Legislature(1997 - 1998)
04/08/1997 08:04 AM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE STATE AFFAIRS STANDING COMMITTEE April 8, 1997 8:04 a.m. MEMBERS PRESENT Representative Jeannette James, Chair Representative Ethan Berkowitz Representative Fred Dyson Representative Kim Elton Representative Mark Hodgins Representative Ivan Ivan Representative Al Vezey MEMBERS ABSENT All members present. COMMITTEE CALENDAR *HOUSE BILL NO. 188 "An Act relating to calculation of compensation for the public employees' retirement system." - HEARD AND HELD HOUSE BILL NO. 200 "An Act relating to subpoenas of the Administrative Regulation Review Committee; and providing for an effective date." - PASSED CSHB 200(STA), as amended, OUT OF COMMITTEE HOUSE BILL NO. 79 "An Act relating to the offense of possession of tobacco by a person under 19 years of age." - HEARD AND HELD HOUSE JOINT RESOLUTION NO. 21 Relating to amendment of Title VIII of the Alaska National Interest Lands Conservation Act. - SCHEDULED BUT NOT HEARD (* First public hearing) PREVIOUS ACTION BILL: HB 188 SHORT TITLE: DEFINITION OF COMPENSATION IN PERS SPONSOR(S): REPRESENTATIVE(S) COWDERY JRN-DATE JRN-PG ACTION 03/12/97 640 (H) READ THE FIRST TIME - REFERRAL(S) 03/12/97 640 (H) STATE AFFAIRS, FINANCE 04/08/97 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 200 SHORT TITLE: SUBPOENA POWER: ADMIN. REG. REVIEW COMMIT SPONSOR(S): REPRESENTATIVE(S) JAMES JRN-DATE JRN-PG ACTION 03/18/97 737 (H) READ THE FIRST TIME - REFERRAL(S) 03/18/97 737 (H) STATE AFFAIRS 03/25/97 (H) STA AT 8:00 AM CAPITOL 102 03/25/97 (H) MINUTE(STA) 04/03/97 (H) STA AT 8:00 AM CAPITOL 102 04/03/97 (H) MINUTE(STA) 04/08/97 (H) STA AT 8:00 AM CAPITOL 102 BILL: HB 79 SHORT TITLE: MINOR IN POSSESSION OF TOBACCO SPONSOR(S): REPRESENTATIVE(S) BUNDE, James JRN-DATE JRN-PG ACTION 01/16/97 90 (H) READ THE FIRST TIME - REFERRAL(S) 01/16/97 90 (H) STA, JUDICIARY, FINANCE 04/03/97 (H) STA AT 8:00 AM CAPITOL 102 04/03/97 978 (H) COSPONSOR(S): JAMES 04/08/97 (H) STA AT 8:00 AM CAPITOL 102 WITNESS REGISTER REPRESENTATIVE JOHN COWDERY Alaska State Legislature State Capitol, Room 416 Juneau, Alaska 99801-1182 Telephone: (907) 465-3897 POSITION STATEMENT: Sponsor of HB 188. MIKE McMULLEN, Personnel Manager Division of Personnel Department of Administration P.O. Box 110201 Juneau, Alaska 99811-0201 Telephone: (907) 465-4431 POSITION STATEMENT: Provided testimony on HB 188. DON ETHERIDGE, Jr., Lobbyist Alaska State District Council Laborers 710 West 9th Street Juneau, Alaska 99801 Telephone: (907) 586-3707 POSITION STATEMENT: Provided testimony in opposition to HB 188. KEVIN C. RITCHIE, Executive Director Alaska Municipal League 217 Second Street, Suite 200 Juneau, Alaska 99801 Telephone: (907) 586-1325 POSITION STATEMENT: Provided testimony in support of HB 188. CRAIG PERSSON, Vice President Public Safety Employees Association 6450 Airport Way, Suite 1 Fairbanks, Alaska 99709 Telephone: (907) 474-2536 POSITION STATEMENT: Provided testimony in opposition to HB 188. WALTER WILCOX, Legislative Assistant to Representative Jeannette James State Capitol, Room 102 Juneau, Alaska 99801-1182 Telephone: (907) 465-3743 POSITION STATEMENT: Provided testimony on HB 200. REPRESENTATIVE CON BUNDE Alaska State Legislature State Capitol, Room 104 Juneau, Alaska 99801-1182 Telephone: (907) 465-4843 POSITION STATEMENT: Sponsor of HB 200. PATRICIA SWENSON, Legislative Assistant to Representative Con Bunde State Capitol, Room 104 Juneau, Alaska 99801-1182 Telephone: (907) 465-4843 POSITION STATEMENT: Provided testimony on HB 200. LOREN JONES, Director Division of Alcoholism and Drug Abuse Department of Health and Social Services P.O. Box 110607 Juneau, Alaska 99811-0607 Telephone: (907) 465-2071 POSITION STATEMENT: Provided testimony in support of CSHB 79(STA). CATHERINE REARDON, Director Division of Occupational Licensing Department of Commerce and Economic Development P.O. Box 110806 Juneau, Alaska 99811-0806 Telephone: (907) 465-2534 POSITION STATEMENT: Provided testimony on CSHB 79(STA). ACTION NARRATIVE TAPE 97-37, SIDE A Number 0001 The House State Affairs Standing Committee was called to order by Chair Jeannette James at 8:04 a.m. Members present at the call to order were Representatives James, Elton, Hodgins, Ivan and Vezey. Members absent were Berkowitz and Dyson. Representative Berkowitz arrived at 8:05 a.m.; and Representative Dyson at 8:06 a.m. HB 188 - DEFINITION OF COMPENSATION IN PERS The first order of business to come before the House State Affairs Standing Committee was HB 188, "An Act relating to calculation of compensation for the public employees' retirement system." CHAIR JEANNETTE JAMES called on Representative John Cowdery, sponsor of HB 188, to present the bill. Number 0080 REPRESENTATIVE JOHN COWDERY, Alaska State Legislature, read the following sponsor statement into the record: "HB 188 was introduced at the request of Anchorage Mayor Rick Mystrom. "The current definition of compensation for the Public Employees Retirement System allows for the use of overtime in the calculation of pension benefits. "This definition invites abuse of the system through the use of overtime loading to inflate an employee's high three years. Salaries have been inflated by as much as $40,000 to $50,000 per year in extreme cases through the use of overtime. This increases the long term liability to the State in its retirement systems. "HB 188 amends AS 39.35.680(8) to exclude overtime from the definition of "Compensation" for all new employees." REPRESENTATIVE COWDERY explained the Public Employee Retirement System (PERS) was calculated on an employees' highest three years consisting of the following: base pay, employee contribution, cost-of-living differential, leave, and overtime. The Municipality of Anchorage had been experiencing an increasing amount of "overtime padding" where some retiring employees maximized the amount of overtime to maximize their pensions. In the past year alone, the municipality had reported overtime payments as high as $76,000 a year. The bill would simply exclude overtime from the calculation of the benefit. Number 0221 CHAIR JAMES asked Representative Cowdery if overtime was time and a half or premium pay? REPRESENTATIVE COWDERY replied overtime was anything above the salary base pay. In addition, the bill would only affect new hires; it would not be retroactive. Number 0246 REPRESENTATIVE AL VEZEY said overtime was pay at the overtime rate, and premium time was pay above the normal hourly rate. The point that Chair James raised was a good one, however; it was not defined anywhere. Number 0281 REPRESENTATIVE ETHAN BERKOWITZ asked Representative Cowdery if the best three years were adjusted for inflation or were just flat dollars? Number 0296 REPRESENTATIVE COWDERY replied flat dollars. Any three high years could be calculated. Number 0318 CHAIR JAMES wondered, if a person's base pay required him to work six days a week, would the sixth day be counted because it would receive a time-and-a-half rate of pay. Number 0343 REPRESENTATIVE COWDERY replied, "Yes." It was overtime. CHAIR JAMES responded then only the premium was overtime as far as she was concerned. REPRESENTATIVE COWDERY replied there was the occasional overtime worked beyond the 37.5 hours a week for state employees. The bill, he reiterated, was based on the base salary. Number 0393 REPRESENTATIVE IVAN IVAN asked Representative Cowdery if this was a problem in Anchorage? Number 0405 REPRESENTATIVE COWDERY replied, "Yes." In the police and fire departments there had been as high as $1,500 of overtime used for the purpose of retiring. He reiterated the bill was not retroactive; it was perceived as an abuse of the past and the purpose was to deal with the problem in the future. Number 0454 REPRESENTATIVE FRED DYSON commented on the part-time and seasonal professions, such as, firefighting. The nature of the work required lots and lots of overtime, not by choice, but by demand. Therefore, was the case of a firefighter more valid because it was seasonal? he asked. REPRESENTATIVE COWDERY replied he did not know if it would be more valid. He reiterated the bill was not talking about the past; it was talking about the future. If the bill was to pass, the law would be in place and the firefighters would have to live by it. He understood, however, that there were emergency situations that demanded a lot of overtime. Number 0557 REPRESENTATIVE VEZEY said state employees who worked seasonally did not accrue a year's pay in a calendar year. They could have to work three years to accrue one calendar year of retirement credit, for example. Number 0581 REPRESENTATIVE KIM ELTON stated the presentation made by Representative Cowdery indicated this was an employee problem. He defined this issue as a management or political problem. For example, in the case of the police officers, it could be argued that there were not enough police officers to reduce the amount of overtime needed. He was concerned that the police officers would lose out because of a management problem. Furthermore, overtime was approved by management. Number 0667 REPRESENTATIVE COWDERY replied there was a problem. He did not know if it was a management or an employee problem, however. Maybe the bill would solve the problem. In addition, the debate in Anchorage was to create all new hires in PERS rather than the existing system. Number 0737 REPRESENTATIVE MARK HODGINS agreed with the bill. He suggested changing Sec. 2, however, to make it equal for everybody. There could be changes made in another committee to prevent two tiers, for example. Number 0784 REPRESENTATIVE COWDERY replied the act would take effect on the effective date. REPRESENTATIVE HODGINS stated this was a good fix for a mounting problem. Number 0821 REPRESENTATIVE COWDERY explained there were many things included in the definition of "compensation" and the bill just added one more thing to the definition - overtime. If there was better language to clarify Sec. 2, he would not have a problem changing it. Number 0846 REPRESENTATIVE ELTON stated retirement and benefits could not be reduced which was why the multiple tier system had been created for the state. Number 0865 REPRESENTATIVE DYSON asked Representative Cowdery where the bill went next? REPRESENTATIVE COWDERY replied the House Finance Committee. REPRESENTATIVE DYSON asked Representative Cowdery where had the bill been? REPRESENTATIVE COWDERY replied the House State Affairs Standing Committee was the first committee of referral. REPRESENTATIVE DYSON asked Representative Cowdery if there was a fiscal note attached? REPRESENTATIVE COWDERY replied there was a zero fiscal note. Number 0902 CHAIR JAMES stated she did not understand the zero fiscal note because the state would save money. Number 0918 REPRESENTATIVE COWDERY replied the state would not save any money until it happened. The state would not undo anything. CHAIR JAMES stated she understood it was the operations that were measured and not the liabilities for the funding ratio of the General Fund. However, it had been a cause for concern in the past that the funding ratio stay constant and sufficient. It was hard to realize that there would not be a fiscal note attached to the bill. A positive fiscal note would be from communities that would take advantage of this. Number 0975 MIKE McMULLEN, Personnel Manager, Division of Personnel, Department of Administration, was the first person to testify in Juneau. The retirement benefit was now based on the average of the high five instead of the high three as a result of the passage of Tier III last year. It would be more difficult for an employee to build up and sustain his overtime for retirement over a five year period compared to a three year period. Therefore, Tier III already had addressed this issue. MR. McMULLEN further stated that Representative Elton was correct. Overtime was a management decision. In addition, upon passage of the bill, it would be necessary to identify the new hires and forever thereafter track them as a separate group in order not to calculate their overtime creating a two tier system for the employer. In the past, when Tier II and Tier III were enacted, the new rates applied to everybody. Moreover, there were prohibitions in statute against reducing retirement benefits for employees. Therefore, Sec. 2 would apply to those hired after the effective date of the bill. There were employees who moved to a high cost- of-living area for their final three years so that the overtime would be based on the higher differential rate and the combination would go into their retirement calculation. The Tier II program provided that the geographic differential could only be counted if over half of an employee's service was at the higher differential. Number 1241 CHAIR JAMES asked Mr. McMullen what was in Tier I, II and III that allowed for the retirement compensation to be calculated the same? Number 1265 MR. McMULLEN replied the difference was in the tracking. Tier II changed the geographic differential provision so that the employer deducted the full percentage from the employee, but upon retirement, the record was reviewed to determine if the majority of the service was at the higher level or not. Tier III changed the benefit calculation from three years to five years. For Tier II and III, the employer did not have to distinguish between its employees; it continued to make the same deductions. Tier IV, on the other hand, affected the calculation determination and required a distinction between employees. Number 1352 CHAIR JAMES stated there was no other way to reduce benefits. Number 1367 MR. McMULLEN stated the way to keep them the same was to off-set the difference. Number 1394 REPRESENTATIVE BERKOWITZ asked Mr. McMullen if the segregation for the different tiers of employees was done on a computer? MR. McMULLEN replied, "Yes." The system was computerized. Mr. Bill Church, Division of Retirement and Benefits, was also here today. He could answer the question better. The bill required that the employer make the distinction rather than the retirement system. Number 1394 REPRESENTATIVE BERKOWITZ asked Mr. McMullen if this would be a difficult technical step to take for the state? MR. McMULLEN replied it would take work to make the distinction because all of the hiring offices in the departments would have to get the right information from the new hire to determine the tier he or she was under. REPRESENTATIVE BERKOWITZ stated that information would already be part of the employee record. MR. McMULLEN replied, "Not necessarily." A person could have worked for the Municipality of Anchorage in the past which would not be part of the record. There were dozens of steps in the enrollment process, and this was a minor burden that would not be looked at for the next 20 years. Number 1506 REPRESENTATIVE BERKOWITZ asked Mr. McMullen which state employees would this bill impact? Number 1511 MR. McMULLEN replied there were state employees who worked overtime as a matter of course, such as, firefighters. Airport safety officers worked a schedule where there was a quarter of an hour of overtime per day because they did not get a real break. Therefore, someone hired after the effective date of the bill would be treated differently. Number 1567 CHAIR JAMES asked Mr. McMullen if the employees under a collective bargaining unit could make a different deal than state law? MR. McMULLEN replied retirement was outside the scope of collective bargaining. But, rates to accommodate the same thing, for example, could be collectively bargained. At some point, an employer would note that this would be an employment and recruitment problem. Number 1620 REPRESENTATIVE BERKOWITZ asked Mr. McMullen if it was possible for seasonal workers to negotiate overtime pay away from the contract? MR. McMULLEN replied the state was subject to the Fair Labor Standards Act (FLSA) which mandated overtime pay for time over 40 hours in a week. REPRESENTATIVE BERKOWITZ asked Mr. McMullen if it was possible for seasonal workers to negotiate overtime pay away from the contract in terms of PERS? MR. McMULLEN replied, "No." Workers could negotiate for a 20 percent higher rate of pay for those hired after the effective date of the bill, for example, to take care of the difference. Number 1669 REPRESENTATIVE ELTON asked if a seasonal employee would loose status in the retirement tier if he was hired in another tier? MR. McMULLEN replied employees were in whatever tier they were first hired into, even if they left the work force for 10 years. Number 1702 REPRESENTATIVE ELTON stated there could be costs outside of the retirement and benefit system, if every PERS unit had to track its employees differently. He asked Mr. McMullen if that would be a minor or a major cost? Number 1725 MR. McMULLEN replied it was a matter of the Division of Finance making computer changes, training, and departments following the provision for the next 20 years. The division was not asking for a fiscal note because it made changes to the payroll system all of the time. In addition, there were 20 questions as part of the new hire process so this would be question 21. It was just one more cog in the process. Number 1725 DON ETHERIDGE, Jr., Lobbyist, Alaska State District Council, Laborers, was the next person to testify in Juneau. The council opposed the bill. It recognized that there were problems in some cases, but it was a management problem. The council was trying to help management take care of the problem to protect those that justified their overtime work. He worked 22 years for the Alaska Marine Highway System averaging 1,000 hours of overtime per year. It was not by choice; the job had to be done. He stuck with it because it would help his retirement. If that incentive was cut out, it would create a recruitment problem because there were a lot of areas that troopers would not move to, for example. It was unfair to blanket everybody with those who abused the system to correct the problem. There must be a way to handle the abuses without hurting everybody. Number 1890 CHAIR JAMES stated that earnings were how much a person made in a year, not necessarily what a person made in a day or an hour. In Fairbanks, the fire and policemen worked a lot of overtime, and their salaries reflected that. She agreed it was a management decision; management approved overtime. She also understood that overtime was necessary. She questioned the concept of counting the extra hours in the week as overtime rather than calling it premium time. "It seems to me if you have the people working just for the straight time, and you counted the straight time but not the overtime premium, then you would be at the same place based on the value of the work that you need done - whether you have new employees or the same employees." It would create a more level playing field because more people would be working more overtime rather than new people being hired as a way to cut down on the cost of retirement. Number 1991 MR. ETHERIDGE replied in his situation his overtime was the same just about ever year. The department figured it was cheaper, overall, to pay the overtime for two men than it was to hire a third man. The same amount of work was accomplished for less dollars. He worked on average of 6 days a week, 12 hours a day. A lot of people would be better off in the scenario Chair James presented. The Local 71 folks usually worked scheduled overtime - seven days a week all summer, for example. And the hours did not count towards vested time, but the dollars that they did earn helped build up the overtime earnings when they were vested. Number 2104 REPRESENTATIVE DYSON asked Mr. Etheridge how long a person had to work in the state system before being eligible for retirement? MR. ETHERIDGE replied five years. REPRESENTATIVE DYSON asked Mr. Etheridge if a person could retire at a certain age? MR. ETHERIDGE replied a person could retire after 30 years; or 55 years of age under Tier I; and 60 years of age under Tier II. REPRESENTATIVE DYSON asked Mr. Etheridge, if a person could retire after 30 years or at 55 or 60 years of age, whichever came first or last? MR. ETHERIDGE replied whichever came first. Number 2142 REPRESENTATIVE BERKOWITZ commented that there did not appear to be a definition of overtime in statute. Maybe, this issue could be resolved by developing a definition of overtime. Number 2153 CHAIR JAMES responded that would be a big issue to fix because overtime and premium time were not separated. She did not think it could be done in this bill. Number 2172 REPRESENTATIVE ELTON stated that a definition was not needed before because we did not put it in statute. Now that we were putting it in statute, it was time for a definition. CHAIR JAMES stated she was not convinced that a definition was needed; it was a different issue than what was before us now. Number 2204 KEVIN C. RITCHIE, Executive Director, Alaska Municipal League (AML), was the next person to testify in Juneau. In November of 1996 at its annual conference, the AML membership passed a policy statement which include the following section: "3. Basis for Computation of PERS Benefits: The League supports changes to the computation of PERS benefit to exclude overtime pay and leave cash-in from the calculation of retirement benefits." Number 2230 CHAIR JAMES stated this appeared to be a good deal for the municipalities but not necessarily the state. She wondered if it was possible to sort out the municipal employees, such as, the firefighters. Number 2259 MR. RITCHIE asked Chair James if she was talking about firefighters mainly? CHAIR JAMES replied firefighters and others who worked seasonally. Seasonal employees did not work a full year so if their overtime was taken away they would get even less. A person's expenses lasted for 12 months even if he or she did not work a full year. She would prefer to look at an annual wage as opposed to an hourly or weekly wage. In addition, some took a job because it could be extended. It seemed proper to include the straight-time hours as opposed to the premium pay in a retirement plan. But she also understood that the municipalities were asking the state for relief. She agreed with Representative Elton that the issue could be managed differently without changing the retirement computation, especially since it was such a generous and costly retirement system. She wondered if this could be done for the municipalities as well. Number 2341 MR. RITCHIE replied the Fair Labor Standards Act was passed in 1938 but it was not mandated until 1986 which kicked hundreds of state employees into the overtime categories that were not there before. The FLSA was designed for a post-depression, back-to-work, industrial society. Firefighters at the local level were affected by this because of their rigid shifts. Rigid shifts had not been factored into the FLSA. Number 2395 REPRESENTATIVE ELTON stated there were the following three ways to address the problem: hire enough people to do the work, manage the departments better, or adopt HB 188. He asked Mr. Ritchie if all three options had been discussed by the AML before adopting the recommendation? Number 2436 MR. RITCHIE replied the recommendation was done by a finance sub- committee of the AML. He was not familiar with all of its discussion. In some cases management worked, and in some cases it did not. For example, in the case of snow removal, sometimes there were dry years requiring no overtime. TAPE 97-37, SIDE B Number 0020 REPRESENTATIVE ELTON stated he was concerned that by adopting the bill, the first two options were taken off of the table. There would not be incentive to hire enough people, for example. He was sympathetic to the snow removal example, but in reality strong mayors often made a low-ball decision to be seen as a thrifty manager. And, the employees had to bear the brunt of the low-ball decision if the mayor was wrong. For example: they were on the road for 24 hours a day, away from their families, and missing their kid's school play. Now, their overtime would not count towards retirement. "It seems to me that the only person losing in this is the person that has to bear the brunt of decisions that we make as elected political officials or city department heads." He was more in favor of a rigid management style. Number 0094 REPRESENTATIVE BERKOWITZ stated police officers ran up big overtime because they were either working undercover or waiting in court. This type of inefficiency had not been addressed anywhere in the system. The bill seemed to be driven by police overtime and there was a different way of "skinning the cat." He asked Mr. Ritchie what other alternatives had been used to reduce overtime? Number 0127 MR. RITCHIE replied any time overtime could be reduced, money would be saved. And sometimes hiring more people to reduce overtime was not efficient. If a municipal government did not try to limit overtime, it would not be fulfilling its management obligation to the public. Number 0160 CRAIG PERSSON, Vice President, Public Safety Employees Association, was the first person to testify via teleconference in Fairbanks. He represented the State Troopers, the Juneau Police Department and several other law enforcement agencies. The association opposed the bill because it was a management problem. In Fairbanks, the airport had a severe overtime problem because of short staffing. But through negotiations and a change in the work schedule it reduced the overtime greatly. There were clauses in the bargained agreements with the state troopers that management could call anybody for overtime; it was not based on seniority. The padding of overtime was a problem within the collective bargaining agreement itself which could be solved by management and the union. The association did not believe in penalizing everybody in the state for a problem that could be occurring in several municipalities. This was a slap in the face of the men and women who helped keep the streets safe. Number 0248 REPRESENTATIVE BERKOWITZ asked Mr. Pearson if he knew much about the problem with the Anchorage Police Department? He wondered if the municipality had explored ways of reducing overtime. MR. PEARSON replied he could not answer the question because he was not familiar with the agreement in Anchorage and the problems. He did know that Fairbanks had worked with its state personnel and had been able to solve a lot of the overtime problems; not all of them, but a great portion of them. Under staffing for the state troopers was necessitated by budget cuts. The bill penalized the folks for what had happened through the legislature. Number 0290 REPRESENTATIVE BERKOWITZ asked Mr. Pearson if there was anything that would preclude a municipality from negotiating separately on this issue with a police department? MR. PEARSON replied, "No." A municipality could work on a separate letter of agreement, for example, on the overtime problem. Number 0344 REPRESENTATIVE BERKOWITZ commented there were definitions of overtime in statute, but he had not had a chance to review them. A definition was crucial before it could be amended; it was unfair to push an interpretation down to the courts and bargaining units. Number 0373 CHAIR JAMES stated the intent of overtime in the bill was all of the hours at whatever rate over and above the regularly scheduled work time including time and a half and double time. A definition could be made in terms of the bill, as opposed to changing the definition throughout the statutes - the typical way the statutes were messed up. She was open to discussing such an amendment. Number 0406 REPRESENTATIVE BERKOWITZ said he was interested in providing a conceptual amendment. Number 0436 CHAIR JAMES asked Representative Cowdery what did he expect overtime to mean in HB 188? Number 0443 REPRESENTATIVE COWDERY replied anything over the base pay that was paid at an overtime pay - time and a half and double time. Moreover, in Anchorage, the police and fire departments had their own separate retirement system consisting of four tiers. Now, all new hires were under PERS. The bill talked about future hires only. Number 0546 REPRESENTATIVE COWDERY further stated the present police chief opted out of the local police retirement system and opted for PERS instead. Number 0570 CHAIR JAMES stated, historically, a person maintained his existing benefits despite changes to the system. CHAIR JAMES asked the committee members if they wanted to adopt a conceptual amendment today or hold the bill over to prepare an actual amendment to be discussed later? Number 0621 REPRESENTATIVE ELTON replied he wanted to hold the bill over. The bill created a fourth tier which was a big step. In the last several decades only three tiers had been created; the speed appeared to be picking up. In addition, this was the only committee of referral where substantive issues could be debated. He suggested holding the bill beyond Thursday even. Number 0661 CHAIR JAMES replied she did not intend to hold the bill beyond Thursday. In addition, the House Finance Committee - the next committee of referral - did more substantive changes to bills than any other committee. It behooved the House State Affairs Standing Committee to fix things as good as it could before reaching the House Finance Committee. CHAIR JAMES announced she would hold the bill over until Thursday, April 10, 1997, to look at the overtime definition issue further. HB 200 - SUBPOENA POWER: ADMIN. REG. REVIEW COMMIT The next order of business to come before the House State Affairs Standing Committee was HB 200, "An Act relating to subpoenas of the Administrative Regulation Review Committee; and providing for an effective date." CHAIR JAMES called on Walter Wilcox, Legislative Assistant to Representative Jeannette James, to present the bill. Number 0730 WALTER WILCOX, Legislative Assistant to Representative Jeannette James, explained that Sarah Felix, Department of Law, pointed out some problems with the bill at the last hearing. Upon review, and learning that the attorney's general office would represent the committee if sued, we took her advise. MR. WILCOX explained the portion dealing with the arrest was dropped so that a denied subpena would go to the superior court for action. MR. WILCOX explained the language in Section 1 (5) was changed to read: "(5) is signed by the chair of the committee." MR. WILCOX explained the language "or the chair's designee" needed to be deleted. Number 0811 REPRESENTATIVE ELTON moved that the committee substitute (0- LS0777/B, Cook, 4/4/97) be adopted. There was no objection, the committee substitute was so adopted. Number 0824 REPRESENTATIVE IVAN asked Mr. Wilcox to explain the changes again. Number 0837 MR. WILCOX explained in Section 1 (c) the original language read: "(c) A witness who is under subpoena and neglects or refuses to attend a meeting of the Administrative Regulation Review Committee may be arrested and brought before the committee by any person charged with the enforcement of state law. The only warrant of authority necessary to authorize an arrest under this subsection is (1) a copy of the subpoena; (2) a copy of proof of service of the subpoena; and (3) a written direction for the arrest of the witness signed by the chair and by a majority of the members of the committee." MR. WILCOX explained the attorney's general office did not think that was a good way to handle the situation. It should be a court action in lieu of a committee action. Therefore, the following language was adopted: "(c) If a witness who is under subpoena neglects or refuses to attend a meeting of the Administrative Regulation Review Committee, the committee may bring an action in superior court to enforce the subpoena." MR. WILCOX further explained the second change was in Section 1 (5), of which, the last four words needed to be stricken from the committee substitute. CHAIR JAMES announced an amendment was needed to delete the last four words on page 2, line 5. Number 0946 REPRESENTATIVE BERKOWITZ moved that the language "or the chair's designee" be deleted on page 2, line 5. There was no objection, Amendment 1 was approved. REPRESENTATIVE ELTON asked, for clarification, if the attorney's general office would bring action to the superior court? MR. WILCOX replied if the committee was sued the attorney's general office would defend it. And if the committee went out and arrested people there would be a greater chance of running afoul of the law. Number 0990 REPRESENTATIVE BERKOWITZ asked if there was anticipation about spending too much money on the reimbursement of expenses for food and lodging in (3). CHAIR JAMES replied the anticipation for the expenses would be negligible. Number 1021 MR. WILCOX replied the individuals that would be affected by a subpena resided here in Juneau. They would be on the state payroll so there would not be a need for any reimbursement. REPRESENTATIVE BERKOWITZ explained he asked the question because he wanted to be sure that people would not be pulled from across the state. MR. WILCOX replied that was not the intent. Number 1047 REPRESENTATIVE VEZEY moved that CSHB 200(STA), as amended, move from the committee with individual recommendations and the attached fiscal note(s). REPRESENTATIVE ELTON objected. A roll call vote was taken. Representatives James, Dyson, Ivan and Vezey voted in favor of the motion. Representatives Berkowitz and Elton voted against the motion. The CSHB 200(STA), as amended, was so moved from the House State Affairs Standing Committee. HB 79 - MINOR IN POSSESSION OF TOBACCO The next order of business to come before the House State Affairs Standing Committee was HB 79, "An Act relating to the offense of possession of tobacco by a person under 19 years of age." CHAIR JAMES called on Representative Con Bunde, sponsor of HB 79, to present the bill. Number 1125 REPRESENTATIVE CON BUNDE, Alaska State Legislature, stated the goal of HB 79 was to strength existing access laws for the use and purchase of tobacco. REPRESENTATIVE BUNDE announced there was a committee substitute (0- LS0348/H, Chenoweth, 4/7/97) based on the last hearing of the bill and explained the sections. REPRESENTATIVE BUNDE explained Section 1 (A) changed the location of the vending machines to at least 10 feet away from any entrance to the premises that the public may use, or as far as possible for smaller stores. REPRESENTATIVE BUNDE explained Sec. 2 dealt with persons under 19 years of age and the use of false identification as a violation. REPRESENTATIVE BUNDE explained Sec. 3 added new language to exempt a person under the age of 19, to comply with the Synar Amendment, who made a controlled buy under the auspices of a police officer or law enforcement agency. REPRESENTATIVE BUNDE explained Sec. 4 defined proof of age, tobacco product, and vending machine. REPRESENTATIVE BUNDE explained Sec. 5 prevented anybody from preempting a local government's right to pass a local tobacco tax. REPRESENTATIVE BUNDE explained Sec. 6 caused the revocation of a license for people selling tobacco illegally. REPRESENTATIVE BUNDE explained Sec. 7 added new language that prevented a person from selling tobacco unless a business license endorsement was purchased. REPRESENTATIVE BUNDE explained Sec. 8 raised the fee for the business license endorsement from $25 to $100. REPRESENTATIVE BUNDE explained Sec. 9 added new language to change the time a business license could be suspended or revoked to 90 days for the first offense; to 180 days, if there was a previous conviction in the past 24 months; and to 1 year, if there were two or more convictions within the past 24 months. REPRESENTATIVE BUNDE explained Sec. 10 limited the business license endorsement suspension to the retail outlet where the violation occurred; not system wide. REPRESENTATIVE BUNDE explained Sec. 11 added new language that required tobacco products to be in a secure place that was accessible only by authorized employees. It also defined the term "defined place". REPRESENTATIVE BUNDE explained Sec. 12 added a new subsection that required retailers to notify all employees that state law prohibited the sell of tobacco. It also required carding all persons under the age of 27 to comply with federal law. REPRESENTATIVE BUNDE explained Sec. 13 provided for the disposal of money collected into the General Fund. REPRESENTATIVE BUNDE explained Sec. 14 allowed for the separate accounting of the money for a training program for the clerks. REPRESENTATIVE BUNDE explained Sec. 15 required that an accused minor be charged, prosecuted, and sentenced in the district court in the same manner as an adult while a parent, guardian, or custodian was present. Number 1420 PATRICIA SWENSON, Legislative Assistant to Representative Con Bunde, explained Sec. 7 was tied to Sec. 12 (i). Section 12 (i) required all those that sold tobacco products to take a class every other year that provided information about the federal/state laws and regulations. The subsection also prevented the sell of single cigarettes unless they met all the federal labeling requirements and warnings. REPRESENTATIVE BUNDE stated this was a federal requirement. CHAIR JAMES replied she understood that. MS. SWENSON further explained Sec. 7 was also tied to Sec. 13 and 14. Section 13 provided that the money collected from the increased endorsement fees be deposited to the General Fund. Section 14 deposited the money into the General Fund and accounted for it separately so that the legislature could make appropriations for the training program. The funds were not dedicated, however. Number 1512 CHAIR JAMES stated the fiscal note did not show an impact. MS. SWENSON replied there was not a fiscal note for the new committee substitute yet. CHAIR JAMES stated a new fiscal note would be needed before the bill could be moved out of the committee. CHAIR JAMES referred the committee members to page 2, line 18, "(1) who is a prisoner at an adult correctional facility; or". The language was discussed at the last hearing but a conclusion had yet to be reached. Number 1568 REPRESENTATIVE VEZEY announced he had a lot of problems with Section 1. Section 1 (b) (2) said that employers could not put vending machines that sold tobacco products in a break room, or not to hire any person under 19 years of age. It left an employer no other option. Number 1614 REPRESENTATIVE BUNDE replied that was accurate, if a person under 19 years of age had access to a vending machine unsupervised. Number 1625 CHAIR JAMES wondered if the exemption could be taken out to remove that option; it was hard to define a break room. Number 1669 REPRESENTATIVE BUNDE replied the bill itself limited where a vending machine could be and that it had to be under supervision. Thus, by de facto, if it was in a locked break room, it would not meet the other requirements of the law. Number 1710 CHAIR JAMES agreed with Representative Vezey. The bill said a vending machine could not be in a break room. MS. SWENSON said the provision had to do with the new Food and Drug Administration's (FDA) regulations. Number 1735 REPRESENTATIVE VEZEY further said he understood the intent of Sec. 3, but believed it was very unnecessary. The police currently conducted their own sting operations without a statute that authorized them to possess drugs, for example. He always believed it was an affirmative defense for breaking the law. He also knew that the police departments had limited resources and they probably used that as an excuse not to enforce the tobacco law. He could appreciate that given the rate of violent crimes. He did not really object to the provision; it was just a response to a very poor excuse. Number 1802 CHAIR JAMES wondered if minors even needed to be used given the new law of carding everybody under 27 years of age. Number 1837 REPRESENTATIVE BUNDE replied there were two different types of violations - carding and purchasing. Therefore, somebody under 19 years of age would be needed for the purchase violation. Number 1855 REPRESENTATIVE BERKOWITZ stated not everybody was carded. That was the problem. In addition, in response to Representative Vezey, the provision did cut the affirmative defense of entrapment. Number 1877 REPRESENTATIVE VEZEY stated he was concerned about the defense aspect of an affirmative defense position. "Somebody would claim a defense that the police did not have the authority to do this because we didn't give it to them in statute. I think we're maybe narrowing their authority." REPRESENTATIVE BERKOWITZ replied affirmative defense was defined in statute under Title 11. REPRESENTATIVE VEZEY asked why was the provision needed then? REPRESENTATIVE BERKOWITZ replied this was not an affirmative defense, but a response to a vendor claiming entrapment. Number 1959 REPRESENTATIVE IVAN asked Representative Bunde if the licensing was part of federal law or state law? REPRESENTATIVE BUNDE replied it was an endorsement to a business license for the state. Number 2085 REPRESENTATIVE IVAN asked about the Department of Commerce and Economic Development's (DCED) training program. MS. SWENSON replied the intent was to have a course that would go over the federal and state laws, as well as, the applicable regulations. It would be a condition of renewing an endorsement every other year. The retailers would pay for the class themselves, and part of the money would be allocated from the raise in the endorsement fee from $25 to $100. REPRESENTATIVE IVAN wondered if all small retailers would have to go through the class. MS. SWENSON replied, "Yes." Everybody that sold tobacco products would have to go through the class to be brought up to speed on the new regulations at least every other year. Number 2107 CHAIR JAMES wondered if this could be done without going to Juneau, Anchorage or Fairbanks, for example. MS. SWENSON replied it would depend on how the department set the class up. Number 2132 REPRESENTATIVE ELTON asked the following: What was a retailer? The owner? The manager? Would the clerks have to take the class? Number 2152 MS. SWENSON replied the owner: the person responsible for running or maintaining the establishment. Number 2166 REPRESENTATIVE ELTON said this could create a problem because the owners of 7-Eleven, for example, were different than the managers, yet the managers would be responsible. He suggested a definition of retailer was needed. MS. SWENSON replied, "Okay." REPRESENTATIVE BUNDE stated the intent was the local manager of the retail outlet; not the Chief Executive Officer of 7-Eleven, for example. CHAIR JAMES agreed that it needed to be defined. Number 2223 REPRESENTATIVE IVAN stated he was concerned about the small retailers throughout the state and how they would get together with the DCED for the class. It would be cost prohibitive to fly from Akiak to wherever the DCED folks would be, for example. Number 2269 REPRESENTATIVE BUNDE said he could not imagine that this type of schooling would require somebody to fly from Akiak to Anchorage, for example. It would probably only require correspondence. Number 2292 CHAIR JAMES replied education was necessary. It was not as simple as signing a waiver that indicated a person had read the information. Number 2372 LOREN JONES, Director, Division of Alcoholism and Drug Abuse, Department of Health and Social Services, was the next person to testify in Juneau. The department supported the previous committee substitute and he did not see a lot in the current committee substitute that would change its position. MR. JONES stated the department was pleased to see the change to age 27 to comply with the proposed FDA regulations. TAPE 97-38, SIDE A Number 0001 MR. JONES further stated the limit in Sec. 3 (b) of "not less than $300" was of concern to the department. Other bills were setting a limit of "up to $250" to avoid potential jury trials. He suggested putting a period at the end of the word "violation" on page 2, line 28 and deleting the remaining language. The normal punishment for a violation was a penalty of up to $250 anyway. There had been discussions with the Department of Law regarding this issue. Number 0104 CHAIR JAMES replied the provision in Sec. 3 (b) was different. The provision established a floor as opposed to a ceiling for the fine. Number 0126 MR. JONES responded the department did not have a problem with establishing a floor. The courts had ruled that if there was a floor of $300 there had to be a jury trial. CHAIR JAMES said she understood. She was wondering about moving the floor down. MR. JONES replied the department would not have a problem with moving the floor below $300. Number 0167 REPRESENTATIVE BERKOWITZ explained the courts tended to set a bail schedule for the various violations. The courts adopted a set amount so that there would be uniformity in the court system. CHAIR JAMES stated if the bill set a fee at $250 that was the amount the courts would adopt. REPRESENTATIVE BERKOWITZ replied, "That's true." Number 0219 MR. JONES explained that Ms. Swenson just talked to the Department of Law yesterday and it was okay with the amount of $300. The language needed to be cleaned up so that the fine was $300 and not less than, however. MR. JONES further explained that the department liked the new Sec. 7 prohibiting the sale of single cigarettes. It was in line with the new FDA regulations. Number 0281 REPRESENTATIVE ELTON said Sec. 7 (3) did not outlaw the sale of single cigarettes. It only said one could not sell single cigarettes unless the container from which they came from displayed a warning. CHAIR JAMES replied Representative Elton misread the provision. A person could not open a box and sell single cigarettes from the box. REPRESENTATIVE ELTON replied, "Thanks." He had misread it. Number 0344 REPRESENTATIVE BERKOWITZ wondered about the provision of the stamp discussed earlier in the House State Affairs Standing Committee. CHAIR JAMES replied that was a problem for the state surrounding the tobacco tax. We were not talking about taxes. We were talking about a warning. Number 0383 REPRESENTATIVE BERKOWITZ said he was wondering if there would be any disturbance to the stamp. Number 0410 REPRESENTATIVE DYSON asked Chair James if the committee was going to vote on the bill today? CHAIR JAMES replied she would like to move it out today, but we would probably run out of time. REPRESENTATIVE DYSON asked to be excused from the meeting. He had something important to do before 10:00 a.m. CHAIR JAMES replied he might want to ask his minority friends to see if they could fill his spot as a vote to move the bill before he left. REPRESENTATIVE ELTON said he would be here until 10:00 a.m. REPRESENTATIVE BERKOWITZ said he would be happy to fill Mr. Dyson's slot. Number 0469 MR. JONES further said on page 5, lines 1-8, the department questioned the wording in (C) of "two or more times" and in (2) of "three or more times". Was "two or more times" needed in (C) if it was going to be permanently revoked in (2)? he asked. MR. JONES further stated that in Title 4 there were requirements for servers, bartenders and waitresses who served alcohol. He suggested looking there for language surrounding the training course required in the bill from the Department of Commerce and Economic Development. Number 0614 REPRESENTATIVE IVAN stated he was still concerned about the training. Number 0628 CATHERINE REARDON, Director, Division of Occupational Licensing, Department of Commerce and Economic Development, was the next person to testify in Juneau. The division administered the business license program for the state. A business license was needed to conduct business in the state and every two years a $25 fee was paid for a special tobacco endorsement. The provisions concerning education were new in version "H" so she had yet to familiarized herself with the changes and had not given much thought to how the department would conduct the training courses and/or the cost associated with it. MS. REARDON further stated the division supported the efforts and intent of the bill to strengthen enforcement of the tobacco laws. Thus, she did not want to stand in the way of any effort. Enforcement had been the biggest issue between the departments. In version "H" it appeared that the Division of Occupational Licensing was the department that would receive the complaints, investigate them, and deal with the Department of Law for prosecution. That was an activity that the division did not engage in at all right now. It did not have enforcement staff for the business license program. It was a tax collection system, and no one had been convicted of practicing without a business license up to this time. Therefore, enforcement was something that the division would have to gear towards. She would like to have some conversations with the Department of Health and Social Services and the alcohol board to see who could most effectively do it for the cheapest. It was important that the state enforce this. MS. REARDON further stated that the business license and tobacco endorsement had been a revenue generating system rather than a regulatory system. It was very easy to get multiple business licenses and tobacco endorsements. Therefore, she would like to address the issue of a business, with a revoked tobacco endorsement, getting a new license, with a new name, the next day, for example. CHAIR JAMES said it appeared that whoever got the endorsement could control the enforcement. She assumed that would be the Department of Public Safety. It could, however, be the Department of Health and Social Services. It needed to be identified. Whoever it was should also authorize the endorsement. CHAIR JAMES announced the bill would not be moved out of the committee today. It needed to be improved before going to the House Judiciary Standing Committee. CHAIR JAMES suggested a diagram was needed to see how the bill would work. Number 1070 REPRESENTATIVE ELTON stated a new fiscal note would probably be needed as well because there would be a cost associated with enforcement and control. CHAIR JAMES replied a positive fiscal note would be needed because the state would be taking in more fees. ADJOURNMENT Number 1150 CHAIR JAMES adjourned the House State Affairs Standing Committee meeting at 9:55 a.m.