05/08/2002 03:25 PM House L&C
| Audio | Topic |
|---|
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
May 8, 2002
3:25 p.m.
MEMBERS PRESENT
Representative Lisa Murkowski, Chair
Representative Andrew Halcro, Vice Chair
Representative Kevin Meyer
Representative Pete Kott
Representative Norman Rokeberg
Representative Harry Crawford
Representative Joe Hayes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 215(FIN)
"An Act relating to licensing common carriers to dispense
alcoholic beverages; and providing for an effective date."
- MOVED CSSB 215(FIN) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 270(L&C)
"An Act extending the termination date of the Board of
Dispensing Opticians; relating to the regulation of dispensing
opticians; and providing for an effective date."
- MOVED HCS CSSB 270(L&C) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 191(JUD)
"An Act relating to insurance pooling by air carriers."
- MOVED HCS CSSB 191(L&C) OUT OF COMMITTEE
PREVIOUS ACTION
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
04/29/02 (H) Heard & Held
MINUTE(L&C)
05/06/02 (H) L&C AT 3:15 PM CAPITOL 17
05/06/02 (H) Heard & Held
MINUTE(L&C)
05/08/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: SB 270
SHORT TITLE:DISPENSING OPTICIANS:EXTEND BD/REGULATION
SPONSOR(S): RLS BY REQUEST OF LEG BUDGET & AUDIT
Jrn-Date Jrn-Page Action
02/01/02 2089 (S) READ THE FIRST TIME -
REFERRALS
02/01/02 2089 (S) L&C, FIN
02/14/02 (S) L&C AT 1:30 PM BELTZ 211
02/14/02 (S) Moved CS(L&C) Out of
Committee
02/14/02 (S) MINUTE(L&C)
02/19/02 2222 (S) L&C RPT CS 3DP 1NR SAME TITLE
02/19/02 2222 (S) DP: STEVENS, DAVIS,
TORGERSON;
02/19/02 2222 (S) NR: AUSTERMAN
02/19/02 2222 (S) FN1: (CED)
03/25/02 2517 (S) FIN RPT CS(L&C) 5DP 3NR
03/25/02 2518 (S) DP: KELLY, AUSTERMAN, OLSON,
WILKEN,
03/25/02 2518 (S) LEMAN; NR: DONLEY, GREEN,
WARD
03/25/02 2518 (S) FN1: (CED)
03/25/02 (S) FIN AT 9:00 AM SENATE FINANCE
532
03/25/02 (S) Moved Out of Committee
03/25/02 (S) MINUTE(FIN)
03/28/02 (S) RLS AT 8:30 AM FAHRENKAMP 203
03/28/02 (S) -- Time Change --
03/28/02 (S) MINUTE(RLS)
04/02/02 2586 (S) RULES TO CALENDAR 4/2/02
04/02/02 2588 (S) READ THE SECOND TIME
04/02/02 2588 (S) L&C CS ADOPTED UNAN CONSENT
04/02/02 2589 (S) ADVANCED TO THIRD READING
UNAN CONSENT
04/02/02 2589 (S) READ THE THIRD TIME CSSB
270(L&C)
04/02/02 2589 (S) PASSED Y18 N- E2
04/02/02 2589 (S) EFFECTIVE DATE(S) SAME AS
PASSAGE
04/02/02 2593 (S) TRANSMITTED TO (H)
04/02/02 2593 (S) VERSION: CSSB 270(L&C)
04/03/02 2770 (H) READ THE FIRST TIME -
REFERRALS
04/03/02 2770 (H) L&C, FIN
04/12/02 (H) L&C AT 3:15 PM CAPITOL 17
04/12/02 (H) Heard & Held
04/12/02 (H) MINUTE(L&C)
04/17/02 (H) L&C AT 3:15 PM CAPITOL 17
04/17/02 (H) <Bill Postponed>
05/01/02 (H) L&C AT 3:15 PM CAPITOL 17
05/01/02 (H) Heard & Held
MINUTE(L&C)
05/03/02 (H) L&C AT 3:15 PM CAPITOL 17
05/03/02 (H) Heard & Held
MINUTE(L&C)
05/08/02 (H) L&C AT 3:15 PM CAPITOL 17
BILL: SB 191
SHORT TITLE:INSURANCE POOLING BY AIR CARRIERS
SPONSOR(S): SENATOR(S) TAYLOR
Jrn-Date Jrn-Page Action
04/12/01 1094 (S) READ THE FIRST TIME -
REFERRALS
04/12/01 1094 (S) L&C, JUD
04/17/01 (S) L&C AT 1:30 PM BELTZ 211
04/17/01 (S) Heard & Held
04/17/01 (S) MINUTE(L&C)
04/19/01 (S) L&C AT 1:30 PM BELTZ 211
04/19/01 (S) Scheduled But Not Heard
04/24/01 (S) L&C AT 1:30 PM BELTZ 211
04/24/01 (S) Heard & Held
04/24/01 (S) MINUTE(L&C)
04/28/01 (S) L&C AT 9:30 AM BELTZ 211
04/28/01 (S) Scheduled But Not Heard --
Time Change --
05/01/01 (S) L&C AT 1:30 PM BELTZ 211
05/01/01 (S) Moved CS(L&C) Out of
Committee
05/01/01 (S) MINUTE(L&C)
05/02/01 1431 (S) L&C RPT CS 4NR NEW TITLE
05/02/01 1431 (S) NR: PHILLIPS, AUSTERMAN,
DAVIS,
05/02/01 1431 (S) TORGERSON
05/02/01 1431 (S) FN1: ZERO(CED)
05/04/01 (S) JUD AT 4:45 PM BELTZ 211
05/04/01 (S) Heard & Held -- Time Change -
05/04/01 (S) MINUTE(JUD)
05/05/01 (S) JUD AT 8:45 PM BELTZ 211
05/05/01 (S) Moved SCS(JUD) Out of
Committee -- Time Change --
05/05/01 (S) MINUTE(JUD)
05/06/01 1574 (S) JUD RPT CS 2DP 3NR NEW TITLE
05/06/01 1574 (S) DP: TAYLOR, COWDERY;
05/06/01 1574 (S) NR: ELLIS, THERRIAULT, DONLEY
05/06/01 1574 (S) FN1: ZERO(CED)
05/02/02 (S) RLS AT 10:30 AM FAHRENKAMP
203
05/02/02 (S) -- Time Change --
05/02/02 (S) MINUTE(RLS)
05/06/02 3182 (S) RULES TO CALENDAR 1OR 5/6/02
05/06/02 3184 (S) READ THE SECOND TIME
05/06/02 3184 (S) JUD CS ADOPTED UNAN CONSENT
05/06/02 3184 (S) ADVANCED TO THIRD READING
UNAN CONSENT
05/06/02 3184 (S) READ THE THIRD TIME CSSB
191(JUD)
05/06/02 3184 (S) PASSED Y20 N-
05/06/02 3189 (S) TRANSMITTED TO (H)
05/06/02 3189 (S) VERSION: CSSB 191(JUD)
05/07/02 3415 (H) READ THE FIRST TIME -
REFERRALS
05/07/02 3415 (H) L&C
05/08/02 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
DON SMITH, Staff
to Senator John Cowdery
Senate Transportation Standing Committee
Alaska State Legislature
Juneau, Alaska 99801
POSITION STATEMENT: Testified on behalf of the sponsor of CSSB
215(FIN), Senator Cowdery.
BILL MACKAY, Vice President
Public and Government Affairs
Alaska Airlines - Seattle
(No address provided)
POSITION STATEMENT: During discussion of CSSB 215(FIN),
answered questions.
DOUGLAS GRIFFIN, Director
Alcoholic Beverage Control Board
Department of Revenue
550 W 7th Avenue, Suite 540
Anchorage, Alaska 99501-3510
POSITION STATEMENT: Testified on SB 215.
HEATHER BRAKES, Staff
to Senator Gene Therriault
Joint Committee on Legislative Budget and Audit
Alaska State Legislature
Capitol Building, Room 121
Juneau, Alaska 99801
POSITION STATEMENT: On behalf of the Joint Committee on
Legislative Budget and Audit, explained Version R of SB 270.
CATHERINE REARDON, Director
Division of Occupational Licensing
Department of Community & Economic Development
PO Box 110806
Juneau, Alaska 99811-0806
POSITION STATEMENT: Answered questions during discussion of SB
270.
PAT DAVIDSON, Legislative Auditor
Division of Legislative Audit
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During discussion of SB 270, informed the
committee of the schedule for renewals of boards and commissions
in the coming years.
CAROLYN THOMAS, Staff
to Senator Robin Taylor
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 191 on behalf of the sponsor,
Senator Taylor.
KIP KNUDSON
Alaska Air Carrier's Association
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 191 with a few
caveats.
VICKI TURNER MALONE
PO Box 2178
Bethel, Alaska 99559
POSITION STATEMENT: Testified in opposition to SB 191.
JIM WILSON
Coastal Helicopters
2355 Ka-See-An Drive
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 191
conceptually.
JOHN GRUMMETT, President
Alaska Independent Insurance Agents & Brokers, Inc.;
Shattuck & Grummett Insurance
301 Seward Street
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SB 191 as
currently written.
KEVIN HAND, Staff
to Representative Andrew Halcro
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As staff to the subcommittee on aviation
insurance, answered questions during discussion of SB 191.
ACTION NARRATIVE
TAPE 02-73, SIDE A
Number 0001
CHAIR LISA MURKOWSKI called the House Labor and Commerce
Standing Committee meeting to order at 3:25 p.m.
Representatives Murkowski, Halcro, Meyer, Rokeberg, and Crawford
were present at the call to order. Representative Kott arrived
as the meeting was in progress.
SB 215-COMMON CARRIER LIQUOR LICENSE
CHAIR MURKOWSKI announced that the first 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."
CHAIR MURKOWSKI reminded the committee that this legislation was
set aside at a past hearing because committee members had
questions for which there were no answers at the time.
Number 0107
DON SMITH, Staff to Senator John Cowdery, Senate Transportation
Standing Committee, Alaska State Legislature, announced that
Representative Rokeberg was correct in his interpretation of
Title IV in that this legislation would raise the fees for the
seasonal licenses from $700 to $1,000. However, the fiscal note
would be less because the [seasonal] carriers would pay a
slightly higher rate. He noted that seasonal license holders
pay 50 percent of the fee. In response to Chair Murkowski, Mr.
Smith related that a lobbyist for Alaska Airlines informed him
that there are no additional fees [imposed] in other states.
CHAIR MURKOWSKI noted that the committee packet should include
an e-mail from Doug Griffin dated with today's date. Chair
Murkowski asked if Mr. McKay could shed any light as to why
Alaska is unique with regard to the amount assessed on the
common carrier licenses for Alaska Airlines.
Number 0318
BILL MACKAY, Vice President, Public and Government Affairs,
Alaska Airlines - Seattle, testified via teleconference. Mr.
MacKay related that he had confirmed with [Alaska Airlines']
finance group that the charges on the systemwide state-to-state
license fee page are only charges associated with liquor
licenses. Illinois did want to amend [its fees], he noted, to a
flat $60 charge rather than the previous $1,260. Illinois only
requires Alaska Airlines to license one aircraft. He also noted
that Colorado and Maine are missing from the list because those
contracts were recently initiated. Mr. MacKay said that he had
no idea how Alaska's formula has gotten so out of line in
comparison to the other states.
REPRESENTATIVE ROKEBERG asked if Mr. MacKay has seen a fee
schedule of all the 50 states and other jurisdictions. He asked
if there are any fees in Mexico.
MR. MACKAY answered that he hasn't seen such a spreadsheet and
didn't know the answer regarding fees for Mexico, but offered to
provide that information as well as the information regarding
Colorado and Maine.
Number 0462
DOUGLAS GRIFFIN, Director, Alcoholic Beverage Control Board,
Department of Revenue, testified via teleconference. Mr.
Griffin pointed out that Alaska Airlines is unique due to the
number of licenses it holds. Beside the 104 common carrier
licenses held by Alaska Airlines, only 111 others are held.
Alaska Airlines pays full price for those 104 common carrier
licenses. Of the other 111 licenses, 89 are seasonal and 22 are
year round license, which is why this fee increase doesn't
generate much additional revenue. Mr. Griffin pointed out that
AS 04.11.680 is the provision that provides the seasonal common
carriers a break.
MR. GRIFFIN said that with this legislation, the offset does
cost the state a little less, although it doesn't make up all
the breaks Alaska Airlines receives. Mr. Griffin related his
belief that this is an area in which the board realizes that
Alaska's statutes are probably in need of comprehensive
revision. Mr. Griffin, in response to Representative Rokeberg,
confirmed that the board will submit a revised fiscal note.
CHAIR MURKOWSKI, upon determining no one else wished to testify,
closed public testimony.
Number 0727
REPRESENTATIVE MEYER moved to report CSSB 215(FIN) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, CSSB 215(FIN) was
reported from the House Labor and Commerce Standing Committee.
SB 270-DISPENSING OPTICIANS:EXTEND BD/REGULATION
CHAIR MURKOWSKI announced that the next order of business would
be CS FOR SENATE BILL NO. 270(L&C), "An Act extending the
termination date of the Board of Dispensing Opticians; relating
to the regulation of dispensing opticians; and providing for an
effective date."
Number 0782
REPRESENTATIVE ROKEBERG moved to adopt Version 22-LS1382\R,
Lauterbach, 5/8/02, as the working document. There being no
objection, Version R was before the committee.
Number 0813
HEATHER BRAKES, Staff to Senator Gene Therriault, Joint
Committee on Legislative Budget and Audit, Alaska State
Legislature, explained that Version R retains the mandatory
licensure of dispensing opticians and retains the board with the
original extension date of 2005. Version R includes some intent
language in Section 1, which addresses the board's deficit by
directing the Division of Legislative Audit to review the
board's progress at the next sunset review date. This version
includes a career progression program, which is a study course
that the board wanted included as a licensing requirement. The
hours of training under a licensed professional was decreased to
1,800 hours, which is approximately one year. Version R
provides for a dispensing optician's assistant, which is someone
who wants to be employed under another licensed professional. A
dispensing optician's assistant wouldn't be mandated to work
toward licensure. The language relating to the dispensing
optician's assistant is based on an amendment presented by the
department on behalf of the board.
MS. BRAKES pointed out that on page 4, line 16, of Version R the
language "direct supervision of a" was deleted. She requested
that the committee consider reinserting the language
"supervision of a".
CHAIR MURKOWSKI inquired as to why the word "direct" wouldn't be
included. Isn't "direct supervision" important, she asked.
MS. BRAKES said the recommendation was made by the Division of
Legal and Research Services.
CHAIR MURKOWSKI inquired as to how in debt the Board of
Dispensing Opticians is and a realistic idea of [when] the board
could break even.
Number 1079
CATHERINE REARDON, Director, Division of Occupational Licensing,
Department of Community & Economic Development (DCED), noted
that other programs and boards have, over time, accumulated
insignificant deficit and thus fees are raised such that the
group ultimately pays itself back. Last year, before the Board
of Dispensing Opticians' renewal, the board had a $28,000
deficit. The renewal will be up in a year and Ms. Reardon
expected the board to have fallen further into deficit, perhaps
to $32,000. Therefore, paying the deficit all at once would
result in about $360 more [per dispensing optician] plus the
approximately $12,000-$14,000 biennial under collection.
Generally, the division doesn't ask professions to pay back
deficits all at once, rather a payment plan is utilized.
CHAIR MURKOWSKI directed attention to page 1, line 9, which
specifies that during the board's next review there will be an
analysis with regard to the board's compliance. However,
Version R provides that the board [won't be renewed] for three
years. Chair Murkowski inquired as to whether that timeframe
should be shortened.
Number 1206
MS. REARDON noted that she shares significant responsibility for
letting the board be in a situation in which it hasn't paid back
its deficit. It won't simply be left to the board to increase
fees, she said, but rather it will be the decision of the
division. She pointed out that in February or March there will
be the opportunity to reset fees. Ms. Reardon said she didn't
believe three years was too long [because it] will allow the
Legislative Audit Division to review the impact of the fee
increase.
MS. REARDON turned to the difference between "direct
supervision" versus "supervision." She pointed out that current
statute includes a definition of "supervision" as follows: "the
provision of any needed direction, control, consultation,
instruction, evaluation, and personal inspection of the work
being performed." The legislation specifies that the unlicensed
assistants must be supervised by a licensee and thus the
licensee must provide any needed direction, which is a fairly
general term that wouldn't necessarily mean on-site supervision.
"Direct supervision", which is currently used in the apprentice
statute, has been defined in regulation to mean that "the
supervisor is physically present at the same site as the
supervisee while dispensing optician tasks are being performed."
Therefore, she suggested that the reference to "direct
supervision for apprentices" probably does mean that the board
wants the apprentices to be under direct supervision so that
they can be trained. She related her belief that the board
would also want the unlicensed assistants to be under direct
supervision.
Number 1397
REPRESENTATIVE ROKEBERG reminded the committee that there have
been concerns with regard to the 2005 date. He mentioned that
[the legislature] wants to have [the board] come before the
legislature again and have another audit.
CHAIR MURKOWSKI recalled that during testimony, the issue of the
practical exam was brought up repeatedly. [Version R] doesn't
include it, although the progression program is included. Some
folks expressed concern that the practical exam is important and
perhaps with a shorter time period for legislative review, the
legislature could review the practical exam at that time.
REPRESENTATIVE ROKEBERG asked if the board could act on its own
through regulation [and include the practical exam].
MS. REARDON said she didn't believe that the board could require
the practical exam by regulation because the exams that need to
be passed are specified in statute.
REPRESENTATIVE ROKEBERG turned attention to Section 6(a)(4) and
asked if the board could [by regulation] require an applicant to
pass a course in operating the machine with which everyone has
difficulty.
MS. REARDON related her understanding that [Section 6(a)(4)]
refers to an academic or training course of study. However, she
supposed that at the end of the course one must pass a test
showing [the individual can operate the machine]. Still, she
said she believes that there would have to be a regulation that
would pass legal muster. She expected the board to adopt in
regulation the need for completion of the career progression
program, which includes written exams and requirements that
demonstrate to the supervisor that the individual can do certain
things. It would be very difficult to have a regulation
requiring the practical exam since the practical exam has been
removed from statute.
Number 1589
REPRESENTATIVE HALCRO moved that the committee adopt Amendment
1, as follows:
Page 4, line 16:
Following "the"
Insert "supervision of a"
There being no objection, Amendment 1 was adopted.
REPRESENTATIVE MEYER returned to the 2005 date and asked if
there had been a decision on that.
CHAIR MURKOWSKI said that although changing the date has been
discussed, no decision has been made yet.
Number 1631
PAT DAVIDSON, Legislative Auditor, Division of Legislative
Audit, Alaska State Legislature, informed the committee that in
2005 there will be ten occupational-related boards and
commissions going through the legislative process. This year
there were only five [boards and commissions] that the committee
had to address. The proposal to combine the psychologist and
social workers will also occur in 2005, she noted.
Number 1697
REPRESENTATIVE MEYER moved that the committee adopt Amendment 2,
as follows:
Page 1, line 14:
Delete "2005"
Insert "2004"
There being no objection, Amendment 2 was adopted.
REPRESENTATIVE ROKEBERG said that the letter of intent needed to
be revisited because it refers to the board reporting its
findings in 2004. Representative Rokeberg moved that the
committee amend the letter of intent such that it refers to June
30, 2003, rather than June 30, 2004. There being no objection,
the letter of intent was amended as specified.
Number 1751
REPRESENTATIVE HALCRO moved to report HCS CSSB 270, Version 22-
LS1382\R, Lauterbach 5/8/02, as amended out of committee with
individual recommendations and the accompanying fiscal note and
amended letter of intent. There being no objection, HCS CSSB
270(L&C) was reported from the House Labor and Commerce Standing
Committee.
SB 191-INSURANCE POOLING BY AIR CARRIERS
CHAIR MURKOWSKI announced that the final order of business would
be CS FOR SENATE BILL NO. 191(JUD), "An Act relating to
insurance pooling by air carriers."
Number 1826
CAROLYN THOMAS, Staff to Senator Robin Taylor, Alaska State
Legislature, read the following portions of the sponsor
statement:
SB 191 would allow Alaska's air carriers to pool for
property/casualty insurance. This is not a new
concept. Since 1988, the pooling concept has been
working effectively for the majority of Alaska's local
governments and school districts, and has reduced
insurance costs and increased loss control and safety.
The effects of the September 11th attacks threaten the
viability of many of Alaska's air carriers as aviation
insurance rates have risen even further than
previously predicted. Although the aviation insurance
market has been hardening for many years, the cost of
insurance has reached a crisis point since last fall,
increasing 20-300 percent depending on a company's
claims. Many insurance companies have left the Alaska
market, making the purchase of aviation insurance even
more difficult. Increased insurance costs mean higher
costs of transportation for all goods and services in
the majority of Alaska's communities.
SB 191 permits air carriers to group together to self-
insure, purchasing reinsurance of a large self-insured
retention. With this large "deductible", air carriers
share a financial stake in each other's claims. This
motivates the industry to police itself, with more
focus on loss prevention, safety, and training. Pools
produce not only cost relief, but also increased
passenger and pilot safety.
Patterned after the very successful statute which
allows cities, boroughs, school districts and REAA's
to pool, this bill imposes stricter financial
requirements on a joint aviation insurance arrangement
to further protect Alaskans and ensure the financial
strength of the pool. SB 191 is a necessary tool for
keeping Alaska's transportation network safe and
viable while positively affecting the economy.
REPRESENTATIVE HALCRO inquired as to how much money will be
required to capitalize this pool. He also asked from where the
money is going to come.
MS. THOMAS answered that statutorily SB 191 will require $1.5
million. However, it is believed that [the pool] would be
better capitalized with at least $5 million. She reminded the
committee that last year Congressman Don Young pledged support
for funding this pool and until the funding source is in place
the pool won't happen. She informed the committee that it has
never been the intent to fund the pool with state funds.
Number 1965
REPRESENTATIVE HALCRO clarified that last year Congressman Young
clearly said that it's the state's responsibility to find the
money to fund this pool. Congressman Young further said that
Alaska shouldn't look to him to find federal funds to fund this
pool. Representative Halcro turned to reinsurance and asked if
there have been any discussions with the industry regarding the
availability of reinsurance if the pool came to fruition. He
pointed out that the committee packet doesn't include any
letters of support from the air carriers or any background
information with regard to how the pool would work.
Representative Halcro related his understanding that the
legislation establishes a structure and leaves several
unanswered questions.
MS. THOMAS confirmed that the legislation does establish a
structure so that this option is available. She noted that the
air carriers are in support of the legislation.
Number 2021
REPRESENTATIVE ROKEBERG inquired as to Senator Taylor's
understanding of Congressman Young's commitment [to this pool].
Representative Rokeberg related his understanding that
Congressman Young would work to obtain funding [for this pool].
MS. THOMAS agreed with Representative Rokeberg's understanding
and added that Congressman Young hasn't withdrawn that
commitment.
REPRESENTATIVE ROKEBERG related his further understanding that
there was an endeavor to lobby support in Congress to establish
this.
MS. THOMAS informed the committee the funding for this first
came up in February 2001 in Ketchikan and it was discussed again
when Congressman Young was in Juneau.
REPRESENTATIVE HALCRO said that he remembered the conversation,
which was held in the House caucus room, very clearly. He
recalled bringing up the subject of obtaining federal money for
improvements at rural airports. The aforementioned subject
dovetailed into the availability of insurance for air carriers.
Representative Halcro reiterated that he clearly remembered
Congressman Young saying that he found it difficult to find $20-
$30 million to put into a pool for private aviation companies
and it should be the state's responsibility to find the money.
He pointed out that Congressman Young repeated the
aforementioned sentiment in a recent closed caucus.
Representative Halcro expressed concern with passing this
legislation with some expectation [that the federal government
will provide the funds]. He reminded the committee that last
year there was significant research on pooling, which found that
there would need to be a capitalized pool of at least $20
million. A $1.5 million capitalized pool doesn't provide very
much, when the average payout of an aircraft accident can be
upwards of $10 million. He expressed concern with passing
legislation that's a hollow statement.
CHAIR MURKOWSKI inquired as to whether the air carriers can do
this presently.
MS. THOMAS related her understanding that without legislation
such as SB 191, the air carriers can't pool for insurance.
CHAIR MURKOWSKI recalled that when this issue was discussed in
the aviation subcommittee, the Division of Insurance clearly
stated that this is not insurance and not subject to regulation
by the director. The aviation subcommittee recommended a
reinsurance pool as opposed to the joint pool being suggested in
SB 191.
Number 2220
KIP KNUDSON, Alaska Air Carrier's Association, testified via
teleconference. Mr. Knudson announced that the association does
support the legislation with a few caveats. Currently, the
aviation industry can form a reciprocal insurance arrangement.
Although a reciprocal insurance arrangement is similar to the
proposal embodied in SB 191, a reciprocal insurance arrangement
would require the pool's group to register with the state's
Division of Insurance as an insurance company. Under SB 191,
the risk pool wouldn't have to register which would probably
result in a little less paperwork and a smaller overhead
requirement. Mr. Knudson explained that although [the air
carriers] do have the option to pool their risk, it hasn't been
done because of the reserve requirements for the pool to work
adequately. From discussions with the Division of Insurance,
Mr. Knudson related his understanding that reserves should match
losses. The Division of Insurance [reported that] in 2001 the
aviation industry statewide caused insurance companies to payout
a total of $45 million. Therefore, the air carriers pool would
want to have a minimum of $45 million [in reserves]. He
questioned whether the $45 million figure included air carriers
operating in Alaska that insure all of the fleet outside.
MR. KNUDSON turned to Congressman Young's position and noted
that the association has contacted his office with regard to his
support for feeding this money into the insurance pool. To
date, there has been no response. This legislation is enabling
legislation which the industry will review closely. He noted
that since no one in the [aviation industry] is familiar with
running an insurance company [such pooling] will require quite a
bit of leg work.
TAPE 02-73, SIDE B
REPRESENTATIVE ROKEBERG recalled another meeting in which Mr.
Knudson discussed the Medallion Program. Representative
Rokeberg asked if creating a pool that isn't regulated by the
Division of Insurance would allow the adoption, as part of the
standards in underwriting criteria for that pool, of some
provisions of conformance to the Medallion Program.
MR. KNUDSON answered that under SB 191 that would be possible.
However, he wasn't sure whether that isn't possible under the
reciprocal arrangement. In forming an aviation pool, having a
higher standard of operation through the Medallion Program would
be required.
REPRESENTATIVE ROKEBERG asked if there has been any change in
Mr. Knudson's testimony regarding availability of insurance.
MR. KNUDSON answered that he continues to hear from operators
that are about to go through the renewal process. Apparently,
aviation insurance companies had a conference recently and the
word was "we ain't seen nothing yet." The problem brewing is
that a host of carriers haven't had to renew since the September
11th tragedy.
Number 2250
VICKI TURNER MALONE, testifying via teleconference, informed the
committee that she is a lifelong Alaskan who has had ownership
interest in an air taxi operation in Bethel during the 1970s.
She also informed the committee that since 1983 she has owned
and is the president of Malone Company, an independent
property/casualty insurance agency. She said that she doesn't
currently write any air taxi accounts nor is she courting them.
Ms. Malone announced her opposition to SB 191 because the
insurance industry already provides one of the largest
incentives for air carriers to maintain a good safety record.
Ms. Malone related that she had spoken with a gentleman in
Bethel who purchased a small air taxi company a year ago because
the company was going under due to several fatalities. This
gentleman said that his insurance premium decreased by half due
to a good safety record over the last year. Ms. Malone said
that she had a lot of sympathy for the post-September 11th
insurance environment, however she didn't believe that SB 191
will provide a long-term fix to the problem. Furthermore, Ms.
Malone expressed concern that this risk retention association
will fail. Unlike other public entities, air carriers don't
have to exist and the losses the aviation industry experience
are generally catastrophic. While it's predictable that the
losses will be catastrophic, she didn't believe that the number
of losses are predictable. She said that she didn't believe
there is enough actuarial data, which is what provides an
insurance company with its ability to predict losses and that
results in its success or demise. Ms. Malone related her belief
that the joint insurance association will fail because the well-
managed carriers will leave and the premiums for those left will
be too high due to their adverse loss records. Meanwhile, there
will be more serious disruption in the marketplace. Ms. Malone
mentioned that she believes the Alaska Independent Insurance
Brokers Association has gone on record opposing SB 191 because
it's severely undercapitalized and it doesn't come under the
same form of regulation that other insurance companies do. In
conclusion, Ms. Malone said that she didn't believe SB 191 is in
the best interest of the public at this time.
REPRESENTATIVE ROKEBERG inquired as to the impact the September
11th tragedy has had on property and casualty line premiums.
MS. MALONE answered that in general Alaska has been very
fortunate to have two carriers, one of which is Alaska National,
that are domiciled within the state. These carriers weren't
impacted by the September 11th tragedy.
REPRESENTATIVE ROKEBERG asked if Alaska National writes
property/casualty insurance besides workers' compensation.
MS. MALONE replied yes, but noted that Alaska National doesn't
write aviation risk.
Number 2074
JIM WILSON, Coastal Helicopters, announced that he conceptually
supports SB 191. However, without funds he didn't see how it
could be successful. He echoed earlier comments that it would
take about $50 million to set up a pool adequate to fund an
insurance program of this nature. Mr. Wilson agreed that
something needs to be done about insurance. The Medallion
Program is an important element as is HB 271 and HB 319. The
combination of the aforementioned and SB 191 will assist in
decreasing insurance rates. Mr. Wilson noted that yesterday
testimony was given in the Senate regarding SB 271 and
compensatory and punitive damages. He pointed out that most
insurance policies today are silent on punitive damages,
although those can be covered. The problem is that most
insurance companies settle before cases reach a court-awarded
settlement and thus there is no knowledge as to what portion of
the settlement would be punitive and what portion would be
compensatory.
Number 1952
REPRESENTATIVE HALCRO acknowledged that Mr. Wilson sat in on
yesterday's Senate hearing on HB 271. Representative Halcro
ascertained that the sponsor of SB 191 doesn't "think too much
of HB 271 that we passed." However, he related his
understanding from Mr. Wilson that HB 271 and HB 319 create a
better chance for the aviation industry getting through the
tough insurance times than SB 191 without a funding mechanism.
MR. WILSON agreed with Representative Halcro's understanding
taken in the context [it was presented]. However, a combination
of any of the earlier mentioned legislation would be of great
assistance. A [limit on] punitive damages will also be of great
assistance.
Number 1876
JOHN GRUMMETT, President, Alaska Independent Insurance Agents &
Brokers, Inc. (AIIAB); Shattuck & Grummett Insurance, announced
that AIIAB opposes SB 191 as it's currently written. He pointed
out that the legislation states that a joint aviation insurance
arrangement isn't considered insurance, and therefore wouldn't
be regulated by the Division of Insurance. The aforementioned
is cause for concern with regard to fair claims and complaints
and the recourse for those. Furthermore, joint aviation
insurance arrangements don't pay a premium tax and thus wouldn't
contribute to the general fund and aren't part of the [Alaska
Insurance Guaranty Association Act], which is also specified in
the legislation. The [Alaska Insurance Guaranty Association
Act] protects the public against insolvencies.
MR. GRUMMETT highlighted that over the years there have been
attempts, which weren't well thought out, to create various
self-funding mechanisms. As has been stated, SB 191 doesn't
address the substantial amounts of money to fund the pool let
alone pay the aviation losses. He stated that $1.5 million
isn't close. The difference between this proposed joint
insurance arrangement and municipalities and school districts is
that the municipalities and school districts have a tax base on
which to rely when reserves are low. He surmised that SB 191
implies that the owners will put up the equity of the fund other
than the state contribution. Furthermore, air carriers are
competitive while municipalities and school districts aren't
inherently competitive with one another. Therefore, Mr.
Grummett said that he didn't know the impact of such on the
marketplace. Mr. Grummett urged the committee to review some of
the above before passing SB 191. He directed attention to page
4, lines 9-12, and urged the committee to establish reserves for
losses of the joint aviation insurance arrangement prior to the
enactment of SB 191.
Number 1701
REPRESENTATIVE HAYES asked if AIIAB has testified on this
legislation during the legislative process.
MR. GRUMMETT replied no and specified that [AIIAB] has been
watching the legislation. In response to Representative
Rokeberg, Mr. Grummett noted that [Shattuck & Grummett] does
underwrite aviation on a case-by-case basis. He informed the
committee that currently he writes a small private noncommercial
carrier who hasn't experienced any increase. However, he knew
that some people have experienced modest to moderate increases
while others have experienced large increases. Still, he
submitted that the aforementioned was directly related to loss
experience as well as the rate. He deferred to the
representative from the air carrier's association for a true
assessment.
REPRESENTATIVE ROKEBERG recalled that Mr. Grummett thought there
are problems with SB 191 with regard to fair claims and the
actuarial determinations. However, Representative Rokeberg
asked if it would be logical that a third party administrator
would be retained if this pool was created.
MR. GRUMMETT said that he didn't know.
REPRESENTATIVE ROKEBERG turned to the issue of adverse losses
and remarked that there have been significant losses in Alaska,
which he characterized as a statewide problem. He asked if Mr.
Grummett felt that a limit on punitive damages would lower the
underwriting premiums.
MR. GRUMMETT answered that he believes it would go toward that
and is a good start.
REPRESENTATIVE ROKEBERG characterized the three bills as
measures trying to impose limitations or immunities. The
problem with passing these bills is the lack of an answer with
regard to the true impact of these proposals. Representative
Rokeberg said [the intent] is to establish something that would
help [brokers] help underwriters moderate their premiums.
MR. GRUMMETT said he was just as frustrated. For example, his
office lost the remaining three large air carriers that it
wrote. The aviation portion of the package was lost because
"we" don't have an effective market to compete for them.
Number 1450
KEVIN HAND, Staff to Representative Andrew Halcro, Alaska State
Legislature, noted that he was staff to the subcommittee on
aviation insurance. He turned to an earlier question regarding
what is legally available to these aviation insurance pools. He
informed the committee that under current statute the following
is available: a risk purchasing group, a joint underwriting
association, a state-based joint reinsurance plan, reciprocal
insurance arrangements, and risk retention groups. The options
requiring new statutorial provisions are as follows: assigned
risk plans, risk sharing plans, market assistance plans, and
joint insurance arrangements. He noted that assigned risk plans
and the joint insurance arrangement are basically what HB 270
and SB 191 propose respectively.
REPRESENTATIVE HALCRO noted that Mr. Hand worked with Neil
Webster, a private individual attempting to gather participants
for a pool similar to that proposed in SB 191. He asked Mr.
Hand to share Mr. Webster's experience.
MR. HAND informed the committee that in December 2000 there was
an informal community meeting in Anchorage and it was highly
attended by a number of aviation operators and the Division of
Insurance and various insurance interests in the state. This
meeting sought to create a grass roots, independent of
government, pool situation. This would basically be a joint
insurance arrangement in which everyone came together and paid
an upfront premium to join a pool and create a capital
securitization and pay an annual premium, and therefore it would
be a joint self-insurance arrangement. This group actually
brought in folks to discuss how these funds would managed.
Forms were distributed inquiring of pilot experience,
technological advancements, and use of safety programs. This
was sent out to all interested parties and the information was
correlated and sent to the underwriter that was located out of
state. The underwriter said the pool could work but the
premiums would have to be double what was originally intended.
The premiums being sought were in the range of $260,000, which
was the case two to three years ago. Therefore, the cost is the
problem.
CHAIR MURKOWSKI related her understanding that all the
information was gathered before the September 11th tragedy and
thus she presumed that the numbers will be higher.
MR. HAND replied yes. Mr. Hand related that there is talk that
a $40 billion hit on the insurance market will have impacts
beyond aviation.
Number 1138
MR. HAND, in response to Representative Rokeberg, said that much
of the information is anecdotal and difficult to grasp with
regard to the hard and fast numbers that can be obtained from
actuaries and underwriters regarding the possible impact of any
of the proposed legislation. Mr. Hand noted that he inquired as
to the numbers and the findings of this particular private pool,
however the underwriter is one who would've likely been the
administrator of the pool and thus the information was
proprietary. One of the main concerns with a pool is that even
if one could find a joint insurance arrangement, reinsurance is
unlikely to be available at any price.
CHAIR MURKOWSKI, upon determining that no one else wished to
testify, closed public testimony.
REPRESENTATIVE HALCRO noted his support of SB 191, although he
expressed the need to be realistic. Certainly pooling is a good
tool, however it won't help the aviation industry get its feet
on the ground.
Number 0953
REPRESENTATIVE KOTT stated his reluctance to move SB 191 from
committee. However, since this provides one more tool he said
he would move the legislation with the understanding that the
two other components, SB 271 and HB 319, should be [moved] to
the Senate floor.
CHAIR MURKOWSKI echoed the "luke warm endorsement" of SB 191,
which is meaningless without the funding. However, she
expressed the hope that with the structure being available maybe
the money will follow.
REPRESENTATIVE MEYER agreed that SB 191 is only as good as the
funds that are received from Congressman Young.
Number 0758
REPRESENTATIVE ROKEBERG recalled that there was testimony that
the legislation fails to require any actuarial review prior to
operation. He directed attention to page 4, lines 9-12. He
asked if that [annual determination] would occur before
operations begin.
CHAIR MURKOWSKI pointed out that the language is under the
financial provisions of the agreement. She specified that the
agreement has to include a provision regarding an annual
determination, although the language doesn't specify that it
must be done upfront.
Number 0639
REPRESENTATIVE ROKEBERG moved that the committee adopt
conceptual Amendment 1, which would include a provision
requiring what is specified on page 4, lines 9-12, to be
determined prior to the commencement of operation [of a joint
aviation insurance arrangement]. He explained that this
determination will determine the amount of funds required.
There being no objection, conceptual Amendment 1 was adopted.
Number 0497
REPRESENTATIVE ROKEBERG moved to report CSSB 191(JUD), as
amended, out of committee with individual recommendations and
the accompanying zero fiscal note. There being no objection,
HCS CSSB 191(L&C) was reported from the House Labor and Commerce
Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:55 p.m.
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