Legislature(1997 - 1998)
05/09/1998 09:10 AM House RLS
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RULES STANDING COMMITTEE
May 9, 1998
9:10 a.m.
MEMBERS PRESENT
Representative Pete Kott, Chairman
Representative Gail Phillips
Representative Brian Porter
Representative William K.(Bill) Williams
Representative Kim Elton
Representative Irene Nicholia
MEMBERS ABSENT
Representative Al Vezey
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 259(TRA) am
"An Act relating to the membership of a metropolitan highway
planning organization."
- MOVED HCSCSSB 259(RLS) OUT OF COMMITTEE
HOUSE BILL NO. 490
"An Act relating to insurance premium taxes."
- MOVED CSHB 490(RLS) OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: SB 259
SHORT TITLE: METROPOLITAN PLANNING AUTHORITY
SPONSOR(S): TRANSPORTATION
Jrn-Date Jrn-Page Action
1/26/98 2300 (S) READ THE FIRST TIME - REFERRAL(S)
1/26/98 2300 (S) TRANSPORTATION
2/03/98 (S) TRA AT 1:30 PM BUTROVICH ROOM 205
2/03/98 (S) MINUTE(TRA)
2/12/98 (S) TRA AT 1:30 PM BUTROVICH ROOM 205
2/12/98 (S) MINUTE(TRA)
2/17/98 (S) TRA AT 1:30 PM BUTROVICH ROOM 205
2/17/98 (S) MINUTE(TRA)
2/20/98 2591 (S) TRA RPT CS 4DP 1NR NEW TITLE
2/20/98 2591 (S) DP: WARD, LINCOLN, HALFORD, GREEN
2/20/98 2591 (S) NR: WILKEN
2/20/98 2591 (S) ZERO FISCAL NOTE TO SB & CS (DOT)
2/23/98 (S) RLS AT 12:17 PM FAHRENKAMP RM 203
2/23/98 (S) MINUTE(RLS)
2/24/98 2630 (S) RULES TO CALENDAR 2/24/98
2/24/98 2632 (S) READ THE SECOND TIME
2/24/98 2632 (S) TRA CS ADOPTED UNAN CONSENT
2/24/98 2632 (S) AM NO 1 ADOPTED UNAN CONSENT
2/24/98 2632 (S) ADVANCED TO THIRD READING UNAN
CONSENT
2/24/98 2632 (S) READ THE THIRD TIME CSSB 259(TRA) AM
2/24/98 2633 (S) PASSED Y20 N-
2/24/98 2637 (S) TRANSMITTED TO (H)
2/25/98 2418 (H) READ THE FIRST TIME - REFERRAL(S)
2/25/98 2418 (H) TRANSPORTATION
3/11/98 (H) TRA AT 1:00 PM FAHRENKAMP RM 203
3/11/98 (H) MINUTE(TRA)
3/13/98 2618 (H) TRA RPT 3DP 3NR
3/13/98 2619 (H) DP: SANDERS, COWDERY, WILLIAMS;
3/13/98 2619 (H) NR: HUDSON, ELTON, MASEK
3/13/98 2619 (H) SENATE ZERO FISCAL NOTE (DOT) 2/20/98
4/07/98 (H) RLS AT 5:00 PM CAPITOL 124
4/07/98 (H) MINUTE(RLS)
5/09/98 (H) RLS AT 9:00 AM CAPITOL 124
BILL: HB 490
SHORT TITLE: INSURANCE PREMIUM TAX
SPONSOR(S): RULES BY REQUEST
Jrn-Date Jrn-Page Action
4/27/98 3279 (H) READ THE FIRST TIME - REFERRAL(S)
4/27/98 3279 (H) L&C, FINANCE
5/01/98 (H) L&C AT 3:15 PM CAPITOL 17
5/01/98 (H) MINUTE(L&C)
5/02/98 3466 (H) L&C RPT CS(L&C) NT 2DP 3NR
5/02/98 3466 (H) DP: RYAN, ROKEBERG; NR: COWDERY,
HUDSON
5/02/98 3466 (H) SANDERS
5/02/98 3466 (H) FISCAL NOTE (DCED)
5/05/98 (H) FIN AT 8:00 AM HOUSE FINANCE 519
5/06/98 3554 (H) FIN RPT CS(FIN) NT 4DP 4NR
5/06/98 3555 (H) DP: THERRIAULT, MULDER, MARTIN,
KOHRING;
5/06/98 3555 (H) NR: DAVIES, GRUSSENDORF, MOSES, KELLY
5/06/98 3555 (H) FISCAL NOTES (DCED)
5/06/98 3555 (H) REFERRED TO RULES
5/09/98 (H) RLS AT 9:00 AM CAPITOL 124
WITNESS REGISTER
SENATOR DAVE DONLEY
Alaska State Legislature
Capitol Building, Room 508
Juneau, Alaska 99801
Telephone: (907) 465-3892
POSITION STATEMENT: Sponsor of CSSB 259(TRA) am.
JAMES HORNADAY, Legislative Assistant
to Representative Pete Kott
Alaska State Legislature
Capitol Building, Room 204
Juneau, Alaska 99801
Telephone: (907) 465-6848
POSITION STATEMENT: Presented HB 490.
REPRESENTATIVE JOE RYAN
Alaska State Legislature
Capitol Building, Room 420
Juneau, Alaska 99801
Telephone: (907) 465-3875
POSITION STATEMENT: Explained HB 490.
JERRY REINWAND, Lobbyist
Blue Cross
2 Marine Way, Number 219
Juneau, Alaska 99801
Telephone: (907) 586-8966
POSITION STATEMENT: Testified on HB 490.
ACTION NARRATIVE
TAPE 98-11, SIDE A
Number 001
CHAIRMAN PETE KOTT called the House Rules Standing Committee
meeting to order at 9:10 a.m. Members present at the call to order
were Representatives Kott, Phillips, Porter, Williams and Elton.
Representative Nicholia arrived at 9:27 a.m.
CSSB 259(TRA) am - METROPOLITAN PLANNING AUTHORITY
Number 011
Chairman KOTT announced the first order of business would be CSSB
259(TRA) am, "An Act relating to the membership of a metropolitan
highway planning organization," sponsored by Senator Donley. He
noted the bill had been heard previously.
SENATOR DAVE DONLEY came before the committee. He said he has had
ongoing discussions with the Anchorage Assembly and mayor on this
issue. He said the bill addresses the restructuring of local
metropolitan planning organizations for transportation purposes.
The only one currently in Alaska is the Anchorage area. He said
the bill would specify that it applies only to communities over
200,000. For a long time, it would only apply to Anchorage. That
is consistent with some of the break points in the federal
Intermodal Surface Transportation Efficiency Act (ISTEA) as far as
planning certain levels of local municipal planning that needs to
go on. Senator Donley said, "One of the concerns that has been
raised -- and remember this was kind of a close question with the
assembly. There was a vote that was 7 to 4, and since that time I
think there has been even a closer meeting of the minds. Against
the earlier version was that it disrupted the balance of power
between the city and the state and made the state more powerful.
In an effort to alleviate that concern, we have a proposed CS
(committee substitute), I hope the committee will entertain, to
have three assembly people appointed by the assembly and three
people appointed by the mayor on AMATS (Anchorage Metropolitan Area
Transportation Study) - one from the Senate, one from the House,
one from the Governor. (Indisc.) even making the city even
stronger than it's been in the past, making it a 2 to 1 ratio
rather than the current 3 to 2 ratio of city control over the
planning process, which is one of the key points we heard in the
public testimony. They wanted to make sure it remained local
control. That's always been fine with the Anchorage Caucus. The
Anchorage Caucus is simply looking at a better way of coordinating
the AMATS process. And the example - what happened last week with
the capital budget is a good example of why that could really
payoff down here. When we were doing the capital budget in the
Senate, DOT (Department of Transportation), on behalf of AMATS,
submitted the AMATS projects. They didn't submit all the AMATS
projects. They failed to do that and when we, in the Senate, over
the weekend, were trying to inquire about why projects were
missing, nobody could answer our questions. And since nobody in
the Senate or the House had any say or any involvement in the
actual development process or how they voted, why they chose what
projects they did, we didn't know what had happened and why DOT
didn't submit certain projects. And we took about two or three
days to get any kind of answers and it turned out that it was a
faxing glitch. DOT failed to fax the complete list. So it was
quite a scramble to try to restore the $3 million project, that had
been left out, into the budget and it wasn't easy. There was a lot
of work for me that night trying to explain that to the people on
the Finance Committee - how to restore a $3 million project that
had magically disappeared during the fax transmission. But it
really pointed out to me the difficulty in not having anybody
(indisc.) involved in the actual budget process have any knowledge
of how the projects were chosen and what priority they were given
and why. And it's never been the intent of the Anchorage Caucus to
dominate this process in any way, or have the state dominate the
process. We just wanted to have a level of expertise to be able to
facilitate our constitutional function within that process, which
is to develop the state budget and have a level of knowledge on why
things are there and how they got there and what is, in fact,
actually there -- because you might remember the AMATS was
seriously delayed this year - much more than usual for I don't know
why. But we didn't get the rewrites until about a week ago or ten
days ago, which made our job really a scramble here. So
additionally, I would think that, you know, it would be good to
bump up that process to where (indisc.) be done. It was usually
done by January of the year, it was usually completed."
Representative Donley urged the committee to pass the proposed CS
that says 3 and 3.
Number 115
CHAIRMAN KOTT explained there is a draft CS, Version X, dated
5/6/98.
REPRESENTATIVE GAIL PHILLIPS moved to adopt the draft CS, Version
X. There being no objection, Version X was before the committee.
REPRESENTATIVE BRIAN PORTER made a motion to move HCSCSSB 259(RLS)
out of committee. There being no objection, HCSCSSB 259(RLS) moved
out of the House Rules Standing Committee.
HB 490 - INSURANCE PREMIUM TAX
Number 122
CHAIRMAN KOTT announced the next order of business would be CSHB
490(FIN), "An Act relating to insurance premium taxes and to
insurance taxes, licenses, or fees imposed by another state or
country; and providing for an effective date," sponsored by the
House Rules Committee.
Number 127
JAMES HORNADAY, Legislative Assistant to Representative Pete Kott,
Alaska State Legislature, came before the committee. He read the
following statement into the record:
"In general, HB 490 repeals the retaliatory tax paid on health
insurance by the state, a municipality, city or borough,
school district, REAA or University of Alaska or community
college. It does this by amending an existing statute [AS
21.09.270]. The fiscal impact of this provision is about
$200,000 loss in tax revenue. There is a fiscal note from
Representative Ryan's office and there is also a new fiscal
note from the Division of Insurance that indicates that is a
$270,000 figure. Mr. Reinwand, I think, may want to address
that. The purpose of the retaliatory tax is to not [un]fairly
advantage an Alaska domiciled health insurance company. There
are no Alaska domiciled health insurers at present. It is my
understanding that this statute has been on the books for 30
years and there are still no domiciled health insurers. As a
result of legislation passed in the state of Washington, the
taxes imposed on Blue Cross were increased 2 percent in the
state of Alaska and the consumers have been notified that the
increase will be passed on to them. Blue Cross is placed at
a competitive disadvantage as it is the only insurer subject
to the increase. HB 490 provides an even playing field for
companies writing health insurance in the state of Alaska.
"HB 490 also should encourage large private placement
insurance policies exceeding $1 million in annual premiums in
conjunction with the prior passage of the Alaska Trust Act."
MR. HORNADAY deferred any questions to Representative Ryan and Mr.
Reinwand for further explanations.
Number 167
REPRESENTATIVE JOE RYAN came before the committee. He explained
that in consultation with Marianne Burke, Director, Division of
Insurance, Department of Commerce and Economic Development, she
told him that there weren't any policies written in the state of
Alaska with a yearly premium of $100,000 or more. Representative
Ryan said these are high-end policies and he figures that there
between 11,000 and 12,000 a year that are written. He explained
that there is a person in Los Angeles who has a insurance policy
with a premium of $200 million a year and is waiting for
legislation like this to be passed so they can buy it in Alaska
rather than an offshore jurisdiction. Almost all this business
goes outside because offshore jurisdictions don't have a premium
tax. He stated we are trying to get some of that market by
reducing the premium on the high-end policies to 1/10 of 1 percent.
It would make Alaska competitive with the offshore jurisdiction.
Representative Ryan explained that there are a number of people who
would like to come to Alaska to do business because we're under the
American Banking System and the American government protection
rather than the Virgin Islands or the Caymans or some place like
that. Ms. Burke has indicated it is a good idea and she is going
to go to New York in July to meet with the chief executive officer
(CEO) of New York Life. They are talking about establishing a
wholly owned Alaska subsidiary to deal with the high-end market of
the Pacific Rim in conjunction with the Alaska Trust Act. By
passing the legislation, it is another way of bringing more money
to Alaska that we are currently not receiving.
Number 203
JERRY REINWAND, Lobbyist, Blue Cross, came before the committee.
He explained that Section 3 of the Rules Committee substitute deals
with the retaliation tax. He explained that essentially, insurance
companies pay premium taxes to the state. The public policy
question that the CS and the original version of the bill raises
is, "Should the state collect taxes in any form, insurance policies
written in the private sector, to public entities - municipalities,
school districts and the University of Alaska?" Mr. Reinwand
informed the committee members that issue is further compounded by
a tax law, which is really astounding in many respects, a
retaliation tax. He pointed out that nobody really paid much
attention to this law until the state of Washington passed a major
health insurance overhaul plan in 1994. He said, "Basically, the
idea of a retaliation tax is to not give any insurance company --
or to protect any Alaska-based insurance company against an
insurance company that's based in another state, but is selling
insurance in your state, through tax policy, not to give the
outside company an advantage over and Alaska domiciled company."
He explained that the net effect of what the state of Washington
did in 1994, was to trigger a 2 percent increase all premiums
written by Blue Cross. He said that Blue Cross has been in
discussions with the Division of Insurance for quite awhile over
this issue, particularly over public entities. Blue Cross writes
insurance in the private market and insures over 90,000 Alaskans.
Mr. Reinwand noted some are federal employees, some who work for
school districts, municipalities and the University of Alaska.
After lengthy discussions with the Division of Insurance and after
reviewing the law, people have come to the conclusion that the
retaliation tax needs to be looked at. He said the question is,
"Does the state want to impose at least a retaliation tax
equivalent to a 2 percent tax on all premiums we write for
municipalities, school districts, etc.?" Mr. Reinwand asked, "Do
you want to impose a 2 percent retaliation tax that was basically
triggered by the state of Washington on Alaskan people who buy
health insurance from us?" He said Blue Cross is the only company
affected by this because most of the companies are domiciled in
Delaware or Connecticut or some other place that has a favorable
tax plan. He informed the committee members that Blue Cross' plans
are scattered all across the nation and are domiciled in one place.
MR. REINWAND said the legislation proposes to, in a limited way,
say the state of Alaska will not impose a retaliation tax on
insurance that Blue Cross sells to the state if that were ever
happen. Mr. Reinwand said that you could argue that's a tax that
never should have been collected in the first place, but Blue Cross
has been paying it. They have basically been eating the tax for
the last three years. People have been informed that it will be
passed along to them next year.
Number 266
MR. REINWAND referred to the fiscal note from the Division of
Insurance for $270,000 and said about $40,000 is for the Public
Safety employees' trust. He said, "That would not be exempted from
this amendment. So really, at least in our math, the fiscal note
is $230,000." He indicated it is confusing and the issue is a very
difficult issue to deal with. They hope that next year the
legislature will look at the entire question to give guidelines
about premiums paid by public entities to private insurers being
taxed. The next effect is that Blue Cross doesn't believe they
should be.
MR. REINWAND pointed out that the House Finance Committee voted to
entirely repeal the retaliatory tax. He said, "This takes it back.
We would pay the retaliation tax on premiums we write on the
private side, but we would not pay the retaliation tax on premiums
paid by public organizations. So it's a very complicated difficult
issue to understand."
Number 292
REPRESENTATIVE PORTER asked if all insurance companies would be
treated the same.
MR. REINWAND responded in the affirmative.
REPRESENTATIVE PORTER asked if there are any insurance companies
domiciled in the state.
MR. REINWAND responded in the negative.
REPRESENTATIVE PORTER said, "If we got one, we wouldn't have a
retaliatory tax on the books that would, in some way, assist it?"
MR. REINWAND said, "You would under this provision. The
retaliation tax would still exist for insurance written on the
private side, not on the public side. And in that sense, everybody
would be treated equally. I think there is a legitimate public
policy reason. There was a big discussion in House Finance about
this circular loop that the state appropriates money to school
districts, municipalities and so on and so forth, and then you turn
around and tax it and bring at least part of it back. And that's
what lead people -- frankly, we didn't remember asking for a total
repeal. But after the House Finance committee kicked it around,
they decided this law doesn't make any sense." He indicated Ms.
Burke was not optimistic there would ever be a health insurance
company domiciled in the state of Alaska. Mr. Reinwand said he
doesn't know whether that will happen or not. If and when that
happens, the legislature could always revisit the issue. He said
he believes that is why the House Finance Committee voted for a
total repeal. The current version would limit the repeal to just
public entities.
Number 316
REPRESENTATIVE PORTER stated, "I didn't quite track how Blue Cross
got affected by Washington's...."
MR. REINWAND indicated Blue Cross is the only insurance company in
the state of Alaska that is "domiciled." He said the official
residence is Seattle. He noted they are also selling insurance in
the state of Alaska. When the state of Washington increased, to
cover the cost of its major overhaul of the health care plan, they
increased premium taxes 2 percent. Mr. Reinwand said, "Because of
our retaliation tax that's on the book, when they did that, we are
2 percent hit up here. I mean automatically, the taxes were raised
2 percent. You need a road map to even understand this law, but if
you read this law, basically the legislature has surrendered its
taxing power to another jurisdiction. I mean the retaliation tax
is not that unusual, but it's a very weird way to do business."
Number 333
REPRESENTATIVE PHILLIPS said she thinks it would be better to
repeal it for everybody. She said she doesn't know what the
justification is for reestablishing part of the retaliation.
MR. REINWAND stated that some people felt it would jump the fiscal
note to about $700,000. He said, "It's such a difficult issue to
explain. At least on the public side, (indisc.) make some sense to
say let's at least start and look at it here."
REPRESENTATIVE PORTER said, "We're paying it, in other words, on
the public side.
MR. REINWAND responded in the affirmative.
Number 348
REPRESENTATIVE KIM ELTON said without the bill, Blue Cross will
pass the costs on to the public entities. He said, "So
essentially, what is going to happen is we're going to be -- if we
don't pass this, the fiscal note here says $270,000, but if it's
$230,000 or $200,000 or whatever it is, you'll be passing that cost
back to these public entities."
MR. REINWAND responded in the affirmative. He said, "For almost
three years, the Blue Cross has 'eaten it.' In the case of
Anchorage, which is the largest school district we insure, it's a
sizable chunk of money. It was about $800,000 or $900,000. In
addition, Blue Cross gets hit with an assessment on the high risk
pool. Nobody knows about that, that's a tax (indisc.) $500,000 or
$600,000. So you start putting all these things together, it gets
to be a real problem, at least this piece of it, we think, from a
public policy point of view."
Number 368
CHAIRMAN KOTT referred to information the committee has and said
there are several rural districts that will benefit from this.
Number 375
REPRESENTATIVE PHILLIPS moved to adopt Version K. There being no
objection CSHB 490(RLS) was before the committee.
Number 378
REPRESENTATIVE BILL WILLIAMS made a motion to move CSHB 490(RLS)
out of committee with individual recommendations and with the
attached fiscal note. There being no objection CSHB 490(RLS) moved
out of the House Rules Standing Committee.
ADJOURNMENT
Number 380
CHAIRMAN KOTT adjourned the House Rules Standing Committee meeting
at 9:30 a.m.
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