04/13/2015 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| HB169 | |
| HB66 | |
| HB12 | |
| HB122 |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 12 | TELECONFERENCED | |
| *+ | HB 169 | TELECONFERENCED | |
| += | HB 66 | TELECONFERENCED | |
| *+ | HB 122 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 13, 2015
3:19 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Shelley Hughes, Vice Chair
Representative Jim Colver
Representative Gabrielle LeDoux
Representative Cathy Tilton
Representative Andy Josephson
Representative Sam Kito
MEMBERS ABSENT
Representative Mike Chenault (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 169
"An Act directing the Regulatory Commission of Alaska to provide
a report to the legislature relating to electrical transmission
in certain areas of the state; and providing for an effective
date."
- HEARD & HELD
HOUSE BILL NO. 66
"An Act relating to providing medical insurance coverage under
the Teachers' Retirement System of Alaska and the Public
Employees' Retirement System of Alaska; and providing for an
effective date."
- HEARD & HELD
HOUSE BILL NO. 12
"An Act relating to mortgage lending, mortgage loan originators,
depository institutions, nonprofit organizations, and nonprofit
organization employees; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 122
"An Act relating to the required reports, required fees, and
other aspects of for-profit corporations, cooperative
corporations, nonprofit corporations, corporations formed under
AS 10.40, limited liability companies, and limited liability
partnerships; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 169
SHORT TITLE: RCA: RAILBELT ELECTRIC UTILITY REPORT
SPONSOR(s): LABOR & COMMERCE
03/30/15 (H) READ THE FIRST TIME - REFERRALS
03/30/15 (H) L&C
04/13/15 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 66
SHORT TITLE: INS. FOR DEPENDENTS OF DECEASED TEACHERS
SPONSOR(s): MILLETT
01/21/15 (H) READ THE FIRST TIME - REFERRALS
01/21/15 (H) L&C, FIN
04/08/15 (H) L&C AT 3:15 PM BARNES 124
04/08/15 (H) Heard & Held
04/08/15 (H) MINUTE(L&C)
04/13/15 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 12
SHORT TITLE: MORTGAGE LENDING AND LOAN ORIGINATORS
SPONSOR(s): HUGHES
01/21/15 (H) PREFILE RELEASED 1/9/15
01/21/15 (H) READ THE FIRST TIME - REFERRALS
01/21/15 (H) L&C
04/13/15 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 122
SHORT TITLE: CORPORATION/LLC/PARTNERSHIP REPORTS
SPONSOR(s): COLVER
02/23/15 (H) READ THE FIRST TIME - REFERRALS
02/23/15 (H) L&C, JUD
04/03/15 (H) L&C AT 3:15 PM BARNES 124
04/03/15 (H) -- MEETING CANCELED --
04/13/15 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
KONRAD JACKSON, Staff
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: On behalf of the House Labor and Commerce
Standing Committee, Kurt Olson, Chair, testified and answered
questions on HB 169.
BRAD JANORSCHKE, General Manager
Homer Electric Association (HEA)
Homer, Alaska
POSITION STATEMENT: Testified during the discussion of HB 169.
T.W. PATCH, Commissioner, Chair
Regulatory Commission of Alaska
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 169.
CORY BORGESON, President & CEO
Golden Valley Electric Association (GVEA)
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 169.
GRACE ABBOTT, Staff
Representative Charisse Millett
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the prime sponsor,
Representative Millet, during the discussion of HB 66.
BRANDY JOHNSON
Wasilla, Alaska
POSITION STATEMENT: Testified in support of HB 66.
NIKKI TOLL
Wasilla, Alaska
POSITION STATEMENT: Testified in support of HB 66.
JAMES COCKRELL, Colonel; Director
Alaska State Troopers (AST)
Department of Public Safety (DPS)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 66.
ARRON DANIELSON, President
Public Safety Employees Association (PSEA)
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 66.
MOLLY BRINK
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 66.
REPRESENTATIVE SHELLEY HUGHES
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 12 as prime sponsor.
KIMBERLY SWIANTEK, Staff
Representative Shelley Hughes
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the sponsor on the
changes in the proposed committee substitute, Version H, of HB
12.
GINGER BLAISDELL, Staff
Representative Shelley Hughes
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the prime sponsor,
Representative Shelley Hughes, during the discussion of HB 12.
KRISTIE BABCOCK, Agent
State Farm Insurance
Kenai, Alaska
POSITION STATEMENT: Testified in support of HB 12.
ROGER BAINBRIDGE, Counsel
State Farm Bank
Bloomington, Illinois
POSITION STATEMENT: Testified during the discussion of HB 12.
JOHN CARMAN, President
Home State Mortgage
Chair; Legislative Affairs Committee
Alaska Mortgage Bankers Association
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 12.
MICHAEL MARTIN, Executive Vice President, General Counsel
Northrim Bank
Alaska Bankers Association (ABA)
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 12.
KEVIN ANSELM, Director
Division Banking and Securities
Department of Commerce, Community & Economic Development (DCCED)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 12
MIKE WILKINSON, Agency Field Leader
State Farm Insurance
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 12.
DAVID SCOTT, Staff
Representative Jim Colver
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the prime sponsor,
Representative Jim Colver, during the discussion of HB 122.
SARA CHAMBERS, Operations Manager
Division of Corporations, Business, and Professional Licensing
Department of Commerce, Community, & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Provided comments and responded to
questions on HB 122.
ACTION NARRATIVE
3:19:17 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:19 p.m. Representatives Kito,
Tilton, Colver, Josephson, LeDoux, Hughes and Olson were present
at the call to order.
HB 169-RCA: RAILBELT ELECTRIC UTILITY REPORT
3:19:45 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 169, "An Act directing the Regulatory Commission
of Alaska to provide a report to the legislature relating to
electrical transmission in certain areas of the state; and
providing for an effective date."
3:20:20 PM
KONRAD JACKSON, Staff, House Labor & Commerce, Representative
Kurt Olson, Chair, stated that HB 169 would direct the
Regulatory Commission of Alaska (RCA) to review and make
recommendations regarding a process whereby an Independent
Railbelt Transmission Operator would be created. The Railbelt
energy system consists of an interconnected electrical
transmission system in Southcentral Alaska which encompasses the
Bradley Lake hydroelectric plant on Kachemak Bay near Homer
north to Fairbanks. The interconnection of the communities by
these transmission lines helps keep a significant number of
people of Alaskans safe and secure. With long distances between
utility companies and their generation facilities, the
interconnected system is of great importance. The interconnect
system helps bring reliable electricity to a large percentage of
Alaskans should not to be taken lightly, he said.
MR. JACKSON said the transmission authority proposed to be
evaluated by the RCA would act as more of a "craigslist" type of
authority. Instead of mandating utilities pledge their assets
to one controlling entity, this concept would allow continued
local control of assets while at the same time maximizing the
value and reliability of the interconnected system. Using this
approach, excess power could be posted as available and be
purchased as needed by any utility. This would promote usage of
the most economical power along the interconnected system at all
times. Without local control of assets, some utilities stand to
be losers while others stand to gain from these losses.
Consumer pricing and reliability across the Railbelt is critical
for any transmission company to work in the long-term.
3:22:35 PM
MR. JACKSON said that willing participation and continued local
control of assets should also be considered critical as Alaska
continues to look towards an ISO [Independent System Operator]
concept along the Railbelt. Last year the RCA was tasked with
the job of reporting to the legislature whether creating an
independent system operator was the best option to provide for
effective and efficient electrical transmission. The RCA is
nearing completion on its work and the intent of HB 169 is not
to interrupt the foregoing work, but to allow the legislature to
consider any further direction to the RCA. He characterized HB
169 as a first step in that regard. In response to
Representative Kito, he stated that House Bill 340 was
considered by the legislature in 2014 and directed the RCA to
look at a similar concept with an independent system operator
(ISO) and report back to the legislature. This bill refers to a
slightly different ISO and the reporting date falls one year
later, he said.
3:25:00 PM
REPRESENTATIVE KITO, referring to the fiscal note, suggested
some cost should be associated with it, but the fiscal note was
identified as indeterminate through 2021. He questioned why the
report would still be ongoing in 2021 and also said he was a
little confused why the fiscal note was indeterminate. He
further asked for clarification on the source of funding for the
report.
MR. JACKSON offered his belief that last year House Bill 340 had
a fiscal note. He deferred to Mr. Patch, RCA to speak to the
fiscal note. He surmised that some of the funds might be
available for this report, but Mr. Patch could better answer
questions on the fiscal note.
3:26:25 PM
BRAD JANORSCHKE, General Manager, Homer Electric Association
(HEA), stated that the RCA has been directing a study which was
funded during the last legislative session to consider whether
creating an ISO or similar structure for the Railbelt
transmission system is the best option for effective and
efficient use of the transmission system. Although the RCA's
efforts were appreciated, he offered his belief that HB 169
would provide additional direction and clarity on the RCA's
analysis. This bill would direct the RCA to evaluate the
creation of an independent entity to manage the transmission
system and the entity, regulated by the RCA, and must meet
criteria the Homer Electric Association (HEA) has identified as
important. The entity would be required to attain a Certificate
of Public Convenience and Necessity from the RCA and operate
under a tariff. Secondly, participation in such an entity would
be voluntary, he said, which is a critical attribute for HEA.
While each utility's participation is important, each utility
should voluntarily enter into the arrangement since a voluntary
model encourages cooperation and reduces the magnitude of
winners and losers. He said he recently talked to Alaska
Municipal Light & Power's (AML&P) chair, Jim Trent, who couldn't
participate today since he was attending an RCA hearing.
However, Mr. Trent advised him that he also felt very strongly
that any entity created should be voluntary in order to better
allow for consensus on a common set of principles and standards
and to mitigate any losers in the process. Lastly, the entity
envisioned in HB 169 will allow for continued local control of
assets, while at the same time it will maximize the value and
reliability of an interconnected system, he said.
3:29:20 PM
MR. JANORSCHKE said that the entity envisioned in HB 169 will
manage and create a voluntary and transparent wholesale energy
market without adding significant administrative overhead, which
will be the most economical distribution of wholesale power on
the Railbelt. He said that HEA has worked with other utilities,
without a middle man, to ask for bids on short term spot market
energy needs, which has been fairly successful. The Railbelt
has been going through some increases and ratepayers and members
have had to shoulder most of those rising costs. Thus the HEA
has tried to mitigate circumstances that will add to the costs.
Last September, all the Railbelt utilities signed a [MOU]
Memorandum of Understanding adopting guiding principles of a
Railbelt "transco" [or transmission company]. This bill appears
to be entirely consistent with those principles, he said. The
entity envisioned by HB 169 would be transparent and
nondiscriminatory and adhere to established planning and
reliability standards. He stated that these standards and
protocols would be based on established objective transmission,
operating, maintenance, planning, and design principles to
promote safety, reliability, and economic efficiencies across
the Railbelt grid.
3:31:16 PM
T.W. PATCH, Commissioner, Chair, Regulatory Commission of Alaska
(RCA), Department of Commerce, Community & Economic Development
(DCCED), stated he is a commissioner and Chair of the Regulatory
Commission of Alaska.
3:31:58 PM
The committee took an at-ease from 3:31 p.m. to 3:34 p.m.
3:34:33 PM
MR. PATCH stated that the RCA recently got a new state phone
system. [Mr. Patch was unable to testify due to technical
difficulties with the audio.]
3:35:46 PM
The committee took an at-ease from 3:35 p.m. to 3:36 p.m. due to
technical difficulties.
3:36:54 PM
CORY BORGESON, President & CEO, Golden Valley Electric
Association (GVEA), stated that the GVEA has 34,000 members and
provides electric service as an electric cooperative owned by
its members in Interior Alaska. He spoke in support HB 169.
The GVEA has faith in the RCA, he said, noting that Mr. Patch
has done a phenomenal job. Most Railbelt utilities generally
support changes in how the Railbelt interties are operated. He
related his understanding that how the Railbelt dispatches its
energy needs to be reevaluated, which is exactly what HB 169 is
intended to do. As Mr. Janorschke mentioned, the composition of
the Railbelt utilities has changed in the past few years and
will continue to evolve as Matanuska Electric Association (MEA)
becomes a self-generating utility. He reported that the
Railbelt consists of five utilities that produce third
generation and there needs to be additional rules and
regulations as the Railbelt becomes "a bigger club."
Historically, three utilities primarily produced all of the
energy, but as the Railbelt has grown and matured some
additional rules, organizations, and structures will be
necessary. The Railbelt utilities have been discussing the need
for change over the past few years.
MR. BORGESON acknowledged that some information that has come to
the legislature has been from independent power producers, who
have had some issues with their ability to connect to the
intertie for their own projects. As utilities have become more
complex, they realize that an evolution is necessary in the
Railbelt. He stated that Golden Valley Electric Association
(GVEA) supports the study that is contemplated in HB 169. All
six utilities have signed the "guiding principles," which
indicates the cooperative spirit that has evolved in the
Railbelt towards this issue. The guiding principles have been
filed with the RCA so they are also available for committee
members to review. One concept in the bill is for a voluntary
organization. As Homer Electric Association stated, that aspect
is important to them. The GVEA believes that the markets will
prevail and as the new system is developed, the Railbelt will
have a better economic dispatch of energy that will save
Alaskans on electric costs. He appreciated this bill coming
into play. He anticipated that discussions will continue over
the summer.
3:41:01 PM
CHAIR OLSON hoped the committee could work on HB 169 over the
legislative interim.
3:42:33 PM
CHAIR OLSON left public testimony open.
[HB 169 was held over.]
The committee took an at-ease from 3:42 p.m. to 3:44 p.m.
HB 66-INS. FOR DEPENDENTS OF DECEASED TEACHERS
3:43:32 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 66, "An Act relating to providing medical
insurance coverage under the Teachers' Retirement System of
Alaska and the Public Employees' Retirement System of Alaska;
and providing for an effective date."
3:44:13 PM
GRACE ABBOTT, Staff, Representative Charisse Millett, Alaska
State Legislature, on behalf of the prime sponsor,
Representative Charisse Millett, said that this bill would
provide health care coverage for dependents and spouses of a
state employee who has died in the line of duty. The coverage
would be offered under PERS [Public Employees' Retirement
System] and TRS [Teachers' Retirement System], and would be
uniform to all public employees.
3:46:23 PM
BRANDY JOHNSON, spoke on behalf of herself, her three daughters,
and her late husband, Scott Johnson, as well as for the spouses
of current and prior Alaska State Troopers, in support of HB 66.
She said she had never lost anyone prior to her husband's death,
but when she lost her husband she lost her best friend and
father of their three children. Scott Johnson was an Alaska
State Trooper (AST) who was shot to death on May 1, 2014 in
Tanana by Nathaniel Kangas while in the line of duty, she
advised. Five years ago at his 18-year mark with PERS [Public
Employees' Retirement System], Scott traveled to Juneau as the
Northern Vice-President of the Public Safety Employees
Association (PSEA) to lobby for House Bill 242, which would have
provided Tier II benefits to Alaska State Troopers, including
full medical benefits at their 20-year mark. Unfortunately, the
bill failed to pass, which meant Scott needed to work an
additional seven years to obtain benefits. Since she and Scott
had three daughters, working the additional time was an
important consideration for them. At the time of his death,
Scott Johnson had worked 23 years with the state, two years shy
of qualifying for full medical benefits. When asked the AST if
she and her children had medical benefits, she was initially
told she was "set for life" by one lieutenant, but that was not
the case. She was later told that the health care benefits
would only be provided until the end of May 2014. Initially,
she was shocked, disappointed, and angry to learn of the limited
coverage. She had thought that the family's medical coverage
would be similar to their health care coverage prior to Scott's
murder. She stated that Scott always took his responsibilities
to protect Alaskans very seriously and she thought the state
would take care of his family after his death, and when it
didn't she felt like his last few years of his service was all
for nothing.
MS. JOHNSON said she later learned that Trooper Tage Toll's
wife, Nikki Toll, had exactly one day of health insurance for
herself and their three sons after her husband was killed in a
helicopter crash on March 30, 2013.
MS. JOHNSON said she found it frustrating that the person who
shot her husband to death and his father, who helped move her
husband's dead body, have medical coverage available to them at
no cost while they are incarcerated.
MS. JOHNSON asked for members' support for HB 66 since this bill
will help take care of families of peace officers killed in the
line of duty. Further, it allows families to grieve instead of
needing to address medical coverage.
3:49:55 PM
NIKKI TOLL, spoke in support of HB 66 on behalf of herself, her
three sons, her late husband, Tage Toll, and families of Alaska
State Troopers. She stated that her husband, Trooper Tage Toll,
was killed in the line of duty when the rescue helicopter
crashed in Talkeetna on March 30, 2013. She said that Trooper
Tage Toll is an Alaskan hero. As a family, she and Tage were
well aware of the dangers he faced when he was on duty.
However, she had faith and confidence in his abilities to handle
himself and using his training and skills acquired as a law
enforcement officer so nothing prepared her when he died. When
he was killed she lost her best friend, the father of their
three children, and the life she had with him for 19 years. At
the time of his death, Trooper Tage Toll had served as an AST
for 10 years. They chose Alaska as their home and she continues
to make her home in Alaska since this state is a wonderful
place. She said, "Tage served Alaska with loyalty, integrity,
courage, compassion, leadership, and accountability." When Tage
was killed, she had one day of insurance coverage before her
insurance expired at the end of the month. Tage's body had not
even been positively identified yet when her family was without
insurance. Four months later, after piles of paperwork and
corrections to an inaccurate death certificate, she was finally
able to obtain health insurance benefits through the state's
Division of Retirement and Benefits, by paying 100 percent of
the cost herself, she said.
3:51:42 PM
MS. TOLL said the burden of losing her husband was heavy enough
without the added stress. Her own health has suffered as the
result of that added stress, she said, yet, the man charged with
the murders of two Alaska State Troopers, Scott Johnson and Gabe
Rich, has cost-free medical coverage during his incarceration.
In contrast, she and Brandy Johnson, Scott's widow, have been
expected to carry the cost of their health and medical expenses
while working through the grief of rebuilding their lives.
Their husbands dedicated their lives to the pursuit of justice,
but the state's medical insurance policies are an injustice.
She said that HB 66 is part of the solution to correct this
injustice and this bill will remedy an oversight in Alaska's
acknowledgement and help to honor its heroes by providing health
insurance for families of those who have lost their lives in the
line of duty. She acknowledged the losses the Alaska State
Troopers have had with the deaths of Troopers Johnson, Rich, and
Toll and state pilot, Mel Nading. With budget cuts and
reductions of services, the men and women in the Alaska State
Trooper community need to have the encouragement and knowledge
that their families will be cared for if the worst happens to
them. She asked members to support HB 66.
3:53:44 PM
JAMES COCKRELL, Colonel; Director, Alaska State Troopers (AST),
Department of Public Safety (DPS), thanked members and the
sponsor. He spoke in support of HB 66, on behalf of the prior
administration, Governor Parnell, and current Governor Walker,
who gave him permission to speak out and support the bill as a
member of the Alaska State Troopers and as a state employee. He
relayed that he was in Fairbanks shortly after May 1, 2014,
Tanana incident.
COLONEL COCKRELL said that as a 25-year AST veteran, he always
believed that if he was killed in the line of duty that his
family would be cared for, in fact, troopers routinely discuss
these issues with their spouses. Many troopers, including him,
were surprised to learn that survivors of troopers killed in the
line of duty were not covered by health insurance. He said that
health care is an important benefit and many troopers are
following HB 66. He offered his belief that the state has an
obligation to take care of surviving family members, to pay for
premiums. Meanwhile, the department has continued to pay the
premiums for the four members' families until this bill passes.
In closing, he offered the department's full support for HB 66.
3:56:10 PM
ARRON DANIELSON, President, Public Safety Employees Association
(PSEA), spoke in support of HB 66. He said the PSEA has over
700 members and this bill is important to surviving families and
to all law enforcement families. He acknowledged that police
officers understand the risks they face; however, one thing that
most do not think about health benefits for their families if
they are killed in the line of duty. In fact, law enforcement
officers simply assume that the state, city, or organization
will take care of the surviving family members. Unfortunately,
the policy the state has had for many years does not do so and
this knowledge has shocked and disappointed members and their
families. They worry enough as it is about their spouses and
now they believe they will be "left out to dry" if the
unthinkable happens. He expressed gratitude for the past and
current administrations for helping families of tragic events.
These administrations have stepped up to do the right thing, he
said. He stated that the PSEA is fully in support of HB 66.
It's important to PSEA's current members and surviving members
that these changes occur and to improve the policy to help
ensure the wellbeing of surviving families. He urged members to
support HB 66.
3:59:02 PM
MOLLY BRINK stated she is the wife of a Juneau Police officer.
Although HB 66 was not exclusively for police officers since it
affects PERS and TRS employees, law enforcement would probably
be the biggest beneficiary, she said, which is the least we can
do as a society for those who put their lives on the lines for
the public every day. She stated that her husband has worked
for the state or city for 27 years. She said she hoped she
would ultimately be fine if something happened to him, in terms
of medical insurance; however law enforcement is a young
person's job, many officers have children, with some surviving
families having four or five children. These families will have
to try to get medical coverage or else hope the state will fund
it in the budget. She urged members to support HB 66.
4:00:52 PM
CHAIR OLSON held public testimony open on HB 66.
[HB 66 was held over.]
4:01:25 PM
The committee took an at-ease from 4:01 p.m. to 4:03 p.m.
HB 12-MORTGAGE LENDING AND LOAN ORIGINATORS
4:03:38 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 12, "An Act relating to mortgage lending,
mortgage loan originators, depository institutions, nonprofit
organizations, and nonprofit organization employees; and
providing for an effective date."
4:04:14 PM
REPRESENTATIVE TILTON moved to adopt the proposed committee
substitute (CS) for HB 12, Version H, labeled 29-LS0089\H,
Bannister, 4/10/15, as the working document.
There being no objection, Version H was before the committee.
4:04:34 PM
REPRESENTATIVE SHELLEY HUGHES, Alaska State Legislature offered
that HB 12 would protect the public, update the law, create more
level playing field, and simplify the process for mortgage loan
originators in Alaska. She referred to the flow chart in
members' packets created by the Division of Banking that may be
helpful in interpreting the current process as compared to the
process under HB 12. Under current statutes, a depository
institution or a bank and each of its licensed mortgage loan
originator (MLOs) employees are exempt from mortgage lender
brokers' licenses since regulation of banks fall under federal
regulations. However, if the licensed MLO does not work as a
direct employee and instead works as a contractor, that person
must not only have a license as MLO, but also obtain a license
as a mortgage lender broker. She characterized it as being a
double-layer licensing policy.
4:07:02 PM
REPRESENTATIVE HUGHES offered her belief that HB 12 would
eliminate an unnecessary layer of licensure. Instead of
requiring the contractor MLO [mortgage loan originator] to also
be licensed as a lender/broker and a mortgage loan originator,
the person will simply be licensed as an MLO. In addition, this
bill also would give the state supervisory and regulatory
authority over banks. For example, HB 12 would allow the state
to require banks to submit reports and audits. Currently, if
the bank was supervising contractor MLOs, the bank will be
solely under federal regulation, but under the bill, the bank
will need to register with the state. Essentially, this means
the contractor MLOs would no longer be supervising themselves -
since previously they were the MLO and the broker. Instead, the
bank will have responsibilities for some of the supervision.
These changes will allow the state to go to one point - the bank
- for information rather than to contact each of the independent
contractors throughout the state.
4:08:53 PM
REPRESENTATIVE HUGHES directed attention to the flowchart in
members' packets entitled, "Comparison between provisions of
Federal SAFE Act, the Alaska SAFE Act, and Proposed HB 12 which
she briefly reviewed.
4:10:21 PM
REPRESENTATIVE HUGHES said that HB 12 would exempt the Alaska
Housing Finance Corporation (AHFC) and any government agency
from the state Mortgage Lender Broker license requirements. The
governmental agencies would be responsible to ensure their MLOs
meet the standards with respect to the Federal SAFE Act.
4:11:04 PM
KIMBERLY SWIANTEK, Staff, Representative Shelley Hughes, on
behalf of the prime sponsor, Representative Shelly Hughes,
reviewed the proposed committee substitute (CS) for HB 12,
Version H. She said that Section 1 outlines the license
requirements for mortgage loan originators and would add
language that individuals can be licensed as mortgage loan
originators if they work under an exclusive contract for a
registered depository institution as stated on page 1, line 11
or are sponsored by a registered depository institution.
MS. SWIANTEK directed attention to page 2, line 5, Section 2,
which outlines the requirements for a registered depository
institution to be eligible to sponsor a mortgage loan originator
by adding a registered depository institution (RDI) throughout
this chapter creates same requirements for mortgage licensees or
brokers.
MS. SWIANTEK, referring to page 3, line 8, Section 3, stated
that this provision would exempt government agencies. In doing
so, the state would recognize them under the SAFE Act effective
August 30, 2011. She noted that this was limited to government
agencies. By exempting the bona fide nonprofit organizations,
the State of Alaska would be in compliance with the SAFE Act
effective 8-30-2011, she said.
4:13:45 PM
MS. SWIANTEK directed attention to page 3, Section 4-7, which
includes registered depository institutions (RDI) and the
bonding requirements, which are the same for mortgage licensees.
MS. SWIANTEK stated that Section 4, line 12, would require a
registered depository applicant to have a surety bond and
Section 5, [page 3], line 19, ensures that an RDI does not have
file more than one bond if they cover more than one location.
Instead of having 15 contractors applying for a bond, only one
will be filed, she said. Section 6, [page 3], line 23 required
the bond must last for three years Section 7 [page 3], line 27
gives the department the authority to determine if the bond is
unsatisfactory.
MS. SWIANTEK directed attention to Section 8, page 3, line 31
through page 4, line 13, which would amend the annual reporting
requirements by requiring registered depository institutions to
follow the same reporting requirements as a mortgage loan
originator licensee and be subject to the same penalties if the
report is not filed as required.
4:15:24 PM
MS. SWIANTEK stated that Section 9-13 on pages 4-5, includes
registered depository institutions in the existing requirements
for managing mortgage records. She briefly reviewed these,
noting Section 9 would apply to business transactions that occur
entirely or partially in the state. Section 10 would require
accounting records be kept in accordance with generally accepted
accounting principles. Section 11 would require the retention
of all records pertaining to the loan including electronic
correspondence be kept for three years. Section 12 would
require that the note and associated documents be kept for three
years.
MS. SWIANTEK directed attention to Section 13, page 5, line 11,
which would require a mortgage loan servicing agent who acts on
behalf of the licensee or an RDI maintain adequate records for
three years. She clarified that a mortgage loan servicing agent
could be an accountant, legal counsel, or a collection agent.
4:16:31 PM
MS. SWIANTEK directed attention to Section 14, page 5, line 29,
which would requires out-of-state records maintained by an RDI
be made available to the state.
MS. SWIANTEK referred to Section 15 on page 6, line 10, which
would grant the department investigation and examination
authority. Section 16 indicates that a "person" and "person
subject to this chapter" include a registered depository
institution, she said.
MS. SWIANTEK referred to Section 17, page 6, line 25, through
page 7, line 16 which would allow the department the
authorization to censure, suspend, or bar a licensee or
depository institution in the same manner as a mortgage
licensee.
4:17:27 PM
MS. SWIANTEK referred to Section 18, page 7, lines 18-24, which
would allow the department to hold administrative hearings and
issue disciplinary orders on RDIs.
MS. SWIANTEK referred to Section 19, page 7, lines 25-27, which
would add definition of a registered depository institution.
Finally, Sections 20-22 would allow the Department of Commerce,
Community & Economic Development (DCCED) the authority to adopt
regulations by January 1, 2016, which is the effective date of
the bill.
4:18:17 PM
GINGER BLAISDELL, Staff, Representative Shelley Hughes, Alaska
State Legislature, on behalf of the prime sponsor, introduced
herself. In response to a question, she agreed that in every
section in the statutes that pertains to mortgage was modified.
4:18:57 PM
REPRESENTATIVE COLVER asked whether the bill was responding to
mortgage fraud and national regulation.
MS. BLAISDELL answered that the 2008 was a nationwide mortgage
lending debacle, which was part of reason the SAFE Act was
updated and finalized in 2011. This bill was directed at
resolving business plans or models to level the playing field
between other mortgage lender brokers and mortgage loan
originators (MLOs).
4:20:00 PM
REPRESENTATIVE COLVER asked whether this bill was directed more
at non-traditional lenders, such as insurance companies.
MS. BLAISDELL answered that the "level playing field" was more
of an administrative leveler. People who are conducting the
same types of business will have the same type of licensure
requirement placed on them. She said that if this bill does not
pass, any banks in Alaska with independent contractors can still
conduct business and issue mortgages. This bill would make the
education and license requirements the same as others doing the
same kind of business.
4:21:12 PM
CHAIR OLSON opened public testimony on HB 12.
4:21:28 PM
KRISTIE BABCOCK, Agent, State Farm Insurance, spoke in support
of HB 12, stating she works as independent contractor for State
Farm Insurance in Kenai. She has been an agent and small
business owner in Kenai for the past 15 years and has eight
employees. She markets insurance and bank products exclusively
on behalf of State Farm Insurance and State Farm Bank, she said.
MS. BABCOCK stated that as an originator she handles the initial
application. Banks and their employees are exempt from state
licensing since they are federally regulated; however, since she
serves as an independent contractor, she must be licensed as a
mortgage loan originator and broker. The mortgage loan
originator (MLO) license requires rigorous state and federal
testing, background check, fingerprinting, continuing education,
and license renewal. In fact, she has undergone this process to
better serve her customers and provide more lending options for
Alaska homeowners, many of whom have been longstanding clients.
Although she does not contest the MLO licensing requirements nor
does this pertain to MLO licensing requirements, HB 12 will
address an additional license she currently must possess. Under
Alaska law an MLO must sponsored and supervised by a mortgage
broker and even though banks are exempt from having a mortgage
broker license, she must be licensed as mortgage broker, which
means that she must sponsor and supervise herself. This makes
no sense, she said, since she must supervise self, plus she does
not broker any loans. This requirement causes unnecessary
expense, was time consuming, she said, estimating that the extra
cost at $2,000 per year for the broker license. In addition, it
takes considerable time to file the required quarterly, annual
reporting, filing, as well as meeting other reporting
requirements.
MS. BABCOCK described the bill as a "win-win" solution since it
will remove unnecessary costs and burdens for MLOs without
reducing any protections associated with broker supervision.
She stated that HB 12 would allow the sponsoring bank, in her
case State Farm Bank, to step in and register with the state as
her supervisor, thereby assuming all the liabilities,
responsibilities, and oversight as if the bank was her broker.
She offered that this makes more sense since the bank serves as
the leader and her business is the originator. In fact, it
provides more oversight than if she supervised herself. She
reported that 26 other states have licensing requirements
similar to the provisions in HB 12. In closing, she emphasized
that this bill would not result in any less regulation for MLOs.
Although a similar bill was before the legislature in 2014, it
did not pass. She asked members to pass out HB 12 today.
4:26:39 PM
ROGER BAINBRIDGE, Counsel, State Farm Bank, said he represents
State Farm Bank as their in-house counsel. He offered his
belief that Ms. Babcock did a fantastic job of explaining the
issues. He offered that the Safe Act did not contemplate an
independent contractor working on behalf of an exempt depository
institution. He echoed that 26 other states have adopted
legislation or otherwise provided State Farm Bank the
opportunity to register an exempt company solely for the purpose
of sponsoring its MLO state licensed agents. He pointed out
that State Farm Bank was already regulated by the Office of the
Comptroller of the Currency and the Consumer Financial
Protection Bureau. He suggested that bringing in the Division
of Banking for loans originated by the MLO license agents gives
the sense of dual and layered supervision and examination that
these loans originated by MLO licensed agents will receive. He
asked members to support HB 12.
4:28:33 PM
CHAIR OLSON asked whether the 26 states previously mentioned had
adopted model legislation to address this issue.
MR. BAINBRIDGE answered no. He said that State Farm has been
working on these issues with other states and will continue to
do so with the remaining states on similar licensing issues.
4:28:58 PM
CHAIR OLSON asked whether the legislation that was passed in the
other 26 states was the same or if State Farm Bank has "tweaked"
the solution.
MR. BAINBRIDGE answered that the remedy has varied based on the
concerns of the banking department in individual states. Some
states wanted their statutes to be very specific to the
particular business model and other states preferred to address
the issue more broadly so that it doesn't limit the provisions
to one insurance company. He characterized the Alaska proposal
as one that takes a broad and less specific approach. He
suggested that the specific remedy really depends on what the
banking division or department will support. He said that State
Farm Bank has worked closely with the Alaska Division of Banking
for the past several years, noting that approximately 16-17
State Farm licensed agents work in Alaska and they have held
several examinations of those offices. He described his
relationship with the Division of Banking as being a good
working relationship, that the division understands the state's
business model, including how agents function, their limited
origination activities, and how that transfers to the bank and
its employees, who are federally registered to process and close
loans.
4:30:41 PM
JOHN CARMAN, President, Home State Mortgage, Chair; Legislative
Affairs Committee, Alaska Mortgage Bankers Association, stated
he has held many conversations with the sponsor and was grateful
for the communication. This bill was first introduced last year
and he indicated was not totally in favor of this bill nor was
he in agreement with the characterization thus far. He related
his understanding that other testifiers characterized the bill
as creating a level-playing field; however, he suggested the
bill as creating a "remodeled" playing field to accommodate the
State Farm Bank model. He said that the State Farm Bank has
"non-employees" that they are sponsoring. He agreed that when
First National Bank has an employee of the bank that separate
registration requirements do not apply, but the State Farm Bank
model uses independent contractors working primarily as
insurance agents who originate a loan. However, he offered his
belief that these independent contractors simply refer the loans
to State Farm Bank for origination. He acknowledged that under
this bank model the bank is very limited and only does
conventional loans with a fixed rate with some adjustable rate
mortgages and for example, they do not process all the other
loans, such as FHA [Federal Housing Administration], VA [US
Department of Veterans' Affairs, or [AHFC], Alaska Housing
Finance Corporation loans. He said it does concern him that him
if the agents don't do those loans or have them available that
they may not be giving their clients the best advice in every
situation.
4:33:15 PM
MR. CARMAN admitted that under the current model [State Farm
Bank] forms a brokerage and employ themselves as the only
employee of the brokerage. He said he has talked to Ms. Kevin
Anselm [Operations Manager, Division of Banking & Securities,
Department of Commerce, Community, and Economic Development],
who agreed that it would make the division's job to regulate
these companies easier by changing to this model; however, he
still has a hard time fully supporting the model. He guessed it
was an improvement over the existing situation.
4:33:59 PM
MICHAEL MARTIN, Executive Vice President, General Counsel,
Northrim Bank, stated he has an affiliation with the Alaska
Bankers Association. He noted that the Alaska Bankers
Association sent a letter dated April 10, 2015 in opposition to
HB 12. He has reviewed the recent version [Version H] of HB 12.
He very much appreciated the division's exhibits, which were
very helpful. He noticed the original version would eliminate
the proposed nonprofit entities from the licensing requirement
for mortgage loan originators. He said it was one of provisions
the Alaska Bankers Association opposed. He appreciated that the
language has been removed.
4:35:26 PM
MR. MARTIN directed attention to background materials [in
members' packets], which better illustrated the regulatory
environment if HB 12 were to pass. He admitted that he hasn't
fully digested the proposed committee substitute. The Alaska
Bankers Association will convene on Friday, he said, and will
review the bill. He expressed concern with the original version
was the exemption for nonprofits. In addition, the [ABA] was
concerned notion of level playing field was difficult to define.
He expressed concern that some of the MLOs would be unlicensed
and unregulated; however, these materials helped him to
understand. This has been characterized as making things
simpler, but there is nothing about this statute or the proposed
changes in HB 12 that he considered simple. In fact, it will
take some time to wade through all of it.
4:37:07 PM
KEVIN ANSELM, Director, Division Banking and Securities,
Department of Commerce, Community & Economic Development
(DCCED), in response to Chair Olson, answered that the
department was neutral on HB 12.
4:37:51 PM
REPRESENTATIVE HUGHES thanked for work she did to provide the
graphic. She directed attention to the fiscal note that
mentioned bona fide nonprofit provision which was removed in
Version H. She asked whether that was an oversight.
MS. ANSELM agreed that the original fiscal note was prepared in
January and the fiscal note has not been updated; however, the
division does not believe there will be any fiscal impact.
4:39:06 PM
MIKE WILKINSON, Agency Field Leader, State Farm Insurance,
thanked members for holding this hearing. He expressed support
for HB 12 since it allows shifting of responsibility and
oversight required of licensed mortgage brokers over its
independent contractor mortgage loan originators from
individuals agents to State Farm Bank. He offered his belief
that the public will be better served if State Farm Bank was
allowed to legally assume the assurances, oversight, and
reporting requirements for mortgage broker licensing.
4:40:48 PM
CHAIR OLSON, after first determining no one wished to testify,
closed public testimony on HB 12.
[HB 12 was held over.]
4:41:42 PM
The committee took an at-ease from 4:41 p.m. to 4:43 p.m.
HB 122-CORPORATION/LLC/PARTNERSHIP REPORTS
4:43:11 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 122, "An Act relating to the required reports,
required fees, and other aspects of for-profit corporations,
cooperative corporations, nonprofit corporations, corporations
formed under AS 10.40, limited liability companies, and limited
liability partnerships; and providing for an effective date."
4:43:48 PM
REPRESENTATIVE COLVER, speaking as prime sponsor of HB 122,
stated that this bill hopes to cut "red tape" by reducing cost
and time for businesses and the state by reducing the corporate
filing reports from two years to four years. Currently, if the
corporation does not renew its certificate of authority, it will
automatically lapse and dissolve. There would not be any fiscal
change except to change the regulations.
4:45:59 PM
DAVID SCOTT, Staff, Representative Jim Colver, on behalf of the
prime sponsor, Representative Jim Colver, stated that HB 122
would amend two chapters, AS 10, related to corporation and AS
32, the Uniform Partnership Act. He related that the intent of
the bill would be to change the reporting requirements from two
years to four years for cooperative corporations, nonprofit
corporations, religious corporations, LLCs and limited liability
partnerships, businesses and professional corporations. He
added that the changes are limited to the length of time for
reporting from a biennial report to a status report every four
years.
4:47:06 PM
MR. SCOTT briefly reviewed the bill. He stated that Sections 1-
18 relate to the Alaska Corporations Code, Sections 19-25 relate
to the Cooperative Corporations Act, Sections 26-36 relate to
the Alaska Nonprofit Corporations Act, Sections 37-38 relate to
religious corporations, Sections 39-45 relate to LLCs, Sections
46-49 relate to the Uniform Partnership Act, Section 50 provides
transition provisions, Section 51 relates to regulation
authority, and Sections 52-53 provide effective dates.
MR. SCOTT directed attention to Section 6, which would change
the reporting requirement from every two years to every four
years. Section 12 would change the amount the filing fee, which
has a net effect of not changing the overall fees.
4:48:20 PM
MR. SCOTT referred to Sections 18, 25, 36, and 49 provide
definitions and Section 50, provides the transition provisions
and conversion from a two-year reporting requirement to four
years.
4:48:40 PM
REPRESENTATIVE JOSEPHSON asked whether there was anything the
department might discern in a two year renewal cycle as opposed
to the four year window.
REPRESENTATIVE LEDOUX changed to status report since people may
not know what quatra-annual report.
MR. SCOTT answered that the bill drafter made the decision.
4:49:46 PM
REPRESENTATIVE HUGHES expressed concern about cost of $72,000
listed in the fiscal note for operating expenditures and a loss
of $3.1 million for fiscal year (FY) 16, and in FY 17 of 2,617.
She asked for further clarification on the fiscal note.
REPRESENTATIVE COLVER deferred to the department to respond.
4:51:13 PM
REPRESENTATIVE HUGHES asked for further clarification on the
cycle.
REPRESENTATIVE COLVER suggested that it would be more
appropriate for department to answer the mechanics.
4:52:33 PM
REPRESENTATIVE JOSEPHSON asked for the type of things the
department reviews when it inspects the biennial corporate
reports and what might go missing if the reports were not
reviewed every two years.
SARA CHAMBERS, Operations Manager, Division of Corporations,
Business, and Professional Licensing, Department of Commerce,
Community, & Economic Development (DCCED), answered the
department collects basic information. The division was most
interested in the officers of the corporation, and the
registered agent. She stated that the division becomes the
repository for this information and many entities and private
citizens who use the information.
4:53:34 PM
CHAIR OLSON asked whether any information might be time
sensitive and any impact of waiting four years for the data.
MS. CHAMBERS reported that if HB 122 were to pass, Alaska would
be the only state not collecting the information on an annual or
biennial basis. She acknowledged that the information on file
might be less accurate if it was only required to be reported
every four years. She said the department was neutral on the
bill.
REPRESENTATIVE LEDOUX asked how the mechanism would work under
the bill if the registered agent changed. She asked whether
anyone else shared the concern.
MS. CHAMBERS shared Representative LeDoux's concern.
4:55:35 PM
REPRESENTATIVE HUGHES asked whether any other states have
something similar.
MS. CHAMBERS answered the program coordinator showed other
states have an annual or biennial license renewal.
4:56:03 PM
REPRESENTATIVE COLVER asked whether any states do not require
reporting by corporations.
MS. CHAMBERS said she was not aware of any jurisdictions without
reporting requirements.
REPRESENTATIVE COLVER offered that he has done some research and
will distribute the results.
4:56:48 PM
REPRESENTATIVE COLVER asked for any consequences to corporations
for not filing the biennial registration form.
MS. CHAMBERS answered that the department sends out courtesy
notices to corporations if the department does not receive the
form timely and if the corporation fails to respond, the
corporation is involuntarily dissolved.
4:57:23 PM
REPRESENTATIVE COLVER expressed concern that the corporation
would be dissolved for failure to return the biennial form that
restates corporate officers and registered agents - which can be
changed at any time. He stated that corporations pay a $100
filing fee for their corporate license, but the entity still
needs a business license, and any professional licenses. He was
unsure if it was in the state's interest to dissolve
corporations, which supports his desire to extend corporate
licenses for four years.
4:58:15 PM
MS. CHAMBERS, in response to Representative Hughes, stated that
the division initiated the courtesy notice a few years ago and
found many corporations appreciated the reminder. The division
has seen the numbers of involuntary corporate dissolutions drop
dramatically. She said the division will continue to send
courtesy reminders. As a side benefit, any net effect; surplus
for corporate fining fees is deposited into the general fund,
which has been between $5 to 6 million. She stated that part of
$72,000 in the fiscal note was to cover informational courtesy
mailings. In further response to Representative Hughes, she
explained that the courtesy reminders were sent out prior to the
involuntary dissolution; however she hoped everyone would
remember to file their biennial reports.
5:00:23 PM
REPRESENTATIVE HUGHES asked how many corporations were
involuntarily dissolved last year.
MS. CHAMBERS said she was uncertain, but could compile that
information.
5:00:49 PM
REPRESENTATIVE HUGHES asked if corporations that are dissolved
re-form their corporation.
MS. CHAMBERS answered yes; but explained corporations dissolve
for a variety of reasons, and some corporations come back as a
different iteration. Others simply acknowledged that they had a
glitch and failed to renew. In further response to
Representative Hughes, she explained that the initially filing
costs about $200 and the biennial report cycle would follow.
5:02:05 PM
REPRESENTATIVE LEDOUX, with regard to registered agents,
referred to page 1, lines 12-14, indicates that the corporation
was dissolved if within 30 days it has failed to notify the
commissioner of any changes to the registered agent. Thus, that
would not really be a consideration with the four year cycle
versus the two year cycle.
MS. CHAMBERS answered that the division could involuntarily
dissolve a corporation if the division was aware of any changes
in registered agents.
5:03:01 PM
REPRESENTATIVE LEDOUX said the only information filed in the
biennial report was registered agent and the officers of the
corporation.
MS. CHAMBERS answered that some additional information is
collected, such as shares of corporate ownership.
5:03:41 PM
REPRESENTATIVE LEDOUX wondered if it makes sense to have no
filing required, unless the corporation changes its officers or
registered agents.
REPRESENTATIVE COLVER agreed with Representative LeDoux's
approach.
5:04:17 PM
CHAIR OLSON asked if the division could generate a list of other
jurisdictions in terms of annual and biennial corporate filings
to ensure Alaska treats corporations similarly.
5:04:53 PM
REPRESENTATIVE COLVER said the biennial report asks corporations
to list their corporate officers, the number of outstanding
shares and the shareholder interest of the corporate officers,
or in other words, the number of share issued, the number of
outstanding shares, and the number of shares held by corporate
officers.
REPRESENTATIVE COLVER offered his belief that involuntary
dissolution of a company because of failure to fill out this
short form seemed like a harsh penalty. He suggested one
alternative to changing the cycle was to offer forgiveness since
it is expensive to reinstate a corporation, which often requires
legal assistance.
5:06:02 PM
REPRESENTATIVE JOSEPHSON asked whether the impetus was the
frustration over the threat of dissolution.
REPRESENTATIVE COLVER answered that it was he has a bit of a
"Libertarian" streak in him. He wasn't certain that government
should tell its citizens to do something. He asked whether the
state could get by with different reporting period was one
question and achieve the same results. He suggested that
corporations may receive the card in the mail, but the
corporation must track when the biennial report is due.
5:08:01 PM
[HB 122 was held over.]
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:08 p.m.