and is therefore in the public interest.
Secondly, Alaska Airlines would like the fees reduced.
Alaska [Airlines] currently has 102 aircraft in its
fleet and plans to add additional aircraft each year.
The growth of the fleet substantially exceeds the
growth of our interstate flying. The company does not
have an effective means of limiting the aircraft that
serve Alaska to a select few. And instead operates
all of its aircraft in the state, often to enable us
to provide us single plane service to [and] from
cities in Alaska to cities south or east of Seattle.
Recent examples are our new routes to Washington,
D.C., Boston, and Denver. Since every aircraft must
be separately licensed with the current law and every
license costs Alaska Airlines $450 a year, that's a
$700 biannual few plus $200 license fee. The license
fees have become quite high and will continue to
escalate at a faster rate than the company's
interstate flying will escalate. Alaska only operates
a small portion of our fleet on interstate routes on
any given day. In addition, it should be noted that
none of the other major airlines serving Alaska, with
the possible exception of Delta, obtain Alaska liquor
licenses since they do not operate interstate. Alaska
[Airlines] believes that it pays substantially more
for common carrier licenses than any other licensee in
the state. And it seems fair to us to reduce the fees
to more accurately reflect the cost to the board of
issuing licenses and the interstate presence that
Alaska [Airlines] actually has. If the proposed bill
becomes law, Alaska [Airlines] will still pay fees far
in excess of fees we pay in any other state, and
rightfully so because of our interstate flying.
Number 2099
DOUGLAS GRIFFIN, Director, Alcoholic Beverage Control Board
(ABC), Department of Revenue, testified via teleconference. Mr.
Griffin informed the committee that the board was initially
approached by Alaska Airlines a few years ago. Alaska Airlines
is in unique situation, and licensing all of its airlines seems
like a bit of overkill. From an equity standpoint, this
legislation does make sense. Therefore, the ABC Board does
support it even though there is some cost. The way the
legislation is currently structured it would take a few more
years before any other company would be impacted. The
administrative "fix" is found on page 2, line 1, which allows
the licenses to move to the same biennial cycle. Mr. Griffin
reiterated the ABC Board's support of the legislation, and he
noted that the legislature and the state should be aware that
this legislation will cost some revenue. Mr. Griffin concluded
by urging the committee to pass the legislation.
REPRESENTATIVE ROKEBERG referred to a document with the heading
"SB 215 - License Renewal Breakdown".
MR. GRIFFIN said that document was a way in which to determine
which companies would be impacted by this legislation. He said
he wasn't sure whether [that document] was part of the latest
fiscal note reflecting the Senate version. Basically, no other
company has enough rail cars, buses, or other vehicles that
would fall under the common carrier category impacted by this
bill. Mr. Griffin pointed out that another unique aspect of
Alaska Airlines is that it pays for a full year of licenses
because it operates year round. Therefore, those tourism
companies only pay for half the year due to their seasonal
operations; thus it will be quite some time before those
entities are impacted.
Number 1920
REPRESENTATIVE ROKEBERG asked if the current requirements
require each vehicle, boat, aircraft, or railway buffet car to
be licensed as a common carrier.
MR. GRIFFIN replied yes. If any of the aforementioned operate
between two Alaska ports, the entity has to obtain a common
carrier license. This lead to the notion mentioned earlier of
placing all of an entities rail cars, for example, on the same
renewal cycle. He characterized that provision as a win-win
provision.
REPRESENTATIVE MEYER related his understanding that ERA is on
contract with Alaska Airlines. Therefore, he asked whether ERA
would have to obtain its own liquor license or would ERA fall
under the umbrella of Alaska Airlines.
MR. GRIFFIN answered that ERA is licensed separately. He said
he wasn't sure that ERA still provided alcoholic beverage
service, but when it did the company was licensed separately.
REPRESENTATIVE MEYER acknowledged that this is a minor cost when
compared to the cost of running an aircraft. However, he
pondered whether giving a break to the planes that Alaska
Airlines flies intrastate would be create an advantage over
those carriers that only fly within the state.
VICE CHAIR HALCRO related that he didn't believe any of the in-
state carriers serve alcohol and those wouldn't need a common
carrier license.
MR. GRIFFIN pointed out that there has to be a flight attendant
to serve the alcohol and many of the in-state carriers don't
have flight attendants and thus, by extension, don't serve
alcohol. Mr. Griffin remarked that Alaska Airlines is a
different order of magnitude [when compared to in-state
carriers].
VICE CHAIR HALCRO, upon determining that no one else wished to
testify, closed public testimony and announced that CSSB
215(FIN) would be held until Chair Murkowski returned.
HB 512-UNFAIR CIGARETTE SALES
VICE CHAIR HALCRO announced that the last order of business
would be HOUSE BILL NO. 512, "An Act relating to cigarette
sales; and providing for an effective date."
The committee took an at-ease from 4:27 p.m. to 4:28 p.m.
VICE CHAIR HALCRO reminded the committee that Version 22-
LS1646\F, Ford, 4/26/02, had been adopted [on April 26, 2002]
and thus Version F was before the committee.
Number 1712
NEIL SLOTNICK, Deputy Commissioner, Office of the Commissioner,
Department of Revenue, testified via teleconference. Mr.
Slotnick specified that HB 512 isn't legislation from the
Department of Revenue, although it certainly impacts the
department. This legislation provides the department with the
authority to enforce the Unfair Cigarette Sales Act. Mr.
Slotnick informed the committee that the committee substitute
(CS) was drafted because the original legislation contained many
technical problems with the licensing scheme. Mr. Slotnick
thanked the sponsor and Mike Elerding, Northern Sales, for
working on the CS. However, Mr. Slotnick noted that there are
additional technical problems with [Version F] that may result
in additional conceptual amendments to achieve technical
accuracy. Mr. Slotnick pointed out that the Department of
Revenue does not urge that this legislation be passed out of
committee. This legislation maintains a minimum price for
cigarette sales in the state. Mr. Slotnick stressed, "This is
not a revenue measure. We, the Department of Revenue, are given
the mandate to enforce this act but it is not a tax act, it is
not a revenue act. There will be costs associated with the
passage of this act." However, there is no funding source
connected with this legislation, he pointed out. This
legislation deals with a program that addresses alleged unfair
business practices, which falls outside of the Department of
Revenue's mandate, opined Mr. Slotnick.
Number 1565
MIKE ELERDING, President, Northern Sales Company of Alaska,
Inc., testified via teleconference. Mr. Elerding provided the
following testimony:
There are 25 states in the union and the District of
Columbia that have specific legislation dealing with
Unfair Cigarette Sales practices. House Bill 512
identifies and addresses predatory pricing practices
and would end unfair cigarette practices in Alaska.
The intent of the legislation is three-fold:
1. To end predatory pricing practices with regard to
selling cigarettes at or below cost.
2. To create a level playing field for competition for
the sale and distribution of tobacco products in
Alaska.
3. To reduce youth access to cigarettes by ending
below cost sales of cigarettes.
The climate in cigarette sales has changed
dramatically over the years. Due to efforts of the
health service community, the American Cancer Society
and, bolstered by the Master Settlement Agreement,
government, business and the public as a whole have
come to recognize that cigarettes are a commodity with
which there are associated certain health risks and,
as such, must be marketed and sold in a manner
different from the common "free enterprise" products.
These changes reflect a philosophical change toward
more control of how commerce in cigarette [sales] is
conducted and how to prevent youth access, together
with the philosophy of assisting the legitimate
business interest in complying with tobacco laws
without losing the ability to sell these products.
In Alaska the manufacturer's list price on a carton of
cigarettes is the same for every wholesale distributor
regardless of the volume purchased. The current
manufacturer's list price for a carton of full revenue
cigarettes is $27.64. The state of Alaska collects
$10.00 in excise tax for every carton, bringing the
[basic] wholesale cost on a carton of cigarettes to
$37.64. The Department of Revenue receives a copy of
every manufacturers invoice for each carton of
cigarettes imported into the state. These invoice
copies assure the state that licensed wholesalers are
remitting the appropriate amount of excise tax to the
state. And based on these invoice copies the
department can verify that the invoice cost on
cigarettes is the same for all wholesalers ....
The actual retail price on a carton of cigarettes can
range anywhere from the mid thirty dollar range to the
high forties. Today in Ketchikan you can buy a carton
of Marlboro's at retail from a large national chain
store for $35.15, which is $2.49 below the
manufacturer's list price to wholesale. Large Multi-
state chain stores are employing predatory pricing
practices by using price promotions on cigarettes to
attract store traffic. The result of these pricing
practices is to keep the cost on a carton of
cigarettes artificially low.
Large national chain stores can absorb the cost of
selling cigarettes below cost because they are looking
to make a sale on a TV or VCR to a consumer who comes
in to purchase the cheap cigarette prices. Tobacco
wholesalers do not have the luxury of making up for
low margin sales by selling high end consumer goods.
And these predatory pricing practices by the large
multi-state operators are injuring fair competition in
the wholesale distribution community. And one
unintended consequence of this pricing practice is
that by keeping the cost of cigarettes artificially
low it provides greater access to these products by
underage consumers.
The question you have to ask yourself is "are
cigarettes the type of commodity that should be
marketed and promoted in Alaska on the basis of
price?" Based on the fact that we are among one of
the few states charging the highest cigarette excise
taxes in the nation, I suspect that the answer is ...
that Alaska does not advocate the marketing of
cigarettes based on price.
The passage of HB 512 will create a new law that will
mandate minimum price requirements for cigarettes at
wholesale and retail. This law will minimize the
potential for wholesalers and retailers to reduce the
price of these products as a means of marketing
cigarettes to minors. And it creates a level playing
field for Alaska based wholesale distributors by
ending predatory pricing practices of large multi-
state operators.
The department of revenue had some initial
reservations regarding this legislation however, we
have worked closely with representatives from the
Department and I believe that the legislation in its
current form addresses most or all of their concerns.
I urge your support of HB 512 and ask for a favorable
recommendation from this committee.
[original punctuation provided]
Number 1363
REPRESENTATIVE ROKEBERG asked if stores such as Costco could
receive shipments from its outside distributions warehouses and
bypass any Alaskan wholesalers.
MR. ELERDING pointed out that anyone selling cigarettes in the
state must be licensed by the state. He emphasized that the
manufacturer's list price on a carton of cigarettes is the same
for any wholesaler doing business [in the nation]. In further
response to Representative Rokeberg, Mr. Elerding specified that
manufacturers don't have promotions lowering the list price.
REPRESENTATIVE ROKEBERG informed the committee that recently he
purchased a five-pack of Marlboros in which he received two
packs free for the price of five.
MR. ELERDING said that's a contract arrangement whereby the
manufacturer was under a contract with a retail store which will
provide a buy-down for those products. Those buy-downs are
available to all retail outlets. Mr. Elerding highlighted his
point that he could purchase cigarettes from Wal-Mart at a
cheaper price than he could from the manufacturer. Therefore,
he questioned whether cigarettes are being promoted as a loss
leader and are the sale cigarettes being promoted at a reduced
price. He said he wasn't sure that is what the state would
support in terms of the state's policy and practice on the sale
of cigarettes.
Number 1203
REPRESENTATIVE MEYER related his understanding that large
companies are doing with cigarettes the same thing that can be
done with various other items being sold. He noted that it's
common for large companies to use loss leaders.
MR. ELERDING agreed, but pointed out that cigarettes and tobacco
are controlled products that have laws with regard to the
consumption of tobacco. "My question is does Alaska really want
to endorse price promotions ... with tobacco products as a means
of getting people in the store to buy other products." He
further pointed out that as the price of tobacco is lowered, the
product becomes more available to underage consumers.
REPRESENTATIVE MEYER disagreed because underage consumers should
not purchase the tobacco to begin with, which is why the law to
place tobacco products behind the counter was passed.
Representative Meyer asked if Mr. Elerding would recommend
extending this to all tobacco products and alcohol.
MR. ELERDING said that this legislation deals specifically with
cigarettes, which he supports. However, he recognized that
there are disparities in how tobacco products are taxed in the
state as an in-state distributor versus a mail order
distributor.
REPRESENTATIVE MEYER related that a Brown & Williamson
representative had expressed concern that retailers were being
paid by Phillip Morris in order to obtain prime shelf space.
MR. ELERDING clarified that HB 512 addresses both the wholesale
cost and the retail price of a carton of cigarettes by mandating
minimum prices. The Brown & Williamson issue is one regarding
the display of products and how Phillip Morris controls
contracts for buy-downs. If one participates in the Brown &
Williamson program, then the Phillip Morris buy-down isn't
available. He noted that Phillip Morris sells the most tobacco
products.
Number 0983
BOB GALOSICH, Vice President, Wholesale Operations, Alaska
Commercial Company, Frontier Expediters, testified via
teleconference. He informed the committee that Alaska
Commercial Company operates Frontier Expediters. Mr. Galosich
related that Frontier Expediters is in agreement with Mr.
Elerding's statements. With regard to loss leaders, Mr.
Galosich pointed out that loss leader pricing is a retail issue
not a wholesale issue. He explained that there are two ways to
go to market. There is either the high:low philosophy that uses
loss leaders and the margins are picked up from other items or
the every day low pricing scheme. Both ways can be used because
there is a broad line products. Therefore, the large box
retailers with wholesale buying privileges employ 0 percent to
draw folks in the store and use 14 percent on general
merchandise, which is where the profit is made. However,
wholesalers are typically in the specialty business with short
lines of distribution that are generally competitive lines that
don't allow variance in profit. Furthermore, the [wholesalers]
have a very fine margin on which to operate. Therefore, there
is no level playing field. Mr. Galosich pointed out that with
issues of pricing, one must compare retail versus retail and
wholesale versus wholesale because the two operate and go to
market differently. In conclusion, Mr. Galosich reminded the
committee that the intent of HB 512 is to place wholesalers and
retailers on a level playing field with everyone making [some
profit] in the end.
Number 0836
BOBBY SCOTT, Jan's Distributors, testified via teleconference.
He noted the he has e-mailed his comments to the committee. Mr.
Scott turned to the issue of the buy-down at the retail level.
He related his understanding, after speaking with his RJ
Reynolds's contact, that in the states with a minimum sale law
the promotions for buying down go away. Therefore, some of the
aforementioned concerns may be eliminated.
REPRESENTATIVE ROKEBERG directed attention to page 6, line 11,
Section 43.50.560 and inquired as to the meaning of paragraph
(3).
MR. SCOTT explained that if a carton of cigarettes costs $5 to
everyone then the $10 tax would be added to that, totaling $15.
From that total, a 4 percent mark up would be added to the
price.
REPRESENTATIVE ROKEBERG asked whether the mark up would be 5.5
percent due to the cartage. Furthermore, he asked whether there
would be a cost differential due to the location of the store.
MR. SCOTT answered no. In further response to Representative
Rokeberg, Mr. Scott explained that the cartage prices would be
the same as well because it represents the cost to deliver the
product to store level. He confirmed that the cost to deliver
the product to the premises is absorbed in the 4.5 percent.
REPRESENTATIVE ROKEBERG inquired as to how the 4.5 percent
reflect the current types of mark up on average. He asked, "Is
that approximately what your mark ups are currently?"
MR. SCOTT replied no.
REPRESENTATIVE ROKEBERG related his understanding that there can
only be a mark up of only 4 or 4.5 percent under this
legislation.
MR. SCOTT emphasized that the [aforementioned mark up] isn't
being obtained now. [The current mark up] is a little less than
half [4.5 percent]. In further response to Representative
Rokeberg, Mr. Scott confirmed that everyone in wholesale would
have to [mark up] 4 percent and thus the playing field would be
level and whatever one chooses to sell above the 4.5 percent is
up to the individual [business]. The 4.5 percent is a threshold
that an entity can't go below.
Number 0457
CYNTHIA DRINKWATER, Assistant Attorney General, Fair Business
Practices Section, Civil Division (Anchorage), Department of
Law, testified via teleconference. Ms. Drinkwater expressed
concern that HB 512 is anti-competitive and unnecessary. The
intent of the legislation is to address predatory pricing.
However, there are statutes addressing this at the state and
federal levels. Ms. Drinkwater turned attention to page 2, line
5, where Section 43.50.460 specifies the prohibited conduct and
the penalties for such. She also directed attention to page 5,
line 15, Section 43.50.540, which specifies the remedies for the
violations. She explained that Alaska's anti-trust provisions
allow for an injured person to bring an action seeking
injunctive relief. If the defendant's conduct was shown to be
wilful, the injured person is entitled to treble damages.
Alaska law also provides for criminal penalties as well,
although the current statutes are stricter.
MS. DRINKWATER said that the case law on predatory pricing makes
it clear that anti-trust laws are established not to prevent
competitive price-cutting but to address conduct that goes
beyond that. The Supreme Court has, on numerous occasions,
emphasized that simple below cost pricing isn't enough to equate
anti-trust violations. Anti-trust laws are in place for the
protection of competition not for the protection of competitors.
Therefore, anti-trust laws are intended to promote and maintain
legitimate price competition. Because the courts have been
skeptical of predatory pricing claims, she suggested that
businesses may be seeking an alternative or means to circumvent
the established statutory law and case law. Therefore, HB 512
would make it easier for a plaintiff to obtain injunctive relief
for damages while shifting the burden from private parties using
the judicial process to resolve disputes. Ms. Drinkwater noted
that although [Version F] makes this less expensive for the
Department of Revenue, [tape changes]...
TAPE 02-69, SIDE A
MS. DRINKWATER continued by pointing out that there are still
costs involved for the department in following the requirements
of [HB 512]. [Version F] has a provision that would allow DCED
to spend or revoke licenses of retailers who have tobacco
endorsements. Therefore, there is the potential for 1,700
tobacco endorsements to be subject to action if the retailers
were found to be in violation of the provisions of the statute
and thus there could be a huge administrative expense related to
HB 512. Ms. Drinkwater reiterated that this bill is unnecessary
due to the already existing laws addressing predatory pricing.
VICE CHAIR HALCRO announced that HB 512 would be held over and
public testimony would not be closed.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:00 p.m.
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