03/05/2013 08:00 AM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB71 | |
| HB84 | |
| HB76 | |
| HB74 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 71 | TELECONFERENCED | |
| *+ | HB 84 | TELECONFERENCED | |
| *+ | HB 76 | TELECONFERENCED | |
| += | HB 74 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 5, 2013
8:11 a.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Lora Reinbold, Vice Chair
Representative Mike Chenault
Representative Bob Herron
Representative Charisse Millett
Representative Andy Josephson
MEMBERS ABSENT
Representative Dan Saddler
OTHER LEGISLATORS PRESENT
Representative Doug Isaacson
Representative Steve Thompson
Representative T. Wilson
Senator Click Bishop
COMMITTEE CALENDAR
HOUSE BILL NO. 71
"An Act extending the termination date of the Alaska regional
economic assistance program; and providing for an effective
date."
- MOVED CSHB 71(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 84
"An Act relating to applying military education, training, and
service credit to occupational licensing and certain
postsecondary education and employment training requirements;
providing for a temporary occupational license for qualified
military service members; and providing for an effective date."
- MOVED HB 84 OUT OF COMMITTEE
HOUSE BILL NO. 76
"An Act relating to electronic filing of certain information
with the Department of Labor and Workforce Development; relating
to surcharges, rate increase reduction, prohibition on the
relief of certain charges, the unemployment trust fund account,
and the offset of certain unemployment compensation debt under
the Alaska Employment Security Act; relating to the definition
of 'covered unemployment compensation debt' in the Alaska
Employment Security Act; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 74
"An Act relating to development project financing by the Alaska
Industrial Development and Export Authority; relating to the
dividends from the Alaska Industrial and Export Authority;
authorizing the Alaska Industrial Development and Export
Authority to provide financing and issue bonds for a liquefied
natural gas production system and natural gas distribution
system; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 71
SHORT TITLE: AK REGIONAL ECONOMIC ASSISTANCE PROGRAM
SPONSOR(s): REPRESENTATIVE(s) HUGHES
01/16/13 (H) READ THE FIRST TIME - REFERRALS
01/16/13 (H) L&C, FIN
02/18/13 (H) L&C AT 3:15 PM BARNES 124
02/18/13 (H) Heard & Held
02/18/13 (H) MINUTE(L&C)
03/04/13 (H) L&C AT 3:15 PM CAPITOL 106
03/04/13 (H) MILITARY TRAINING CREDIT/TEMP. LICENSE
03/05/13 (H) L&C AT 8:00 AM BARNES 124
BILL: HB 84
SHORT TITLE: MILITARY TRAINING CREDIT/TEMP. LICENSE
SPONSOR(s): REPRESENTATIVE(s) SADDLER
01/24/13 (H) READ THE FIRST TIME - REFERRALS
01/24/13 (H) L&C, FIN
03/04/13 (H) L&C AT 3:15 PM CAPITOL 106
03/04/13 (H) UNEMPLOYMENT; ELEC. FILING OF LABOR
INFO
03/05/13 (H) L&C AT 8:00 AM BARNES 124
BILL: HB 76
SHORT TITLE: UNEMPLOYMENT; ELEC. FILING OF LABOR INFO
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/18/13 (H) READ THE FIRST TIME - REFERRALS
01/18/13 (H) L&C, FIN
03/04/13 (H) L&C AT 3:15 PM CAPITOL 106
03/04/13 (H) AIDEA: LNG PROJECT; DIVIDENDS;
FINANCING
03/05/13 (H) L&C AT 8:00 AM BARNES 124
BILL: HB 74
SHORT TITLE: AIDEA: LNG PROJECT; DIVIDENDS; FINANCING
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/16/13 (H) READ THE FIRST TIME - REFERRALS
01/16/13 (H) L&C, FIN
02/08/13 (H) L&C AT 3:15 PM BARNES 124
02/08/13 (H) Heard & Held
02/08/13 (H) MINUTE(L&C)
03/04/13 (H) L&C AT 3:15 PM CAPITOL 106
03/04/13 (H) ** Meeting will Recess and Reconvene at
03/05/13 (H) L&C AT 8:00 AM BARNES 124
WITNESS REGISTER
GINGER BLAISDELL, Staff
Representative Shelley Hughes
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of HB 71.
KRIS CURTIS, Legislative Auditor
Legislative Audit Division
Legislative Affairs Agency (LAA)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions on HB 71.
KIM SKIPPER, Staff
Representative Dan Saddler
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 84 on behalf of the sponsor,
Representative Dan Saddler.
SARA CHAMBERS, Professional Licensing Operations Manager
Division of Corporations, Business, and Professional Licensing
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 84.
CHRIS CHRISTENSEN, Associate Vice President
State Relations
University of Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 84.
MARK SAN SOUCI, Regional Liaison
Military Families for the Northwest
Deputy Assistant Secretary of Defense for Military Family and
Community Policy
U.S. Department of Defense (DOD)
Tacoma, Washington
POSITION STATEMENT: Testified in support of HB 84.
DIANNE BLUMER, Commissioner
Department of Labor & Workforce Development (DLWD)
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 76.
BRYNN KEITH, Deputy Commissioner
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 76.
PAUL DICK, Director
Employment Security Division (ESD)
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion HB 76.
DON ETHRIDGE, Lobbyist
Alaska State AFL-CIO
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 76.
PAUL GROSSI, Lobbyist
Alaska State Pipe Trades UA Local 375;
Ironworker Management Progressive Action Cooperative
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 76.
DOUG HOLMES, President
National Foundation for Unemployment Compensation and Workers'
Compensation
Washington, D.C.
POSITION STATEMENT: Testified during the discussion of HB 76.
SARA FISHER-GOAD, Executive Director
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint and answered
questions during the discussion of HB 74.
TED LEONARD, Executive Director
Alaska Industrial Development and Export Authority (AIDEA)
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions of HB 74.
ACTION NARRATIVE
8:11:32 AM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 8:11 a.m. Representatives
Millett, Reinbold, Josephson, Chenault, Herron, and Olson were
present at the call to order.
HB 71-AK REGIONAL ECONOMIC ASSISTANCE PROGRAM
8:12:02 AM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 71 "An Act extending the termination date of the
Alaska regional economic assistance program; and providing for
an effective date."
8:12:44 AM
REPRESENTATIVE REINBOLD moved to adopt the proposed committee
substitute (CS) for HB 71, labeled 28-LS0288\U, Martin, 2/22/13
as the working document.
CHAIR OLSON objected for the purpose of discussion.
8:13:09 AM
GINGER BLAISDELL, Staff, Representative Shelley Hughes, Alaska
State Legislature, stated the bill for reauthorization of the
Alaska Regional Development Organizations (ARDORs) was requested
by several chairs of individual ARDORs. She explained that the
ARDORs do not sunset but will simply end. Currently, the ARDORs
are scheduled to end on June 30, 2013. She related that HB 71
would extend the end date until 2018. During review of the
program it was discovered that an audit has never been
conducted, which should be done for performance sake.
Additionally, the committee substitute, Version U, would change
the end date until 2016, which would follow the projected
completion date of the proposed audit.
8:14:23 AM
KRIS CURTIS, Legislative Auditor, Legislative Audit Division,
Legislative Affairs Agency (LAA), stated that she believes 2016
is appropriate date, which would allow the division time to
complete an audit. She suggested the audit would start in
January or possibly earlier.
REPRESENTATIVE HERRON agreed an audit is needed since the
program hasn't been audited in 25 years, but also because the
ARDOR program should be reviewed for possible consolidation.
Currently, 12 ARDORs exist, but he suggested that several ARDORs
are under performers. Therefore, he concluded that a fewer
number of ARDORs may be beneficial to the overall health of the
organization.
8:15:58 AM
REPRESENTATIVE MILLETT echoed Representative Herron's comments.
She informed members that she has served on the Department of
Commerce, Community & Economic Development's (DCCED) finance
subcommittee this legislative session. She reported that the
state spends $807,000 per year for 12 ARDORs, which amounts to
$62,000 per ARDOR. Some ARDORs are prolific and operate
effectively, including the Anchorage Economic Development
Corporation (AEDC), Southwest Alaska Municipal Conference
(SWAMC), and Southeast Conference ARDORS. However, she
questioned what other ARDORS, such as Dillingham, Cordova,
Juneau, Bethel, and Nome, are doing with the $62,000 they
receive. The aforementioned makes her frustrated, she related.
Upon reviewing the aforementioned successful ARDORs, she found
them to be structured with significant engagement with private
sector economic development groups. She opined that at some
point the state should not continue to fund - at $800,000 per
year - functions that can be done by the private sector.
Furthermore, there is duplication of effort since the state
already has the Department of Commerce, Community & Economic
Development (DCCED). Representative Millett relayed that while
she understands the reasons to develop the ARDORs, she is unsure
the current program is effective.
8:17:49 AM
CHAIR OLSON asked whether the audit would address these issues.
MS. CURTIS answered yes; the auditors would take the concerns
expressed today under consideration when requesting the special
audit. She related that the request would be put forth and
audited - typically on a first come, first audited basis. She
said the auditors would review the legislative intent of the
program and review the committee's concerns when the request is
drafted.
REPRESENTATIVE JOSEPHSON noted that he also sits on the DCCED's
finance subcommittee and reported that the ARDOR budget has been
cut. Thus, the program will have to fight for its survival.
8:18:58 AM
CHAIR OLSON removed his objection. There being no further
objection, the proposed committee substitute (CS) for HB 71,
labeled 28-LS0288\U, Martin, 2/22/13, was adopted.
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 71.
8:19:41 AM
REPRESENTATIVE MILLETT reiterated her concern regarding whether
the program is effective and if these organizations need the
$62,000 per year for each ARDOR to survive. With regard to
spending the funds to maintain the program while the audit
occurs, she suggested that each ARDOR could come before the
committee - one by one - to articulate any accomplishments. In
fact, she related that she has attempted this assessment with
some ARDORs during which she has heard each ARDOR echo its role
as essentially what she has viewed as DCCED's function.
Therefore, the ARDORs seem like a large duplication in
government, she reiterated. Representative Millett stated that
although she does not object to moving the bill from committee,
she would recommend the program sunset.
CHAIR OLSON asked if she would like to hold the bill further.
REPRESENTATIVE MILLETT answered no; that she can voice her
opinion on the House floor and will discuss the bill further
with others.
8:22:01 AM
REPRESENTATIVE JOSEPHSON related that while the finance
subcommittee decided to cut the ARDOR program funding - as
mentioned earlier - there was not any testimony or inclination
by the chair, Representative Costello, to end the ARDOR program.
He agreed with Representative Millett that this is a
conversation for the House floor.
REPRESENTATIVE HERRON offered that the ARDOR program - given the
right circumstances - is very important to the state. He did
not think the department has the boots on the ground to really
generate localized efforts that do contribute. He said he will
defend the ARDOR program, except for the underperformers, which
clearly exist. Thus the consolidation and better use of state
funding is probably appropriate.
CHAIR OLSON related the bill has a further referral to the House
Finance Committee.
8:23:38 AM
REPRESENTATIVE REINBOLD moved to report the proposed committee
substitute (CS) for HB 71, labeled 28-LS0288\U, Martin, 2/22/13,
out of committee with individual recommendations and the
accompanying fiscal notes. There being no objection,
CSHB 71(L&C) was reported from the House Labor and Commerce
Standing Committee.
8:24:07 AM
The committee took an at-ease from 8:24 a.m. to 8:26 a.m.
HB 84-MILITARY TRAINING CREDIT/TEMP. LICENSE
8:26:40 AM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 84 "An Act relating to applying military
education, training, and service credit to occupational
licensing and certain postsecondary education and employment
training requirements; providing for a temporary occupational
license for qualified military service members; and providing
for an effective date."
KIM SKIPPER, Staff, Representative Dan Saddler, Alaska State
Legislature, speaking on behalf of the sponsor, Representative
Saddler, stated that HB 84 relates to military training credit
and temporary licensing. The goal of HB 84 is to help
separating service members transition quickly and effectively
into the workforce. Each year, approximately 1,200 service
members separate from military service in Alaska. Americans in
the military service receive world class training, education,
and experience during their time in uniform, which are assets
that should not be lost to them or Alaska's communities. This
bill asks the Department of Commerce, Community & Economic
Development (DCCED), Division of Corporations, Business and
Professional Licensing (DCBPL), the University of Alaska (UAA),
and the Department of Labor & Workforce Development (DLWD) to
evaluate military training and education and assign civilian
credit where appropriate, without comprising current licensing
standards. This bill would improve the probability of veterans
finding jobs by accelerating the state's licensing process and
early education credits. Service members often experience
delays and lost opportunities qualifying for licenses and
academic credit, even though they have the applicable training
and experience. As of July 2012, 19 states have enacted
legislation and over 30 states are considering similar
legislation in 2013. She related that this bill concept
originated last legislature by former Representative Bill
Thomas, who introduced a similar bill. She explained that
factors such as budget cuts and federal sequestration will see
more veterans seeking civilian jobs. The state has an
obligation to find ways to give veterans opportunities to
leverage their military experience into academic credit, job
certification, or vocational training credits. She concluded
that bills such as HB 84 help make that happen to everyone's
benefit.
8:29:22 AM
CHAIR OLSON asked about the fiscal notes.
MS. SKIPPER answered that the effective date of HB 84 is
12/31/2013. The DCCED's fiscal note of $137,000 is for the
DCBPL to meet requirements of the bill.
8:29:47 AM
REPRESENTATIVE JOSEPHSON, referring to page 2, subsection (b),
asked if the committee should be concerned about the required
experience, degree, or diploma or certificate listed.
MS. SKIPPER responded that the certification or credits require
substantial equivalence. Thus any substantially equivalent
experience, training, or academic credits can be considered for
licensure. She deferred to the DCBPL to expand on this.
8:30:48 AM
REPRESENTATIVE JOSEPHSON referred to subsection (c) [on page 2,
lines 22-24] and inquired as to the expedited procedure for
licensure.
MS. SKIPPER answered that this subsection would give veterans a
priority for licensure to speed up the licensing process.
8:31:27 AM
REPRESENTATIVE REINBOLD said she thinks HB 84 is a good bill.
She stated that the U.S. has already paid for the training for
the military with federal tax dollars so it only makes sense to
transfer the experience. She commended the bill.
8:31:59 AM
REPRESENTATIVE HERRON asked whether a new board would be created
[in the DCCED.]
MS. SKIPPER answered no; but to meet the effective date 11
affected boards would need to schedule meetings and review the
requirements. She deferred to the department to more fully
respond.
8:32:43 AM
SARA CHAMBERS, Professional Licensing Operations Manager,
Division of Corporations, Business, and Professional Licensing,
Department of Commerce, Community & Economic Development
(DCCED), introduced herself.
8:33:26 AM
REPRESENTATIVE HERRON said he supports the bill. He then asked
whether HB 84 could ask existing boards to accomplish the tasks.
MS. CHAMBERS answered that many boards don't meet frequently
enough to review the requirements for equivalency or propose
regulations to articulate the equivalency to staff to properly
administer licensure. She estimated an additional meeting for
each of the effected boards in order to deliberate and work
through the regulations process. She said an additional handful
of programs the division administers will also be affected.
Thus, part of the fiscal note includes the cost of adopting
regulations and properly noticing all licensees.
8:34:40 AM
REPRESENTATIVE HERRON asked the House Finance Committee to
review the fiscal note.
8:34:52 AM
CHRIS CHRISTENSEN, Associate Vice President, State Relations,
University of Alaska (UA), read from prepared testimony, as
follows:
For the record, I am Chris Christensen with the
University of Alaska. I'm here today to talk about
Section 2 of the bill, which directs the University's
president to adopt policies and procedures to award
credit for military training, education, and service
time. While the bill hasn't yet become law, I'm
pleased to tell you that the university is in
compliance with this mandate.
I'd like to begin by noting that the university is
committed to offering quality educational experiences
to active military, veterans, and their dependents.
GI Jobs, which is a magazine and web portal that
exists specifically to serve military members in their
transition back to civilian life, has designated both
UAA and UAF as "military friendly schools". Only 15
percent of all the colleges, universities, and
vocational schools in the country have earned this
distinction. He said this is probably one of the
reasons that the Department of Defense (DOD) is
pushing this legislation nationwide. It's actually a
pretty sad commentary on education in the Lower 48 -
that so few schools actually get this designation.
The web portal guidetoonlineschools.com, which bills
itself as the most comprehensive authority on distance
education has last year put out a list of the most
military-friendly online colleges in the country, and
we're proud that the University of Alaska was ranked
number five. As the entity that made that rating
possible by your support, we think you should be very
proud of that also.
8:36:37 AM
MR. CHRISTENSEN continued to read prepared testimony as
follows [original punctuation provided]:
I'm based in Anchorage so while I work for the
statewide system I am most familiar with UAA. That
campus has close to 2,000 active duty military and
veteran students, which is close to 10 percent of the
student body. After winning the military friendly
designation three years in a row, UAA didn't just rest
on its laurels. Last year, it formed a Military and
Veteran Student Task Force which is currently
inventorying all the existing services that we
provide: programs, academic and administrative
policies, and recommending improvements. Last year
UAA opened a Military & Veteran Student Resource
Center in the student union to act as an on-campus
central service point for military and veteran
students and their families. The UAA is one of just
11 schools in the entire country selected by the U.S.
Department of Veterans Affairs to participate in the
"VetSuccess on Campus" program, which places full-time
V.A. coordinators on campus to work with our resource
center servicing the military veteran students and
their families.
In the short time I've been with the university, the
single issue I have heard about the most is transfer
of credit. This is a subject that arouses great
passion, and military transfer credit is just one
piece of this bigger issue.
The Board of Regents has adopted a written policy that
the campuses must accept in transfer as much credit as
is appropriate to a student's new degree and
graduation requirements. All three campuses have
established transfer credit policies designed to give
maximum credit for courses and training taken
elsewhere, including in the military.
8:38:16 AM
MR. CHRISTENSEN continued to read prepared testimony as
follows [original punctuation provided]:
We do believe that awarding appropriate credit for
military training is one of the university's core
responsibilities and another way we can show our
commitment to our military and veteran students.
While testifying last year [on similar legislation] I
discovered there are tremendous misconceptions about
what the university is doing, which is why I wanted to
testify today, Mr. Chair.
Transfer credit processes at the university are
managed at the campus level, although there is
necessarily a great deal of uniformity in the system.
All three campuses transfer credit based on
recommendations made by "ACE," which is the acronym
for the "American Council of Education." ACE has had
an agreement with the Department of Defense (DOD)
since the end of World War II to review military
training and experience for the award of equivalent
college credits. Its recommendations on equivalent
college credits are utilized by thousands of colleges
and universities across the country.
8:38:35 AM
MR. CHRISTENSEN continued to read prepared testimony as
follows [original punctuation provided]:
Each of UAA's three campuses actually has written
agreements with the defense department to use the ACE
recommendations. Our three campuses are also members
of the SOC consortium. "SOC" stands for the "service
members' opportunity colleges." This is a consortium
of over 1,000 colleges and universities across the
country that enroll military, veterans, and dependents
in special degree programs, both on-campus and through
distance learning. Its purpose is to let the military
members actually get degrees, instead of just
accumulate credits as they move from base to base.
The UA has signed written agreements with the other
members of the consortium to, among other things,
follow specific guidelines to ease transferability of
credit. For example, a military students working on
an associate's degree at UAA only need three UAA
credits to earn the degree. UAA will accept all of
the rest of the credits from other schools in the SOC
consortium.
UAA is currently accepting approximately 51 credits on
average from military students at any of the
regionally accredited military institutions, such as
the Community College of the Air Force, the Service
Academies, and others. At UAF, a military student can
use approximately 30 credits of typical training for
the Bachelor of Emergency Management Degree, or 90
credits for a General Studies BA that doesn't require
satisfying particular major requirements.
Neither UAA nor UAF has any limitation on the number
of military transfer credits that they will award.
They used to, but they've done away with it in the
past few years, as part of our continual process to
review the system and make it better.
I could go on - but the bottom line, Mr. Chair - while
I don't have figures for the entire system, UAA alone
awards over 21,000 hours a year of military transfer
credit for training, for education, and even for time
spent in the service, and the number is increasing
every year. As of this year, approximately 99.5
percent of the students who requested military
transfer credits received those credits. Alaska is
widely known to service members as a state that
welcomes and appreciates the military and I think that
Alaska's university, as demonstrated by our existing
policies reflects those prevailing social values
pretty accurately.
I'd be happy to answer any questions that members may
have.
8:41:40 AM
REPRESENTATIVE REINBOLD characterized this effort as
outstanding. She asked whether he does his own follow-up.
MR. CHRISTENSEN said he would follow-up personally.
REPRESENTATIVE REINBOLD said she asks this question because some
agencies did not provide the information requested to the
finance subcommittees. She recalled that Mr. Christensen
testified that an online publication attributes UAA as being
military friendly and rated number five. She asked for more
information on the publication. Additionally, she requested
information on the SOC program. She thanked the UAA for working
on making it possible to transfer credits since this is a "hot
button" issue for her as well as for others. She appreciated
the effort and sees the university as moving in the right
direction.
8:42:55 AM
CHAIR OLSON pointed out that several military veterans serve on
the committee. He also offered his appreciation for the bill.
8:44:04 AM
MARK SAN SOUCI, Regional Liaison, Military Families for the
Northwest; Deputy Assistant Secretary of Defense for Military
Family and Community Policy, U.S. Department of Defense (DOD),
related his support for HB 84. He noted he has been watching
and listening to testimony on this bill. He agreed with Ms.
Skipper's outline and concurs with Mr. Christensen's comments.
He then provided some abbreviated comments from his written
testimony submitted to the committee.
MR. SAN SOUCI said two years ago, the U.S. Department of Defense
began asking states to give separating service members credit so
that they may not be held back from finding employment or
finishing a degree. As Representative Reinbold remarked, the
training has been paid for through federal taxes. Last year the
legislature passed identical language in a bill introduced by
Representative Thomas, but the bill languished on the Senate
floor and died on the last legislative day. He acknowledged the
language in this bill was ever so close in passing. He reported
that the DOD is making efforts due to the unemployment rate -
primarily in September 2012 - of over 736,000 unemployed
veterans, the jobless rate for post 9/11 veterans at 9.9
percent, and an unemployment rate of 18.1 percent for young male
veterans ages 18 to 24.
MR. SAN SOUCI echoed Ms. Skipper's testimony that in the past
two years, about 25 states enacted new laws to help grant
veterans credit towards licensing and/or academic credit. Thus
far in 2013, 30 states are in the process of considering similar
legislation. He said he appreciated the legislature considering
HB 84, which only seeks to obtain academic and training credit
where credit is due and does not ask for direct licensure if it
is not equivalent. In cases in which the regulatory agency or
board determines partial credit, it will still save time and
money.
8:46:48 AM
MR. SAN SOUCI said another point to consider is that the more
credit given to a veteran towards licensing or a degree or
certification, the more school slots can be made available to
civilians, especially in programs where there may be waiting
lists. The Department of Defense (DOD) recognizes that if it is
going to ask credentialing bodies to evaluate military training
and experience it must also be easier for them to do so. In
that respect, the DOD is working feverishly with the U.S.
Department of Labor to link service transcripts of military
occupations with civilian to private sector licensure
requirements, while also asking state regulatory authorities in
six pilot states - Washington, Illinois, Maryland, New York,
Virginia, and Colorado - to review select military occupations
to determine whether the training and experience are sufficient
to be useful in rendering licensing credit in a given
occupation.
8:47:33 AM
MR. SAN SOUCI noted one point Mr. Christensen did not mention is
that as of March 1, 2013, the DOD has also worked with the
respective military services to create a joint service
transcript, or JST, which will be a common purple transcript -
generic to all military services for uniformity. The JST will
be an official tool designed to ease the burden of translating
one service's coding and course descriptions and training to
another. He anticipated this will streamline and standardize
the process to evaluate credits.
8:48:53 AM
The committee took an at-ease from 8:48 a.m. to 8:51 a.m.
8:51:21 AM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 84.
8:51:47 AM
REPRESENTATIVE REINBOLD moved to report HB 84 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 84 was reported from the
House Labor and Commerce Standing Committee.
HB 76-UNEMPLOYMENT; ELEC. FILING OF LABOR INFO
8:55:24 AM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 76 "An Act relating to electronic filing of
certain information with the Department of Labor and Workforce
Development; relating to surcharges, rate increase reduction,
prohibition on the relief of certain charges, the unemployment
trust fund account, and the offset of certain unemployment
compensation debt under the Alaska Employment Security Act;
relating to the definition of 'covered unemployment compensation
debt' in the Alaska Employment Security Act; and providing for
an effective date."
8:55:37 AM
DIANNE BLUMER, Commissioner, Department of Labor & Workforce
Development, introduced herself and other departmental staff
present.
8:57:00 AM
BRYNN KEITH, Acting Deputy Commissioner, Department of Labor &
Workforce Development (DLWD), stated that HB 76 does four
things. First, it would allow for the electronic filing of
reports and documents. Second, it will improve the department's
ability to recoup fraudulent unemployment insurance payments.
Third, it would adopt minor changes to bring the department into
conformance with federal law that governs the unemployment
insurance program. Fourth, it would change how unemployment tax
rates are set in order to keep more money in the hands of
Alaska's employers and employees, and to keep money circulating
through the economy while protecting the integrity of the trust
fund.
8:57:49 AM
PAUL DICK, Director, Employment Security Division, Department of
Labor & Workforce Development (DLWD), offered to provide a
section by section analysis of the bill, with brief commentary
on each section. He explained that Section 1 would add a new
section authorizing the commissioner the use of electronic
filing methods in place of paper, which is a measure to
modernize the division and is an efficiency measure for the
state. Section 2 would authorize the legislature to appropriate
funds to the Unemployment Trust Fund, in conjunction with
Sections 5 and 6, which will be covered later.
8:59:18 AM
MR. DICK stated that Section 3 would conform to federal law,
which essentially will prohibit relief of charges to
reimbursable employers, which are governmental agencies for
which the department processes their benefits and charge them
back for the benefits the department paid out. He highlighted
that this section would apply to employers with a repeated
pattern of failure for untimely response to the division's
request. He contrasted the number of governmental employers,
200 governmental employers, with the 18,000 private employers
and noted that the division has not had any specific issues with
governmental employers responding to requests. Section 4 would
repeal and reenact AS 23.20.290 (f), replacing a table method
for determining unemployment insolvency adjustments with a more
precise calculation method. As part of the tax rate, the
Unemployment Insurance (UI) trust fund solvency adjustment
examines the fund's solvency in comparison to wages. This
basically would collapse the table into verbiage and would take
the calculation from tenths of a percent to hundredths of a
percent. Section 5 would authorize the commissioner to
eliminate or reduce increases in unemployment insurance (UI) tax
rates. This would only apply to given years within the tax
rate, conditional upon another measure of solvency - the average
high cost multiple - or the measure of solvency calculated by
the U.S. Department of Labor Employment and Training
Administration. The rate would be calculated at 0.8 or greater.
This section is intended to provide UI tax relief to employers
during times when the economy is in recession, deferring the
taxes to subsequent years when the economy is growing and
healthy and pertains only to years in which the tax rate is
being increased.
9:02:04 AM
MR. DICK informed the committee that Section 6 would bring the
state into conformity with federal law [Public Law 112-40] by
removing the department's authority to waive collection of a
penalty established due to misrepresentation. Section 6 also
would require a minimum of 30 percent of the UI penalties
collected due to misrepresentation to be deposited to the UI
Trust Fund. He reported that currently, those funds from
penalties are deposited in the general fund. This federal law
conformity would dictate that 30 percent of the penalties be
deposited to the UI Trust Fund, which benefits the fund's
balance and can help mitigate tax increases for employers.
Section 7 would authorize the department to participate in an
offset program called the Treasury Offset Program. Currently,
21 states participate in the program. This would become another
tool to aid the department in collections, he said. The
department already offsets liabilities through the PFD
garnishment program. This would expand this effort and be very
beneficial to the state since it would give the department the
authority to offset federal income tax refunds from out-of-state
people who are out of jurisdiction and from whom it is difficult
to collect.
MR. DICK moved on to Section 8, which would amend AS 23.20.520
by adding a new paragraph to define "covered employment
compensation debt" in accordance with the federal statutes
definition. Section 9 would amend the state's uncodified law
specifying that AS 23.20.279, Section 3 of this bill, applies to
overpaid benefits established after October 21, 2013 - the date
which ties into federal law that requires enactment of the
conformity provision by that date. Sections 10-12 pertain to
effective dates and the authority to adopt regulations.
9:04:28 AM
REPRESENTATIVE JOSEPHSON referred to a chart in members' packets
entitled, "Unemployment Insurance Trust Fund Balances and
Benefits Paid/Taxes Collected 2005-2012." He compared the
actual fund balance on September 30, 2012, to what would have
occurred if HB 76 had been in effect. Although the differences
from 2005 to 2010 are marginal as there is virtually no
difference in the net balance for the first five years.
However, then a marked change occurs. He asked for an
explanation of the change. For example, in 2009 the fund
balance for the department was $319 million, but under HB 76
would be $313 million, but last year the figures are $264
million versus under this bill $189 million. He asked the
reason for the significant disparity that begins in 2010.
MS. KEITH replied that there are a lot of moving parts in these
calculations. Not only would the division suspend all of the
tax increases during these periods, but the division has a
solvency adjustment, which allows the department to increase or
decrease to a certain degree. Additionally, the division has
penalties that flow into the fund. She reiterated that lots of
moving pieces affect the calculations. She characterized the
figures at the end of 2012 as a cumulative result. She
suggested it might be helpful to go back some additional years
to provide an extended period to better view the overall effect.
MR. DICK added that in 2009 the U.S. went into a recession and
the division sees the effects of cost increases during these
years, which resulted in increases in rates in the last three
years. The chart reflects the cumulative rate increase for each
of those years, which results in a further decline in the
balance. He added that with HB 76, which is essentially a tax
deferral program, the trust fund will work its way up to the
targeted rate of 3 percent over the years when the economy is
growing and rates would have been going down. He described this
as a concept for tax deferral and in the subsequent years,
assuming the state is beyond the recession and the economy is
growing. One of the moving parts in the overall formula of the
tax rate is benefit costs compared to wages. Thus, as more
people are employed, the employment rate decreases and the costs
decrease and normally the division would experience a tax
decrease. However, because of the trust fund factor working its
way up to a targeted rate, the tax increase is essentially
deferred into subsequent years.
9:09:36 AM
REPRESENTATIVE JOSEPHSON inquired as to the maximum unemployment
benefits in Alaska.
MR. DICK answered that the maximum unemployment benefit is $370
per week and the minimum amount is $56 per week.
REPRESENTATIVE JOSEPHSON asked how that compares with other
states' benefits.
MR. DICK responded that Alaska is approximately in the middle of
the pack. He offered that some states pay unemployment benefits
of $550 so Alaska maybe a bit above the middle.
REPRESENTATIVE JOSEPHSON asked whether the Unemployment
Insurance Trust Fund has ever been insolvent.
MR. DICK replied no, adding that the UI trust fund has never
been insolvent since statehood.
9:10:49 AM
REPRESENTATIVE JOSEPHSON asked whether the current system allows
for peaks and valleys that is boom and bust cycles.
MR. DICK answered yes; the current system allows a solvency
adjustment. As the economy weakens the UI Trust Fund balance
will typically decrease, which then reverses with economic
upswing. He acknowledged the fluctuation and referred to the
table in members' packets entitled, "Alaska Department of Labor
& Workforce Development Employment and Security Division,
Historical Average Combined UI Contribution Rates, Rate Class
10," which ranges from 4.84 to low of 1.65. The rates fluctuate
between years and if one were to overlay a chart of the economy,
the relationship would be visible, he said.
9:12:10 AM
REPRESENTATIVE JOSEPHSON related his understanding that the
current system allows for some departmental flexibility, to
increase or decrease, in terms of the employee and employer
rates.
MR. DICK clarified that the rates are established through a
formula in statute, and thus the department does not have any
discretionary at this time.
REPRESENTATIVE JOSEPHSON asked what the federal government does
in the event the state under collects and a greater demand for
unemployment exists.
MR. DICK answered that the federal government has guidelines for
reviewing trust funds. First of all, penalties are not imposed
for becoming insolvent; however, the federal unemployment
program requires states to continue to pay UI benefits. As many
as 32 states have had to borrow to pay these benefits and have
had to subsequently repay the federal government with interest.
9:13:50 AM
REPRESENTATIVE JOSEPHSON asked how the other states became
insolvent and how does Alaska avoid it.
MR. DICK responded that although he is not familiar with
programs or systems in other states, he believes the issue has
been driven by the economy and recessions in those states. For
example, California currently owes $10 billion and Michigan also
has substantial debt. He reiterated that he has not studied the
interplay between the system and their economies.
REPRESENTATIVE JOSEPHSON related his understanding that Alaska
is one of 18 states that have never been in an insolvency
situation.
MR. DICK answered that is correct.
9:14:48 AM
REPRESENTATIVE REINBOLD remarked that the electronic filing is a
great idea. This bill helps Alaska be federally compliant and
businesses be sustainable. She commented that Alaska is not
doing so well compared to other states with respect to
competition. She said there isn't any cost to the department
and it seems as though it will streamline the process and make
things more efficient. She thanked Mr. Dick for bringing this
forward.
9:15:41 AM
REPRESENTATIVE CHENAULT referred to Section 5 of the bill, which
will give the commissioner a lot leeway in suspending all or
part of the unemployment rates. He asked whether there is any
concern with the ability to adjust .3 percent yearly regardless
of the unemployment rates.
MR. DICK answered that currently the structure is such that the
UI Trust Fund solvency adjustment can only increase or decrease
by .3 percent per year. Section 4 would remove the .3 percent
decrease aspect. Therefore, the department would still have the
ability to implement a .3 percent increase, which is intended to
provide protection to employers, to stair step, and in years of
increase to increase the rate. He informed the committee that
the department believes the .3 percent limitation on decreases
should be eliminated when the economy recovers to allow
employers more tax relief, get more money in the economy, and
help the economy grow even more.
9:17:21 AM
REPRESENTATIVE CHENAULT asked who pays the federal government
unemployment benefits.
MR. DICK answered that the federal benefits the division pays
out is 100 percent reimbursed by the federal government.
9:18:14 AM
DON ETHRIDGE, Lobbyist, Alaska State AFL-CIO, said that the
Alaska AFL-CIO supports the fraud protection measures in HB 76,
but does not support Section 5. He expressed concern that the
changes in Section 4 add politics into a formula-driven process
that has worked for many years. After all, Alaska is solvent
and doesn't have to go to the federal government for money.
Currently, state and federal budget cuts are being discussed,
including cuts to the capital budget. Construction trades
depend on unemployment benefits during the winter to avoid going
to the Lower 48 for work. He concluded that politics is the
wrong way to go to address [the UI tax rates]. He asked the
committee to consider adjusting the calculations if the formula
needs adjusting and encouraged the committee not to introduce
politics into the equation.
9:20:34 AM
REPRESENTATIVE MILLETT requested clarification as to how Mr.
Etheridge believes politics play a role in this rather than
viewing the amount of unemployment collected as an economic
decision. She said she did not view Section 5 as politicizing
the movement of the unemployment rate.
MR. ETHRIDGE answered that if the commissioner is making the
decision, the pressure would be on the commissioner to reduce
the unemployment rate, whether or not it is viable to do so.
REPRESENTATIVE MILLETT disagreed that there would ever be a
scenario in which the DLWD commissioner would place the UI Trust
Fund in jeopardy. In fact, she suggested the effect would be
the exact opposite in that the reduction [of UI taxes under the
bill] would come at a time when the economy needs adjustment.
She maintained it isn't always about politics, but rather what
is best for the economy and the employee. She maintained that
neither the commissioner nor the governor would put Alaska's
unemployment benefits at risk.
MR. ETHERIDGE said he hoped that would be true, but he
maintained his concerns.
9:23:06 AM
PAUL GROSSI, Lobbyist, Alaska State Pipe Trades UA Local 375;
Ironworker Management Progressive Action Cooperative, said he
shares the same concerns [as Mr. Etheridge]. He characterized
the bill as basically a housekeeping bill, the vast majority of
which he supports, to help the department perform its job better
and better comply with federal requirements. However, he
expressed concern over Section 5 of HB 76. He explained that
the formula was put into place over 30 years ago and was
designed by David Teal, the [legislative fiscal analyst in the]
Legislative Finance Division. Thus far it's worked perfectly
without any insolvency - for over 30 years. In the good times,
he predicted the proposed changes will work well and assist
employers. However, in bad times it could lead to underfunding
and should the economy take a drastic downturn, it could lead to
insolvency or add to the possibility of insolvency.
MR. GROSSI explained that the formula has a three-year look back
period with various parts to the formula designed to lessen the
increase and decrease in taxes to employers and employees. Thus
the formula is designed to level out the peaks and valleys. He
expressed concern that [HB 76, Section 5] could add additional
risk. He related that his clients have employers and his
[clients] want the employers to get the benefits; however, he
was unsure how much benefit [Section 5] would mean. He
estimated that it would probably range from $30 to $40 annually
per employee, which isn't significant but could help. However,
if the formula is such that it is currently overfunding the [UI
Trust Fund], he suggested changing the formula. In fact, David
Teal is still available and no one knows the formula better than
him, he said. He cautioned against placing this decision in the
hands of one person. Granted, he said he trusts the new DLWD
commissioner and does not believe anyone would intentionally
harm the fund, he pointed out that predicting what will happen
to the economy next year is difficult.
9:27:21 AM
MR. GROSSI maintained that if the formula is overfunding [the UI
Trust Fund], then the legislature should review the formula
since it is the legislature's job to do so and not the job of
the DLWD commissioner. The legislature determines funding so if
a problem with the formula for the UI Trust Fund exists, the
legislature should address it and not place the fund at risk.
MR. GROSSI brought up another point that would help employers.
He said that if the [UI Trust] fund becomes insolvent, the
federal government will need to step in to ensure that
unemployment benefits are paid; however, the state would be
required to reimburse the federal government the funds,
including interest. In fact, it really would be the employers
who would be charged since the UI tax being withheld is the
employers' money. Thus, while the legislature is trying to help
employers with this bill, it ultimately may put employers at
risk. He urged members to thoroughly review this bill.
CHAIR OLSON said the commissioner acted appropriately by
bringing this issue to the committee in the form of a bill.
9:29:19 AM
REPRESENTATIVE MILLETT related her understanding that Mr. Grossi
trusts David Teal, and asked if Mr. Grossi would rather Mr. Teal
make the adjustments. Representative Millett opined that the
formula doesn't need to be rewritten; HB 76 merely requests the
latitude to make a small adjustment to the formula. She
questioned whether the concern is with the DLWD commissioner
making the adjustment. She suggested that [Section 5] does not
make a significant request nor would anyone ever want to ever
make the fund insolvent. While the increment and the benefit to
employers might be minimal under the bill, it seems like a wise
thing to consider when the economy is bad. She asked again
whether Mr. Grossi's objection was specifically to the DLWD
commissioner making the decision and if he believes the
legislative finance analyst is the more appropriate person to
make the determination.
MR. GROSSI clarified that he trusts the current DLWD's
commissioner, but he emphasized again that the formula has
worked. Therefore, if the formula needs to be adjusted, it
should be reviewed. "It's not David Teal," although he
obviously designed is a good system that has never experienced
insolvency. Although California and other states have had
problems with insolvency, Alaska has not, even though the
economy suffered severe downturns such as the one during the
mid-80s. In fact, the system survived the mid-80s. He
highlighted that the good thing about this formula is that it
considers the [UI Trust] fund, the number of employees, plus a
whole gambit of factors, and determines what is needed. He
suggested if the formula needs minor changes to keep it working
effectively, it could occur while still giving employers a
break.
9:32:34 AM
CHAIR OLSON reiterated it is within the commissioner's purview
to make this decision, but he did not believe this function is
in Mr. Teal's current job description.
9:32:49 AM
REPRESENTATIVE HERRON, referring to page 3, lines 23-26,
questioned whether the issue or concern with Section 5 is with
the "in whole" language and if it should be limited to "in
part".
MR. GROSSI responded that he doesn't know. He suggested that
the review did not need to be limited to Mr. Teal, but perhaps
the actuaries and Mr. Teal could review the formula and
determine whether it needs to be changed to give employers
relief. However, it should be done in such a way that doesn't
put the fund at risk. After all, chances are - especially
during the good times - the changes would be fine, but if
overfunding is the issue, it seems as though that adjustment
could be made through the formula, which could then suffice for
another 30 years. He agreed he does not have the solution to
this issue, but reiterated that it seems the actuaries and Mr.
Teal could review the formula.
9:35:10 AM
REPRESENTATIVE HERRON, after considering the comments and
reading Section 5, suggested the committee should consider
deleting the "in whole" language from Section 5, but keep the
"in part" language with side boards.
CHAIR OLSON indicated he does not intend to move HB 76 today.
9:36:05 AM
REPRESENTATIVE MILLETT referred to a letter in members' packets
from the National Federation of Independent Business (NFIB)
dated January 18, 2013, from which she read the following
statement: "House Bill 76 revises the contribution requirements
to keep the trust fund solvent and allows the commissioner the
authority to eliminate or reduce increases in unemployment
insurance tax rates when the fund is fully funded, based on
standards to ensure the actuarial soundness of the unemployment
trust fund." She then asked if Mr. Grossi agrees or disagrees
with the statement.
MR. GROSSI answered he agrees with the intent. He maintained
his concern about the uncertainty of whether the fund will
remain solvent. He recalled Mr. Etheridge indicated the future
is unknown. In fact, none of us knows the future. He expressed
concern that if the [UI trust fund] is reduced and the state
experiences a downturn in the economy, it would harm employers.
He suggested Representative Herron's concept would at least make
it less of a possibility and is moving in right direction.
9:38:27 AM
REPRESENTATIVE MILLETT pointed out that the voice of small
businesses, the NFIB, is saying they support the bill, while the
unions express fear that the commissioner - who is very aware of
the state of the fully funded UI [trust fund] not being able to
make a small adjustment. "It baffles me," she said.
Representative Millett remarked that it seems like a
contradiction between the union and small business owners, who
would be most affected.
MR. GROSSI noted that he also represents small employers and
also wants to help small employers, but wants to avoid
unintentionally harm to them or the fund.
REPRESENTATIVE MILLETT suggested perhaps he was worried about
negligence.
MR. GROSSI answered that he would characterize his concern not
as pertaining to negligence but due to a lack of knowledge.
9:40:00 AM
CHAIR OLSON offered his belief that the commissioner's goal and
the one he stated are similar. He suggested the commissioner
has the best interests of the state at hand.
REPRESENTATIVE REINBOLD said this is the first time she has
heard insinuations and mistrust and she found the undercurrent
as inappropriate. She also said she knows the commissioner, who
has a reputation of working well with labor. She said she was
unsure if the concern is that under the current commissioner
that insolvency would result. She highlighted that the NFIB
letter speaks loud and clear in its support of HB 76, and added
that the state needs to support its small businesses.
9:41:17 AM
REPRESENTATIVE JOSEPHSON, with due respect to his colleagues,
said he was puzzled by Representative Reinbold and
Representative Millett's comments, who indicated they seem to
find differences between management and labor as shocking. He
said, "I don't find it shocking. It's the history of humanity.
It goes back to the guilds in the 1700s. Of course there is a
difference. I woke up knowing that. I take his - Mr. Grossi's
- comments as just being concerned about some employers who he
represents ...."
CHAIR OLSON interjected that this might be best under committee
comments. He remarked he's appalled that someone might think a
political decision is occasionally made in this building.
9:42:16 AM
COMMISSIONER BLUMER said that although HB 76 lists the
commissioner of the Department of Labor & Workforce Development
(DLWD) as the decision-maker, she cannot imagine the decision
would be made in a vacuum. She stressed the importance of
considering the best interests of the state and highlighted that
the current governor would not want to put the state in the
position of borrowing from the federal government. She offered
her belief that sideboards on the bill exist that defines when
the decision can be made, in conjunction with the actuary. Thus
the decision would not be made in a vacuum and would not be
harmful to businesses in the state. She concluded that all who
know this administration know that wouldn't be the case.
9:43:32 AM
DOUG HOLMES, President, National Foundation for Unemployment
Compensation and Workers' Compensation, stated he also serves as
the president of UWC, an organization that monitors unemployment
insurance policy and law at the federal and state level. He
provided his background, including his service as a UI
administrator, legal counsel, and Secretary of the Council for
the Ohio system. He retired from state service and became
president of the national organization. He related he watches
these issues closely and often consults with states on solvency
efforts related to unemployment insurance. He referred to
Sections 4 and 5 of HB 76 and offered to provide his perspective
on how Alaska fits relative to other states and the federal
guidelines. He indicated that Alaska is in a good place in
terms of solvency of the UI trust fund.
9:45:36 AM
MR. HOLMES, with regard to Section 5, explained that the .08
high cost multiple equates to about $230 million so even if
Alaska dropped to .08 it would still have $230 million in the UI
trust fund, which would be a fairly good balance given the
state's benefit payout history. He offered his belief the risk
of insolvency is minimal or non-existent and suggested that it
seemed reasonable to place the review with the commissioner and
actuary, which would provide some flexibility and enable the
state to respond.
MR. HOLMES said one issue that arises in each state is
determining the appropriate trust fund balance and the impact on
the ability to keep money in the state to use for job creation
or to reduce the cost of employment. He acknowledged this is a
judgment call; however, Alaska's unemployment tax rate per
employee as a percent of total wages is relatively high compared
to other states. He also suggested the UI trust fund [balance]
is high. Hence, it seems like an appropriate time to consider
flexibility and the language in Section 5 is suitable, doesn't
place the state at risk, and would give the state flexibility.
Additionally, the interest rate being provided for the UI trust
fund balance is about 2.5 percent and the interest is applied to
the UI Trust Fund itself; these are dedicated dollars that are
part of the federal unified budget and can't be used for other
purposes so some restriction exists. Further, the more money
deposited to the UI Trust Fund may improve the overall solvency,
but it is only maintained in federal unified budget and can't be
used for other purposes.
9:48:29 AM
MR. HOLMES summarized that Alaska is in good shape in terms of
the UI Trust Fund as a percent of total wages and the average
high cost multiple. Even if the fund dropped to the .08 rate,
the UI Trust Fund would still have a balance of $230 million.
9:48:59 AM
[HB 76 was held over.]
9:49:25 AM
The committee took an at-ease from 9:49 a.m. to 9:53 a.m.
HB 74-AIDEA: LNG PROJECT; DIVIDENDS; FINANCING
9:53:28 AM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 74 "An Act relating to development project
financing by the Alaska Industrial Development and Export
Authority; relating to the dividends from the Alaska Industrial
and Export Authority; authorizing the Alaska Industrial
Development and Export Authority to provide financing and issue
bonds for a liquefied natural gas production system and natural
gas distribution system; and providing for an effective date."
9:53:35 AM
SARA FISHER-GOAD, Executive Director, Alaska Energy Authority
(AEA), Department of Commerce, Community & Economic Development
(DCCED), informed the committee that her PowerPoint presentation
will update the committee on the proposal to bring liquefied
natural gas (LNG) to the Fairbanks area. She said HB 74 would
develop a catalyst and financing package with the strength of
the Alaska Industrial Development and Export Authority (AIDEA)
to provide low-cost North Slope natural gas and propane to
Interior Alaska. This package provides an opportunity for the
project to happen, but passage of HB 74 does not necessarily
mean the project would move forward since numerous assumptions
have been made and lots of work is happening to determine
feasibility. This presentation will show the status of the
project development and where a significant difference can be
made with the financing package to provide lower cost heating
fuel to Interior residents. She reiterated the project provides
the catalyst and gives AIDEA additional tools, although she
noted HB 74 is primarily a financing package [slides 2-3]. She
described the LNG project as one that would help build out the
LNG to Interior Alaska by trucking gas to consumers while
assuring the private sector is used as much as possible. The
natural gas would be liquefied on the North Slope and trucked to
Interior Alaska and propane would be delivered to the Interior.
Although the initial phase would serve Fairbanks and the North
Pole area, gas would also be made available for other parts of
Interior Alaska. The LNG would be stored and degasified in the
Interior and the distribution system would be built out to
provide natural gas for heating. Additionally, the distribution
system would lay the foundation when a gas line comes to
Interior Alaska and the LNG customers could transition to have
their gas distributed from the pipeline [slide 4]. Ms. Fisher-
Goad pointed out the LNG trucking value chain [slide 5]. The
AEA and AIDEA have been working to develop the proposed LNG
project. In fact, AIDEA has worked with the proposers and sent
a letter of interest out to help develop the package and
initiate the due diligence.
9:57:36 AM
MS. FISHER-GOAD explained what's been happening with the cost of
heating fuel and what this project could do to make a
significant difference for many customers in Interior Alaska
[slide 6]. She explained the graph, noting fuel oil is roughly
$4 per gal and this project proposal has the wholesale LNG cost
at approximately $3.50 per thousand cubic feet (Mcf). This
figure was based on information from project proponents who
anticipate natural gas contracts will be available from the
North Slope to provide gas at that price. She explained that
the blue part of the graph is the liquefaction plant, the green
part of the bar charts is trucking, and the yellow portion is
the regas storage and distribution portion which brings natural
gas to the home. Thus, this graph demonstrates the cost savings
in using natural gas versus fuel oil, which could reduce costs,
which start at $4, by nearly 50 percent for Interior residents.
She referred to an earlier question by the committee, which was
to ask why an electricity future wouldn't be considered as an
alternative. She turned to slide 7, entitled, "Heating Energy
Supply Comparison," which shows that electricity costs would
need to be $.04 - $.06 per kilowatt per hour (kWh) in order to
be competitive. She said she appreciated the economist's
development of the slide since it demonstrates the heating costs
for electricity in Fairbanks is currently at $.22 per kWh. She
pointed out the significant difference between electricity and
fuel oil costs, which also demonstrates the reason AIDEA is
considering the LNG trucking proposal to Fairbanks.
10:00:11 AM
MS. FISHER-GOAD turned to plant use and expansion which begins
to discuss the startup costs in district [slide 8]. The initial
plant would be a 9 billion cubic feet (Bcf) plant that would
provide 4.5 Bcf for space heat, 2.0 Bcf for electricity, and 2.5
Bcf for industrial use. At start up, the eligible customers are
estimated at 7,800 LNG and 1,800 propane customers. As the
distribution system expands, the LNG plant would serve 15,900
LNG and 2,700 propane customers.
10:01:01 AM
MS. FISHER-GOAD discussed the capital cost breakdown [slide 9].
The estimated cost of the LNG plant is $220 million, with the
regas, storage, and redistribution for a total startup cost of
$425 million. She explained that the estimates are based on
project proponents who developed this project last year. This
concept is not a new concept, but is one that has developed in
the past few years to provide an affordable fuel source to the
Fairbanks area. She reiterated that these assumptions are being
vetted and the due diligence is starting with Mr. Leonard's team
on the technical discussion of the project.
10:02:09 AM
MS. FISHER-GOAD then turned to [slide 10] with regard to
household heating savings, which compares the current monthly
fuel oil costs in the Interior with the potential range of fuel
oils with the natural gas future. She highlighted that this
demonstrates AEA's mission to reduce the cost of energy for
Alaskans. The aforementioned coupled with the fact that AIDEA
is the development financing agency for the state results in a
very good marriage of sister agencies to develop a project to
help pursue gas for Interior Alaskans. There would also be
significant savings in heating costs if LNG can be trucked to
Fairbanks at this point. Furthermore, changing from oil heat to
LNG also provides a reduction in the uncertainty of the price
[slide 11]. She pointed out that there is a direct correlation
between crude oil prices and fuel oil prices. In 2008, Alaskans
using diesel fuel began to see a significant increase in heating
costs. Of course, Interior Alaska and rural Alaska are the
colder parts of the state. With the LNG future, the swing
between low and high prices is reduced. However, as crude
prices fluctuate, a significant difference exists.
Additionally, use of natural gas can reduce overall emissions,
which has been a significant concern in Interior Alaska [slide
12]. Thus natural gas could help increase public health
benefits substantially.
10:04:55 AM
MS. FISHER-GOAD moved on to the long-term use of LNG [slide 13].
She recalled concern was raised in terms of what would happen to
the infrastructure as a pipeline is developed. However, all the
existing entities can be served by the pipeline, including the
existing space heating and electrical generation, she said. The
pipeline would replace the trucking system; however, the
liquefaction plant is moveable and could continue to serve areas
in which a pipeline would not serve. Thus AEA and AIDEA believe
a real significant industrial development can be done post
pipeline. Additionally, this can assist with further expansion
of rural Alaska river system and highway system in order to
continue to supply LNG and propane to other areas of the state.
10:06:28 AM
CHAIR OLSON asked for the project's timeframe.
MS. FISHER-GOAD projected that if everything pencils out and
AIDEA is able to develop the financing package that it would
like, first gas would flow into the system in the last quarter
of 2015 [slide 14].
10:07:06 AM
TED LEONARD, Executive Director, Alaska Industrial Development
and Export Authority (AIDEA), Department of Commerce, Community
& Economic Development (DCCED), stated that HB 74 would provide
authorization for AIDEA to participate in the financing through
two separate streams of funding. One stream would be AIDEA's
direct financing of $275 million to the project through AIDEA's
issuance of $150 million in bonds. The rate on the direct
financing would be the bond rate plus 25 basis points that AIDEA
will have for managing the project. The second revenue stream
would be direct financing of $125 million at 3 percent, which is
set in statute [from the Sustainable Energy Transmission and
Supply Fund established last year] [slide 14-15]. Additionally,
the Governor's proposed FY 14 capital budget proposes another
$50 million in general fund dollars for the purpose of reducing
direct costs to consumers in Interior Alaska. This would be an
equity investment by the state using some type of public-private
partnership (P3) agreement.
10:08:24 AM
MR. LEONARD explained the funding sources for the initial
distribution system build out totals $355 million.
Additionally, based on existing statutes, credits can be used in
distribution and production phases. More specifically, the
credits are available for providing LNG storage. He anticipated
LNG storage on the North Slope and in Fairbanks for
regasification.
10:09:22 AM
MR. LEONARD highlighted the potential financing tools potential
finance options for initial build out [slide 16]. The financing
AIDEA is requesting for the initial distribution system build
out would consist of $425 million with communities and utilities
providing full financing for the expansion of a 9 Bcf to a 13.5
Bcf plant. He described the funding, which includes a direct
loan for the production facility for $125 million, with the
general fund appropriation providing the investment for the
equity portion for the state, with funding including the storage
credit. In order for the project to work, private investment
must occur, estimated at approximately $70 million of the $425
million.
10:10:43 AM
MR. LEONARD explained the different costs to bring gas to
Fairbanks, excluding the distribution system [slide 17]. He
detailed the interest at $.25 for the $10.28 per Mcf. The
principal on the loan would be $.46 per Mcf; and the return on
equity would be $.21 per Mcf. He pointed out that the majority
of the cost to bring gas to Fairbanks is in the trucking, the
natural gas contract, and a small amount of actual operations
[as depicted on the colored bar graph on the right of the
slide.]
10:11:34 AM
MR. LEONARD related the project timeline and milestones [slide
18]. He explained that the feasibility stage is currently
happening, from February to August 2013. The plant and storage
is anticipated to start in June 2013, with gas delivery
anticipated in the last quarter of 2015. The build out of the
distribution system would happen in 2014-15. He reported that
AIDEA and AEA have had a team in Fairbanks meeting with
proponents - the project sponsors. Last week three days of
meetings were held. AIDEA has two engineering firms on board to
begin analyzing the two turnkey proposals from project sponsors,
including HDR, Inc. and MEI, LLC. He advised that MEI is an
expert on building liquefaction plants and to date the company
has built approximately 300 plants around the world.
Additionally, AIDEA also has financial advisors who have begun
to review the financial feasibility of the plant, which will
continue through June 2013. He reiterated the goal to have
first gas delivered during the last quarter 2015.
10:13:15 AM
REPRESENTATIVE REINBOLD recalled Fairbanks households would
convert to gas. She asked for an estimate of the time frame and
the approximate cost per household for conversion.
MS. FISHER-GOAD estimated that the costs would range from $300
to $500 per household. However, due to the significant annual
savings AIDEA believes some incentives exist for conventional
financing to help handle the necessary conversion costs. Since
AIDEA is currently working through the due diligence, she did
not anticipate Fairbanksans to do so until due diligence is
completed and when the project and cost-savings figures are
proven up.
10:14:58 AM
REPRESENTATIVE REINBOLD asked for clarification on the private
investment of $70 million as part of the potential finance
options.
MR. LEONARD answered that money would come from the project
sponsors, which is likely going to be one of the utilities.
Additionally, on for storage side the investment would come from
the various utilities investing in the distribution system,
including Fairbanks Natural gas, and the new utility, Interior
Gas Utility. He pointed out that this type of project is one in
which AIDEA is currently involved; as AIDEA invests its money,
the project sponsor is also expected to invest, which creates a
combination of funds to perform the build out and the project
construction.
10:16:19 AM
REPRESENTATIVE REINBOLD, referring to the moveable facility,
asked where the facility would move and the cost to move it.
CHAIR OLSON also asked whether the LNG facility would be skid
mounted or if it would be dismantled and rebuilt.
MR. LEONARD answered that he doesn't have the cost to move the
facility; however, it is a modular facility. It is built in
parts and constructed so it would be moved in the same way.
One possibility would be to move it to Fairbanks next to the
proposed pipeline and "it would be a customer to utilize... gas
coming off the pipe to make LNG," which would be trucked to
mining operations, for example. He noted the Ambler mine is
scheduled to come on line in 2019 and other mines have indicated
a preference for LNG, if possible. Further, the LNG would be
trucked down the Richardson Highway; however, he does not
currently have the cost for that trucking. He related this
would be part of the due diligence undertaken by the agency. He
offered his belief that the cost of moving the plant would not
be a significant cost for the plant.
10:18:08 AM
REPRESENTATIVE CHENAULT said he noticed one slide did not
include trucking capital. He asked whether any estimate
existed. He anticipated it would be reasonable but wondered why
the trucking estimates were not included.
MS. FISHER-GOAD answered that trucking is obviously a part of
cost to get to Fairbanks. The financing that will be made
available by AIDEA and the potential $50 million would not be
used in the development of the trucking cost. She related her
understanding from discussions with the utility proponents
mentioned earlier that the trucking portion would be contracted
with a company to provide this service. She agreed the cost
exists, but the financing package would not be used to finance
the trucking cost.
10:19:47 AM
REPRESENTATIVE CHENAULT commented that although he understands
the need for the project and supports the project, he has some
questions. He asked whether AIDEA is considering any financing
distribution for other communities.
MR. LEONARD answered yes; that under the SETS program AIDEA has
been contacted by small community outside of Anchorage for an
air gas propane system and distribution system for it. He
related that AIDEA is beginning to receive requests through the
SETS program.
10:21:12 AM
REPRESENTATIVE CHENAULT related that the state funded a gas
pipeline to Homer, which will be repaid, in part, through an
assessed fee on rates. However, Homer has assessed its
[property owners] in the amount of about $3,900 per parcel in
order to get a gas distribution system. He was curious as to
whether other communities have contacted AIDEA as he anticipated
other communities will expect to have distribution systems and
ask for funding. Therefore, he expressed hope the state is
ready and willing to assist other communities in that endeavor.
Representative Chenault then said he hoped to move the bill
forward once questions are answered.
10:23:08 AM
REPRESENTATIVE JOSEPHSON remarked this seemed inexpensive
considering the alternatives. He recalled one slide would serve
15,000 customers; however 100,000 reside in the Fairbanks North
Star Borough. He asked how this would serve the additional
85,000 people.
MR. LEONARD answered that instead of people the number of
customers is estimated. He said a full build out is estimated
to serve 19,000 customers, although currently there are 22,000
to 25,000 total units.
10:24:14 AM
REPRESENTATIVE JOSEPHSON asked about $105 million for
distribution system and asked whether that refers to trucking
not retrofitting homes.
MR. LEONARD answered that the $105 million distribution is to
get the pipeline to the neighborhoods and the mains to the
neighborhoods. After the mains are completed, a hookup from
Fairbanks Natural Gas or IGU - which is estimated from the main
to the house at $300 to $500 per household - would need to
happen.
[HB 74 was held over.]
10:25:16 AM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
10:25 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB71 Supporting Documents-Assorted Letters of Support 3-1-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 71 |
| HB84 ver A.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 84 |
| HB84 Sponsor Statement.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 84 |
| HB84 Sectional Analysis.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 84 |
| HB84 Supporting Documents-Letter Ed Kringer DOD 2-11-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 84 |
| HB84 Supporting Documents-Testimony-Mark San Souci Regional Liaison NW DOD 02182013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 84 |
| HB76 ver A.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Transmittal Letter 1-17-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Sectional Analysis 1-21-2012.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Fiscal Note-DOLWD-CO-1-17-13.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Fiscal Note-DOLWD-UI-1-17-13.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Supporting Documents-DOLWD Q&A 1-28-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Supporting Document-UI STEP TVEP flow chart 1-29-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Supporting Documents-UI Trust Fund Balances 2-14-2013 pdf.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Supporting Documents-Letter NFIB 1-18-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Supporting Documents-Treasury Offset Program 2-14-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Supporting Documents-Historical UI Rates 1-21-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Opposing Documents-Letter AK AFL-CIO 2-20-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB76 Opposing Documents-Letter AK District Council of Laborers 2-25-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB74 Supporting Documents-AIDEA-AEA Policy Presentation 3-4-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 74 |
| HB74 Supporting Documents-Op Ed Newsminer - Fairbanks Chamber 2-16-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 74 |
| HB74 Supporting Documents-AIDEA Project Analysis Process 2-26-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 74 |
| HB74 Supporting Documents-Committee Questions & Answers 2-26-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 74 |
| HB74 Supporting Documents-Interior Energy Plan.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 74 |
| HB74 Supporting Documents-Letter-GFCC 2-15-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 74 |
| HB74 Supporting Documents-North Pole Resolution(1) 2-4-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 74 |
| HB74 Supporting Documents-North Pole Resolution(2) 2-4-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 74 |
| HB71 Draft Proposed CS ver U.PDF |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 71 |
| HB76 Opposing Documents-Letter Teamsters Local 959 3-4-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 76 |
| HB74 Supporting Documents-Letter Teamsters Local 959 3-4-2013.pdf |
HL&C 3/4/2013 3:15:00 PM HL&C 3/5/2013 8:00:00 AM |
HB 74 |