02/27/2015 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB32 | |
| HB116 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 32 | TELECONFERENCED | |
| *+ | HB 116 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 27, 2015
3:17 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Shelley Hughes, Vice Chair
Representative Jim Colver
Representative Cathy Tilton
Representative Andy Josephson
Representative Sam Kito
MEMBERS ABSENT
Representative Gabrielle LeDoux
Representative Mike Chenault (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 32
"An Act relating to employer-required drug testing; requiring
the Alaska Workers' Compensation Board to adopt regulations
relating to the prescription of controlled substances to
employees; and relating to the prescription of controlled
substances to employees."
- HEARD & HELD
HOUSE BILL NO. 116
"An Act extending the termination date of the Alcoholic Beverage
Control Board; and providing for an effective date."
- MOVED HB 116 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 32
SHORT TITLE: WORKERS COMP: CONTROLLED SUBSTANCES TESTS
SPONSOR(s): REPRESENTATIVE(s) OLSON
01/21/15 (H) PREFILE RELEASED 1/9/15
01/21/15 (H) READ THE FIRST TIME - REFERRALS
01/21/15 (H) L&C, JUD
02/27/15 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 116
SHORT TITLE: EXTEND ALCOHOLIC BEVERAGE CONTROL BOARD
SPONSOR(s): LABOR & COMMERCE
02/18/15 (H) READ THE FIRST TIME - REFERRALS
02/18/15 (H) L&C, FIN
02/27/15 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
KONRAD JACKSON, Staff
Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 32 on behalf of the prime
sponsor, Representative Kurt Olson.
MICHAEL MONAGLE, Director
Central Office
Division of Workers' Compensation
Department of Labor & Workforce Development (DLWD)
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 32.
AESHA PALLESEN, Assistant Attorney General
Labor & State Affairs Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 32.
SCOTT JORDAN, Director
Division of Risk Management
Department of Administration (DOA)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the discussion of
HB 32.
LORI WING-HEIER, Director
Division of Insurance (DOI)
Anchorage Office
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 32.
LAURA STIDOLPH, Staff
Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 116 on behalf of the House
Labor & Commerce Standing Committee, Representative Kurt Olson,
Chair.
KRIS CURTIS, Legislative Auditor
Legislative Audit Division
Legislative Agencies and Offices
Juneau, Alaska
POSITION STATEMENT: Presented auditor findings and
recommendations and answered questions during the discussion of
HB 116.
CYNTHIA FRANKLIN, Executive Director
Alcoholic Beverage Control Board ("ABC Board")
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 116, answered
questions.
ACTION NARRATIVE
3:17:34 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:17 p.m. Representatives Colver,
Tilton, Josephson, Kito, Hughes, and Olson were present at the
call to order.
HB 32-WORKERS COMP: CONTROLLED SUBSTANCES TESTS
3:18:32 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 32, "An Act relating to employer-required drug
testing; requiring the Alaska Workers' Compensation Board to
adopt regulations relating to the prescription of controlled
substances to employees; and relating to the prescription of
controlled substances to employees."
3:19:03 PM
KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State
Legislature, on behalf of the prime sponsor, Representative Kurt
Olson, stated that HB 32 is intended to address opioid use,
which is one of the factors leading to the high cost of workers'
compensation insurance in Alaska. The sponsor introduced a
similar bill last legislature on the same topic. This bill
would allow for drug testing for workers' compensation patient
opioid use under very specific circumstances by limiting
prescriptions for opioids to a 30-day supply. He said the
bill's focus is aimed to help reduce the high cost of workers'
compensation in Alaska by addressing the epidemic use of opioid
use and abuse of prescription drugs by workers' compensation
patients.
MR. JACKSON gave a brief section-by-section analysis of HB 32,
relating that Section 1 would authorize drug testing of injured
workers if the employees have been prescribed a controlled
substance for over 90 days. He said a negative test could
result in denial of future payments for the controlled substance
by the employer, although negative or positive test results may
not result in any adverse employment action. He directed
attention to the "may" language, which is permissive since it
does not mandate a test after 90 days.
MR. JACKSON stated that Section 2 requires the Workers'
Compensation Board to adopt regulations pertaining to the
provisions in Section 3 of HB 32.
3:20:53 PM
MR. JACKSON stated Section 3 will limit prescriptions of
controlled substances listed in schedule IA, IIIA, or VA in AS
11.71 to a 30-day supply; however, an employer or insurer may
use an employee's negative test result under AS 23.10 to claim
that the employee may not be eligible for future payments for
schedule IA controlled substance prescription. Again, this bill
is designed to limit and discourage use of long-term opioids by
restricting prescriptions to controlled substances to 30 days,
he said. He reported statistics that show one in four
prescriptions is being used by someone who has not been
prescribed the medication that employers are paying for, either
directly or through insurer premiums.
3:22:06 PM
MR. JACKSON emphasized that the drugs in question are not mild
drugs, but are opioids, which are a synthetic version of opium-
derived drugs as defined in AS 11. Higher usage and dosage of
opioids over long periods of time can lead to addiction,
increased disability or work loss, and potentially even death.
He reported that deaths from overdoses have grown dramatically
and in many states have now exceeded deaths from automobile
crashes. He concluded by stating that prescription drug abuse
has been declared an epidemic by the Centers for Disease Control
(CDC).
3:23:45 PM
CHAIR OLSON asked whether patients can obtain a new prescription
so long as they see their doctor.
MR. JACKSON answered yes. The bill proposes reducing a 90-day
prescription of controlled substances to 30 days. Patients can
obtain refills by visiting their physicians, who can prescribe
an additional 30-day refill, if deemed necessary. The overall
goal is to reduce workers' compensation costs, but also to get
workers healthy and back to work as quickly as possible, and
proper pain management is a key component.
3:24:42 PM
REPRESENTATIVE HUGHES asked for further clarification if the
drug test is negative and the opioids are not in the patient's
system, whether it is possible that these drugs might be
diverted and are being illegally sold. She further asked
whether the statistics for overdoses are for patients being
prescribed the drugs or by people illegally buying diverted
prescription drugs.
MR. JACKSON replied that a negative test may result in denial of
a prescription refill for controlled substances, noting these
costs are being passed on to the insurer or the employer. Thus
if the patients do not need the medication, their employers need
to stop paying for it. He clarified that this bill does not
accuse workers' compensation patients of selling their
prescription drugs, in fact, patients may simply be putting
their prescriptions in the medicine cabinet. This bill allows
the drug testing to occur to ensure that patients are taking
their medications. If patients have been consciously attempting
to wean themselves off their pain medication, and some have done
so, they must do so in conjunction with their doctors. He
reiterated that this bill does not intend to harm the injured
worker. He directed attention to some of the reports in
members' packets that provide information on drug overdoses,
although he did not specifically recall the figures.
3:27:48 PM
CHAIR OLSON said that he has heard that one-third of Alaskan
workers are subject to random UAs (urine analysis) with more
stringent actions allowed for positive tests. For example,
North Slope workers will lose their jobs if they have a negative
test. Employees of many industries, including ones related to
transportation, maritime, and the military currently subject to
drug testing, he reported.
3:28:28 PM
REPRESENTATIVE HUGHES said it is a good bill and she supports
it. She emphasized the importance of reducing workers'
compensation costs in Alaska. She asked whether any employers
are subject to rules regarding administering random UAs, for
example, whether employees are forewarned.
MR. JACKSON answered that this bill specifically addresses Title
23, which relates to workers' compensation and does not apply to
other workers. He clarified that this bill applies to injured
workers who have been taking prescriptions opioids for more than
90 days. However, this bill would not apply to patients taking
prescription drugs for opioids for less than 90 days; instead,
the trigger for drug testing of workers' compensation patients
is for patients have been taking prescription opioids for 90
days or longer. He stated that the details for testing will be
laid out in regulation upon passage of HB 32.
3:30:44 PM
REPRESENTATIVE COLVER asked who can order the tests, whether it
is the employer or the workers' compensation carrier.
MR. JACKSON answered that it is not spelled out in the bill, but
it will be established in regulation. He directed attention to
Section 1, which allows the employer, or essentially the claims
manager to order the testing. He deferred to Mr. Monagle to
further address this during his testimony.
3:31:49 PM
REPRESENTATIVE KITO said this is the first time he has seen the
bill. He expressed concern that the state would establish
different classes of care for people. He offered if the state
believes that it needs to assure that there isn't abuse of
scheduled drugs, the statutes should apply to everyone, not just
those receiving workers' compensation. However, if there is
further concern about keep people from illegally selling
narcotics, it is already illegal to do so. He suggested that
there should be other ways to investigating whether that
activity is taking place. He did not think that doctors could
provide evidence to an investigator as to whether a patient is
potentially selling narcotics.
3:33:09 PM
REPRESENTATIVE KITO asked how long it takes for prescription
drugs listed in schedule IA to clear a patient's bloodstream.
He wondered when workers' compensation patients will have clear
urine analysis tests. He further asked for the percentage of
cases that this would apply to in Alaska, for example, if the
state has 100 workers' compensation cases, how many cases would
involve prescriptions for narcotics beyond 30 days. He asked
whether the doctor will need to refill the prescriptions after
30 days for patients who have prescriptions for narcotics.
MR. JACKSON answered he is absolutely correct that it is illegal
for anyone to resell prescriptions that are not prescribed to
them. Thus only pharmacies can sell prescription drugs. In
terms of the length of time for opioids to leave a person's
system, he surmised that it would depend on the body mass and
the drug; however, he was not certain. He deferred to Mr.
Monagle, but also offered to research the matter.
3:35:42 PM
REPRESENTATIVE KITO felt it was important to know what workers'
compensation patients were being testing for and if a
prescription drug clears in one day or seven days would mean
different things.
MR. JACKSON provided some statistics for Alaska, noting that in
2011, prescription drugs comprised almost 20 percent of the
medical costs of workers' compensation claims. Over 90 percent
of the time, injured workers missing one or more weeks had
prescriptions covered by workers' compensation, of which, 60 to
90 percent received opioids or narcotics.
3:36:42 PM
REPRESENTATIVE KITO asked for further clarification if he was
indicating 60 percent of 90 percent of the 20 percent of medical
costs were for workers' compensation claims.
MR. JACKSON answered yes.
3:37:09 PM
CHAIR OLSON asked whether that amounted to 11 percent of injured
workers.
MR. JACKSON deferred to Chair Olson on the math.
3:37:20 PM
MR. JACKSON, referring to the 30-day renewal, stated that the
sponsor's hope was to encourage a stronger and more robust
communication between doctors and injured workers, which will
allow for 30-day refills of prescriptions for opioids, which
could encourage a conversation between doctors and patients that
could mean patients don't need prescriptions for additional
drugs.
3:38:11 PM
REPRESENTATIVE JOSEPHSON asked for clarification on the
statistics.
MR. JACKSON responded that 20 percent of the medical costs in
workers' compensation claims were for prescription drugs in
2011. Ninety percent of the injured workers who missed a week
or more received workers' compensation prescriptions, with 60-90
percent of them receiving opioids.
3:39:25 PM
REPRESENTATIVE JOSEPHSON said that the statistics tell him that
injured workers are prescribed lots of drugs. He contemplated
how best to use that information and whether this bill
represents the right means to reduce costs.
CHAIR OLSON added that HB 32 will provide one tool to do so.
Ultimately, he hoped that the best practices for pain management
will be completed in the next year or two. Although he is not a
doctor, it seemed to him that prescribing drugs to injured
workers that were intended as end of life drugs for cancer
patients without first trying other options can create some
problems. For example, after several months of being on
opioids, injured workers are much less likely to return to their
jobs. He offered to provide statistics, but reiterated that the
longer injured workers are on drugs like oxycodone, the less
likely they are to return to work.
3:41:04 PM
REPRESENTATIVE JOSEPHSON asked whether any study or data
supported that legislation of this type in other states has
achieved results, in other words if premium costs were then
reduced.
MR. JACKSON related that Florida, Washington, Colorado and Texas
have initiated reforms and Texas and Washington have also seen
significant reductions in deaths from opioid use. Other states,
including Florida have restricted physicians from dispensing and
all of those measures have contributed to a reduction in deaths
and abuse of prescription opioids. He did not have the
statistics on hand, he said.
3:42:42 PM
CHAIR OLSON recalled that the committee has a relatively recent
national study from the Workers' Compensation Research Institute
it can distribute to members.
3:43:55 PM
REPRESENTATIVE TILTON related her understanding that long-term
use leads to addiction. She asked whether workers' compensation
covers rehabilitation.
MR. JACKSON deferred to Mr. Monagle to respond. He referred to
a study in members' packets by the Lockton Companies entitled,
"Opioids Wreak Havoc on Workers' Compensation Costs" that
highlighted the addiction and other problems observed throughout
the country. He added that members' packets also include some
charts that show the number of deaths attributed to overdoses.
3:45:19 PM
REPRESENTATIVE TILTON asked whether any information is available
on prescription paid medicines prescribed in workers'
compensation claims that have been seized in investigations.
MR. JACKSON answered that he was unsure whether the Department
of Public Safety (DPS) tracks the source, but he offered to
check. He stated the DPS provided information in members'
packets on hydrocodone seized in 2011-2013.
REPRESENTATIVE TILTON suggested it may be difficult to track
that type of information, but it could be useful information.
CHAIR OLSON offered to request any information that is available
from the department.
3:46:54 PM
REPRESENTATIVE KITO pointed to the earlier statistics. He said
he was surprised only 20 percent of workers' compensation claims
involve prescriptions, but it seemed as though about 1 or 1.2
people per hundred were using opioids. He asked for further
clarification on whether there are any anticipated cost savings
by implementing this bill.
MR. JACKSON answered that not have the figures, which were
calculated by the National Council on Compensation Insurance
(NCCI). He anticipated that it may take time to quantify costs
and savings that may be realized from passage of HB 32. He
offered to try to obtain the information.
3:48:24 PM
REPRESENTATIVE KITO asked for further clarification on whether
the information would be nationwide or applicable to Alaska.
MR. JACKSON answered that the estimated savings would be
specific to Alaska, assuming that this bill passes.
3:48:46 PM
REPRESENTATIVE KITO expressed an interest in identifying a
ballpark figure of cost savings. He reiterated his interest in
how much money Alaska insurers stand to save on workers'
compensation costs. He suggested that if the state hopes to
save money it would be good to identify any savings.
MR. JACKSON emphasized that he agreed it is important to
determine savings, plus, another benefit in passing the bill
could be the number of people that may never abuse narcotics or
have prescription drugs diverted and found by children.
3:50:17 PM
CHAIR OLSON stated that approximately half the states have
enacted similar legislation. He offered to obtain the
information on the number of states that have implemented
measures of this type. He offered his belief that other states
have seen significant savings.
3:50:45 PM
REPRESENTATIVE HUGHES offered her belief that it is important to
have a foundation on this issue. She asked for further
clarification, in terms of protection of privacy, of how
employers become aware of their employees being on workers'
compensation.
MR. JACKSON deferred to Mr. Monagle to respond.
REPRESENTATIVE HUGHES asked for further clarification on the
information that employers are provided.
3:52:33 PM
REPRESENTATIVE JOSEPHSON agreed this could be in the workers'
best interests; however, he imagined that injured workers will
be taking painkillers and not be getting a flu shot. He looked
forward to a discussion on the nature of employer being privy to
this type of medical information.
3:53:51 PM
MICHAEL MONAGLE, Director, Central Office, Division of Workers'
Compensation, Department of Labor & Workforce Development
(DLWD), said as he consider the bill, he does not look at it in
terms of cost savings to employers, but in terms of returning
someone back to work and preventing people from destroying their
lives by long-term opioid use. He recalled an instance in which
an injured worker reached a point of medical recovery, but due
to extensive use of opioids for several years, the worker had
developed such cognitive and other impairments that the doctor
classified the worker as permanently disabled. He said that it
was those types of concerns that this legislation will address.
The 90 days is identified by medical studies as the threshold
when the physical problems begin to develop. He said that the
curve for employees who return to work drops off sharply after
90 days on prescription pain killers. He explained that under
the bill, injured employees under workers' compensation claims
would obtain a 30-day supply of medication, followed by a
consultation with their physician who can determine the
effectiveness and necessity of prescribing an additional 30-days
prescription for opioids. In many cases there isn't any
functional improvement and the patients become addicted to
opioids and continue to use them. Nationwide, the emphasis is
to work to wean patients off opioids after 90 days in the hopes
that patients can discontinue these drugs and learn how to deal
with their pain management in more constructive ways.
3:56:29 PM
REPRESENTATIVE JOSEPHSON asked for further clarification on how
employee privacy and the employer's right to know would work.
MR. MONAGLE said that typically what was meant in referring to
the term "employer" in workers' compensation matters is the
employer, the insurance company, or the claims administrator.
Unless the entities are self-insured, most employers do not
interact with an injured worker; instead that contact is done by
the insurance company or the contracted claims administrator.
The claims administrator or claims adjustor provides regular
contact with the injured worker, who reviews the medical bills,
authorizes payment of medical bills, and issues disability
checks to the injured worker. He reiterated that the employer,
the insurance company, or the claims administrator are the ones
who will have access to the information on the prescription
drugs since they are the ones who have access to the frequency
that the injured worker is using prescription drugs. He
suggested the claims administrator would initiate any check on
the prescription, not the employer.
3:58:03 PM
REPRESENTATIVE JOSEPHSON asked whether the claims adjustors
confer to inquiries by small employers and if these adjustors
use some discretion.
MR. MONAGLE answered that workers' compensation was excluded
from HIPAA [Health Insurance Portability and Accountability Act
of 1996] law so the health care concerns between a provider and
the patient does not apply in workers' compensation cases.
Second, the provision of the Workers' Compensation Act says that
parties to workers' compensation cases are entitled to any of
the information about that case, which includes the employer,
the injured worker and their representatives, such as the claims
administrator or legal counsel. Thus any of the parties would
have access to the information, he said.
3:59:26 PM
REPRESENTATIVE JOSEPHSON asked whether any current statutes
requires drug testing other than for those employees operating
heavy equipment or for commercial carriers.
MR. MONAGLE answered that AS 23.10.600-699 outlines employer
drug testing. First, drug testing is a voluntary system so it
is not mandatory for any employer to test. Drug testing is not
administered by the state, but is left open to private action.
He suggested that if employees feel their rights have been
violated, their recourse is civil. It goes on to say that an
employer must meet certain requirements in order to put in a
policy for drug testing, for example, providing employees a 30-
day notice prior to implementing a plan, as well as advising
them of the conditions of testing, including the substances that
will be tested. These statutes also provide remedies for those
whose confidentiality has been violated or who suffer a false
positive test that occurred through negligence on the part of
the employer or the person doing the testing for the employer.
4:01:41 PM
AESHA PALLESEN, Assistant Attorney General, Labor & State
Affairs Section, Civil Division (Anchorage), Department of Law
(DOL), agreed that provisions are generally set out in AS 23.10
for drug testing and that Section 1 of this bill would add a
section to that drug testing regime for a negative drug testing
in workers' compensation cases.
4:02:19 PM
REPRESENTATIVE KITO recalled Mr. Monagle mentioned a patient who
was on opioids for a long period of time; however, he offered
his belief that this bill would not do anything about that and
would only allow an action to be taken if someone had not been
taking prescribed opioids.
REPRESENTATIVE KITO expressed concern about what would be
accomplished by the bill if the only denial is in regards to
those who are not taking their prescribed medication.
CHAIR OLSON stated that part of the bill was aimed at having
workers' compensation injured employees see their doctor monthly
and not refilling potent drugs via the pharmacy. He said that
this action may result in additional costs, but it may also
result in ultimate savings; however, the ultimate goal is to
assist in getting injured workers back to work.
4:05:06 PM
SCOTT JORDAN, Director, Division of Risk Management, Department
of Administration (DOA), in response to a question on privacy
issues, stated that Health Insurance Portability and
Accountability Act (HIPAA) does not apply to workers'
compensation cases so the state, which is self-insured, can
share these records. He reported that he obtains a quarterly
report of the workers' compensation individuals on opioid drugs.
4:06:05 PM
CHAIR OLSON asked for further clarification on how many injured
employees are taking scheduled drugs.
MR. JORDAN answered that 67 employees of 900 open claims, or
less than 1 percent are prescribed opioids. He characterized it
as a low amount.
4:06:31 PM
REPRESENTATIVE JOSEPHSON asked for further clarification that
these are injured Alaska state employees.
MR. JORDAN answered yes.
4:07:09 PM
LORI WING-HEIER, Director, Division of Insurance (DOI),
Anchorage Office, Department of Commerce, Community & Economic
Development (DCCED), stated that from the DOI's perspective,
after all is said and done, the data comes to the division and
the DOI sets the rates for employers, including rates for the
State of Alaska. These rates have gone up, and while they have
stabilized somewhat in the past year, the rates are still very
high. The division was proud that the state fell off the number
one spot in the nation; however, these rates still represent a
very high cost to employers across the state. Any impact to
bring down the cost of workers' compensation will be considered,
and this is one approach to do so. As a former risk manager,
she can attest to the fact that the cost of rehabilitation is an
expensive part of most workers' compensation claims when it
involves pulling someone back from being on an opioid for a long
period time. She reported that it increases the cost of the
claim, which goes back into the workers' compensation rate and
is shared by all employers.
4:08:52 PM
REPRESENTATIVE JOSEPHSON related his understanding that there
would normally be some type of tracking by the prescriber. He
asked whether that information would be shared to ensure that a
drug contract was followed. He asked whether that information
would make its way back to the adjuster.
MS. WING-HEIER answered that the adjuster will have a record of
prescriptions being prescribed to the injured employee.
However, this bill would require the employees to touch base
with the physician every 30 days. In fact, it isn't meant to
try to take the painkiller or narcotic away, but just requires
patients to touch bases with their physicians to help prevent
overprescribing.
REPRESENTATIVE JOSEPHSON referred to Section 1 of the bill
related to testing. He asked whether there is some redundancy
if the prescriber already doing some testing. He recalled that
in his experience as an attorney, that evidence he saw during
trial and drug contracts. He asked whether an insurance
adjuster will know those facts.
MS. WING-HEIER answered that the adjuster will know the
prescriptions were issued, but she was unsure whether the
adjuster will know if any prescriptions were not being used and
of the patient might be stockpiling the medication.
4:10:59 PM
REPRESENTATIVE JOSEPHSON asked whether costs can be reported for
the 67 of 900 injured employees. He recalled that 20 percent of
the cost is for prescription drugs so he wondered how much money
is being spent.
MS. WING-HEIER said she has cumulative data for the state, but
not the State of Alaska data. She deferred to Mr. Jordan. She
did not have the itemized costs for the 67 injured state
workers.
4:12:17 PM
REPRESENTATIVE KITO offered that not all of the 67 total
scheduled drug use cases will have prescriptions for controlled
scheduled drugs over 90 days or that all of them will be
violation cases. Thus it seemed as though out of 67, a very
small number might be subject to this law. He asked whether she
had any idea of the number of cases this would affect.
MS. WING-HEIER answered that she does not have the specific
information related to the state's plan; however, she agreed not
every case would be for injured workers with prescriptions for
controlled substances for over 30 days. She was unsure of
whether the 67 of 900 were for prescriptions of over 90 days or
if that was the current total for the state's claim record. She
offered to provide some state statistical data for all
employers.
4:13:51 PM
REPRESENTATIVE KITO asked for further clarification on whether
this applies to all employers. He expressed an interest in
seeing the data for all employers.
MS. WING-HEIER offered to provide it.
4:14:31 PM
REPRESENTATIVE JOSEPHSON related his understanding that the
state does not write workers' compensation checks to insurers
since the state is self-insured.
MR. JORDAN agreed that is correct. In further response to
Representative Josephson, he clarified that the division does
not pay a premium and he was unsure of the source of the $1,400
premium since the state is self-insured.
CHAIR OLSON answered that the $1,400 refers to the monthly major
medical health insurance cost for state employees. This bill
would not affect those premiums since it isn't related to
workers' compensation.
4:15:25 PM
CHAIR OLSON opened public testimony on HB 32 and held public
testimony open.
[HB 32 was held over.]
HB 116-EXTEND ALCOHOLIC BEVERAGE CONTROL BOARD
4:16:37 PM
CHAIR OLSON announced that final order of business would be
HOUSE BILL NO. 116, "An Act extending the termination date of
the Alcoholic Beverage Control Board; and providing for an
effective date."
4:17:00 PM
LAURA STIDOLPH, Staff, Representative Kurt Olson, Alaska State
Legislature, on behalf of the House Labor & Commerce Standing
Committee, Representative Kurt Olson, Chair, presented HB 116.
This bill would extend the sunset date for the Alcoholic
Beverage Control (ABC Board) to June 30, 2018. Each year the
Division of Legislative Audit reviews state boards and
commissions to determine whether they should be reestablished
per AS 24.44. The Division of Legislative Audit reviewed the
activities of the Alcoholic Beverage Control Board ("ABC
Board"). The purpose of the legislative audit was to determine
whether there is a demonstrated public need for the ABC Board's
continued existence and whether it has been serving the public's
interest effectively.
MS. STIDOLPH reported that the board has resolved all issues
found in prior audits with two being resolved and one being
partially resolved. She directed attention to the five findings
and recommendations in the most recent audit. First, the
legislative auditors recommended including having the board's
director ensure that all board meetings are properly published
on the state's online public notice system. Second, the
legislative auditors recommended that the board should notify
local governing bodies of applications for new and transfer
licenses within 10 days of receipt. Third, the legislative
auditors recommended that the board should issue catering
permits in accordance with statutory requirements. Fourth, the
legislative auditors recommended that the board should issue
recreational site licenses in accordance with statutes; and
finally, the legislative auditors recommended that the board
should implement a process to monitor and track all complaints
to ensure they are resolved in a timely manner.
MS. STIDOLPH reported that the Division of Legislative Audit
recommended that the ABC Board be extended three years to June
30, 2018. The legislative auditors serve public's interest by
effectively licensing and regulating the manufacture, barter,
possession and sale of alcoholic beverages in Alaska. In
closing, she related the auditors found that the ABC Board
serves an important role in guarding the health and safety of
Alaskans by protecting the general public through the issuance,
renewal, revocation, and suspension of alcoholic beverage
licenses. The continuation of this board is very important, she
relayed.
4:19:54 PM
KRIS CURTIS, Legislative Auditor, Legislative Audit Division,
Legislative Agencies and Offices, reported that the division
conducted a sunset review of the ABC Board and concluded it was
serving the public interests; however, the division noted
several operational improvements were needed in the licensing
and general administration of the board. She said that the
board is set to sunset in June 2015 and the legislative audit
recommended a conditional five-year extension. At the time the
audit was completed in May 2014, the outcome of the marijuana
initiative was not yet known, so the audit suggested a three-
year extension, just in case the marijuana initiative passed,
since the initiative will significantly expand the board's
duties.
4:20:45 PM
MS. CURTIS referring to page 9 of the legislative audit,
reviewed the recommendations. She directed attention to
Recommendation 1, which recommended that the board's director
ensure that all board meetings are properly published on the
state's online public notice system. Three of the 25 meetings
held were not publically noticed, she said. Second, referring
to page 10 of the audit, she said that the division's auditors
recommended [Recommendation 2] that the board should notify any
local governing bodies of applications for new and transfer
licenses within 10 days of receipt as required by statutes. The
auditors found the board did not notify local governing bodies
within the required timeframe for two of the ten licenses
tested. She advised that these errors were caused by board
staff not adhering to their policies and procedures.
4:21:21 PM
MS. CURTIS directed attention to audit Recommendation 3, that
the board should issue catering permits in accordance with
statutory requirements. The auditors reviewed four licensees
who had received more than six consecutive catering permits. Of
those, three of the four were non-compliant, which each
represent a statutory violation since the permits were issued
with the intention of serving alcohol on a licensed premises
during the regular operation of the business rather than for a
short-term social gathering or similar event. The board issued
the permits to ensure that the businesses could continue to
operate.
4:21:56 PM
MS. CURTIS referred to page 11 to audit Recommendation 4, which
recommended that the board issue recreational site licenses in
accordance with statutory requirements. She reported that 15 of
32 recreational site licenses active during the audit period, or
40 percent of the businesses, did not meet the criteria for a
recreational site license. She explained that the ineligible
businesses included a sports center and pub, an exercise gym,
gift shop, bowling alleys, theatres, and pool halls. These
business types did not meet the definition of a recreational
site nor were the operations limited to a season. The issuance
of these licenses expanded the number of establishments licensed
to sell alcohol over the number allowed for in statute. She
stated that inquiries with board members revealed that improper
issuance of these recreational site licenses was caused by an
historic misunderstanding of what qualifies as a recreational
event.
4:22:55 PM
MS. CURTIS referred to page 12 to the final audit
recommendation, Recommendation 5, that the board implement a
process to monitor and track all complaints and to ensure that
they are resolved in a timely manner. Although the board had a
process in place3 to receive complaints, complaints were only
tracked if they resulted in an inspection or investigation. If
the complaint was deemed invalid, it was not documented;
furthermore, the basis for a decision not to investigate was not
documented or maintained. She stated that the board director
did not consider tracking all complaints as necessary since
there was not any statutory mandate to do so. She concluded
that the department and the board agreed with all of the audit
recommendations and submitted a corrective action plan.
4:23:35 PM
REPRESENTATIVE JOSEPHSON, in terms of the misunderstanding on
Recommendation 4, asked whether the board currently agrees on
the foregoing interpretation of the statute.
MS. CURTIS answered that the division believes so. The board
and department's response to the audit indicated that the board
had operated under guidance from the assistant attorney general,
but the board has since reconsidered its process, including
taking public testimony, and the board has gone back to a
stricter interpretation of statute.
4:24:34 PM
REPRESENTATIVE JOSEPHSON referred to a proposed rewrite of Title
[4] and to the stakeholders who are working on it. He asked
whether this should give the committee some pause and if it will
lead to a shorter extension given the ABC Board's shared staff
with the proposed marijuana board.
MS. CURTIS answered that the recommendation for extension took
into consideration the results of the audit, including the
findings and recommendations. When the sunset audit was
completed for the ABC Board, the division did not have any idea
if the marijuana initiative would pass. She acknowledged that
the proposed marijuana board envisioned sharing staff with the
ABC Board; however, she did not see a sunset provision for
proposed marijuana board. She suggested that if the two
separate boards plan on sharing staff, it is possible the
extension date could put the sunset dates of each board out of
synch with one another, which could result in inefficient use of
audit resources.
CHAIR OLSON commented that as the bill establishing a marijuana
board continues to move forward through the legislative process,
that he will work to ensure that it shares the same sunset date
as the ABC Board. He also noted that some of the Department of
Commerce, Community & Economic Development's occupational
licensing staff was often shared by boards.
MS. CURTIS agreed.
4:26:55 PM
REPRESENTATIVE HUGHES had questions on some of the proposed
changes to the Title 4 [alcoholic beverage] revisions. She
suggested that three years still works for a proposed sunset.
She asked whether Ms. Curtis had any comments.
MS. CURTIS answered that at the time the field work was done,
which was in late spring, the division was aware of the
stakeholders group, but could not predict any outcome at that
point.
4:27:34 PM
REPRESENTATIVE KITO referred to audit Recommendation 2, in which
two meetings did not have the appropriate notice. He asked
whether there is any cause for the state to find out if
decisions were made without adequate local involvement.
MS. CURTIS answered that the division did not find any
complaints made by the local governing body or any outcome
resulting from the lack of timely noticing.
4:28:36 PM
REPRESENTATIVE KITO related her understanding that the several
violations occurred with Recommendations 3 and 4. He asked
whether the violations were corrected and if the permits been
removed, where appropriate.
MS. CURTIS answered that the audit team does not know that;
however, it will be a good question for the department.
4:29:00 PM
CYNTHIA FRANKLIN, Executive Director, Alcoholic Beverage Control
Board ("ABC Board"), Department of Commerce, Community &
Economic Development (DCCED) introduced herself.
4:29:26 PM
REPRESENTATIVE KITO asked for further clarification on the
sunset audit Recommendations 3 and 4, and if the changes have
been implemented and improper permits have been withdrawn.
MS. FRANKLIN answered that with respect to Recommendation 3, the
catering permits were for individual events that had been held
prior to the audit, that catering events are held for specific
events, and represent short-term permission in which sellers
serve alcohol. She elaborated that what happened with the
catering permits predated her tenure with the board as of last
September. She related her understanding that there was a
practice during the liquor license transfers such that the new
licensees had the expectation of approval. During this
timeframe catering permits were issued that allowed the
establishment to continue to sell or serve alcohol. In
particular, this occurred with respect to stock transfers, in
which ownership of the organization changed but the day-to-day
operations were not changing. She said the agency was issuing
catering permit to allow for "non-interruption" of service in
the license; however, it was determined to violate the permit
statute. She reported that the practice had already been
discontinued by September 2014, and the ABC Board does have
safeguards in place to check all catering permits to ensure that
the activity is not happening. She said that involves some
coordination between the licensing and enforcement sections,
which was not previously occurring. She stated that this
practice has ceased.
4:31:43 PM
MS. FRANKLIN said it is a little more complicated in terms of
the recreational site licenses. She explained that liquor
licenses were issued to businesses that did not technically
qualify for recreational site licenses. For example, a
recreational site license was issued to the Alaska Club South
location. However, the facility is a gym that operates every
day and does not qualify for an event. Since they have a liquor
license, the ABC Board will not be able to review the license
until renewal. However, the board is very aware it overstepped
its bounds in issuing that and several other recreational site
licenses. She anticipated that the issue will be addressed when
these licenses come up for renewal.
4:32:46 PM
REPRESENTATIVE KITO asked whether provisions allow for
transition of facilities. He related his understanding that
gaps could exist when transferring ownership and there is a gap;
however, he asked whether another method for issuing
transitional licenses exists.
MS. FRANKLIN answered not really. She characterized this as
being "chicken and egg" problem in terms of stock transfers,
depending on the individual transfer. For example, in
Anchorage, a beverage license dispensary license was sold by the
Sourdough Mining Company to the Texas Roadhouse with the
intention that Sourdough Mining Company would come in and
acquire a restaurant eating place license that would allow it to
continue selling beer and wine with meals. However, this effort
requires engaging in careful planning, and had he applied ahead
of time, nothing would have prevented approval or a smooth
transition when he sold his beverage dispensary license. Due to
the way the business transition occurred, the beverage
dispensary license was sold, followed by an application being
submitted for a restaurant eating place license. It led to an
interruption in alcohol service at Sourdough Mining Company, she
said; however, if the person seeking transfers could have
planned better.
4:35:02 PM
MS. FRANKLIN stated that the ABC Board works to accommodate its
licensees. In this instance the statutes did not authorize the
board to issue catering permits to Sourdough Mining Company so
it could continue to serve alcohol to its customers while the
business obtained its other license. Although the board works
to assist its licensees, in some instances it is out of the
board's control if licensees wait too long to apply.
4:35:44 PM
REPRESENTATIVE KITO, referencing audit Recommendation 4,
expressed concern that some facilities may be operating
illegally if they received their permits in error. He expressed
further concern that some operators should have sought an
alcoholic beverage license, but now have recreational site
licenses, especially since these establishments may not have
been granted a license.
MS. FRANKLIN responded that she did not believe these facilities
are operating in violation of the law since the operators
legally obtained their licenses from the ABC Board. She agreed
with the audit finding that the definition of recreational site
license had been stretched beyond its original intent. However,
those decisions were apparently made upon advice of legal
counsel. She did not think anyone could argue that those
licensed establishments were operating in violation of the state
law, in particular, since they obtained their licenses lawfully
with local approval and other approval that must occur before
the licenses are issued. Further, after the licenses were
issued, the ABC Board received an opinion from the auditing
agency that the licenses "stretched the boundaries" of the
statutory definition of what would have been allowed, but she
did not believe that statement would invalidate the licenses.
4:37:52 PM
MS. FRANKLIN understood his concern and said the board will take
up those individually as they come up for renewal. In addition,
this agency also changed departments during the audit period and
the assistant attorney general changed, as well. Thus, the ABC
Board has a fresh outlook on this statute. She said she has
faith that the licenses in question will ultimately be strictly
reviewed during the renewal process, which occurs every other
year.
4:38:51 PM
REPRESENTATIVE COLVER directed attention to the fiscal note. He
said that the FY 16 budget is $3.35 million, with a fund source
of $1.575 million in general fund monies and approximately $1.8
million in program receipts. He said he was interested in the
program receipts from the industry and how much goes to the
general treasury. He acknowledged that a number of alcohol
taxes also generate revenue and he was also interested in the
tax collections.
MS. FRANKLIN answered that she doesn't have the tax receipts on
hand. She agreed that the receipts for fees for alcohol
licensing are reflected in the fiscal note, which includes money
for agency as expanded. In November, with passage of ballot
measure 2, the agency scope has expanded to include marijuana.
What is not reflected in the fiscal note would be the receipts
from the proposed licensees since the ABC Board is not sure how
many licenses will be issued or the amount of the potential
receipts. Thus more funds are reflected in the budget for the
first year of marijuana licensing, but it isn't possible to
project receipts until the licenses issued, which is a first
year problem for the agency.
4:41:48 PM
REPRESENTATIVE COLVER said he did not have access to last year's
information so he cannot compare the board's budget. He
surmised that the $1.575 million is being charged off to new
regulations. He asked whether Ms. Franklin could provide the
committee with how much of the funding is to regulate the new
industry and the agency budget.
MS. FRANKLIN answered that the ABC Board FY 15 budget was $1.75
million and the FY 16 budget for regulating the new substance
includes a large one-time appropriation for a database to
replace the current paper-based agency. Thus far she has
received a substantial number of questions and demand for data.
The fiscal note includes $500,000 for a database. She explained
that the budget doesn't double since it does not double the
agency, but proposes to add six employees through an FY 15
supplemental budget and FY 16 budget request. She stated that
the agency budget would expand from 10 to 16 statewide positions
to regulate the substances. She clarified that it appears to
mirror the budget since it has a one-time expense for the
database.
4:44:10 PM
REPRESENTATIVE COLVER referred to the fiscal note for FY 17-FY
19 seems to show the same increment, which doesn't reflect a
one-time database upgrade. He suggested that he may wish to
tweak the out years.
MS. FRANKLIN agreed.
4:44:44 PM
REPRESENTATIVE HUGHES referred to the proposed Title 4 revisions
and asked for further clarification on how the three-year
extensions might impact the ABC Board.
4:45:21 PM
MS. FRANKLIN offered her belief that the three-year extension is
a good plan. She explained that the Title 4 revisions will be
introduced by Senator Micciche [by the Senate Rules Committee].
She reported that the group has finished its work. In response
to earlier questions, she stated that no work went beyond the
auditor's findings regarding these specific issues, in
particular, the permit issues. She suggested that the board
needs to stick to the strict statutory interpretations. She
emphasized the stakeholders' intention that the board strictly
follow the statutes when issuing the two types of permits. She
stated that the revisions to Title 4 are very expensive but
since the two-board one agency set up is reflected in SB 60 [and
HB 123], she thought a three-year timeline will be appropriate.
4:47:00 PM
REPRESENTATIVE JOSEPHSON asked for further clarification on
whether the stakeholders group was a balanced membership and for
the groups that were represented.
MS. FRANKLIN answered that the Title 4 stakeholder group was
balanced with multiple representatives from public health
sector, including that many of the subcommittee chairs were from
the health sector. She reported that L. Diane Casto,
[Behavioral Health], Department of Health & Social Services
chaired the underage drinking subcommittee and Jess Jessee,
Executive Director, Alaska Mental Health Trust, chaired the
licensing subcommittee. Bob Klein, Chair, ABC Boar, and
[Aleesha Towns-Bain] of the Rasmuson Foundation served on the
steering committee. She said that the stakeholders consisted of
representatives from every sector of liquor industry, including
manufacturers, breweries, retail package stores, bar and
restaurant eating places. In addition, the group consisted of
numerous municipal members providing local government
representation. She stated that the group issued a report
["entitled Alaska Title 4 Review for the Alaska Alcoholic
Beverage Control Board dated November 2014]. She offered to
share the report with the committee, which also lists the [70]
participants, as well as a PowerPoint that shows the composition
of each subcommittee. She stated that the Title 4 group has
done substantial work since May 2012, noting that as some
members dropped off, others joined. She characterized the
entire process as being a fairly incredible process.
4:49:27 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on HB 116.
4:49:48 PM
REPRESENTATIVE JOSEPHSON remarked that it is evident that the
Alcoholic Beverage Control Board (ABC Board) will exist. He
said he has heard that Ms. Franklin is doing a great job. He
recommended the committee move the bill out of committee.
4:50:14 PM
REPRESENTATIVE HUGHES moved to report HB 116 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 116 was reported from the
House Labor and Commerce Standing Committee.
4:50:38 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:50 p.m.