Legislature(1995 - 1996)
02/08/1996 08:00 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE February 8, 1996 8:00 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative Scott Ogan, Vice Chair Representative Joe Green Representative Ivan Ivan Representative Brian Porter Representative Caren Robinson Representative Ed Willis MEMBERS ABSENT All members present. COMMITTEE CALENDAR * HOUSE BILL NO. 433 "An Act relating to an exemption to the unauthorized publication or use of communications and the prohibition against eavesdropping for certain law enforcement activities." - PASSED OUT OF COMMITTEE * HOUSE BILL NO. 22 "An Act relating to long-term plans of certain state agencies and recommendations regarding elimination of duplication in state agency functions." - PASSED OUT OF COMMITTEE * HOUSE BILL NO. 457 "An Act relating to the unlicensed practice of certain occupations for which licenses are required." - HEARD AND HELD * HOUSE BILL NO. 361 "An Act relating to municipal capital project matching grants for a municipality organized under federal law as an Indian reserve; and providing for an effective date." - PASSED OUT OF COMMITTEE * HOUSE BILL NO. 449 "An Act relating to the taxation of income." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 433 SHORT TITLE: POLICE CAN INTERCEPT SOME COMMUNICATIONS SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 01/19/96 2485 (H) READ THE FIRST TIME - REFERRAL(S) 01/19/96 2485 (H) STATE AFFAIRS, JUDICIARY, FINANCE 01/19/96 2485 (H) 3 ZERO FISCAL NOTES (2-ADM, DCED) 01/19/96 2485 (H) 3 ZERO FISCAL NOTES (CORR, LAW, DPS) 01/19/96 2485 (H) GOVERNOR'S TRANSMITTAL LETTER 02/06/96 (H) STA AT 08:00 AM CAPITOL 102 02/06/96 (H) MINUTE(STA) 02/08/96 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 22 SHORT TITLE: STATE LONG-TERM PLANNING SPONSOR(S): REPRESENTATIVE(S) PARNELL, Hanley, Therriault, Green, Bunde, Navarre, Toohey, B.Davis, Porter JRN-DATE JRN-PG ACTION 01/06/95 26 (H) PREFILE RELEASED 01/16/95 26 (H) READ THE FIRST TIME - REFERRAL(S) 01/16/95 26 (H) STATE AFFAIRS, FINANCE 02/08/96 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 457 SHORT TITLE: FINES: UNLICENSED PRACTICE OF OCCUPATION SPONSOR(S): REPRESENTATIVE(S) JAMES JRN-DATE JRN-PG ACTION 01/30/96 2569 (H) READ THE FIRST TIME - REFERRAL(S) 01/30/96 2570 (H) STATE AFFAIRS, JUDICIARY 02/06/96 (H) STA AT 08:00 AM CAPITOL 102 02/06/96 (H) MINUTE(STA) 02/08/96 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 457 SHORT TITLE: FINES: UNLICENSED PRACTICE OF OCCUPATION SPONSOR(S): REPRESENTATIVE(S) JAMES JRN-DATE JRN-PG ACTION 01/30/96 2569 (H) READ THE FIRST TIME - REFERRAL(S) 01/30/96 2570 (H) STATE AFFAIRS, JUDICIARY 02/06/96 (H) STA AT 08:00 AM CAPITOL 102 02/06/96 (H) MINUTE(STA) 02/08/96 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 361 SHORT TITLE: CAP PROJ MATCHING GRANT FOR INDIAN RESERV SPONSOR(S): REPRESENTATIVE(S) MACKIE JRN-DATE JRN-PG ACTION 12/29/95 2360 (H) PREFILE RELEASED 01/08/96 2360 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2360 (H) CRA, STATE AFFAIRS, FINANCE 01/18/96 (H) CRA AT 01:00 PM CAPITOL 124 01/18/96 (H) MINUTE(CRA) 01/19/96 2482 (H) CRA RPT 6DP 1NR 01/19/96 2482 (H) DP: MACKIE, ELTON, AUSTERMAN, KOTT 01/19/96 2482 (H) DP: NICHOLIA, IVAN 01/19/96 2482 (H) NR: VEZEY 01/19/96 2482 (H) 2 ZERO FNS (ADM, DCRA) 01/19/96 2482 (H) REFERRED TO STATE AFFAIRS 02/08/96 (H) STA AT 08:00 AM CAPITOL 102 BILL: HB 449 SHORT TITLE: INCOME TAX ON INDIVIDUALS & FIDUCIARIES SPONSOR(S): REPRESENTATIVE(S) MOSES, Finkelstein, Brown JRN-DATE JRN-PG ACTION 01/24/96 2524 (H) READ THE FIRST TIME - REFERRAL(S) 01/24/96 2524 (H) STATE AFFAIRS, LABOR & COMMERCE, FINANCE 01/31/96 2587 (H) COSPONSOR(S): BROWN 02/08/96 (H) STA AT 08:00 AM CAPITOL 102 WITNESS REGISTER DENNIS CASANOVAS, Lieutenant Criminal Investigations Unit Division of Alaska State Troopers Department of Public Safety 5700 East Tudor Road Anchorage, Alaska 99507-1225 Telephone: (907) 269-5757 POSITION STATEMENT: Provided testimony in support of HB 433. ANNE CARPENETI, Assistant Attorney General Central Office Criminal Division Department of Law P.O. Box 110300 Juneau, Alaska 99811-0300 Telephone: (907) 465-3428 POSITION STATEMENT: Provided testimony on HB 433. REPRESENTATIVE SEAN PARNELL Alaska State Legislature State Capitol, Room 515 Juneau, Alaska 99801-1182 Telephone: (907) 465-2995 POSITION STATEMENT: Sponsor of HB 22. WALT WILCOX, Committee Aide House State Affairs Committee State Capitol, Room 102 Juneau, Alaska 99801-1182 Telephone: (907) 465-3743 POSITION STATEMENT: Provided sponsor statement for HB 457. CATHERINE REARDON, Director Central Office Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110506 Juneau, Alaska 99811-0806 Telephone: (907) 465-2534 POSITION STATEMENT: Provided testimony in support of HB 457. MARK JOHNSON, President Center for Employment Education 1049 E. Whitney Road Anchorage, Alaska 99501 Telephone: (907) 279-8451 POSITION STATEMENT: Provided testimony in support of HB 457. RANDY WELKER, Legislative Auditor Legislative Audit Division Legislative Agencies and Offices P.O. Box 113300 Juneau, Alaska 99811-3300 Telephone: (907) 465-3830 POSITION STATEMENT: Provided testimony on HB 457. REPRESENTATIVE JERRY MACKIE Alaska State Legislature State Capitol, Room 404 Juneau, Alaska 99801-1182 Telephone: (907) 465-4925 POSITION STATEMENT: Sponsor of HB 361. REPRESENTATIVE CARL MOSES Alaska State Legislature State Capitol, Room 204 Juneau, Alaska 99801-1182 Telephone: (907) 465-4451 POSITION STATEMENT: Sponsor of HB 449. ACTION NARRATIVE TAPE 96-10, SIDE A Number 0000 The House State Affairs Committee was called to order by Chair Jeannette James at 8:00 a.m. Members present at the call to order were Representatives James, Ogan, Ivan and Willis. Members absent were Representatives Green, Porter and Robinson. HB 433 - POLICE CAN INTERCEPT SOME COMMUNICATIONS The first order of business to come before the House State Affairs Committee was HB 433. CHAIR JAMES called on the first witness via teleconference in Fairbanks, Dennis Casanovas, Department of Public Safety. Number 0222 DENNIS CASANOVAS, Lieutenant, Criminal Investigations Unit, Central Office, Division of Alaska State Troopers, Department of Public Safety, said the department supported HB 433 and the exemptions as amended to AS 42.20.320. He said it would grant law enforcement officers additional resources to deal with crisis situations, such as barricaded suspects, and hostages. He stated, currently, law enforcement officers responded to crisis situations without a clear understanding of the number of participants, the identity of the perpetrators, the types of weapons, and the number of hostages. These situations, he asserted, required rapidly changing circumstances and law enforcement negotiators relied heavily on what information was learned from witnesses and suspects. Therefore, HB 433 would allow law enforcement officers the ability to intercept communications between a hostage and a suspect. He also asserted communications would allow law enforcement officers to know in advance if a suspect planned to increase an act of violence, for example. The communication would also help identify whether the negotiator was effective in his or her efforts and change tactics accordingly to resolve situations more safely and without further injury to the suspect, hostage, and general public and law enforcement officers. He cited the Alaska State Troopers responded to approximately four incidents per year when a suspect refused to exit or surrendered creating a threatening situation. In conclusion, he stated, HB 433 would give Alaska law enforcement officers the equipment to resolve crisis situation in a more efficient and safe manner. Number 0366 CHAIR JEANNETTE JAMES thanked Mr. Casanovas for his testimony and asked if the committee members had any questions. Number 0375 REPRESENTATIVE ED WILLIS asked how many other states used this method. Number 0395 MR. CASANOVAS responded he did not know. Number 0415 CHAIR JAMES said she discussed HB 433 with the Department of Public Safety, and was convinced this was a tool they needed in hostage situations. She also discussed it with Representative Brian Porter, Chair, House Judiciary Committee, who said he was very interested in this bill. She asserted she wanted to move HB 433 to the next committee of referral - the Judiciary Committee - to review the legalities involved, and called for a motion. Number 0457 REPRESENTATIVE JOE GREEN moved that HB 433 move from the committee. CHAIR JAMES replied the bill had been moved with individual recommendations and a zero fiscal note. Number 0471 REPRESENTATIVE SCOTT OGAN commented this bill was moving fast and would like to add a few comments to the record. Number 0480 REPRESENTATIVE GREEN withdrew his motion. Number 0490 REPRESENTATIVE OGAN said he wanted to hear from somebody in the Attorney's General office to determine if HB 433 exceeded the right to privacy granted in the Alaska State Constitution. He said he understood the intent of HB 433. He further stated the Alaska State Constitution and the United States Constitution both included privacy clauses, and he wanted to be sure the bill did not exceed the constitutional authority. CHAIR JAMES replied Anne Carpeneti from the Department of Law was here today to respond. She said she did not think that kind of testimony was necessary because the next committee of referral - the House Judiciary Committee - would address those concerns. Number 0545 ANNE CARPENETI, Assistant Attorney General, Central Office, Criminal Division, Department of Law, responded she did not hear the question. CHAIR JAMES commented HB 433 allowed the police to intercept the communications in hostage situations and violate their prohibition for eavesdropping. She said Representative Ogan was concerned it violated privacy granted in the constitution. MS. CARPENETI responded HB 433 was not a violation of the right of privacy. She said these were exceptions to the eavesdropping rule, and exceptions were allowed under the law in certain circumstances, such as emergencies. In her judgement, she said, these situations would be emergencies justifying the taping of words. Number 0614 REPRESENTATIVE OGAN wondered if there had been court tests in other states on this type of law. Number 0620 MS. CARPENETI said she was not aware of any court cases in other states, but was sure a test had been done. She said she would look into it and would be happy to forward that information to him. Number 0630 REPRESENTATIVE OGAN asked Ms. Carpeneti if other states had this type of a statute? MS. CARPENETI replied, yes, other states had this type of a statute. She said she would be happy to provide copies of those statutes. Alaska was not the only state, and HB 433 was similar to a federal statute. Number 0655 REPRESENTATIVE GREEN moved that HB 433 move from the committee with individual recommendations and attached fiscal notes. Hearing no objection, HB 433 was so moved from the House State Affairs Committee. REPRESENTATIVE GREEN said Representative Ogan's points were well made, and as a member of the House Judiciary Committee he would address those issues. CHAIR JAMES suggested to Representative Ogan he participate when the House Judiciary Committee addressed HB 433 and ask the same questions. HB 22 - STATE LONG-TERM PLANNING The next order of business to come before the House State Affairs Committee was HB 22. Number 0710 CHAIR JAMES called on Representative Sean Parnell, sponsor of HB 22. REPRESENTATIVE SEAN PARNELL said this was deja vous for three out of the four member of the House State Affairs Committee because the same bill passed the legislature two years ago. He said long-range planning had taken on a special meaning in the past few years to include closing the fiscal gap based on the charges of the long- range fiscal planning commission. He said HB 22 did not necessarily close the fiscal gap, but rather addressed the accountability and performance of government for expenditures. He noted that one of the recommendations of the long-range fiscal planning commission, was to start performance based budgeting. He further said there was no rational or objective way for the legislature or the Governor to make budget choices and establish priorities; there was a lack of accountability for funds spent; there was a basic distrust of government; and lastly there was a focus on programs rather than serving the public. He further said HB 347 passed with wide bi-partisan support last session in both the House of Representatives and the Senate. However, it was vetoed by Governor Hickel. The reason it was vetoed, he said, was because the Commissioners thought the legislature should not be telling the Governor to long-range plan, creating a turf battle. He said the legislative and the executive branch should work together regarding long-range planning. Representative Parnell said HB 22 tried to implement performance measures as part of the budget process. He further stated the departments were notorious for using irrelevant performance measurements. He said a department would testify it had fewer state troopers than last year, for example, which was not relevant to the financial discussion. The citizens, he alleged, cared about the services, for example, the safety of the Seward Highway, and not the number of state troopers. Therefore, HB 22 established the framework for long-range strategic planning. He further said goals and objective performance measures would be established by each department with public input, and the budget submitted to the legislature would include those performance measures. The process he said was known as performance based budgeting and had been implemented at the federal, city and state government level. He said Hawaii, Connecticut, Iowa, Louisiana, North Carolina, Oregon and Texas used performance based budgeting. He further said Texas was chosen as the model because it was experiencing financial strains and had a natural resource base similar to Alaska. House Bill 22 would follow a five point time line. He said at the beginning of the term the Governor would develop statewide goals to be issued on May 1 when the Office of Management and Budget (OMB) would provide economic and population forecasts to the departments. By July 1 OMB would approve each agencies' goals and by October 1 each agency would submit its long-term plan to OMB. He said the dates corresponded to the submission of the budget to OMB. He further said the plans would cover a six year period and would be used by the Governor, the agency and the legislature to develop the following year's budget. The bill provided a phase-in period where three departments would be chosen by OMB for the first year of implementation. He said this was a result of a compromise on HB 347 (a bill from the 18th Alaska State Legislature) as the departments felt they needed more time to prepare. He alleged it would make budget review jobs easier for the legislators. He noted the legislature in Oregon experienced a decrease in the amount of sub-committees needed. In conclusion, he said unless long-range planning was tied to the budget it would not be a useful document. He said it was not the all-to-end-all, but rather a tool to make government more accountable to its expenditures. It was not meant to be an additional job for the department, but rather supplants what they were already doing for the budget. He lastly said performance based budgeting was a step towards making the government work for the people. Number 1185 REPRESENTATIVE GREEN asked if performance based budgeting incorporated zero based budgeting. Number 1234 REPRESENTATIVE PARNELL replied the correlation between performance based budgeting and zero based budgeting was that performance based budgeting established priorities. Therefore, you would start at zero and fund the priorities. Number 1245 REPRESENTATIVE GREEN commented on the zero fiscal note from OMB. He wondered if HB 22 would require additional work from the departments to warrant a positive fiscal note. Number 1285 REPRESENTATIVE PARNELL said it was what the departments should be doing anyway. The departments gave a zero fiscal note for HB 22 because they realized it was merely a shift of focus on something they should be doing. Number 1308 CHAIR JAMES said she was excited about this type of approach. She further said it was frustrating to plan because of the short time spent in the legislature. She asserted a cooperative effort was needed for success between the Administration and the legislature, and HB 22 tied them together. She further said it was difficult to cut the budget without taking away programs, and the procedure in HB 22 would allow the legislators to see what should be done. She also said it was a move in the right direction to return the public's confidence in state government. Number 1390 REPRESENTATIVE PARNELL referred the committee members to page 2 of the handout titled "General Appropriations Act, 1993 State of Texas, Excerpt from Texas Department of Public Safety." The example illustrated the goal, objective, outcome, strategy and measurement from the Department of Public Safety. He alleged the Alaska budget was not as understandable or readable. Number 1485 REPRESENTATIVE OGAN said as a freshman legislator he would welcome the change. He said the budget currently reflected the number of positions and did not describe the nature of the job. Number 1502 CHAIR JAMES replied the number of positions were even a disillusionment because not all of the positions were filled. Number 1515 REPRESENTATIVE GREEN commented the current budget process was department friendly but not user friendly. He further said HB 22 would create stability because it committed the departments. Number 1538 REPRESENTATIVE PARNELL said an amendment was needed to HB 22 to change the dates accordingly. Number 1562 REPRESENTATIVE GREEN moved that page 3, line 25 and 26, change the dates from "1996" to "1997." Hearing no objection, it was so moved. CHAIR JAMES asked if there was any further testimony. No one responded so she called on a motion. Number 1589 REPRESENTATIVE GREEN moved that HB 22 as amended move from the committee with individual recommendations and a zero fiscal note. Hearing no objection, HB 22 was moved from the House State Affairs Committee. HB 457 - FINES: UNLICENSED PRACTICE OF OCCUPATION The next order of business to come before the House State Affairs Committee was HB 457. CHAIR JAMES called on Walter Wilcox to read the sponsor statement for HB 457 into the record. Number 1680 WALT WILCOX, Committee Aide, House State Affairs Committee read the following statement into the record. "This legislation was requested by LB&A as part of the sunset audits on various boards. "Current law allows enforcement of practicing certain occupations without a license only through the courts. This Bill allows the Department to impose a civil penalty if a person practices or offers to practice an occupation in this State that is regulated under Title Sec.08.01. "The civil penalty may not exceed $5,000.00 for each offense. The Bill also provides for enforcement mechanisms." MR. WILCOX invited Catherine Reardon, Department of Commerce and Economic Development, to explain the department's position. Number 1731 CATHERINE REARDON, Director, Central Office, Division of Occupational Licensing, Department of Commerce and Economic Development, thanked Representative James for introducing the bill, and further stated the department supported HB 457. The bill, she said, would give the division another tool to bring individuals into compliance with the occupational licensing laws. She stated it would be helpful for occupations such as opticians, and commented it was the optician sunset audit that suggested such a bill. She said the department would first try to bring the individuals into voluntary compliance through a letter noting the potential financial fine. The bill she said gave the division up- to $5,000, but, she asserted, the division would not be fining individuals $5,000 for relatively minor violations. She reiterated that was an "up-to" figure. She referred the committee members to page 1, line 11, "The department shall set the amount of the penalty after taking into account appropriate factors, including the seriousness of the violation, the economic benefit resulting from the violation, the history of violations..." The bill she said directed the division to act reasonably depending on the action. However, if someone continued to practice without a license then the department could ratchet-up the fines. She further said the department operated under the Administrative Procedures Act (APA) which required a hearing before a fine was issued. She said the bill did not allow capricious fines. Ms. Reardon said it was frustrating for small business owners to see the competition not pay for a license. She alleged HB 457 would alleviate the court system with citations of unlicensed activity. Number 1870 REPRESENTATIVE GREEN mentioned a conversation between himself and Ms. Reardon regarding another bill where the cost was born by the litigants. He said that bill would net zero but a positive fiscal note would need to be shown. He questioned why HB 457 indicated a zero fiscal note. Number 1898 MS. REARDON said she recalled the conversation. She said if money needed to be collected, for example it would need to be reflected in the fiscal note. However, HB 457 did not require additional money. She said she would use her licensing examiners and Attorneys General for the hearings. She stated the department might see a revenue, but she did not include the estimate in the fiscal note because she simply was not sure how much would be generated. Ms. Reardon did not want to guarantee a certain amount in fines in the event she did not reach it. She reiterated she did not have any new expenditures. She referred to the other bill Representative Green mentioned and stated per diem and travel was needed in addition. She said she was not trying to be inconsistent. REPRESENTATIVE GREEN cited she would issue fines. MS. REARDON replied she would send a letter indicating a fine, but she would not pay anyone new to do that task. REPRESENTATIVE GREEN said he did not see the difference. Number 1994 CHAIR JAMES said she understood Ms. Reardon. A fiscal note indicated money that was not authorized. Ms. Reardon said she was not going to spend any money that was not already authorized and use the existing parameters. For example, the bill might require more stamps, but Ms. Reardon already had a budget for stamps and the bill would not increase her budget for stamps. Number 2025 REPRESENTATIVE GREEN said he agreed if it was true. He alleged it was not the same because the fiscal note suggested she would not spend anything and he asserted there were more steps required that would cost money. Number 2035 MS. REARDON replied, yes, the activities would require staff time, but she was going to cutoff other activities to provide the required time. She cited her staff would cutback time expended trying to prove criminal intent and instead prepare for the hearing. She said she would talk to Representative Green regarding the other fiscal note. Number 2065 CHAIR JAMES said a positive fiscal note sometimes showed money saved and closed the gap. She also said sometimes a positive fiscal note was issued to off-set an expense in which case the legislature was authorizing the money to be spent. In this case, there might be some revenue generated of which would go to the general fund. REPRESENTATIVE GREEN asserted it should be shown as a fiscal note. CHAIR JAMES said Ms. Reardon did not have a clue how much revenue would be generated in fines. REPRESENTATIVE GREEN asked if she had a clue regarding the other issue also. He said he did not want to belabor it here. CHAIR JAMES replied she was happy with the attached fiscal note, and the other bill needed to be discussed outside of the meeting. REPRESENTATIVE GREEN agreed it should be discussed elsewhere, but asserted there was a direct correlation. Number 2115 REPRESENTATIVE OGAN wondered if boards had quasi-judicial power to impose fines for practicing without a license. MS. REARDON replied boards had the authority to fine incompetent activity which was already licensed activity. However, the Board of Registration for Architects, Engineers and Land Surveyors had the authority to fine up-to $5,000 for unlicensed activity. Number 2147 REPRESENTATIVE OGAN said this was a policy shift giving the Department of Commerce and Economic Development more quasi-judicial powers through the ability to judge, for example. Number 2168 MS. REARDON responded it was not a new function for the department. She said in the division there were 20 licensing boards and 14 programs that ran without boards. Therefore, the department had the final authority to sign-off on recommendations. It was not a new procedure but rather a new range of offenses that could trigger the procedure. Number 2208 CHAIR JAMES said the public complained about unlicensed activity and did not feel they had an avenue to fix the problem. She cited business licenses were a problem. There was a requirement to obtain a business license and many people operate without one. This bill, however, did not include business licenses - only occupational licenses. Number 2252 MS. REARDON said the intent of the bill was to only include occupational licenses, but there was the possibility of reading the bill to include business licenses as well. Number 2266 MR. WILCOX asked Ms. Reardon to read the list of the current occupations impacted by HB 457. Number 2280 MS. REARDON said HB 457 referred to AS 08.01 as the centralized licensing statute. It included all the programs the division administered and no others. It did not include drivers licensing, for example. There were 34 program areas. MR. WILCOX asked her to list the program areas to clarify the business licensing issue. CHAIR JAMES said it was a good thing to put on the record. Number 2315 MS. REARDON read into the record AS 08.01.010 which listed the following occupations the statute applied to. Board of Public Accountancy; State Board of Registration for Architects, Engineers and Land Surveyors; Athletic Commission - boxers and wrestlers; Board of Barbers and Hairdressers; Big Game Commercial Services Board - now a division function; Board of Certified Real Estate Appraisers; Board of Chiropractic Examiners; Board of Clinical Social Work Examiners; Board of Dental Examiners; Board of Dispensing Opticians; Board of Marine Pilots; Board of Marital and Family Therapy; State Medical Board; Board of Nursing; Board of Examiners in Optometry; Board of Pharmacy; State Physical Therapy and Occupational Therapy Board; Board of Psychologist and Psychological Associate Examiners; Real Estate Commission; Board of Veterinary Examiners; regulation of acupuncturists under AS 08.06; regulation of audiologists under AS 08.11; regulation of business licenses under AS 43.70; regulation of collection agencies under AS 08.24; regulation of concert promoters under AS 08.92; regulation of construction contractors under AS 08.18; regulation of electrical mechanical administrators under AS 08.40; regulation of professional geologists under AS 08.02.011; regulation of hearing aid dealers under AS 08.55; regulation of morticians under AS 08.42; regulation of the practice of naturopathy under AS 08.45; and regulation of nursing home administrators under AS 08.70. She stated the mention of the regulation of business licenses under AS 08.01 was for administrative reasons such as the collection of fees. She asked the committee members if the bill should apply to business licensing also. Number 2433 CHAIR JAMES replied as sponsor of HB 457 it was not the intent to include business licensing. She said it was drafted after the request of the Legislative Budget and Audit Committee's recommendations. She further said an occupational license was the business license. Number 2464 MS. REARDON responded every business was required to have a business license and some also were required to have an occupation license. She cited for an example, a doctor had to have a medical occupation license and a business license if running a private business. Number 2476 CHAIR JAMES said she was interested in a separate bill to address the business license enforcement. She stated it was important to meet the needs of the state to enforce everyone to obtain a business license. She also said it was not her intention to include that in HB 457 and it needed to be addressed in a separate bill because it had an entirely different constituency. She also said the House Judiciary Committee, the next committee of referral, would look at the bill to determine if additional language was needed to address the business licensing issue. CHAIR JAMES called on the next witness via teleconference in Anchorage, Mark Johnson. Number 0053 MARK JOHNSON, President, Center for Employment Education, said he supported HB 457. He suggested expanding the bill to cover other areas as well. He cited in 1994 his company established the first truck driving training school in Alaska. His company was certified nationally and in August of 1995 the doors opened under the applicable exemptions in the laws. He said it took several months to meet the requirements for the post secondary education and the division of motor vehicle divisions. After one year, he said, the center operated at a considerable loss. He cited the center spent $470,000 to certify the program and make it operational. He stated he understood it was not uncommon for business to lose money in the first years. He further said upon review the center started looking at the competition when it was discovered many of the other businesses were not licensed properly under the laws. A formal complaint was issued to the director of public safety and to the Alaska Commission on Postsecondary Education (ACPE). The response was the training was insignificant therefore it did not fall under the rules of the postsecondary education commission. He said the problem was two-fold as the other companies were training drivers and renting trucks for the CDL test, while the statutes required the renter was licensed to operate the equipment. Number 0286 CHAIR JAMES wondered if the students that attended the Center for Employment Education received Alaska state student loans. MR. JOHNSON replied, yes. CHAIR JAMES asked if the other schools had students attending that received the Alaska state student loan. MR. JOHNSON replied, no, because they did not have authorized approved programs. He cited the responses from his enquiry. A response from Fairbanks said during the check-in procedure a routine check was done to determine if the person renting the equipment was licensed. At times the check-in required an equipment familiarization process but alleged it was not a training course. He also cited a letter from Soldotna which stated the company rented vehicles for individuals to take their CDL test. The letter also asked him to mind his own business so he could do his job. Mr. Johnson further said the center was most concerned about an individual in Anchorage that registered over 700 tests for the CDL at the Department of Motor Vehicles (DMV). He alleged the individual charged $250 per rental which equated to a great deal of money for an unlicensed activity. CHAIR JAMES asked Mr. Johnson to wrap-up his testimony. She further said his concerns were valid and needed to be addressed, however, they did not fit into HB 457. MR. JOHNSON said, in conclusion, there was a serious problem with respect to drivers training in Alaska. The current regulations were not working. Number 0495 CHAIR JAMES said she appreciated his concerns. She said HB 457 went next to the House Judiciary Committee. She reiterated the bill did not cover the issues he shared with the committee members, and suggested special legislation as it affected public safety. Number 0530 MR. WILCOX suggested in section (b) to add a line to explain the section did not apply to business licensing. Number 0542 CHAIR JAMES suggested a conceptual amendment. Number 0549 REPRESENTATIVE IVAN moved to adopt a conceptual amendment. Number 0557 REPRESENTATIVE OGAN said he did not understand the amendment and asked for clarification. Number 0560 CHAIR JAMES replied, the list of regulations and boards Ms. Reardon read earlier could be misconstrued to include the general business license that was bought for $50. The bill was not intended to cover that provision. Therefore, to make it perfectly clear a line should be drafted and included in HB 457. Number 0591 REPRESENTATIVE OGAN wondered if it was referenced to in the statute. CHAIR JAMES replied, "no," and asked Ms. Reardon to respond. Number 0598 MS. REARDON said HB 457 put the provision in Title 8 which included the list of boards and regulations she read earlier. She said a sentence to clarify this issue to eliminate the possibility a business license would be included because statutes were referred to each other in the bill. REPRESENTATIVE OGAN said he understood. CHAIR JAMES said hearing no objection to the motion to accept the conceptual amendment, it was so moved. Number 0640 REPRESENTATIVE OGAN enquired about the $5,000 offense penalty. Number 0645 MS. REARDON replied it was from the Board of Registration for Architects, Engineers and Land Surveyors, the board that already had the authority to fine unlicensed activity. She said it was also based on the recommendation of the Legislative Budget and Audit Committee's suggestion for all the boards and regulations to have the same authority. Number 0663 CHAIR JAMES replied some of the issues were health related. Therefore, a deterrent was needed as the issues were large enough. She further commented a procedure outline was needed to establish the amount of the fine. Number 0683 MS. REARDON responded it was a good idea. She further said the hearing officer usually determined the amount of the fine after listening to the evidence. She alleged the upper amount was seldom delivered, and maybe regulations would clarify the issue. Number 0703 CHAIR JAMES said regulations would clarify, and furthermore, regulations went through a public process to include the input of the public. She further said she was not sure if regulation enforcement should be included in the bill and wondered if it was presumed. Number 0731 REPRESENTATIVE OGAN said when he served on the Big Game Commercial Services he cited there was a $5,000 criminal offense penalty. He said $5,000 was too high for a civil penalty under this scenario. He also said he questioned the due process of an administrative hearing. He cited a driving ticket example, whereby a ticket was issued and went to court following due process. He again stated $5,000 was a severe fine. REPRESENTATIVE OGAN moved that on page 1, line 10, change the amount of "$5,000" to "$500." REPRESENTATIVE WILLIS asked if the fines would be greater under the existing laws based on Representative Ogan's motion. Number 0800 MS. REARDON responded in court an upper limit of $5,000 was issued under a misdemeanor generally. She further stated some of the licenses cost $700 every two years. Therefore, she was concerned about individuals profiting by failing to obtain a license. She suggested a higher offense might serve as a deterrent. Number 0839 REPRESENTATIVE OGAN said if the limit of $5,000 was for a criminal penalty in court, it should not be the same for a civil penalty. He agreed the limit should be expensive and was willing to negotiate on the amount. Number 0874 REPRESENTATIVE GREEN said the committee members were hung-up on an automatic $5,000 fine rather than an "up-to" $5,000 fine. He further said the circumstances would predicate the amount of the fine. Representative Green said there was a presumption of incompetence if a person failed to obtain a license and there should be a worthwhile potential penalty. Number 0942 CHAIR JAMES called on the next witness via telephone, Randy Welker. Number 0950 CHAIR JAMES explained to Mr. Welker the amendment made to HB 457 to not include business licenses. She asked Mr. Welker his opinion regarding the change of the penalty from $5,000 to $500. REPRESENTATIVE IVAN said he was comfortable with the maximum $5,000 limit. He cited there were provisions in the bill to let the department set the fines accordingly. Number 1007 RANDY WELKER, Legislative Auditor, Legislative Audit Division, Legislative Agencies and Offices, said the nature of the potential violations were important to consider. He cited a physician running a medical office without the proper license needed to be stopped immediately using a $5,000 penalty. He alleged it was a tool used to stop the behavior immediately instead of pursuing a criminal procedure which took time. Number 1085 CHAIR JAMES reiterated her suggestion of establishing a regulation to schedule the fees. Number 1107 MR. WELKER said it was reasonable to expect the department would adopt regulations to guide the boards and the hearing officers. Number 1122 CHAIR JAMES said the regulations would be more representative of the applicability of each case because it would include the general public. Number 1136 MR. WELKER replied he agreed with Chair James as long as the legislation language was flexible regarding the up-to limit. Number 1145 REPRESENTATIVE OGAN said he was concerned about the agency acting like a judge. He said the legislation was allowing the agency to act in the same manner as if it were a criminal offense. Representative Ogan said a $5,000 limit was appropriate for a criminal offense, and reiterated his philosophical difference regarding the due process and the lack of the separation of powers. He asked Mr. Welker, if an administrative solution was not possible, was the next step a criminal trial. Number 1212 MR. WELKER replied that was a possibility, and the concern was the issue of time and deterrence until a criminal proceeding took place. Number 1241 CHAIR JAMES referred Representative Ogan to page 2, line 8, "A person aggrieved by the imposing of a civil penalty under this section may file an appeal with the superior court for judicial review of the penalty under AS 44.62.560." She further commented the Administrative Procedures Act (APA) outlined the exact appeal process which included due process. She said there was the opportunity for a hearing to present a case along with an appeal. Number 1295 REPRESENTATIVE OGAN said it took time because of the due process involved. He said it should be a stop gap to a court proceeding. He amended his previous amendment from "$500" to "$2,500." He said it was half-way between nothing and the maximum for a criminal violation. Number 1350 CHAIR JAMES asked if there were any objections to Representative Ogan's amendment. Number 1360 REPRESENTATIVE GREEN replied he was concerned about adding a variety of "up-to" limits. He said one "up-to" was enough and let the department decide the offense. He suggested the limit stay at $5,000. Number 1402 CHAIR JAMES responded she did not want to arbitrarily change the amount otherwise the committee members should look at each board and regulation and decide what amount was appropriate. She suggested leaving it at $5,000 - the suggestion of the auditor. Number 1438 REPRESENTATIVE OGAN replied the auditor did not set the policy in this state, the legislature did. Number 1481 CHAIR JAMES reiterated the motion to change page 1, line 10 from "$5,000" to "$2,500." There was an objection, so a roll call vote was taken. Representatives James, Green, Ivan and Willis voted against the amendment. Representative Ogan voted in favor of the amendment. So, the amendment failed. CHAIR JAMES commented again regarding the parameters of the penalties imposed, and wondered if it should be included in the bill. Number 1510 REPRESENTATIVE GREEN said it was not necessary, but if it added clarity it was worthwhile. Number 1525 CHAIR JAMES suggested a committee substitute to be discussed at the next committee meeting. HB 361 - CAP PROJ MATCHING GRANT FOR INDIAN RESERV The next order of business to come before the House State Affairs Committee was HB 361. Number 1584 CHAIR JAMES called on Representative Jerry Mackie, sponsor of HB 361. REPRESENTATIVE JERRY MACKIE read the following statement into the record. "I introduced this legislation at the request of the Metlakatla Indian Community when their FY 96 Municipal Assistance Matching Grant Program appropriation was eliminated from last year's budget. Metlakatla qualified for this program under the Department of Administration regulations definition for "municipality." However, legal analysis found that the statute definition was not written specific enough to include the Metlakatla Indian Community in this program. Since the statute definition supersedes the regulatory definition the appropriation was eliminated. "HB 361 AMENDS AS 37.06 (Capital Project Matching Grants Programs) by adding a new section that includes a municipality organized under federal law as an Indian reserve. This bill has been drafted to specifically include the Metlakatla Indian Community within the Municipal Assistance Matching Grant Program. This legislation also provides that Metlakatla may not receive a grant under the Unincorporated Community Capital Project Matching Grant Program. "The community of Metlakatla is definitely more reflective of a municipal government and fits more appropriately into the Municipal Capital Matching Grant Program. The community has a mayor, city council, school board, constitution, law and order codes, policy department, court system, etc.. "There are two zero fiscal notes accompanying this legislation from the Department of Community and Regional Affairs and the Department of Administration." REPRESENTATIVE MACKIE mentioned to the committee members a section analysis, a letter from the indian community, a legal analysis and a statute were included in the package of information. He said HB 361 clarified the intent that the Metlakatla community qualified for the capital matching grant program. The qualification issue was raised by Senator Rick Halford last year because of the community title. He said the Metlakatla community was a federal indian reservation, but voted in state elections, which qualified the community for municipal assistance. Therefore, HB 361 clarified the statute the Metlakatla community qualified for the money. He further said it was discovered the Metlakatla Indian Community qualified for both an unorganized grant and municipal assistance. Therefore, HB 361 took away the unorganized portion of the grant. He also said in response to discussion regarding sovereignty, the bill did not affect that issue. He referred the committee members to page 1, line 6, "Municipalities organized under federal law," which stated an indian reserve qualified only if it existed as a municipality before enactment of 43 U.S.C. 1618(a). He said Metlakatla was the only one in the state affected and a definition was needed. The definition used in HB 361 was consistently used in other statutes dealing with municipal assistance and revenue sharing. CHAIR JAMES recognized Kim Helmer, Department of Community and Regional Affairs, in the audience to answer any questions. Number 1870 REPRESENTATIVE GREEN mentioned HB 361 would only apply to the Metlakatla Indian Reservation, and wondered if there were four different reservations in Alaska. REPRESENTATIVE MACKIE replied as defined in HB 361, Metlakatla was the only indian reservation in the state of Alaska. He said there were four areas of the state that had indian trust land and was not effected by HB 361. House Bill 361 only dealt with the capital matching grant program and only included communities organized under federal law. He said he was trying to expedite the bill so the Metlakatla community would be treated fairly in the budget process this year. Number 1888 REPRESENTATIVE OGAN said Representative Mackie briefed him on HB 361 yesterday. He further said there were sovereignty issues that had yet to be resolved in the state, and commented the intent of HB 361 was to not include sovereign communities. REPRESENTATIVE MACKIE replied the bill required the indian reserve to be a municipality and organized under federal law which existed before enactment of 43 U.S.C. 1618(a). The Metlakatla community was the only one that existed before the enactment of 43 U.S.C. 1618(a) and only dealt with it in reference to the capital matching grant program. The reason it was stated specifically was because of a discrepancy due to an oversite. Number 2073 REPRESENTATIVE WILLIS moved that HB 361 move from the committee with individual recommendations and zero fiscal notes. Hearing no objection, HB 361 was moved from the House State Affairs Committee. HB 449 - INCOME TAX ON INDIVIDUALS & FIDUCIARIES The next order of business to come before the House State Affairs Committee was HB 449. Number 2144 CHAIR JAMES called on Representative Carl Moses, sponsor of HB 449. REPRESENTATIVE CARL MOSES read the following sponsor statement into record. "Thank you Madame Chair for hearing house bill 449, a bill that would establish a state personal income tax. "With all the talk these days about the state's fiscal gap, estimated to be roughly half a billion dollars alone, it's time to start the debate on raising new revenues to help address the shortfall. "That's why I introduced house bill 449." "A personal income tax was generally considered the fairest tax, and, because federal law allows deducting state income taxes from the federal income tax, it should not create an unreasonable burde on Alaska taxpayers. "A personal income tax would transfer money to the state that would otherwise go to the feds, and it would return to the state some of the money nonresidents earn in Alaska. "In 1994 alone, over 77,000 nonresidents earned approximately $866 million in the state." REPRESENTATIVE MOSES commented most of the nonresidents did not even buy a tube of toothpaste, for example, unless they absolutely had to. He also said with the tobacco tax bill floating around, the nonresidents would probably bring their own cigarettes to save money. He continued to read the sponsor statement into the record. "It's time some of that money was returned to the state. "Based on Alaska's personal income tax in place from 1949 to 1961, house bill 449 would levy a flat tax on all residents and nonresidents earning income in Alaska based on a percentage of what they pay the federal government. "Starting in 1997, the tax would be five percent of a taxpayer's federal income tax liability if that is not more than $20,000, and 10 percent if the taxpayer's federal income tax liability is over $20,000. "Under my proposal, the tax rate would go up five percent in 1998, and would level off in 1999 after another five percent increase. "Taxing a flat percentage rate of the federal tax liability is not new to Alaska. "Such taxes were in effect at varying rates, between 10 percent and 16 percent, from 1949 to 1963, and again in 1965. "How much revenue would this bill generate? REPRESENTATIVE MOSES said the estimate so far from the Department of Revenue was $22.4 million the first year. He continued to read the sponsor statement into the record. "nonresidents would pay just over half of that, or $11.3 million. REPRESENTATIVE MOSES stated again that was one-half of what would be paid by nonresidents, or money that the state was not receiving now. He further said it was only fair the nonresidence paid for the services they received while in Alaska. He cited in his community the police force doubled because of the transient and seasonal workers. He continued to read the sponsor statement into the record. "Is this a big enough amount?" TAPE 96-11, SIDE A Number 0000 REPRESENTATIVE MOSES replied it was not a big amount compared to the fiscal gap. He continued to read the sponsor statement into the record. "Why doesn't my bill raise the $200 million that some have estimated an income tax to generate? "Two reasons. "First, the tax rate in house bill 449 is lower, at least for the first two years, than the tax rate in the bill on which the higher revenue estimate was based. "The $200 million estimate was for a bill, introduced three years ago, that would have imposed a 15 percent tax rate on a taxpayer's federal income tax liability. "Second, my bill provides a real and personal property tax credit a taxpayer may claim." REPRESENTATIVE MOSES commented that was the reason nonresidents would pay over 50 percent the first year because it was a long-shot that nonresidents owned real or personal property to receive the tax credit. He also said the earlier bill did not address this issue. He cited he would like to see this extended to the small business owners to help compete with the national chains. He felt they needed a break. The national chains were good for the consumer, he alleged, but only in the short-run. He further stated, for more information on how much HB 449 might generate, how much it might cost to administer, and some of the technical aspects of the measure, he deferred to the Department of Revenue. He said there were other tax proposals such as a sin tax that was uncontrolled due to the large number of nonresidents. He reiterated over 50 percent in the first year would be paid by nonresident workers. He also cited there were thousands of part- time residents, such as fishermen, of which the industry was oriented towards Seattle. Consequently, they were contributing to the state of Washington rather than the state of Alaska. Representative Moses commented the trickle down approach was not working so again wondered why an income tax did not exist. He said proposing such a bill affected him personally and cited $1,000 worth of damage was done to his store because of the marine fuel tax. He further said a large portion of his customers in Unalaska were nonresidents. Therefore, HB 449 was a detriment to his business, and he would probably loose votes. In conclusion, he said he would be happy to answer any questions. Number 0522 REPRESENTATIVE GREEN cited a cabin fire example where so much fuel had been added requiring a fire extinguisher to sequester the fire back into the fireplace. He said it was the wrong direction to use gasoline now to try to control the government. He stated he championed Representative Moses' idea to take advantage of the nonresidents. He cited the slope workers who made a lot of money and lived in another state. Representative Green said an avenue was needed to prevent that because the state provided services for the period of time they were here. He further said it was often more service per capita than required from the full-time residents. However, adding an income tax was not responsible until state spending was under control. He said he was not in favor of HB 449 at this time. Number 0680 REPRESENTATIVE WILLIS commended Representative Moses for introducing HB 449. He said it took a lot of courage. He stated he did not want to see a piece-meal revenue enhancement approach. He wondered, as Representative Moses was part of the majority, if the majority was establishing an overall plan that addressed budget cuts and encompassed revenue enhancements such as an income tax. Number 0795 REPRESENTATIVE MOSES replied the most comprehensive and fairest tax was the personal income tax, and hoped it would be part of the over-all plan. He felt he was in the extreme minority right now proposing such a bill. Representative Moses stated the budget cuts could cause a minor or major recession in the state. He also said the state did not know about the federal budget cuts and how it would affect Alaska. He further stated the entire fishing industry was in the doldrums. He alleged the state was still benefiting from the large capital expenditures in fiscal year 1994. He reiterated there would probably be a big recession in Anchorage because it was the service center. A tax did not always help the economy, he said, but it would contribute millions of dollars to the state by requiring nonresidents to contribute. He also cited foreigners and some full-time residents sent every nickel made to a foreign country because they had it so good here in Alaska which did not trickle down into the economy. This, he asserted, was a serious problem. Number 0959 REPRESENTATIVE OGAN said he admired Representative Moses' courage to introduce HB 449. He stated appropriate cuts needed to be made before introducing new taxes. He said his constituents felt there would be no motivation to cut the budget if new money was generated by taxes. He said the people believed there was a bloated state government and the legislature was not interested in controlling it but only new revenue sources. He agreed with the arguments regarding nonresidents. He said it could be argued in the case of oil workers that the employer paid a disproportionate amount of state taxes. He said the fairest tax was a sales tax because it taxed the workers and non-workers according to spending. He also said it did not penalize against spending or saving as an income tax would. He said he did not support HB 449 and would not vote it out of the committee. Number 1071 CHAIR JAMES said ultimately a state income tax was needed, and the income tax was the fairest tax imposed. A sales tax, she stated, should be reserved for the municipalities and local governments to receive money. She said everybody wanted to make exemptions to the sales tax law creating an accounting nightmare born by the business person. She also said she was concerned about the timing. She said state spending must be reduced, but at the same time there were many capital needs in Alaska that should not be ignored. She further said nonresidents were not treating residents fairly and most believed a tax should be collected from them. Philosophically, she believed an income tax would create a more interested and scrutinizing public. She said she did not feel the threat between cutting and spending. She did not want to cut, to simply cut, but a serious evaluation was needed to determine that which validated continued funding. She also said Representative Moses was brave to introduce HB 449. She asserted it was time to start talking about it nonetheless. In conclusion, she said she would like to hear from the Department of Revenue. Number 1272 REPRESENTATIVE IVAN said he had observed first hand the nonresident and seasonal workers in Unalaska, and understood the concerns of Representative Moses. He said Alaska was so big that it required a unique approach to solve the problems. In conclusion, he stated he agreed with some of Representative Moses' philosophy. Number 1355 CHAIR JAMES said politicians liked to spend money, and her fear of adding money to the pot would not allow the budget to be scrutinized. She suggested finding the level of spending and use the reserves to take care of the gap. She alleged there was not a gap if all the earnings were included such as the permanent fund earnings. However, touching the permanent fund was political suicide. In conclusion, she said, as economic activity increased, the only way to factor in the added necessary government services was to tap into the income to provide for those needed services. She did not know when that would be needed but it was good to talk about it now. Number 1455 REPRESENTATIVE MOSES said there would be drilling in the Arctic National Wildlife Refuge (ANWR) if the state did not have $18 billion dollars in the bank. He further said Congress did not have sympathy for the state of Alaska because there was not a tax in some form. He further said there was a chance the state's highway fund would decreased from $200 million to $50 million. He said if he was a Congressman from the lower forty-eight he would be very envious of Alaska and vote to restrict any appropriations. He alleged the majority of the states were jealous of Alaska. Representative Moses also said the candidates had psyched the public into thinking the solution was to cut the budget and no taxes were needed. The public was gullible, he asserted. He also said the legislature did not cut the budget appropriately. He said he campaigned in 1992 on the fact an income tax was needed. Number 1548 CHAIR JAMES reiterated she wanted to hear from the Department of Revenue. She stated she was not ready to pass HB 449 from the committee, but this was an opportune time to discuss the issue of an income tax. Number 1583 CHAIR JAMES further said HB 390 was referred to the House State Affairs Committee and was requested to move to the next committee of referral - the House Special Committee on Fisheries. She asked if there were any objections. Number 1603 REPRESENTATIVE OGAN objected. CHAIR JAMES said she would not waive the bill due to the objection. MR. WILCOX enquired about the status of HJR 51. CHAIR JAMES said Representative Robinson objected to moving HJR 51 forward. Number 1624 REPRESENTATIVE WILLIS also objected to moving HJR 51 to the next committee of referral. ADJOURNMENT CHAIR JAMES adjourned the House State Affairs Committee at 10:05 a.m.