Legislature(2005 - 2006)
04/30/2005 02:15 PM House L&C
| Audio | Topic |
|---|---|
| Start | |
| HB271 | |
| HB286 | |
| SB137 | |
| SB158 | |
| Adjourn |
* 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
April 30, 2005
2:06 p.m.
MEMBERS PRESENT
Representative Tom Anderson, Chair
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Bob Lynn
Representative Norman Rokeberg
Representative Harry Crawford
Representative David Guttenberg
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 271
"An Act relating to limitations on overtime for registered
nurses in health care facilities; and providing for an effective
date."
- MOVED HB 271 OUT OF COMMITTEE
HOUSE BILL NO. 286
"An Act amending the manner of determining the royalty received
by the state on gas production by directing the commissioner of
natural resources to accept, under certain circumstances, the
transfer price of the gas if established by transfer price order
of the Regulatory Commission of Alaska; and providing for an
effective date."
- MOVED HB 286 OUT OF COMMITTEE
SENATE BILL NO. 137
"An Act providing that an institution providing accommodations
exempt from the provisions of the Uniform Residential Landlord
and Tenant Act may evict tenants without resorting to court
proceedings under AS 09.45.060 - 09.45.160."
- MOVED HCS CSSB 137(L&C) OUT OF COMMITTEE
SENATE BILL NO. 158
"An Act prohibiting the imposition of municipal sales and use
taxes on state construction contracts and certain subcontracts;
and providing for an effective date."
- MOVED SB 158 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 271
SHORT TITLE: LIMIT OVERTIME FOR REGISTERED NURSES
SPONSOR(S): REPRESENTATIVE(S) WILSON
04/15/05 (H) READ THE FIRST TIME - REFERRALS
04/15/05 (H) L&C, HES, FIN
04/30/05 (H) L&C AT 1:00 PM CAPITOL 17
BILL: HB 286
SHORT TITLE: VALUE OF ROYALTY ON GAS PROD./ TAX CREDIT
SPONSOR(S): REPRESENTATIVE(S) SAMUELS
04/26/05 (H) READ THE FIRST TIME - REFERRALS
04/26/05 (H) O&G, L&C
04/28/05 (H) O&G AT 5:00 PM CAPITOL 124
04/28/05 (H) Moved Out of Committee
04/28/05 (H) MINUTE(O&G)
04/29/05 (H) O&G RPT 5DP
04/29/05 (H) DP: KERTTULA, SAMUELS, MCGUIRE,
ROKEBERG, KOHRING
04/30/05 (H) L&C AT 1:00 PM CAPITOL 17
BILL: SB 137
SHORT TITLE: EVICTIONS FROM UNIV. STUDENT HOUSING
SPONSOR(S): SENATOR(S) SEEKINS
03/08/05 (S) READ THE FIRST TIME - REFERRALS
03/08/05 (S) L&C, JUD
03/22/05 (S) L&C AT 1:30 PM BELTZ 211
03/22/05 (S) Heard & Held
03/22/05 (S) MINUTE(L&C)
03/24/05 (S) L&C AT 2:00 PM BELTZ 211
03/24/05 (S) Moved SB 137 Out of Committee
03/24/05 (S) MINUTE(L&C)
03/29/05 (S) L&C RPT 3DP
03/29/05 (S) DP: BUNDE, DAVIS, STEVENS B
04/05/05 (S) JUD RPT 3DP 1NR
04/05/05 (S) DP: SEEKINS, THERRIAULT, HUGGINS
04/05/05 (S) NR: GUESS
04/05/05 (S) JUD AT 8:30 AM BUTROVICH 205
04/05/05 (S) Moved SB 137 Out of Committee
04/05/05 (S) MINUTE(JUD)
04/12/05 (S) TRANSMITTED TO (H)
04/12/05 (S) VERSION: SB 137
04/13/05 (H) READ THE FIRST TIME - REFERRALS
04/13/05 (H) L&C, JUD
04/22/05 (H) L&C AT 3:15 PM CAPITOL 17
04/22/05 (H) <Bill Hearing Postponed to 4/25>
04/25/05 (H) L&C AT 3:15 PM CAPITOL 17
04/25/05 (H) Heard & Held
04/25/05 (H) MINUTE(L&C)
04/29/05 (H) L&C AT 3:15 PM CAPITOL 17
04/29/05 (H) -- Meeting Canceled --
04/30/05 (H) L&C AT 1:00 PM CAPITOL 17
BILL: SB 158
SHORT TITLE: MUNI TAX ON STATE CONSTRUCTION CONTRACTS
SPONSOR(S): SENATOR(S) HUGGINS
04/01/05 (S) READ THE FIRST TIME - REFERRALS
04/01/05 (S) CRA, FIN
04/06/05 (S) CRA AT 1:30 PM BELTZ 211
04/06/05 (S) Moved SB 158 Out of Committee
04/06/05 (S) MINUTE(CRA)
04/07/05 (S) CRA RPT 2DP 2NR
04/07/05 (S) DP: STEVENS G, STEDMAN
04/07/05 (S) NR: WAGONER, KOOKESH
04/13/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/13/05 (S) Heard & Held
04/13/05 (S) MINUTE(FIN)
04/15/05 (S) FIN RPT 4DP 1DNP
04/15/05 (S) DP: WILKEN, GREEN, DYSON, STEDMAN
04/15/05 (S) DNP: OLSON
04/15/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/15/05 (S) Moved SB 158 Out of Committee
04/15/05 (S) MINUTE(FIN)
04/21/05 (S) TRANSMITTED TO (H)
04/21/05 (S) VERSION: SB 158
04/22/05 (H) READ THE FIRST TIME - REFERRALS
04/22/05 (H) L&C, FIN
04/29/05 (H) L&C AT 3:15 PM CAPITOL 17
04/29/05 (H) -- Meeting Canceled --
04/30/05 (H) L&C AT 1:00 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE PEGGY WILSON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 271.
REBECCA BOLLING, RN, President
Alaska Nurses Association
Ketchikan, Alaska
POSITION STATEMENT: Testified in support of HB 271.
DAVE WILLIAMS, Project Coordinator
Department of Health and Social Services
Juneau, Alaska
POSITION STATEMENT: Testified on HB 271.
KATHLEEN GETTYS, RN, President
Providence Registered Nurses Bargaining Unit;
Delegate, American Nurses Association
Anchorage, Alaska
POSITION STATEMENT: Urged the committee's support of HB 271.
DIANE O'CONNEL
Alaska Nurses Association
Anchorage, Alaska
POSITION STATEMENT: Urged the committee's support of HB 271.
LONNIE HOSLEY (PH), RN
(No address provided)
POSITION STATEMENT: Testified in support of HB 271.
CAROL WIDMAN, RN
(No address provided)
POSITION STATEMENT: Testified in support of HB 271.
GREY MITCHELL, Director
Division of Labor Standards & Safety
Department of Labor & Workforce Development
Juneau, Alaska
POSITION STATEMENT: During hearing of HB 271, answered
questions.
REPRESENTATIVE RALPH SAMUELS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 286.
JIM POSEY, General Manager
Municipal Light & Power
Anchorage, Alaska
POSITION STATEMENT: Provided specifics on HB 286.
KATE GIARD, Commissioner/Chair
Regulatory Commission of Alaska
Department of Commerce, Community, & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Testified that HB 286 is in keeping with
the agreement RCA had when ML&P purchased the Beluga River
Field.
MARTIN SCHULTZ, Audit Section
Division of Oil and Gas
Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 286.
ANDY LEIMAN
Municipal Light & Power
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 286.
JOE MICHEL, Staff
to Senator Ralph Seekins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Explained the changes encompassed in HCS
CSSB 137, Version F.
SENATOR CHARLIE HUGGINS
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of SB 158.
DAVID LANTZ, General Manager/Owner
Dimond Electric;
Board Member, National Electrical Contractors Association -
Alaska Chapter
(No address provided)
POSITION STATEMENT: During hearing of SB 158, urged the
committee to level the playing field regarding what's taxed on a
state project throughout the state.
DENISE MICHELS, Mayor
City of Nome
Nome, Alaska
POSITION STATEMENT: Testified in opposition to SB 158.
DEBORAH GRUNDMAN, Staff
to Senator Huggins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Offered additional information on SB 158.
KATHIE WASSERMAN
Alaska Municipal League
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to SB 158.
ACTION NARRATIVE
CHAIR TOM ANDERSON called the House Labor and Commerce Standing
Committee meeting to order at 2:15:49 PM. Representatives
Anderson, Lynn, Crawford, and Guttenberg were present at the
call to order. Representatives Kott, LeDoux, and Rokeberg
arrived as the meeting was in progress.
HB 271-LIMIT OVERTIME FOR REGISTERED NURSES
CHAIR ANDERSON announced that the first order of business would
be HOUSE BILL NO. 271, "An Act relating to limitations on
overtime for registered nurses in health care facilities; and
providing for an effective date."
REPRESENTATIVE PEGGY WILSON, Alaska State Legislature, sponsor,
explained that HB 271 prohibits mandatory overtime for nurses
because it causes significant problems for both patients and
health care workers. "Forcing nurses to work beyond their
regularly scheduled shift has been linked to increased error
rates in providing patient care; it's also increased injury
rates for both patients and health care workers," she stated.
For health care workers, the abuse of mandatory overtime has
been associated with unhealthy weight gain, increased use of
alcohol and tobacco, and lower levels of functional ability.
Representative Wilson highlighted that for nurses, errors and
mistakes can cause life-threatening situations for both the
patient and the nurse. Furthermore, errors and mistakes can
lead to lawsuits that could result in the loss of license and
increases in malpractice insurance rates. "The evidence is very
strong that prolonged work hours and fatigue effect worker
performance," she stated.
REPRESENTATIVE WILSON informed the committee that the U.S.
Department of Health and Human Resources authorized the
Institute of Medicine to study nurse work hours and health care
errors. The study provided compelling evidence supporting the
belief that nurses working long hours have an adverse effect on
patient safety. Representative Wilson highlighted that the
study estimated that between 44,000-98,000 hospital deaths can
be attributed to medical errors each year. She said that
mandatory overtime is a serious contributing factor to some of
these errors. The study, she related, recommends that all
overtime should be curtailed altogether.
2:18:46 PM
REPRESENTATIVE WILSON informed the committee that when nurses
had to work shifts longer than 12 hours, the risk of making an
error was three times higher. Furthermore, working overtime
increased the odds of making at least one error, regardless of
the length of the originally scheduled shift. Moreover, about
12 percent of the absences reported by a random sample of
Canadian nurses was directly correlated to overtime.
REPRESENTATIVE WILSON pointed out that mandatory overtime is one
of the major factors causing nurses to leave the profession.
However, in the face of a severe nursing shortage, nurses need
to be kept at the bedside. She informed the committee that
surveys have shown that the exodus of various health care
providers and [other support staff] is directly attributable to
difficult working conditions, including inadequate staffing,
mandatory overtime, and insufficient compensation.
2:19:51 PM
REPRESENTATIVE WILSON specified that HB 271 won't prohibit
nurses from working overtime, although it will discourage an
employer from assigning mandatory overtime. Furthermore, the
legislation will prohibit an employer from threatening or
retaliating against a nurse who refuses to work overtime. She
noted that 10 states have already enacted legislation
prohibiting mandatory overtime and another 20 are in the process
of doing so. Representative Wilson concluded by emphasizing
that this is not an overtime issue but rather a safety issue for
both patients and nurses.
CHAIR ANDERSON turned attention to the fiscal note for a Wage &
Hour Investigator I, which he assumed would cover the state's
nurses.
2:21:18 PM
REPRESENTATIVE LYNN inquired as to what happens in an emergency
situation in which a nurse becomes sick, but no one will
volunteer. He asked if mandatory overtime could be required in
that situation.
REPRESENTATIVE WILSON pointed out that there are five
exemptions, which include the aforementioned situation. The
exemptions are listed on page 2, lines 14-20.
2:23:04 PM
REPRESENTATIVE ROKEBERG turned attention to the exemption
allowing a nurse to voluntarily work overtime. He asked if that
could be problematic in terms of what's voluntary and what's
not.
REPRESENTATIVE WILSON related her belief that the nurse would
know whether she can handle additional hours and how many. In
further response to Representative Rokeberg, Representative
Wilson said that parts of HB 271 are based on statutes from
other states.
2:24:47 PM
REBECCA BOLLING, RN, President, Alaska Nurses Association,
informed the committee that the Alaska Nurses Association
represents over 6,000 registered nurses in the state. She
related her support for HB 271. Ms. Bolling turned attention to
the national nursing shortage, which is expected to be of
greater proportions than those of the past. She reviewed the
many reasons for the nursing shorting, included the growing
elderly population, fewer individuals choosing a nursing career,
and the growing trend of nurses planning to and leaving the
profession. Many surveys have documented that as many as 20
percent of nurses are planning to leave the profession within
the next five years. She echoed Representative Wilson's
comments regarding the reports from surveys that nurses are
leaving the profession primarily due to working conditions,
siting mandatory overtime as one of the top reasons for
dissatisfaction. Furthermore, mandatory overtime has been
associated with poor health of the nurse and most certainly
causes family, marital, and childcare problems. Moreover,
mandatory overtime contributes to poor quality of care and
mistakes that can and do have disastrous results.
MS. BOLLING said that the answer to the nursing shortage isn't
mandatory overtime, rather it will worsen the shortage by
driving away more nurses. She noted that other states have
tackled this issue. She also noted that nurses do suffer
retaliation from employers when they refuse overtime hours, and
therefore legislation to ban mandatory overtime for registered
nurses (RNs) is important. Ms. Bolling, in conclusion,
applauded the effort to protect the profession of nursing in
Alaska and the safety of the state's patients by moving forward
on HB 271.
2:29:09 PM
REPRESENTATIVE GUTTENBERG inquired as to how this legislation
would apply to nurses performing administrative work as opposed
to direct care.
MS. BOLLING related her belief that it wouldn't apply to those
nurses doing administrative work primarily because those are
contracted services that are salary positions. Staff nurses are
paid on an hourly wage and are impacted by mandatory overtime.
2:30:05 PM
REPRESENTATIVE LEDOUX drew attention to the exemption for a
critical access hospital, and inquired as to what it is.
REPRESENTATIVE WILSON opined that there are only five hospitals
in the state that are critical access hospitals, including the
hospitals in Wrangell, Petersburg, and Cordova. Those hospitals
are located in areas in which the population has decreased, but
the federal government has provided help in order to continue to
provide services because without the hospital there would be no
access to health care. There was an indication that the
definition of "critical access hospital" is specified in the
U.S. code.
2:32:27 PM
REPRESENTATIVE LEDOUX expressed concern for hospitals with a
limited number of employees because she surmised that such a
hospital would be most likely to force unwanted overtime.
Therefore, the exemption would seem to undo the good intention
of the legislation.
REPRESENTATIVE WILSON noted that in talking with nurses and the
Alaska Nurses Association, she gathered that the only facilities
making people work overtime are the Alaska Psychiatric Institute
(API), some of the Pioneers' Homes, and within [the Department
of] Corrections.
[Due to a technical difficulty, the committee took a brief at-
ease.]
2:34:51 PM
DAVE WILLIAMS, Project Coordinator, Department of Health and
Social Services (DHSS), informed the committee that he is
representing the pioneers' and veterans' homes. Mr. Williams
stressed the importance of RNs, without which the pioneers' and
veterans' homes cannot work. He noted that the department has
found difficulty in finding RNs to even interview for all of the
shifts and locations, there are six different homes to staff.
Therefore, when a facility is short, it asks for volunteers
first. He related his impression that generally the requests
for volunteers satisfy the need, although that's not always the
case.
MR. WILLIAMS surmised that under HB 271, more attention would
have to be paid to be sure that [the first request was for
voluntary overtime]. Therefore, he surmised that whether the
overtime was mandatory or voluntary would need to be recorded in
some fashion. Mr. Williams said that he should be able to
provide the committee with a fiscal note next week after he has
time to check with each administrator regarding the amount of
voluntary and mandatory overtime. He commented that if there is
a need to request mandatory overtime, but [the administrator] is
not allowed to do so [under HB 271] then an alternative would
have to be sought. He mentioned the possibility of contract
nursing, which is already being used. The aforementioned would
probably be reviewed for the fiscal note. However, he noted
that contract nurses aren't easily found, and in fact locally
contract nurses are now being hired from Canada. Mr. Williams
concluded by stating that the nationwide shortage of RNs is
quite a challenge.
2:38:34 PM
REPRESENTATIVE GUTTENBERG asked if the RN shortage is mainly
[attributable] to salaries and benefits or are there merely not
enough trained people in Alaska.
MR. WILLIAMS said that he couldn't speak to the cause of the
shortage, although he agreed with earlier statements regarding
people not choosing [nursing] as a line of work. Although
higher wages could attract more people, it's such a shortage
that there will still be difficulty finding RNs. In further
response to Representative Guttenberg, Mr. Williams said that he
didn't know the compensation differential between the state and
the private sector.
2:39:18 PM
REPRESENTATIVE CRAWFORD inquired as to whether Mr. Williams had
data regarding the average amount of overtime hours an RN would
work in [the pioneers' and veterans' homes].
MR. WILLIAMS replied no, although he offered to provide that to
the committee as it will be utilized for the fiscal note.
2:40:40 PM
KATHLEEN GETTYS, RN, President, Providence Registered Nurses
Bargaining Unit; Delegate, American Nurses Association, echoed
earlier testimony regarding the concern the Alaska Nurses
Association and the American Nurses Association has regarding
the impact of mandatory overtime. Both organizations, she
related, believe that the elimination of mandatory overtime is a
critical success factor in efforts to improve the quality of
health care and conditions for nurses. Therefore, both
organizations oppose the use of mandatory overtime as a staffing
tool. Overtime, whether mandatory or voluntary, is the most
common method used to cover staffing insufficiencies. In fact,
some employers have described mandatory overtime as a staffing
model. She noted the various states in which mandatory overtime
was the central issue in RN strikes. "Strictly limiting
mandatory overtime for nurses is a critical step in improving
the quality of health care and reducing medical errors," she
opined. She reiterated the findings of the study Representative
Wilson discussed earlier. "Unlike many industries where public
safety is a concern, health care is exempt from regulations
which limit the use of overtime as a staffing tool" she pointed
out. She questioned why one would want a nurse to provide care
for someone when it has been clearly illustrated that long
working hours increase the likelihood of medical errors.
MS. GETTYS stated that API is placed at a disadvantage in
recruiting nurses due to working conditions and below-average
salaries. However, API can't turn away patients and can't deny
hospitalization. She noted that API has lost numerous nurses.
The combination of mandatory overtime and working short has left
nurses with no other option than to seek other employment
opportunities. Therefore, Ms. Gettys concluded by urging the
legislature to prohibit mandatory overtime, which she
characterized as unethical, in Alaska.
2:46:17 PM
REPRESENTATIVE ROKEBERG inquired as to how the RNs labor
agreement deals with mandatory overtime at Providence Hospital.
MS. GETTYS specified that RNs [at Providence Hospital] are
covered by a collective bargaining agreement in which mandatory
overtime isn't used. However, there are situations in which a
case in the operating room runs long. Providence Hospital has a
large pool of nurses and it takes great effort to find someone
to replace that nurse in the aforementioned situation.
2:47:24 PM
DIANE O'CONNEL, Alaska Nurses Association, informed the
committee that many organizations have worked on developing the
language in HB 271, including the Laborers Local 341
representing the nurses at Anchorage's Regional Hospital, the
Teamsters representing nurses located in Kodiak and Homer, and
the Alaska State Employee's Association for API and other nurses
employed by the state. Ms. O'Connell urged the committee's
support for HB 271.
2:48:44 PM
LONNIE HOSLEY (PH), RN, informed the committee that she has been
a nurse for over 20 years and currently works at API. She said
that she fully agrees with the statements of her peers. She
expressed hope that the committee would [forward] HB 271, which
she said she supports.
2:49:18 PM
CAROL WIDMAN, RN, informed the committee that she, too, is an
employee of API and has been forced to work overtime. She urged
the committee to pass HB 271.
2:49:58 PM
REPRESENTATIVE GUTTENBERG referred to page 3, line 10, and
inquired as to what happens if a complaint alleging a violation
isn't filed with the commissioner within three business days.
GREY MITCHELL, Director, Division of Labor Standards & Safety,
Department of Labor & Workforce Development (DLWD), assumed that
it would be the department's failure and the case wouldn't be
pursuable at that point.
REPRESENTATIVE ROKEBERG asked if testimony earlier indicating
that health care workers are exempt from the Alaska Wage & Hour
Act is correct.
MR. MITCHELL answered that there is an exemption for most health
care employees such that those employees who provide medical
services to patients and are employed by an over night hospital
are exempt from the Alaska Wage & Hour Act. Administrative
employees aren't included nor are clinics and physician's
offices.
CHAIR ANDERSON, upon determining no one else wished to testify,
closed public testimony.
2:52:06 PM
REPRESENTATIVE GUTTENBERG urged Representative Wilson to review
his earlier question [regarding the failure of the commissioner
to file a complaint within the specified time].
REPRESENTATIVE KOTT noted that he too is concerned with the
provision addressing the failure to file a complaint. If it's a
failure from the department, then he wasn't sure that it should
restrict the complaint from proceeding. Representative Kott
then turned to the fine imposed on state facilities that are
found not to be in compliance. He surmised that the fine
remitted by the state facility would be from the general fund
dollars it receives and thus the fine would be general fund
dollars that would be deposited back in the general fund.
However, that's not clear in the legislation. Therefore, he
requested that the sponsor review that issue.
2:54:00 PM
REPRESENTATIVE LEDOUX moved to report HB 271 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, it was so ordered.
HB 286-VALUE OF ROYALTY ON GAS PROD./ TAX CREDIT
CHAIR ANDERSON announced that the next order of business would
be HOUSE BILL NO. 286, "An Act amending the manner of
determining the royalty received by the state on gas production
by directing the commissioner of natural resources to accept,
under certain circumstances, the transfer price of the gas if
established by transfer price order of the Regulatory Commission
of Alaska; and providing for an effective date."
REPRESENTATIVE RALPH SAMUELS, Alaska State Legislature, sponsor,
explained that HB 286 is housekeeping legislation that was
brought forth by Municipal Light & Power (ML&P). The
legislation addresses the method for determining the royalty
received by the state [on gas production]. The Department of
Natural Resources (DNR) calculates the royalty value based on a
contract between ML&P and Shell. Then ML&P bought an interest
in the Beluga River Field from Shell and DNR agreed to allow the
rate as if the contract were still in place. The aforementioned
contract expires in 2005. Therefore, HB 286 would allow DNR to
use the gas transfer price set by the Regulatory Commission of
Alaska (RCA) much like DNR used for the contract price for the
gas.
2:55:45 PM
JIM POSEY, General Manager, Municipal Light & Power, specified
that HB 286 allows a matrix of calculations for the price that
ML&P pays royalty on to be first done through the RCA. If that
rate is sufficient for royalty purposes, then it passes muster
for DNR. However, if DNR determines later that the royalty
value is lower, then a second matrix through the DNR process is
utilized in order to establish a royalty for the gas ML&P uses
to run its turbines. Mr. Posey echoed Representative Samuels'
earlier comment that HB 286 is a housekeeping measure that keeps
two competing agencies from having concurrent jurisdiction.
2:57:37 PM
KATE GIARD, Commissioner/Chair, Regulatory Commission of Alaska,
Department of Commerce, Community, & Economic Development
(DCCED), informed the committee that the RCA has reviewed the
statutory revision, which is in keeping with the RCA's
understanding of its responsibilities in terms of opining on the
transfer price on an annual basis. There is no additional cost
to the RCA for this legislation because it's part of the process
ordered in U9636, the docket when ML&P purchased the Beluga
Field; order 39 describes the methods for calculating.
2:58:22 PM
MS. GIARD, in response to Representative Rokeberg, explained
that the formula takes the actual cost of production less the
sales, which is then multiplied by a margin. The margin for
[ML&P] is 1.6, which is ML&P's debt service coverage ratio.
Therefore, the calculations are based on the actual production
costs.
MARTIN SCHULTZ, Audit Section, Division of Oil and Gas,
Department of Natural Resources, related DNR's support of HB
286. He informed the committee that when DNR determines royalty
value under state leases, it reviews either the contract price
the producer receives for the gas or what other producers in the
same area receive. The aforementioned is referred to as "the
higher of" comparison in which the state is entitled to the
higher of those two values. He explained that AS 38.05.180(aa)
allows a producer that sells to a gas or electric utility to
have royalty value certainty.
3:00:00 PM
MR. SCHULTZ said that HB 286 would expand the coverage of AS
38.05.180(aa) to include a transfer price that a producer
receives on gas deliveries to an affiliated gas or electric
utility. Therefore, it's consistent with the current statute
and DNR supports the legislation.
3:00:37 PM
ANDY LEIMAN, Municipal Light & Power, related ML&P's support of
HB 286.
3:01:02 PM
REPRESENTATIVE ROKEBERG moved to report HB 286 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, it was so ordered.
SB 137-EVICTIONS FROM UNIV. STUDENT HOUSING
CHAIR ANDERSON announced that the next order of business would
be SENATE BILL NO. 137, "An Act providing that an institution
providing accommodations exempt from the provisions of the
Uniform Residential Landlord and Tenant Act may evict tenants
without resorting to court proceedings under AS 09.45.060 -
09.45.160."
3:01:33 PM
REPRESENTATIVE KOTT moved to adopt HCS CSSB 137, Version G, as
the working document.
The committee took a brief at-ease.
3:03:01 PM
CHAIR ANDERSON objected.
REPRESENTATIVE KOTT then moved to adopt HCS CSSB 137, Version
24-LS0739/F, Kurtz, 4/27/05, as the working document. There
being no objection, Version F was before the committee.
JOE MICHEL, Staff to Senator Ralph Seekins, Alaska State
Legislature, explained that in order to allay some concerns the
word "institution" is no longer included in the title or
throughout Version F. Furthermore, Version F only applies to
student housing at the University of Alaska. In response to
Representative Lynn, Mr. Michel confirmed that the references to
nursing homes and hospitals were removed.
REPRESENTATIVE ROKEBERG commented that the title and the act
seem to be at odds. He suggested that perhaps there is a syntax
error.
3:04:36 PM
CHAIR ANDERSON opined that he believes it's correct.
REPRESENTATIVE ROKEBERG specified that his concern is with
regard to the title language "without resorting to court
proceedings under" specific statute that is civil procedure.
However, in order to evict someone, [the landlord] has to use
the civil procedures.
CHAIR ANDERSON inquired as to the possibility of deleting the
language: "without resorting to court proceedings under AS
09.45.060 - 09.45.160." on page 1, line 3.
REPRESENTATIVE ROKEBERG said that he wouldn't make a big deal
about it, which he characterized as bad syntax, because the
legislation has been improved. He suggested that the next
committee of referral review the incongruence between the
language in the title and the body of the legislation.
3:07:19 PM
REPRESENTATIVE LEDOUX inquired as to how a student can be
evicted without going through a formal eviction procedure.
MR. MICHEL noted that there is a long appeals process when the
student is removed from student housing. The main goal of this
legislation is that once that process is complete, the student
can be removed, which usually means that the locks are changed.
The legislation means that the university wouldn't have to go to
court to obtain a court order to forcible remove the student.
3:08:09 PM
REPRESENTATIVE LEDOUX pointed out that in one of the cases that
she was aware of, the university didn't go to court to evict the
[student]. Instead, the troopers were called and the court
simply dismissed the misdemeanor complaint against [the
student]. Representative LeDoux said that she wasn't opposed to
moving the legislation, but she said she wasn't sure that it
solved the problem desired. She opined that even under this
legislation, a court would probably still say that somebody
couldn't be convicted of a criminal offense without some sort of
due process.
3:09:23 PM
REPRESENTATIVE ROKEBERG said that he agrees with the legislation
as well as Representative LeDoux. He said that the problem with
the landlord tenant law is that if "it's not for rent, you have
to go through like 30 days to mitigate the situation." He
maintained that the title still doesn't seem to fit the
legislation.
3:10:13 PM
CHAIR ANDERSON reminded the committee that SB 137 was assigned
to this committee because of the landlord-tenant aspect of
commerce. He related his understanding that the committee
concurs with the concept [of the legislation], although there
may be a problem with the title. Therefore, he suggested that
the aforementioned be discussed with Legislative Legal and
Research Services before it's heard in the House Judiciary
Standing Committee.
3:10:44 PM
REPRESENTATIVE KOTT moved to report HCS CSSB 137, Version 24-
LS0739\F, Kurtz, 4/27/05, out of committee with individual
recommendations and the accompanying fiscal note. There being
no objection, HCS CSSB 137(L&C) was reported from the House
Labor and Commerce Standing Committee.
3:10:57 PM
The committee took a brief at-ease.
SB 158-MUNI TAX ON STATE CONSTRUCTION CONTRACTS
3:11:47 PM
CHAIR ANDERSON announced that the final order of business would
be SENATE BILL NO. 158, "An Act prohibiting the imposition of
municipal sales and use taxes on state construction contracts
and certain subcontracts; and providing for an effective date."
SENATOR CHARLIE HUGGINS, Alaska State Legislature, sponsor,
began by saying that SB 158 represents the interest of the
citizens of Alaska. This legislation will maintain what most
believe is already the case. He posed a situation in which
there is a state airport project for $8 million. In the
process, a subcontractor is subjected to a 5 percent sales tax
on that subcontractor's $400,000 contract, which amounts to
about $21,000. However, that wasn't the process when the
subcontractor bid on the project. In discussions with folks
about this, [subcontractors] didn't view the aforementioned
scenario as appropriate and even inquired as to how much [money]
a community wants from them. Therefore, SB 158 has been
introduced.
SENATOR HUGGINS informed the committee that SB 158 doesn't
preclude taxation on the equipment leased in the locale. He
emphasized that this legislation isn't about "rural" or "urban"
areas but rather about how the state does business. In a normal
year, the state has about $350-$400 million worth of
construction contracts. If the state doesn't take action
similar to what's encompassed in SB 158, an unstable environment
will be created. He informed the committee that he has an e-
mail from the Alaska Municipal League (AML) that indicates that
communities using a certain law firm have a policy of collecting
sales tax from subcontractors doing business in the community,
regardless of the funding source.
3:15:43 PM
SENATOR HUGGINS said that when talking with state agencies, it
was foggy at best regarding the state's position on taxing
authority. This legislation clarifies the aforementioned and
provides a predictable business environment.
3:16:17 PM
CHAIR ANDERSON noted that his research has determined that the
impact of [such taxation practices] is de minimis, although he
acknowledged that it adversely impacts the City of Nome. He
asked if there is a way to grandfather in current infrastructure
where there are taxes, or would that defeat the purpose of the
legislation.
SENATOR HUGGINS indicated that from his conversations with
average Alaskans, the question is how much is enough. Senator
Huggins emphasized that [allowing the current situation to
continue] will drive up the cost of contracting and will cost
all Alaskans. In response to Chair Anderson, Senator Huggins
said, "Where we're going out to enhance that community, that to
reach out and carve money out of that and drive up the price of
contracting is not right."
3:17:39 PM
REPRESENTATIVE CRAWFORD inquired as to what the contract was for
that cost the subcontractor in the earlier example $21,000 in
taxes.
SENATOR HUGGINS explained that it was an electrical contract for
$400,000 and the community imposed a 5 percent tax on that.
Senator Huggins reiterated that such a practice isn't right.
REPRESENTATIVE CRAWFORD posed a situation in which a
[subcontractor] had a contract to construct a fence at an
airport. If that [subcontractor] miscalculated the amount of
fencing necessary and purchased the remainder of the fencing in
the location of the construction, would that [subcontractor] be
charged the sales tax.
SENATOR HUGGINS replied yes. In the case that prompted this
legislation, the electrical company spent just shy of $80,000 in
the community on things from hotel rooms to rental cars and paid
tax on those items. The legislation doesn't [change that].
3:19:28 PM
SENATOR HUGGINS, in response to Representative LeDoux, clarified
that even under SB 158 the [subcontractor] in Representative
Crawford's example would pay the tax on the fencing purchased in
the location of the construction. In further response to
Representative LeDoux, Senator Huggins informed the committee
that at least two boroughs or cities, Sand Point and Nome, have
levied the tax [on a state contract] at least once. Both those
communities are advised by the same law firm. He mentioned that
Unalaska may potentially be the third such community. Senator
Huggins remarked that the specific communities aren't important
because without something like SB 158, this business practice
will spread throughout the state. He noted that in the Senate
only three members didn't agree with this legislation.
3:20:46 PM
REPRESENTATIVE LEDOUX related her understanding that a city or
borough can't tax the state.
SENATOR HUGGINS answered that it's not clear. Although the
state assessor would agree that a city or borough can't tax the
state, he would include a "but" clause. Therefore, SB 158
clarifies the situation.
3:21:23 PM
REPRESENTATIVE LEDOUX inquired as to how this occurs now.
SENATOR HUGGINS specified that the city or borough merely taxes
the subcontractor. He reiterated that SB 158 is about the
people of Alaska and whether the desire is to increase the price
of contracting or establish a mechanism such that across the
state purchases at the location of the project would be taxed.
3:22:50 PM
REPRESENTATIVE LEDOUX inquired then as to how this legislation
is different from the current practice.
CHAIR ANDERSON clarified that Senator Huggins is delineating
between tangible items [such as the purchase of nails] and
providing a service [the subcontractor's work].
3:23:31 PM
SENATOR HUGGINS explained that in the example with the airport,
the contract was to fix the airport to a standard the community
would like. When [the subcontractor] purchases something in the
community, there would be a tax on that purchase.
REPRESENTATIVE LEDOUX surmised then that under SB 158 if the
subcontractor was located in the community and sold his/her
services to someone, not to a contractor on a state project, in
the community, then there would be a sales tax. However, the
subcontractor who sells his/her services to the contractor on a
state project would not be taxed, even if the subcontractor is
located in the community. Representative LeDoux specified:
You could have a contractor come in from Anchorage,
for example, but then they hire somebody from ... Nome
to be the subcontractor on it. Now normally, if that
subcontractor were selling to anybody else in Nome
there would be a tax on that. So, how would this be
different, then?
SENATOR HUGGINS expressed his desire that both contractors and
subcontractors for the state would be taxed [for items
purchased] and not be penalized by the location of their
business.
3:25:45 PM
REPRESENTATIVE ROKEBERG said that he finds the concept of
potential double taxation very compelling and thus he expressed
his support of SB 158. However, Representative LeDoux makes a
good point in regard to whether there is a definition of
subcontractor in statute. Furthermore, he questioned whether
there is a distinction between the service component of a
subcontractor and a supplier of materials that would be taxable
in the local municipality. Representative Rokeberg opined that
there is the desire to avoid the double taxation, but the
legislation shouldn't be used to avoid the payment of local
taxes that would occur under normal circumstances for the
purchase of an item.
SENATOR HUGGINS agreed that there will be a tax on materials
purchased in a community.
REPRESENTATIVE ROKEBERG posed a situation in which the supply of
materials is subcontracted out.
SENATOR HUGGINS specified that materials aren't exempt.
3:27:35 PM
REPRESENTATIVE ROKEBERG returned attention to the earlier
hypothetical regarding the fencing project, and inquired as to
the tax ramifications if the subcontractor merely supplied the
material.
SENATOR HUGGINS said that he didn't know.
3:29:25 PM
REPRESENTATIVE GUTTENBERG related his understanding that the
contractor isn't taxed, but the subcontractor is taxed for the
total value, regardless of services. He then asked if all
subcontractors are taxed, regardless of the location of the
business.
SENATOR HUGGINS reiterated that this [taxation on
subcontractors] will spread throughout the state if nothing is
done. However, he agreed that there should be assurances that
there shouldn't be a way to circumnavigate [appropriate local
taxation]. Senator Huggins said that he would obtain an answer
for Representative Guttenberg.
REPRESENTATIVE GUTTENBERG inquired as to whether this is a new
practice or ordinance.
SENATOR HUGGINS specified that this is a new practice.
3:32:00 PM
DAVID LANTZ, General Manager/Owner, Dimond Electric; Board
Member, National Electrical Contractors Association - Alaska
Chapter (NECA), informed the committee that he bid the Nome
project in August 2001 and performed the work in 2002. He noted
that Dimond Electric had done work on the Nome airport over the
course of the last 15 years. During those 15 years, the tax had
never been an issue because by definition it's a retail sales
tax. Dimond Electric purchased some $75,000 worth of services
and goods in the city and paid taxes on those. The company also
paid the sales tax on the gross amount of the subcontract, and
therefore Dimond Electric was double taxed on the portion paid
on the items and services purchased in the city. Mr. Lantz
highlighted that it wasn't until 2002 that [the City of Nome]
applied the sales tax to Department of Transportation & Public
Facilities projects, and thus there was a change in the [city's]
interpretation of how to apply the tax.
3:34:26 PM
MR. LANTZ opined that Dimond Electric was caught by surprise
with the change, and therefore the company paid some $20,000 in
taxes as well as another $10,000 or so in attorney fees to
resolve the issues. As a NECA board member, Mr. Lantz informed
the committee that research discovered that there were other
instances, beyond the Nome project, in which the [double]
taxation occurred. Mr. Lantz expressed the need to have a known
playing field with regard to what's taxed on state projects in
communities across the state.
3:36:51 PM
REPRESENTATIVE GUTTENBERG asked if, in a normal bid document for
a state project, [the subcontractor] would receive all of the
taxation policies that would apply.
MR. LANTZ, drawing on his 20 years of working on state projects,
that subcontractors worked under the assumption that they, as
well as the general contractor, were not subject to sales tax.
Therefore, it hasn't been an issue on state projects because in
practice state projects have been exempt from the sales tax.
3:37:53 PM
REPRESENTATIVE LEDOUX surmised that the real problem is that Mr.
Lantz's company was caught between the changes made between 2001
and 2002. Therefore, if the subcontractor now knows, she
inquired as to how difficult it would be to check with the
communities regarding taxation just as they would check fuel and
material prices.
MR. LANTZ said that he didn't want to see communities changing
their mind about taxation [between the time a project is bid and
the work is performed].
3:39:13 PM
REPRESENTATIVE ROKEBERG asked whether the general contractor
paid a tax as well as Mr. Lantz.
MR. LANTZ explained that the general contractor didn't pay a tax
on its contract, although he did pay taxes on the local services
purchased in the community. Several subcontractors received
bills from the city.
3:39:54 PM
REPRESENTATIVE CRAWFORD asked whether a private contractor in
the City of Nome would be charged sales tax on the total amount
of a non-state contract.
MR. LANTZ related his belief that tax-exempt status has only
been applied to state contracts and thus contractors pay local
taxes on private work in the City of Nome.
3:40:48 PM
DENISE MICHELS, Mayor, City of Nome, noted that the committee
should have a copy of her three-page letter in opposition to SB
158. This legislation, she opined, unfairly restricts the
city's ability to raise revenues for services. She informed the
committee that most of the revenue received by the City of Nome
is through property and sales taxes. However, 40 percent of the
property in Nome is exempt, yet those [residents] use the city's
services like everyone else. When contractors work in the
community, they too use the city's services. Therefore,
collecting a sales tax on the subcontractors helps pay for the
use of those services. Mayor Michels pointed out that whether
or not to charge the sales is an option. She indicated that
larger communities don't apply the sales tax in this way because
they have a larger tax base.
MAYOR MICHELS highlighted that the rules of engagement differ in
each community, and in fact the state request for proposals
recommends contacting the local government regarding possible
fees. She then turned attention to the recent lack of municipal
revenue sharing, which she indicated was a [contributing factor]
for the City of Nome in 2004 to raise its sales tax from 4
percent to 5 percent in order to help offset the rising
operating costs for the community. Mayor Michels said that
taking away this taxation option would hurt the City of Nome.
She informed the committee that the contractor is exempt from
the sales tax [on state projects] and obtains a building permit
that provides tax-exempt status on purchases in the town. The
subcontractor can also apply for a building permit.
3:44:12 PM
REPRESENTATIVE ROKEBERG inquired as to whether the tax exemption
for a general contractor is in the City of Nome's local
ordinance.
MAYOR MICHELS indicated that it's state law.
DEBORAH GRUNDMAN, Staff to Senator Huggins, Alaska State
Legislature, pointed out that due to the state's sovereign
immunity, the state is immune from taxation except when it has
expressly been waived by the state. Nothing in statute waives
the state from taxation, she said. Therefore, the problem is:
"there's a contract and a subcontractor is tied right to that,
defined as an entity to whom the contractor sublets part of the
contract." Practices such as in Nome raise the price of
construction projects.
3:45:30 PM
REPRESENTATIVE ROKEBERG returned to the earlier mention that a
subcontractor could apply for a building permit in order to
receive an exemption from the sales and use tax.
MAYOR MICHELS clarified that the holder of the building permit
would not have to pay tax on the supplies purchased in town.
She noted that most contractors and subcontractors ship in their
materials to Nome.
3:46:10 PM
REPRESENTATIVE ROKEBERG surmised then that Mayor Michels
believes that the issue of double taxation could've been avoided
if the subcontractors had applied for a building permit. He
inquired as to the fee for a permit on a $400,000 contract.
MAYOR MICHELS answered that the fee is based on a percentage of
the project.
3:46:41 PM
KATHIE WASSERMAN, Alaska Municipal League (AML), related that
AML is opposed to SB 158, which is outlined in a letter that
should be in the committee packet. Ms. Wasserman said that
AML's main concern is that the legislature and the
administration, through various actions, have made it clear that
municipalities will have to survive on their taxing ability.
She related that AML believes that taxing decisions should be
left to those at the local level.
REPRESENTATIVE CRAWFORD inquired as to how Ms. Wasserman felt
about the same construction dollars being taxed twice.
3:49:01 PM
MS. WASSERMAN, recalling her experience as a contractor, said
that when she wasn't [working] on a state project, she paid
sales tax on her contract as well as the services she incurred
while in the community. Ms. Wasserman highlighted that in many
communities there are state buildings that aren't taxed at all,
while the state receives the same services as all the property
taxpayers in the community.
3:49:52 PM
SENATOR HUGGINS characterized this practice [of taxing
subcontractors on state projects] as being viewed as revenue
sharing by those communities using it. However, he indicated
that doing so drives up the price of contracting. Therefore,
Senator Huggins opined that it's a simple question. Senator
Huggins suggested that people could be charged for the use of
the local services, but "don't go after the contractor" [because
either way they pay for the services used]. He reminded the
committee that SB 158 would create a stable environment and
contain the price of contracting.
3:52:32 PM
REPRESENTATIVE KOTT announced that he has a conflict in voting
because SB 158 could potentially impact his business
environment.
CHAIR ANDERSON said that Representative Kott would be required
to vote.
3:53:02 PM
REPRESENTATIVE GUTTENBERG said that he's torn between both sides
of this issue.
CHAIR ANDERSON said that although he, too, is torn, the
legislation should move forward. He also recognized the dilemma
that municipalities face with budgeting.
3:54:28 PM
REPRESENTATIVE CRAWFORD opined that there are two questions
here. One is whether there should be municipal assistance and
revenue sharing and the other is whether state projects should
be taxed by a municipality. He noted that he believes in
municipal assistance and revenue sharing, but that's not what SB
158 is about. He recalled testimony that the local community
benefits when the state spends state dollars in a community, and
therefore he opined that those dollars shouldn't be taxed.
Representative Crawford concluded by announcing that he would
advance SB 158.
3:55:11 PM
REPRESENTATIVE LEDOUX said that she wouldn't hold up the
legislation. However, she reiterated that she has some serious
problems with it because she didn't see any difference between
the state having a contractor and the municipality taxing the
subcontractor or a private individual.
REPRESENTATIVE LYNN moved to report SB 158 out of committee with
individual recommendations and the accompanying zero fiscal
note. There being no objection, it was so ordered.
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
3:56:21 PM.
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