Legislature(2003 - 2004)
05/09/2003 03:40 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
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
May 9, 2003
3:40 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Bob Lynn, Vice Chair
Representative Nancy Dahlstrom
Representative Carl Gatto
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CONFIRMATION HEARINGS
Real Estate Commission
Z. Kent Sullivan, Esq. - Fairbanks
- CONFIRMATION ADVANCED
HOUSE BILL NO. 288
"An Act changing the name of the Department of Community and
Economic Development."
- MOVED CSHB 288(STA) OUT OF COMMITTEE
HOUSE BILL NO. 272
"An Act relating to motor vehicle dealers."
- MOVED CSHB 272(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 305
"An Act relating to the calculation and payment of unemployment
compensation benefits; and providing for an effective date."
- MOVED HB 305 OUT OF COMMITTEE
HOUSE BILL NO. 277
"An Act relating to the powers of the Regulatory Commission of
Alaska in regard to intrastate pipeline transportation services
and pipeline facilities, to the rate of interest for funds to be
paid by pipeline shippers or carriers at the end of a suspension
of tariff filing, and to the prospective application of
increased standards on regulated pipeline utilities; allowing
the commission to accept rates set in conformity with a
settlement agreement between the state and one or more pipeline
carriers and to enforce the terms of a settlement agreement in
regard to intrastate rates; and providing for an effective
date."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 285
"An Act adopting the Uniform Electronic Transactions Act;
repealing certain statutes relating to electronic records and
electronic signatures; amending Rule 402, Alaska Rules of
Evidence; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: HB 288
SHORT TITLE:CHANGING NAME OF DEPT OF COMM & ECON DEV.
SPONSOR(S): REPRESENTATIVE(S)KOHRING
Jrn-Date Jrn-Page Action
04/28/03 1156 (H) READ THE FIRST TIME -
REFERRALS
04/28/03 1156 (H) STA, L&C
05/06/03 (H) STA AT 8:00 AM CAPITOL 102
05/06/03 (H) Moved CSHB 288(STA) Out of
Committee
MINUTE(STA)
05/08/03 1475 (H) STA RPT CS(STA) NT 3DP 1DNP
3NR
05/08/03 1475 (H) DP: DAHLSTROM, LYNN, HOLM;
05/08/03 1475 (H) DNP: BERKOWITZ; NR: SEATON,
GRUENBERG,
05/08/03 1475 (H) WEYHRAUCH
05/08/03 1475 (H) FN1: ZERO(CED)
05/08/03 1478 (H) CRA REFERRAL ADDED AFTER L&C
05/09/03 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 272
SHORT TITLE:MOTOR VEHICLE DEALERS
SPONSOR(S): REPRESENTATIVE(S)WEYHRAUCH
Jrn-Date Jrn-Page Action
04/16/03 1009 (H) READ THE FIRST TIME -
REFERRALS
04/16/03 1009 (H) L&C, STA
04/28/03 (H) L&C AT 3:15 PM CAPITOL 17
04/28/03 (H) Scheduled But Not Heard
04/30/03 (H) L&C AT 3:15 PM CAPITOL 17
04/30/03 (H) Scheduled But Not Heard
05/01/03 (H) STA AT 8:00 AM CAPITOL 102
05/01/03 (H) Scheduled But Not Heard
05/05/03 (H) L&C AT 3:15 PM CAPITOL 17
05/05/03 (H) Heard & Held
05/05/03 (H) MINUTE(L&C)
05/07/03 (H) L&C AT 3:15 PM CAPITOL 17
05/07/03 (H) <Bill Hearing Postponed to
5/9>
05/09/03 (H) L&C AT 3:15 PM CAPITOL 17
BILL: HB 305
SHORT TITLE:UNEMPLOYMENT COMPENSATION BENEFITS
SPONSOR(S): LABOR & COMMERCE
Jrn-Date Jrn-Page Action
05/07/03 1416 (H) READ THE FIRST TIME -
REFERRALS
05/07/03 1416 (H) L&C, FIN
05/09/03 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
Z. Kent Sullivan, Esq., Appointee
to the Real Estate Commission
Juneau, Alaska
POSITION STATEMENT: Testified as appointee to the Real Estate
Commission.
REPRESENTATIVE VIC KOHRING
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 288.
EDGAR BLATCHFORD, Commissioner
Department of Community & Economic Development (DCED)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 288 and
responded to questions.
LINDA SYLVESTER, Staff
to Representative Bruce Weyhrauch
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During discussion of HB 272, spoke on
behalf of the sponsor, Representative Weyhrauch.
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General
Fair Business Practices Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 272, provided
comments and responded to questions.
STEVE ALLWINE, Secretary
Alaska Auto Dealers Association (AADA)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 272, as amended,
and responded to questions.
CHRIS HESTER, Lyberger's Car and Truck Sales, LLC
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to Section 1 of HB
272.
CARROL LYBERGER, Lyberger's Car and Truck Sales, LLC
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 272, remarked that
use of the word "current" is problematic, provided comments, and
responded to questions.
TERI PETRAM, Lyberger's Car and Truck Sales, LLC
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 272, provided
comments and responded to a question.
BRUCE MUSICK, Affordable Used Cars
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of HB
272.
DIANA PFEIFFER, President
Alaska Automobile Dealers Association (AADA);
President, Alaska Sales and Service
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 272.
DARRELL FRIESS, Budget Car & Truck
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 272, testified in
opposition to Section 1, provided comments, and suggested an
amendment.
MARTEN MARTENSEN, Continental Honda
Anchorage, Alaska
POSITION STATEMENT: Provided comments during discussion of HB
272.
GREG O'CLARAY, Commissioner
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Assisted with the presentation of HB 305
and responded to questions.
PATRICK SHIER, Employment Security Tax
Division of Employment Security
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Responded to questions during discussion of
HB 305.
JOHN DAVID RAGAN
Ester, Alaska
POSITION STATEMENT: Testified in support of an increase in
unemployment benefits during discussion of HB 305.
RON PECK, President
Alaska Travel Industry Association (ATIA)
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 305, said that the
ATIA is not opposed to the bill, and asked that a complete
analysis by done to determine how the bill will impact the
tourist industry.
PAMELA LaBOLLE, President
Alaska State Chamber of Commerce (ASCC)
Juneau, Alaska
POSITION STATEMENT: Provided comments during discussion of HB
305.
ACTION NARRATIVE
TAPE 03-49, SIDE A
Number 0001
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 3:40 p.m. Representatives
Anderson, Lynn, Rokeberg, Crawford, and Guttenberg were present
at the call to order. Representatives Dahlstrom and Gatto
arrived as the meeting was in progress.
CONFIRMATION HEARINGS
Real Estate Commission
Number 0106
CHAIR ANDERSON announced that the committee would first consider
the nomination of Z. Kent Sullivan, Esq., to the Real Estate
Commission.
REPRESENTATIVE ROKEBERG thanked Mr. Sullivan for volunteering to
serve on the Real Estate Commission, and asked him whether his
legal experience has included much in the way of real estate
activities.
Number 0211
Z. Kent Sullivan, Esq., Appointee to the Real Estate Commission,
replied:
It has, extensively. I'm formerly from Montana, and
practiced law in ... Montana for five years with a
firm ... that focused primarily on real estate and
property law. Our firm represented, among other
clients, the Montana Association of Realtors [Inc.];
was responsible for representing not only the state
association but also numerous of the regional
associations of realtors ...; [and] did a lot of
drafting of legislation ... concerning the regulation
of real estate licensees within the state.
Our firm also handled a real estate hotline for the
Montana Association of Realtors [Inc.], and that was
something that all the real estate licensees in the
state could [use to] call our firm and pose questions
... and receive a written response on ... legal issues
that they were facing every day in the real estate
industry. And that's what I did with the firm down
there. Up here, things aren't near as specialized as
they are down south, and while I still practice
significantly in the area of real estate and property
law, I do ... a much more general practice up here,
primarily in civil litigation - all aspects of civil
litigation.
MR. SULLIVAN, in response to a question, relayed his belief that
his current legal practice would not present a conflict of
interest with serving on the Real Estate Commission. He noted
that his law firm here in Juneau does not represent any local or
state realtor organization, and that he has never represented
any real estate licensee regarding license issues. He said he
does not view his expertise in the field of real estate and
property law as putting him in a position of dominance over
other members of the Real Estate Commission. One of the reasons
he sought to be appointed, he remarked, was so that he could
offer his expertise to the Real Estate Commission's endeavors.
REPRESENTATIVE ROKEBERG asked Mr. Sullivan to comment on the
issue of dual agency.
Number 0540
MR. SULLIVAN responded:
I can offer that dual agency is viewed in different
ways depending upon whose position you're viewing it
from. From a real estate licensee's perspective, for
the most part, I think, licensees generally are in
favor of dual agency because dual agency allows for a
licensee to receive a dual commission, in essence, and
not have a commission cut in half. And when a
licensee is out there working as hard and as
diligently as they do, that's something that they view
as a benefit, and if they can serve as a dual agent,
they're more than happy to do that. So from a
licensee's perspective, I think they're probably
generally in favor of it.
From a consumer standpoint, ... I think it's viewed
much more frequently with confusion; they may not
understand what the role is of a dual agent, they may
not understand what their rights are [and] what's
owing to them by the licensee versus the parties
themselves. From a legal perspective and from the
standpoint of an attorney, dual agency is very
problematic; it's problematic because you're
representing conflicting interests. And in the past,
across the country, the consensus has been to allow
dual agency and to deal with those problems in
different ways.
I do understand it's becoming an issue in Alaska and
[that] there are some concerns about that, and I think
it probably needs to be dealt with. I don't have a
specific opinion as to whether dual agency ought to be
abolished [or] whether it ought to be maintained;
that's an issue that I think would take a lot of time
to resolve and explain, and it's something that I
think the [Real Estate] Commission is probably
exploring currently.
REPRESENTATIVE LYNN mentioned that he is a licensed associate
broker in Alaska. He observed that licensees encounter some
practical problems when complying with the full disclosure
requirements of dual agency, and offered some examples. He
opined that the current laws regarding this contentious issue
need to be fixed and simplified.
Number 0984
MR. SULLIVAN mentioned that he has read through the current
"agency" statutes, and opined that they are confusing and full
of holes. He relayed that according to his experience in
Montana, agency never really was an issue, certainly not like it
appears to be in Alaska. He suggested that instead of
promulgating more statues and regulations, a solution to the
current problem might be to revamp, clarify, and simplify the
statutes already in existence. He surmised that although some
licensees might have a good understanding of the current agency
statutes, most licensees don't and neither does the general
public.
REPRESENTATIVE LYNN suggested to Mr. Sullivan that he take an
opportunity to review all the different forms that real estate
firms in Alaska have developed in an effort to comply with the
current laws regarding full disclosure of dual agency.
REPRESENTATIVE ROKEBERG noted that the real estate industry has
established a task force that is currently attempting to develop
some comprehensive language to address the issue of dual agency
disclosure. After observing that this issue is of particular
importance to those living in rural Alaska, where there may only
be one or two brokers for an entire area, he described some of
the provisions of his proposed legislation pertaining to this
issue. Representative Rokeberg asked Mr. Sullivan if he thinks
it would be possible to craft legislation that would make a
distinction between the general public and what he termed "the
sophisticated buyer."
MR. SULLIVAN replied:
I think it's feasible and would certainly be worth
looking at. I think one downside to it is that,
again, if what you're attempting to do is streamline
things and make them completely black and white, the
more distinctions you draw, you run the risk of
complicating that or confusing that a little bit. So,
I don't think it's impossible; I think it's entirely
possible. Whether you step over that line of maybe
going too far as far as drawing too many distinctions,
if that's the only one, then perhaps it's a lot easier
question to answer, but if you start adding
distinction upon distinction throughout the process,
you might get right back to where we are now. But a
person would just have to look at [it] and see how its
drafted.
REPRESENTATIVE ROKEBERG suggested that the interpretation
regarding the common law principles of agency has complicated
the issue.
MR. SULLIVAN concurred.
Number 1263
REPRESENTATIVE ROKEBERG made a motion to advance from committee
the nomination of Z. Kent Sullivan, Esq., as appointee to the
Real Estate Commission. There being no objection, the
confirmation was advanced from the House Labor and Commerce
Standing Committee.
The committee took an at-ease from 3:45 p.m. to 3:48 p.m.
HB 288 - CHANGING NAME OF DEPT OF COMM & ECON DEV.
Number 1321
CHAIR ANDERSON announced that the next order of business would
be HOUSE BILL NO. 288, "An Act changing the name of the
Department of Community and Economic Development." [Before the
committee was CSHB 288(STA).]
Number 1327
REPRESENTATIVE VIC KOHRING, Alaska State Legislature, sponsor,
said that HB 288 changes the name of the Department of Community
& Economic Development to "Department of Commerce & Economic
Development." He opined that the name "Department of Commerce &
Economic Development" more accurately reflects the goals and
strategies of that department, adding that its mission is to
promote commerce and the development of Alaska's economy. He
pointed out that Governor Murkowski, in his "State of the State"
speech in January, announced that his administration would be
referring to the department as the "Department of Commerce."
Representative Kohring said that the goal of HB 288 is to
formalize that concept in statute.
REPRESENTATIVE KOHRING opined that using the name "Department of
Community & Economic Development" somewhat complicates the
state's efforts to attract investment. He listed the
department's goals and strategies as being the following:
promote local economic development and crucial infrastructure,
market Alaska's goods and services throughout the world,
organize and conduct business and trade missions to expand
product sales in current markets and develop new markets, and
facilitate the exchange of information between Alaska's
exporters and potential customers. He mentioned that many other
states have a comparable department with the word "commerce" in
its name.
REPRESENTATIVE CRAWFORD noted that a few years ago,
Representative Kohring sponsored the legislation that combined
the Department of Community and Regional Affairs (DCRA) with the
Department of Commerce & Economic Development, thereby creating
what is now known as the Department of Community & Economic
Development. He asked what has happened to the mission of the
DCRA: is it no longer a part of the current department's
mission? He added that according to his recollection, having a
portion of each of the old department names combined into the
new department name was a compromise which intended to reflect
that the new department would carry on with the missions of both
departments. House Bill 288 appears to do away with all
vestiges of the DCRA.
Number 1544
REPRESENTATIVE KOHRING offered that the former DCRA has not gone
away; instead, it has become a division within the DCED called
the Division of Community and Business Development. He
indicated that because it is important to develop Alaska's rural
economy, it is not his intention to hurt or do away with the
former DCRA's programs. Merging the two departments has saved
money by eliminating duplication and trimming upper management
costs, he opined, and has thus ensured the continuance of the
programs important to rural Alaska. He assured the committee
that even with a name change, the department will maintain its
Division of Community and Business Development.
REPRESENTATIVE GUTTENBERG said he is concerned that changing the
department's name will leave people in rural communities
wondering whether their needs will be overlooked by the
administration.
REPRESENTATIVE KOHRING, in an effort to allay Representative
Guttenberg's concern, opined that the department's track record
over the last four years demonstrates that the DCED has not
compromised the aforementioned programs and has instead made
them better by becoming more efficient.
Number 1683
EDGAR BLATCHFORD, Commissioner, Department of Community &
Economic Development (DCED), said that the administration
supports HB 288. He added that the term "commerce" is broader
and more clearly reflects the role of the department, and that
the administration believes that "commerce" includes dealings
with governments and all of their subdivisions - the boroughs,
the unorganized boroughs, and other entities within the
unorganized boroughs. After mentioning that he'd at one time
served as commissioner for the DCRA, he relayed that with the
merger, the DCED's mission is twofold: one, continue to be an
advocate for rural Alaska and the municipalities in both
organized and unorganized boroughs; and, two, be "somewhat of a
regulator" regarding occupational licensing, insurance, and
investments.
COMMISSIONER BLATCHFORD went on to say:
We feel that this will send a very clear message to
the people who are eager to do business, or [are]
thinking about doing business, in the state, that
Alaska is open for business and that we welcome the
opportunity to discuss business activities, both in
rural Alaska and in the urban centers. ... I was at a
conference the other day, and it was where you had
financing agencies from across the country meeting in
Anchorage, and when I was introduced as "the
commissioner of the soon to be called Department of
Commerce and Economic Development," one of the
representatives from another state leaned over and
said that is what their state did two years ago - they
changed the name of the department to more clearly
reflect what the mission of that department was, and
that was to encourage commercial activities, business
activities, economic activities.
COMMISSIONER BLATCHFORD, in response to a question, said that
when he was commissioner of DCRA, his mission was to serve as
the commissioner of a department that was dedicated, heart and
soul, to rural Alaska, to assist those communities in accessing
government, in generating economic activities, and in
establishing local government entities.
REPRESENTATIVE CRAWFORD asked whether changing the department's
name will result in those goals no longer being a focus.
COMMISSIONER BLATCHFORD said that the development of the
Division of Community and Business Development within the DCED
was intended to ensure that those goals did remain a focus of
the department. He said that the DCED takes its role in that
regard very seriously, and that the Division of Community and
Business Development is the largest section in the department.
He went on to say: "The way the department is organized now,
you have the regulators, so to speak, on one side, and then you
have the advocates, so to speak, on the other side, and we bring
the two together to look at how we can best ... foster economic
activities throughout the state." In response to another
question, he said that he did not see changing the department's
name as creating a problem. He opined that in order for
Alaska's communities to become self sufficient, there must be
economic activity. The DCED will continue to work closely with
communities to help them develop a strong private sector, and
changing the name of the department, he surmised, will send a
strong message that the private sector is the entity that can
offer hope, economic opportunities, jobs, and responsibility.
Number 1957
REPRESENTATIVE DAHLSTROM moved to report CSHB 288(STA) out of
committee with individual recommendations and the accompanying
zero fiscal note.
REPRESENTATIVE ROKEBERG asked whether the sponsor and the
commissioner had given consideration to other possible names.
COMMISSIONER BLATCHFORD indicated that they had simply settled
on "the Department of Commerce & Economic Development."
REPRESENTATIVE ROKEBERG asked how the name change is going to be
perceived by those living in rural Alaska.
COMMISSIONER BLATCHFORD replied:
I think ... Alaska has changed. ... When the
Department of Community and Regional Affairs was
created 30-some years ago, ... more of Alaska was in
the unorganized borough, and a large portion of
Alaska's population was in the unorganized borough.
That has changed to some degree and you now have more
boroughs, certainly more communities, organized
communities, [and] second class cities recognized by
the state. So ... I think ... changing ... the name
is a recognition that Alaska has also changed and that
we're moving with the times ... in this day and age of
budget cuts, ... that we're seizing the opportunities
to present a good public image that we want commercial
activities, business activities, throughout the state.
[Chair Anderson turned the gavel over to Vice Chair Lynn.]
REPRESENTATIVE ROKEBERG mentioned that he'd considered offering
an amendment to change the department's name in a different
fashion, but had since changed his mind.
Number 2120
REPRESENTATIVE DAHLSTROM again moved to report CSHB 288(STA) out
of committee with individual recommendations and the
accompanying zero fiscal note.
Number 2130
REPRESENTATIVE GUTTENBERG objected. He indicated that removing
"Community" from the department's name is a significant, albeit
symbolic, change because it shifts the focus from rural Alaska.
REPRESENTATIVE CRAWFORD opined that the proposed name change
focuses the department's mission away from communities - leaving
out regional affairs - and that "community advocacy" or
"regional affairs" should be included as part of the
department's name.
VICE CHAIR LYNN opined that commerce, in both urban and rural
areas, needs to be developed.
Number 2253
REPRESENTATIVE GUTTENBERG removed his objection.
Number 2257
VICE CHAIR LYNN announced that without objection, [CSHB 288(STA)
was reported from the House Labor and Commerce Standing
Committee].
HB 272 - MOTOR VEHICLE DEALERS
Number 2266
VICE CHAIR LYNN announced that the next order of business would
be HOUSE BILL NO. 272, "An Act relating to motor vehicle
dealers."
Number 2274
LINDA SYLVESTER, Staff to Representative Bruce Weyhrauch, Alaska
State Legislature, on behalf of Representative Weyhrauch,
sponsor, noted that Section 1 is the most controversial section,
and that Section 2 amends statute created by the 22nd
legislature's HB 182. She offered that Section 1 seeks to
correct portions of current statute that are unenforceable. She
added: "Currently it's not permitted to sell a ... current
year/model vehicle, and that section needs to be changed."
MS. SYLVESTER turned attention to Amendment 1, which read
[original punctuation provided]:
Page 2, Line 7
INSERT: (3) Purchased directly from consumer for
purposes for resale; or
(4) Vehicle has been in service with a bona
fide rental fleet for 6 months.
MS. SYLVESTER opined that Amendment 1 would allow current year
models to be sold by car rental agencies that have had those
cars in their fleets for six months, and would allow dealers to
sell cars that they've purchased from consumers specifically for
the purpose of reselling them.
TAPE 03-49, SIDE B
Number 2370
MS. SYLVESTER asked that the committee take further testimony
before considering whether to adopt Amendment 1.
VICE CHAIR LYNN asked whether the paragraph (4) proposed by
Amendment 1 refers to vehicles that have been in service for at
least six months, exactly six months, or less than six months.
The committee took an at-ease from 4:27 p.m. to 4:28 p.m.
Number 2291
CLYDE (ED) SNIFFEN, JR., Assistant Attorney General, Fair
Business Practices Section, Civil Division (Anchorage),
Department of Law (DOL), suggested that that language in
Amendment 1 should read "for at least six months."
MR. SNIFFEN went on to say that the eight sections of the bill
focus on two primary areas. He said that Sections 2-8 are
clarifications to the existing law that was passed last year.
He added that certain provisions of HB 272 remove portions of
existing law that he felt were not necessary given what he
called "Alaska's auto climate." Turning attention to Section 1
of HB 272, he said:
There has been a primary misconception about what the
current state of the law is in Alaska. As Ms.
Sylvester pointed out, under current Alaska law, it is
illegal for any auto dealer to sell a current
model/year used vehicle. And let me repeat that:
under current law, if you do not have a manufacturer's
statement of origin for a vehicle, you cannot sell
that vehicle; whether you're a new car dealer or a
used car dealer, it makes no difference. ...
What Section 1 does is carve out an exception to at
least allow you to sell some current model used
vehicles if you receive them in the ordinary course of
business in the trade, and now, through this
amendment, perhaps if it's a bona fide rental vehicle
or if you purchased it from a consumer or some other
means. So it just needs to be remembered that without
this amendment, we go back to the existing law; the
existing law says, if you're a car dealer [and] you've
got a current model used vehicle on your lot, you
can't sell it, and I can go out there tomorrow and
take all those off your lot. So we do need to address
that situation, we don't take a position on whether
this language in Section 1 is the best way to address
that, but it's an attempt to do that.
Number 2152
MR. SNIFFEN continued:
And I want to comment briefly on testimony received
from the North American Automobile Trade Association
[NAATA] on Monday, just so the committee is clear on
some of the legal ramifications of Section 1. There
was some suggestion that this section may violate
provisions of the North American Free Trade Agreement
[NAFTA]. And we've looked through NAFTA; there are
two chapters of NAFTA - chapter 3 and chapter 15 -
that address themselves to trade, tariffs, and
antitrust issues. Actually, there's an annex to NAFTA
called Annex 300-A, that deals with auto transactions
specifically. And our review of those NAFTA
provisions do not suggest that anything in that would
prohibit this kind of legislation. And if it does
prohibit this kind of legislation, then we already
have a problem because our current law already
prohibits the sale of these kinds of vehicles. So
that really is not a relevant issue.
Another issue raised by the NAATA folks was a
potential antitrust concern. Antitrust laws in Alaska
are very complex, but there is something about the law
that [is] universally agreed upon, and that is, our
laws do not protect competitors; they are intended to
protect competition. And it's only [reasonable]
competition at that. It is unclear whether Section 1
of HB 272 would have any kind of an impact, or at
least an unreasonable impact, on competition for this
very small and narrow segment of automobiles. To find
out if it did, it would require that we engage in a
very lengthy investigation that would include
identification of product markets, geographic markets,
relevant market power held by the competitors in those
markets, and we'd have to weigh those things against
other market forces to determine whether or not
unreasonable restraints on competition existed. I
don't believe NAATA has done that - we haven't done
that; it's just pure conjecture that anything in this
bill would raise antitrust concerns.
Number 2101
MR. SNIFFEN went on to say:
There was another reference to some litigation in the
Lower 48 that apparently addresses itself to some of
these concerns; that is only one lawsuit, that we are
aware of, that has been filed against auto
manufactures for some antitrust behavior that has
nothing to do with the issues in this bill. That
lawsuit dealt with a potential conspiracy among auto
dealers in the United States and Canada to prohibit
the importation of Canadian automobiles. And that
lawsuit does not address itself to legislation like
this and is really irrelevant to the issues in this
bill, although it does point out some of the issues
that at least some consumers have a concern about.
There was also some suggestion that the legislature
could expose itself to liability for enacting this
kind of law. That (indisc. - paper shuffling)
ridiculous; the legislature enjoys complete immunity
for its actions here. If you do pass [the] law that's
contained in Section 1 ..., and it is found out to be
either illegal under NAFTA or our antitrust laws, the
result would be, the law becomes unenforceable and
this legislature does not concern itself with
liability.
Now, if we get to the real root of what Section 1
tries to do, I'm going to have to let other auto
dealers speak to how it has impacted their business to
allow used auto dealers and brokers to import ... low
mileage Canadian vehicles that are of a current
model/year, and how they have a difficult time
competing with those kinds of purchases. It's not the
Department of Law's job to really regulate that kind
of competition; we leave that up to the competitors in
the market place. It's our job to look out for
consumers, and it is unclear whether or not the
disallowance of these kinds of transactions would be
beneficial or harmful to consumers.
Number 2027
We do understand that somewhere in the process, these
low mileage, current model/year Canadian vehicles find
their way to the U.S., probably in legal ways, but
somewhere in the chain there's an illegitimate
transaction. And I use that word instead of an
illegal transaction because I don't doubt that
perhaps, at every step in the process, something legal
has occurred. But we have heard in our office - and
we have not investigated this, so I don't have any
hard facts - that exporters in Canada are hiring
college kids, for example, to go to car dealers and
buy vehicles, or they're setting up dummy companies to
take vehicles so they can get them into the U.S.
[And] somewhere along the chain, it appears that there
is some kind of an illegitimate transaction that
results in a lot of these vehicles ... coming into
Alaska.
MR. SNIFFEN concluded:
Whether that's good for consumers or bad for consumers
is a call the legislature will have to make, but I
believe that the new auto dealers are trying to do
something to address that situation. So the language
in Section 1 is not language the Department of Law has
proposed; we have consulted with the [Alaska Auto
Dealers Association (AADA)] about the language, we
don't oppose it, there might be some better language
that we could come up with to deal with this issue,
but we haven't been able to come up with that language
in our department. ... I certainly understand the
concern that they're trying to address, [but] we
simply don't have a position on whether or not this is
the best way to address that or not. And with that,
I'd be happy to answer any questions the committee
has.
REPRESENTATIVE GATTO said that if he wanted to buy a new
vehicle, he would want it to truly be a new vehicle. He asked,
is it a new vehicle if it was made in Canada and brought in?
Because it might have been made in Canada, in any event, and
then sold by "the local distributor that's franchised." Is a
distinction being made that one vehicle is new and another is
not?
MR. SNIFFEN replied:
If your vehicle is manufactured in Canada for sale in
the United States, and it comes to a dealer here from
the manufacturer with the manufacturer's statement of
origin, it is a new vehicle. If your vehicle is new
[and] it's purchased from a consumer or an exporter in
Canada from a Canadian dealer, because it was
manufactured for a destination in Canada - it has 10
miles on it and then it's brought across the border
and (Indisc. - coughing) used car dealer here in
Alaska, and you go to that lot and it's a ... 2003 or
2004 ... Dodge 2500 (indisc. - coughing) 10 miles on
it - it is now a used vehicle in the eyes of the law
because it has been sold once and titled.
Number 1867
And there are some serious implications to that fact;
you might think you're buying the same product, ...
but because it's a used vehicle, you do not have
Alaska lemon law protection, for example, because our
lemon law only applies to new vehicles. So your low
mileage Canadian vehicle is now a used vehicle
(indisc. - coughing) excluded from making claims under
our lemon law. Somewhere in that process, too, the
odometer on that vehicle has probably been changed; we
have reports that a lot of those changes don't
necessarily happen in conformance with federal law.
So you don't know if the miles on that are really
accurate or not, although I suspect a lot of them are
documented fairly well.
And there is another recent consumer issue that has
come to the attention of our office, that your
manufacturers warranty may not be valid in the United
States. Vehicles manufactured for sale in Canada are
subject to factory warranties so long as they remain
registered in Canada; as soon as you register that
vehicle in the United States, manufacturers aren't
required to honor those warranties. In the past they
have, [but] I understand that some of the
manufacturers are now declining to do that.
MR. SNIFFEN concluded:
And that's information that (indisc. - coughing)
consumer that the fix may not be to prevent these
transactions, the fix may be just to provide better
consumer awareness, so the consumer can evaluate those
risks and then determine whether or not this is a
transaction he'd like to make.
REPRESENTATIVE GATTO asked whether total disclosure of the
aforementioned issues would make those types of transactions
acceptable.
MR. SNIFFEN said not under current Alaska law, which says that
as soon as that manufacturer's statement of origin (MSO) is
lost, that sale is illegal. So, current law would have to be
changed in order to make such transactions legal.
VICE CHAIR LYNN asked: "How many cars are we talking about
here? ... How big a problem is this?"
MR. SNIFFEN offered an estimate of between 500 and 1,000 cars.
VICE CHAIR LYNN asked whether all "Canadian cars" conform to
"American specs".
MR. SNIFFEN indicated that they did.
Number 1678
VICE CHAIR LYNN returned the gavel to Chair Anderson.
REPRESENTATIVE GUTTENBERG asked whether Section 1 of the bill is
enforceable.
MR. SNIFFEN offered that the controversy of Section 1 centers
around whether or not used car dealers should be prohibited from
selling current model Canadian vehicles. Current law prohibits
it under all circumstances. Section 1 would modify current law
to allow certain types of such transactions to occur. If
Section 1 were to be deleted, the status quo would be
maintained. He added that current law is problematic to enforce
because he would have to go to every car lot and tell all
dealers that they cannot sell any current model used vehicles
that don't have an MSO.
REPRESENTATIVE GUTTENBERG turned attention to page 6, line 20,
and noted that 10 miles is being changed to 100 miles. He asked
whether the 10-mile limit has been problematic and, if so,
whether providing for more than a 100-mile limit would be
better.
MR. SNIFFEN indicated that the aforementioned change is one of
the "cleanup provisions" of the bill. The change to 100 miles
will allow dealers in Wasilla, for example, to send vehicles
received as trade-ins to Anchorage for repairs or detailing. He
opined that the 100-mile limit will be more than sufficient for
that purpose and will still protect consumers.
Number 1455
REPRESENTATIVE LYNN referred to Amendment 1 [text provided
previously], and indicated that he wished to amend it such that
the last line would read, "(4) Vehicle has been in service with
a bona fide rental fleet for at least 6 months." [The amendment
to Amendment 1 was treated as adopted.]
Number 1428
REPRESENTATIVE LYNN made a motion to adopt Amendment 1 [as
amended]. There being no objection, Amendment 1 [as amended]
was adopted.
Number 1412
STEVE ALLWINE, Secretary, Alaska Auto Dealers Association
(AADA), said that the AADA supports HB 272 as amended. He
opined that the goal of the bill is to provide clear and concise
corrections to previous legislation while trying to retain that
legislation's intent. He went on to say:
I and the dealers that I represent believe that HB 272
accurately provides these corrections. With respect
to Section 1, ... it is not our intent, as automobile
dealers, to preclude used car dealers from selling
current model used cars. I have to echo Mr. Sniffen's
comments ... that the statute as it currently exists
precludes all dealers from selling a current model
used vehicle. With the changes we've proposed, all
dealers - not just new car dealers, but used car
dealers as well - will be able to take and market
current used [vehicles] when they're traded in, when
they're purchased from an individual consumer, or when
they come from a bona fide rental fleet - either
through an auction or directly - when they've been in
service for specified period of time.
Starting at the beginning ..., the acquisition of
these vehicles is legal, but essentially it amounts to
the manufacturing of a used vehicle. I have given you
some attachments, one of those is a good indicator of
that - [it] is the advertisement that says the vehicle
has 30 miles on it. That is not a bona fide used
vehicle. The process ... can involve a college
student, it can involve somebody ... handing somebody
$100 so that the vehicle is titled in their name in
Canada. These vehicles that come from Canada are
built specifically for sale and use in their specific
country. In your attachment you have a copy of a
manufacturer's invoice to a dealer that says at the
bottom, in our case, [that] the vehicle is built for
the U.S. market and is supposed to be sold there.
Number 1291
MR. ALLWINE continued:
Problems when the vehicle enters this country:
prerequisite is the speedometer must be changed from
kilometers to miles. Two issues and concerns are
raised when this is done. The first one: an error in
the mileage of a vehicle will render it basically
worthless on the retail market. The stigma of miles
unknown on an odometer statement is significant, it's
huge, and it basically will render the car worthless.
These mistakes can happen, and frequently, when they
do these type of conversions; however, one mistake is
going to cost the consumer thousands of dollars. The
second: temptation for speedometer fraud is strong -
the difference in a popular model pickup truck at
3,000 miles versus 20,000 is in excess of $600. Oh,
by the way, how do we change these speedometers? You
can buy the equipment over the Internet - you have a
copy of the article - [for] about $1,800 ....
Title fraud: If you bring a vehicle in from Canada,
because of how the title is transitioned, if the
vehicle has been totaled, if it's been in a flood, you
don't know. And ultimately the consumer has no
recourse; there's no recourse with that Canadian
importer. Ever try to sue a business in another
country? Another problem is manufacturer's warranty:
... a number of the manufacturers have eliminated the
manufacturer's warranty from their vehicles. What
some of the used car dealers have taken to doing is
they have said, "We're putting a service contract on
your vehicle." However, they're not indicating it's a
service contract; they're stating in this, in the ad
that you have - [it's] a classic example - they're
saying it's a warranty. There's a difference between
a manufacturer's warranty and a service contract. It
is misleading, it is not honest, and it does not
provide the same coverage.
Number 1193
MR. ALLWINE concluded:
... I sent you a letter; ... in my closing paragraph
... I said ...that ultimately, if the consumer has
difficulty with a current model used car, there's only
one place they go - they come to a new car dealer
because a new car dealer has the investment in the
equipment and in the tools and in the training and in
the facilities. If you've got a car that's one or two
years old, and you have a problem, your used car
dealer ... is going to say, "Well, that's okay; it's
got a warranty, it's got a service contract, take it
to a new car dealer." It is not appropriate for a
used car dealer to have the ability to sell a new
vehicle without having any responsibility or
obligation after the sale. This is a manufactured
used car; it is not the same as what we're trying to
correct here for bona fide used car commerce.
MR. ALLWINE, in response to a question, said that used car
dealers have some obligation by virtue of a service contract, if
they have a facility, to fix the vehicles they sell. However,
99 out of 100 used car dealers do not have the special tools or
the special training to fix current model vehicles.
REPRESENTATIVE GATTO asked whether a new car dealer in Anchorage
has the obligation to honor the factory warranty of a vehicle
that was purchased new in Indiana, for example.
MR. ALLWINE said yes.
REPRESENTATIVE GATTO asked whether the same would be true for a
vehicle purchased new in Canada.
MR. ALLWINE said it would be true if the owner of the vehicle is
a Canadian citizen.
REPRESENTATIVE GATTO asked whether a U.S. citizen who went to
Canada to purchase a new vehicle could expect a new car dealer
in Anchorage to honor the manufacturer's warranty.
Number 1088
MR. ALLWINE replied:
The answer is that it would be difficult for you, as a
consumer from this country, to go to Canada and make
that purchase, and would be highly unlikely. In the
event you did, because that vehicle was built and
manufactured for sale and use in Canada, that vehicle,
in many cases, would not have a manufacturer's
warranty.
REPRESENTATIVE ROKEBERG asked whether the aforementioned service
contracts are insurance products or "underwritten separately."
MR. ALLWINE replied:
Service contracts, in a number of cases, are
underwritten by some other company. But service
contracts are not like warranties in as much as
they're not all inclusive. They will cover specific
things, but it is incumbent on the consumer to find
somebody who is willing to make that repair and accept
payment from that service contract company. In our
instance, we do sell a service contract, and our
service contract is backed by the manufacturer -
Daimler Chrysler. Ford Motor Company offers the same
thing as do most of the manufacturers. But there are
offshore and there are independent companies that also
offer service contracts.
REPRESENTATIVE GUTTENBERG asked whether HB 272 prevents a used
car dealer from selling a new car.
MR. ALLWINE replied:
The law prevents a used car dealer from selling a new
car. A new car is an untitled vehicle that is
purchased from the manufacturer and is sold by one of
the manufacturer's agents. ... This bill, with the
recommended amendment, does not preclude that used car
dealer from selling a bona fide current model used
vehicle.
REPRESENTATIVE LYNN asked whether extended warranties are
actually warranties or just service contracts.
MR. ALLWINE said that those are just service contracts, and
indicated that the practice of calling them "warranties" is
misrepresentation. In response to another question, he said:
At this point in time, you will see rental car
companies starting to let loose of some of their
rental fleets, which would be current model. And so
those vehicles will start to show up. The current
statute, as it exists, precludes anybody from selling
a current model used vehicle. What we're proposing
allows everybody to do it, but it doesn't permit the
wholesale manufacture of a used vehicle from Canada.
MR. ALLWINE reiterated that a used vehicle is one that has been
titled.
Number 0690
CHRIS HESTER, Lyberger's Car and Truck Sales, LLC
("Lyberger's"), said that he strongly believes that Section 1 of
HB 272 needs to be deleted. He offered an example of how HB 272
would affect the consumer:
About a year ago, a husband and a wife purchased a
current model vehicle from Lyberger's, a Canadian
vehicle that we got from an auction. The couple knew
that it was Canadian because we do have disclosure
forms that they signed. Two months later, the woman
came in almost in tears and explained that her husband
was the man who ran over an elderly lady walking home
with her husband. This was a story that was in the
newspapers, it was on the news. And she came in and
she asked John if he would buy the car back because
her husband was going to jail and she wouldn't be able
to afford this car payment. Not only did John buy the
car back, he refunded 100 percent of her money.
Now, if Section 1 of HB 272 was in effect, she would
only be able to purchase that vehicle at the franchise
dealership and, with her unforeseen circumstances,
would have no other alternative but to take it back to
the franchise dealership to sell it back; the
franchise dealer, knowing that it was the only place
she could get rid of the vehicle and knowing how bad
she needed to get rid of it, would have a monopoly
advantage ... and would probably give her the lowest,
rock-bottom price. This would not have helped this
lady in her circumstances. Not only is this how
Lyberger's treats their customers, but it shows you
that we are there for the consumer. And this bill is
definitely not there helping them in any way, shape,
or form. Thank you.
Number 0574
CARROL LYBERGER, Lyberger's Car and Truck Sales, LLC, remarked
that the problematic word in HB 272 is the word "current". She
went on to say:
There is a difference between a new and used vehicle.
[With] a new vehicle that is sold ... to a franchised
dealer, from the manufacturer, the manufacturer got
paid for that vehicle [and] it was sent to the
franchised dealer. The franchised dealer, whether
it's U.S. or Canadian, was paid for that vehicle the
price they were asking. I know what a used vehicle
is: as soon as it is sold, it is used - the value of
that vehicle will never be the same.
To Steve [Allwine], I am a member of the Alaska Auto
Dealers Association [but] was never informed of this
Section 1 in [HB 272]; I learned of it last week. As
far as the warranty and service contract goes, a
warranty is free. A service contract is what the
consumer buys - the consumer pays for ... the service
contract. That is the difference between a warranty
and a service contract. ...
As far as the independent [which some claim] that
nobody can possibly find - a mechanic that would be
able to work on the newer models - there are several
independent mechanics that do have very expensive
equipment in their shops, and they do warranty work.
Even a lot of the new cars stores will sublet out to
some of your independents on stuff. I believe it was
about two years ago that the independent mechanics
sued the manufacturers for the codes because they had
the equipment but the codes could not go to the
independents until about six months to a year after
that vehicle came out. So now they're able to get the
codes whenever the manufacturers give it to the
franchised dealers and mechanics. ...
MS. LYBERGER concluded:
This bill, when they say current, there is definitely
a difference between current, new, and used. The word
"current" is ... a bad word; there is a new car and
there is a used car. And I thank you for listening to
me, and ... anybody that wishes to ask any questions,
I'll be glad to answer.
MS. LYBERGER, in response to questions, said that Lyberger's
does offer an "after market" service contract. She added that
when a customer buys a Canadian vehicle that has no
manufacturer's warranty, Lyberger's gives the customer a
"replacement" warranty for free. She noted that there are
several shops in town that "do" the warranty work, and went on
to list five such shops, adding that there are some franchised
dealers that will also honor the after market warranty though
one of those does not do so for 2003 models.
Number 0283
TERI PETRAM, Lyberger's Car and Truck Sales, LLC, said that when
Lyberger's sells a vehicle that's been imported from Canada, all
of the documents are disclosed to the customer. Also, whenever
Lyberger's sells any vehicle, the customer is also given a
"Carfax" report, which provides details about the vehicle's
history. She opined that it is ridiculous to think that
Lyberger's would sell a vehicle with a "rolled back" odometer or
a wrong odometer reading. And if such a vehicle did come to
them, she added, Lyberger's wouldn't sell it; instead,
Lyberger's would absorb the expense.
MS. PETRAM noted that used car dealers have to purchase most of
their inventory from auctions because there is no way they could
keep enough cars on the lot, solely with trade-ins and purchases
through individuals, to stay in business. To illustrate this
point, she added that Lyberger's sells 100-some vehicles a
month. Thus, Lyberger's must supplement its inventory by buying
vehicles from auctions, most of which acquire the majority of
their vehicles from Canada. She remarked: "We want to be
competitive and offer something that the consumer wants, so
we're going to find the lowest mileage vehicles that are
available. We personally don't import these vehicles; we have
nothing to do with the import process, we just buy them from the
people that [import them]."
MS. PETRAM relayed that according to the "General Motors
Acceptance Corporation," a warranty is free and an extended
service contract is something the consumer pays for. So on the
back of the warranty that Lyberger's gives to the customer to
replace the manufacturer's warranty, it specifically lists what
is not covered on that warranty. In conclusion, she suggested
that the way current statute and HB 272 have evolved, they
appear to have the goal of eliminating any competition to
franchised dealers.
REPRESENTATIVE LYNN asked what percentage of Lyberger's vehicles
are Canadian.
MS. PETRAM offered that approximately 50-60 percent of the
vehicles that Lyberger's sells are Canadian.
TAPE 03-50, SIDE A
Number 0001
CHAIR ANDERSON determined that Lorri Urban from the North
American Automobile Trade Association had provided testimony
during the May 5 hearing on HB 272, and indicated that the
committee would take testimony from those that did not testify
at that prior meeting.
Number 0045
BRUCE MUSICK, Affordable Used Cars, said that under HB 272, when
a new car is released, there will be a period ranging between 17
and 24 months during which that car can not be sold as a used
vehicle. He pointed out that the bill's restrictions will also
apply to cars that aren't Canadian, but won't apply to used car
dealers in the Lower 48. He mentioned that many used car
dealers in Alaska acquire inventory in the lower 48.
Number 0161
DIANA PFEIFFER, President, Alaska Automobile Dealers Association
(AADA); President, Alaska Sales and Service, expressed her
support of HB 272. On the issue of odometer readings, she added
that franchised automobile dealers have a computer system
connected to the manufacturer that allows dealers to verify
mileage. She said she did not believe that independent used car
dealers have access to that information. She listed the issues
that others have already spoken to, and relayed that a lot of
people who come into her dealerships don't know how to operate
their vehicles. She said that as a franchised automobile
dealer, her firm invests millions of dollars in facilities,
training, special tools and equipment, and the proper delivery
of automobiles to consumers. She noted that since franchise
dealers have direct communication with manufacturers, if there
are safety issues with [certain] vehicles, a "stop delivery"
order or a recall can be issued. She offered an example of one
such situation, and said that used car dealers in her area at
that time were attempting to sell such cars as "newly used."
She offered her belief that Canadian titles do not show liens.
In conclusion, she requested the committee's support of HB 272.
Number 0366
RICHARD HIATT, General Service Manager, Alaska Sales and
Service, on the issue of how many vehicles are exported from
Canada, suggested that in 1996 it was approximately 16,000
vehicles, 200,000 vehicles in 2002, and that the practice is
still quite prevalent. He relayed that many people who buy
"like new" cars from used car dealers in the area come to Alaska
Sales and Service in an effort to get a better understanding of
how to operate those vehicles. He opined that those who bring
Canadian cars into Alaska for the purpose of reselling them are
committing fraud.
Number 0494
DARRELL FRIESS, Budget Car & Truck, said he questions Mr.
Hiatt's assertion that 200,000 Canadian vehicles are exported
yearly. He relayed that he opposes Section 1 of HB 272, and
opined that there is a difference between a new and a used
vehicle. He offered his belief that current law already
stipulates that a used vehicle is one that has been titled. He
also opined that there should not be any resale restrictions on
any vehicle purchased at what he called a recognized auction,
and suggested that HB 272 be amended to reflect that point.
Number 0567
MARTEN MARTENSEN, Continental Honda, relayed that Honda took a
very firm stance on imported Canadian vehicles, and that many
other manufacturers have followed suit. He explained that
although people who've bought used Canadian vehicles at local
dealers have come to his firm for warranty work, Honda's stance
is that it will not provide any kind of assistance for those
Canadian vehicles. He opined that even if a person can get an
independent shop to honor a warranty on those vehicles, he/she
is not getting the same quality of work that can be provided by
a franchised dealer.
CHAIR ANDERSON closed public testimony on HB 272.
Number 0686
REPRESENTATIVE ROKEBERG moved to report HB 272, as amended, out
of committee with individual recommendations and the
accompanying zero fiscal note.
Number 0705
REPRESENTATIVE GUTTENBERG objected. He relayed that when the
original legislation passed, there was strong opposition to any
consumer protection being built into it, and opined that HB 272
simply continues in that vein. Lacking consideration of the
consumer in HB 272, he said he does not support any continuing
restructuring of the relationship between auto dealers.
Number 0760
A roll call vote was taken. Representatives Lynn, Dahlstrom,
Gatto, Rokeberg, Crawford, and Anderson voted in favor of
reporting HB 272, as amended, from committee. Representative
Guttenberg voted against it. Therefore, CSHB 272(L&C) was
reported from the House Labor and Commerce Standing Committee by
a vote of 6-1.
HB 305 - UNEMPLOYMENT COMPENSATION BENEFITS
Number 0770
CHAIR ANDERSON announced that the final order of business would
be HOUSE BILL NO. 305, "An Act relating to the calculation and
payment of unemployment compensation benefits; and providing for
an effective date."
CHAIR ANDERSON noted that the House Labor and Commerce Standing
Committee is the sponsor of HB 305, and made reference the
sponsor statement.
Number 0844
GREG O'CLARAY, Commissioner, Department of Labor & Workforce
Development (DLWD), said:
This bill has been long in the coming; ... both bodies
of the legislature dealt with a similar bill over the
last two years. For reasons unbeknown to most of us,
it was not acceptable to folks in the construction
industry, on the employers side, and it was hung up in
the other body, first in [the Senate Finance
Committee] and then in [the Senate Rules Standing
Committee]. This is a product, that we bring before
you, that's ... a compromise - a total of five
meetings with the construction industry
representatives, and other employers were also invited
to the meetings. ... We didn't have full participation
by all of the employers, but those that are impacted
the most - the construction industry - [were] involved
with organized labor, and this is the compromise piece
of legislation.
The only difference in the bill that you passed before
and this bill is that the effective dates have been
moved forward and the last increment, they split the
difference between the original bill that didn't pass
and this one. So instead of the top line being as
high as [it] was, this will be at ... $308. ... The
net effect of this bill is that it helps the economy
of Alaska by putting more money on the street during
the off season when [employees] are unemployed, and it
keeps skilled workers in Alaska instead of having to
go south to look for other employment or to go to
places where their costs of living are much lower -
... in many cases, our skilled workers are not coming
back to Alaska. And this moves us from number 47 in
the nation in terms of the top weekly benefit, to
around 28th or 29th. ... The first actual impact on
employers occurs in the year 2006, when their tax
rates will be impacted. ...
REPRESENTATIVE ROKEBERG asked whether there is a large surplus
in the account these funds are placed in.
Number 0999
PATRICK SHIER, Employment Security Tax, Division of Employment
Security, Department of Labor & Workforce Development (DLWD),
replied that the "UI Trust Fund" is "self-balancing" and has a
balance of approximately $220 million. In response to other
questions, he said that there are 21 different "rate classes,"
and that employers are assigned to one of those rate classes
according to their "experience in prior years." He added:
The experience rating depends only on the industry the
first year you come to the [DLWD] and sign up for a
brand new business where there is no prior experience.
As soon as you have four complete quarters in the
rating period, then it's based entirely on your
experience as an individual. Or, if you acquire a
business ..., for rating purposes you will inherit the
... management practices that they may have had in the
past. And the good news is, that goes away; as your
management skills come to bear on the bottom line, the
payroll would be expected to level out, and as those
declines in payroll become more distant ... - 12
quarters is when they fall off the edge of the world -
... the current quarters that you're going through now
exert more influence on your rate, and that would be
ameliorated.
REPRESENTATIVE ROKEBERG said he would like information on the
range of rates that are charged to businesses. Referring to a
handout provided by the DLWD, he asked if the tax rate used on
one of the pages is the average tax rate and how a tax rate is
calculated.
MR. SHIER pointed out that the information being referred to
talks about the "average employer tax rate," adding that the
lowest rate is "1.0" and the highest is "5.9" and that they are
calculated averages that includes the employee portion. He then
provided Representative Rokeberg with a few more details on the
highest and lowest rates.
REPRESENTATIVE GUTTENBERG said he thought that 13 of the states
listed in the handout have automatic "escalators," and asked
whether those escalators have been considered when calculating
what Alaska's rank would be in 2006.
COMMISSIONER O'CLARAY offered his belief that those escalators
were considered, and indicated that the handout merely provides
an estimate of what Alaska's ranking would be with passage of HB
305.
Number 1361
JOHN DAVID RAGAN testified in favor of an increase in
unemployment benefits, adding that it is of particular
importance to those in the construction industry in Alaska. He
expressed dissatisfaction that "labor" bills are heard last in
the committee, because this results in the people who've come to
testify having to leave before getting a chance to speak.
MR. RAGAN, in response to a question, said that in the
construction industry there are times when there is a lot of
work and there are times when there isn't any work; thus a lot
of people depend on unemployment benefits.
Number 1470
RON PECK, President, Alaska Travel Industry Association (ATIA),
relayed some details of the tourism industry, said the ATIA is
not opposed to HB 305, and asked that a complete analysis be
done on the bill with regard to how it applies to the tourism
industry before being moved from committee.
Number 1508
PAMELA LaBOLLE, President, Alaska State Chamber of Commerce
(ASCC), said that the ASCC has been very involved with this
issue the last three years, and suggested that the statistics
provided in the past by the DLWD were misleading because of the
way they were presented. She noted that Alaska is one of five
states that offers an additional "dependent benefit," and opined
that if one were to calculate that additional benefit into the
statistics presented, Alaska would reach what she called the
"national goal of the UI program." She referred to statistics
provided two years ago and offered some calculations based on
those statistics.
MS. LaBOLLE pointed out that although there is a zero fiscal
note because there is no cost to the state for this legislation,
she has not heard the DLWD offer any information regarding how
much the proposed increases will cost employers and employees.
She predicted that whatever the increase is, employers will pay
for 80 percent of it and employees will pay for the remaining 20
percent. She asked the DLWD to provide her with information
regarding the cost to employers and the cost per employee based
on the average tax rate. She opined that employers other than
those in the construction industry ought to be given the
opportunity to weigh in on this issue, and suggested that the
bill failed in the past because those in favor of the
legislation refused to compromise on the increase amount.
CHAIR ANDERSON offered his belief that it is important for this
legislation to move forward.
MS. LaBOLLE expressed concern that HB 305 would move forward
without the committee knowing what the cost will be to
employers.
REPRESENTATIVE CRAWFORD pointed out that any increase in
employer costs would not occur until 2006. He remarked that he
is disappointed in HB 305, and relayed that although he had
considered sponsoring similar legislation, he'd opted to forego
that idea because he'd hoped that the task force which developed
HB 305 would have come up with "a fair and equitable return."
He suggested that he would support HB 305 if it can get adopted
this year, but if it gets delayed in the process, he will go
ahead and sponsor legislation more to his liking. He said that
he would like to see an increase that allows people to reach the
national goal without the addition of the dependant benefit. He
added:
I know that we're losing good, skilled iron workers
because they go down to the Lower 48 and they don't
come back because our unemployment is so low here
[that] they can't afford to stay through the ... slack
times in employment. So we've got to do something
about this, and it's gone on too long.
Number 1881
REPRESENTATIVE DAHLSTROM moved to report HB 305 out of committee
with individual recommendations and the accompanying zero fiscal
note.
Number 1888
REPRESENTATIVE ROKEBERG objected. He opined that the committee
did not yet have enough information regarding costs to the
employer.
REPRESENTATIVE GUTTENBERG mentioned that although he'd
considered sponsoring similar legislation that would have
provided for a bigger increase, he too had opted to see what the
task force developed. He offered that perhaps the information
the ASCC is seeking was presented at the aforementioned task
force meetings, but the ASCC chose neither to attend those
meetings nor send someone to represent its members. Noting that
the ASCC consistently talks about maintaining a competent,
qualified workforce, he pointed out that having adequate UI
benefits is one small step towards retaining that kind of
workforce - it is one small incentive for qualified workers to
stay in Alaska during seasons when there is no work.
COMMISSIONER O'CLARAY indicated that the DLWD would provide the
information requested - to Ms. LaBolle on Monday, and to
Representative Rokeberg before HB 305 is heard on the House
floor.
CHAIR ANDERSON noted that committees often move bills out with
the understanding that information will be forthcoming during
the process.
REPRESENTATIVE ROKEBERG opined that HB 305's next committee of
referral will not have time to adequately address the issues
that concern him, and suggested that the committee refrain from
moving the bill until the requested information is presented to
the committee. He relayed that he did not know who attended the
aforementioned task force meetings or whether small business was
adequately represented.
CHAIR ANDERSON announced that that information would also be
forthcoming.
REPRESENTATIVE GATTO surmised that the bill's next committee of
referral will be relying on this committee's recommendations,
and relayed that he cannot offer a recommendation at this time
because of a lack of information. He added that he would be
leaving in order to avoid having to vote on a bill that he
doesn't want to see moved yet.
Number 2089
A roll call vote was taken. Representatives Guttenberg, Lynn,
Dahlstrom, Crawford, and Anderson voted in favor of reporting HB
305 from committee. Representative Rokeberg voted against it.
Therefore, HB 305 was reported from the House Labor and Commerce
Standing Committee by a vote of 5-1.
ADJOURNMENT
Number 2101
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:40 p.m.
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