Legislature(2021 - 2022)GRUENBERG 120

04/08/2021 03:00 PM STATE AFFAIRS

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
<Bill Hearing Canceled>
Moved HB 106 Out of Committee
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 8, 2021                                                                                          
                           3:04 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Jonathan Kreiss-Tomkins, Chair                                                                                   
Representative Matt Claman, Vice Chair                                                                                          
Representative Geran Tarr                                                                                                       
Representative Andi Story                                                                                                       
Representative Sarah Vance                                                                                                      
Representative James Kaufman                                                                                                    
Representative David Eastman                                                                                                    
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 106                                                                                                              
"An Act relating to missing persons under 21 years of age."                                                                     
     - MOVED HB 106 OUT OF COMMITTEE                                                                                            
HOUSE BILL NO. 102                                                                                                              
"An Act relating to the state insurance catastrophe reserve                                                                     
account; and providing for an effective date."                                                                                  
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB  106                                                                                                                 
SHORT TITLE: MISSING PERSONS UNDER 21 YEARS OLD                                                                                 
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/19/21       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/19/21       (H)       STA, HSS                                                                                               
03/11/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
03/11/21       (H)       Scheduled but Not Heard                                                                                
03/16/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
03/16/21       (H)       Heard & Held                                                                                           
03/16/21       (H)       MINUTE(STA)                                                                                            
03/25/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
03/25/21       (H)       -- MEETING CANCELED --                                                                                 
04/01/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
04/01/21       (H)       Heard & Held                                                                                           
04/01/21       (H)       MINUTE(STA)                                                                                            
04/08/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
BILL: HB  102                                                                                                                 
SHORT TITLE: STATE INSUR. CATASTROPHE RESERVE ACCT.                                                                             
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/18/21       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/18/21       (H)       STA, FIN                                                                                               
04/08/21       (H)       STA AT 3:00 PM GRUENBERG 120                                                                           
WITNESS REGISTER                                                                                                              
KACI SCHROEDER, Assistant Attorney General                                                                                      
Department of Law                                                                                                               
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During the hearing on HB 106, answered                                                                   
questions from the committee.                                                                                                   
SCOTT JORDAN, Director                                                                                                          
Division of Risk Management                                                                                                     
Department of Administration                                                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Introduced HB 102 with a PowerPoint                                                                      
presentation, titled "House Bill 102," on behalf of the House                                                                   
Rules Standing Committee, sponsor by request of the governor.                                                                   
LESLIE ISAACS, Director                                                                                                         
Division of Administrative Services                                                                                             
Department of Administration                                                                                                    
Klawock, Alaska                                                                                                                 
POSITION STATEMENT:  During the hearing on HB 102, answered                                                                   
committee questions.                                                                                                            
PALOMA HARBOUR, Fiscal Management Analyst                                                                                       
Office of Management & Budget                                                                                                   
Office of the Governor                                                                                                          
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During the hearing on HB 102, answered                                                                   
questions from the committee.                                                                                                   
ACTION NARRATIVE                                                                                                              
3:04:40 PM                                                                                                                    
CHAIR  JONATHAN KREISS-TOMKINS  called  the  House State  Affairs                                                             
Standing   Committee    meeting   to    order   at    3:04   p.m.                                                               
Representatives Kaufman,  Story, Tarr, Vance,  and Kreiss-Tomkins                                                               
were present  at the call  to order.  Representatives  Claman and                                                               
Eastman arrived as the meeting was in progress.                                                                                 
           HB  106-MISSING PERSONS UNDER 21 YEARS OLD                                                                       
3:05:39 PM                                                                                                                    
CHAIR KREISS-TOMKINS announced that the first order of business                                                                 
would be HOUSE BILL NO. 106, "An Act relating to missing persons                                                                
under 21 years of age."                                                                                                         
3:06:26 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
3:06:57 PM                                                                                                                    
REPRESENTATIVE VANCE moved to adopt Amendment 1, [labeled 32-                                                                   
GH1581\A.1, Radford, 4/7/21], which read:                                                                                       
     Page 1, line 1, following "Act":                                                                                         
          Insert "relating to human trafficking; and"                                                                         
     Page 1, following line 2:                                                                                                  
          Insert a new bill section to read:                                                                                    
        "* Section 1. AS 11.41.360(a) is amended to read:                                                                   
          (a)  A person commits the crime of human                                                                              
     trafficking in  the first degree if  the person compels                                                                    
     or induces another person to  engage in sexual conduct,                                                                    
     adult entertainment, or labor in  the state by force or                                                                    
     threat of force against  any person, [OR] by deception,                                                                
     or by coercion."                                                                                                       
     Page 1, line 3:                                                                                                            
          Delete "Section 1"                                                                                                  
          Insert "Sec. 2"                                                                                                     
     Renumber the following bill sections accordingly.                                                                          
CHAIR KREISS-TOMKINS objected for the purpose of discussion.                                                                    
3:07:07 PM                                                                                                                    
REPRESENTATIVE  VANCE  recalled  that during  the  previous  bill                                                               
hearing  on  4/1/21,  a representative  from  the  Department  of                                                               
Public  Safety (DPS)  had mentioned  that the  college age  group                                                               
[18-21]  was  more  susceptible  to  coercion,  which  she  later                                                               
concluded  could lead  to human  trafficking.   Consequently, she                                                               
observed that  [Alaska's] human trafficking laws  did not include                                                               
the term  "coercion."  She  explained that Amendment 1  would add                                                               
"or by  coercion" to  the definition of  human trafficking.   She                                                               
deferred to the Department of Law (DOL) for further explanation.                                                                
3:09:40 PM                                                                                                                    
KACI  SCHROEDER, Assistant  Attorney General,  Department of  Law                                                               
(DOL),  stated  that  DOL  was  unsure of  what  the  sponsor  of                                                               
Amendment  1 meant  by "coercion."    She explained  that if  the                                                               
sponsor meant to include the crime  of coercion, as it appears in                                                               
Title  11,  a  defense  attorney could  argue  that  because  the                                                               
broader crime of  coercion is a class C felony  and a lower class                                                               
of offense than human trafficking  [class A felony], it should be                                                               
charged  with  the lower  offense.    She added  that  additional                                                               
amendments  would be  required to  prevent  that from  happening.                                                               
Therefore,  as  drafted,  DOL   had  concerns  with  implementing                                                               
Amendment 1 consistent with the intent of the legislature.                                                                      
REPRESENTATIVE  VANCE concluded  that Alaska's  human trafficking                                                               
statutes required further  work.  She asserted  that the statutes                                                               
should clarify  that coercion  is a  factor in  human trafficking                                                               
while allowing the  crime to be prosecuted to the  full extent of                                                               
the law.   She withdrew Amendment  1 in light of  Ms. Schroeder's                                                               
advice and informed  committee members that she was  working on a                                                               
more comprehensive human trafficking bill.                                                                                      
3:12:28 PM                                                                                                                    
REPRESENTATIVE  CLAMAN   asked  whether   the  majority   of  sex                                                               
trafficking prosecutions  in Alaska were being  prosecuted by the                                                               
federal government or the state.                                                                                                
MS. SCHROEDER  answered both.   She  said she  couldn't determine                                                               
who  was doing  more prosecutions,  just that  state and  federal                                                               
prosecutors worked closely on them together.                                                                                    
3:13:40 PM                                                                                                                    
REPRESENTATIVE EASTMAN  asked whether  the intent of  Amendment 1                                                               
was to account for scenarios involving drug use.                                                                                
REPRESENTATIVE  VANCE  relayed  that  she  was  trying  to  bring                                                               
Alaska's  human   trafficking  definitions  up  to   the  federal                                                               
standard by including the word "coercion."   She said she had not                                                               
specifically thought of drugs [while  drafting the amendment], as                                                               
not all instances of coercion involve them.                                                                                     
3:15:04 PM                                                                                                                    
REPRESENTATIVE  STORY expressed  her appreciation  for the  bill.                                                               
She informed committee  members that many people  in her district                                                               
and across the state were  concerned [about missing persons under                                                               
the age of 21].                                                                                                                 
CHAIR KREISS-TOMKINS  invited final  comments from  the committee                                                               
on HB 106.                                                                                                                      
3:15:53 PM                                                                                                                    
REPRESENTATIVE   VANCE   stated    her   appreciation   for   the                                                               
administration   for  bringing   this  legislation   forward  and                                                               
updating the  reporting standards  for missing persons  under the                                                               
age of 21.  She believed that  many people were not aware of this                                                               
issue  or its  connection  to human  trafficking.   Further,  she                                                               
addressed  the [high  rates of]  missing and  murdered indigenous                                                               
women.  She shared a  personal anecdote regarding a missing woman                                                               
from her  district [District 31]  and stressed the  importance of                                                               
recognizing signs  "of people who  are being sought after  and go                                                               
missing."   She  also reported  that 25  percent of  the homeless                                                               
population  [in Alaska]  were trafficked,  which  falls into  the                                                               
missing persons category.                                                                                                       
3:17:43 PM                                                                                                                    
REPRESENTATIVE EASTMAN  believed it  was important  to understand                                                               
how  the legislature  intended "reasonable  efforts"  on page  2,                                                               
line 9, to be interpreted.   He opined that without clear intent,                                                               
the  requirement for  reasonable effort  could be  ineffective or                                                               
work done  by law  enforcement would  be "extremely  difficult to                                                               
work into  all the  other tasks [the  legislature] is  asking law                                                               
enforcement to do."  He  maintained that the term "reasonable" is                                                               
subjective.   Additionally, he directed  attention to  Section 2,                                                               
paragraph (2),  of the  bill, which required  [that a  request be                                                               
made]  to   remove  the  information  from   state  and  national                                                               
databases within  24 hours of  the missing person  being located.                                                               
He argued that sometimes, information  regarding a missing person                                                               
may not  be accurate.  He  said in those situations,  the 24-hour                                                               
requirement may need further refinement.                                                                                        
3:19:40 PM                                                                                                                    
REPRESENTATIVE KAUFMAN suggested referring  the bill to the House                                                               
Judiciary    Standing   Committee    (HJUD)   to    resolve   the                                                               
aforementioned concerns.                                                                                                        
CHAIR  KREISS-TOMKINS recommended  raising that  consideration to                                                               
the chair of  HJUD or the speaker of the  House, as [the speaker]                                                               
makes the referrals.                                                                                                            
REPRESENTATIVE  CLAMAN  in  response to  Representative  Kaufman,                                                               
explained  that  the intent  of  this  legislation was  to  align                                                               
Alaska statutes  with federal  law to  acquire federal  funds for                                                               
missing persons  reports.  He  said he appreciated the  idea that                                                               
HJUD could  add much to  the process; however, he  disagreed with                                                               
that  opinion, as  the House  State Affairs  Standing Committee's                                                               
process had  been robust.   He concluded  by stating  his support                                                               
for the bill.                                                                                                                   
3:21:28 PM                                                                                                                    
REPRESENTATIVE TARR said  research showed that a  young person is                                                               
typically  trafficked  within  48  hours,  which  indicated  that                                                               
timing is  critical.  She expressed  her hope that "they  will be                                                               
able  to do  it within  24 hours  because it's  less likely  that                                                               
they'll be  able to  help that  young person  the more  time goes                                                               
3:22:04 PM                                                                                                                    
REPRESENTATIVE STORY  agreed with Representative  Tarr's remarks.                                                               
She expressed her  support for the legislation and  hoped that it                                                               
would pass expeditiously.                                                                                                       
3:22:30 PM                                                                                                                    
REPRESENTATIVE CLAMAN  moved to  report HB  106 out  of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.  Without objection, HB 106  was moved from the House State                                                               
Affairs Standing Committee.                                                                                                     
         HB  102-STATE INSUR. CATASTROPHE RESERVE ACCT.                                                                     
3:22:56 PM                                                                                                                    
CHAIR KREISS-TOMKINS  announced that the final  order of business                                                               
would  be HOUSE  BILL  NO. 102,  "An Act  relating  to the  state                                                               
insurance  catastrophe  reserve  account; and  providing  for  an                                                               
effective date."                                                                                                                
3:24:26 PM                                                                                                                    
SCOTT JORDAN,  Director, Division of Risk  Management, Department                                                               
of  Administration (DOA),  introduced  HB 102  on  behalf of  the                                                               
House  Rules  Standing  Committee,  sponsor  by  request  of  the                                                               
governor.   He provided a PowerPoint  presentation, titled "House                                                               
Bill  102" [hard  copy included  in  the committee  packet].   He                                                               
began  on slide  2, which  outlined the  purpose of  the bill  as                                                               
follows [original punctuation provided]:                                                                                        
      This   legislation  would   change  the   Catastrophic                                                                    
     Reserve   Account   (CATFund)    from   $5,000,000   to                                                                    
     $50,000,000 unencumbered funds.                                                                                            
      The purpose is  to allow the State  to self-insure for                                                                    
     property coverage.                                                                                                         
      The   State   currently  self-insures   for   Workers'                                                                    
     Compensation and General Liability.                                                                                        
      Due   to  the   global   property  insurance   markets                                                                    
     hardening,  we saw  a 30%  increase in  insurance costs                                                                    
     from FY20 to FY21 and  have been told to expect another                                                                    
     15% to 20% for FY22.                                                                                                       
      Currently,  the  limit  on  catastrophic  coverage  is                                                                    
     $50,000,000 for  an annual  premium. By  increasing the                                                                    
     statutory cap,  the State will  be able to  fully self-                                                                    
     insure  against property  losses and  in doing  so save                                                                    
     the annual premium.                                                                                                        
3:26:22 PM                                                                                                                    
MR.  JORDAN  addressed  statutory  language  on  slide  3,  which                                                               
highlighted  key   points  in   AS  37.05.289   [State  insurance                                                               
catastrophe reserve  account], including  "Assets of  the account                                                               
may be  used to obtain  insurance, to establish reserves  for the                                                               
self-insurance  program,  and  to  satisfy  claims  or  judgments                                                               
arising under  the program."   The two other  highlighted phrases                                                               
indicated  that the  current  cap  is not  to  exceed $5  million                                                               
unencumbered.   He reviewed a  list of expenditures from  the CAT                                                               
Fund since its inception  in 1988 on slide 4.   He noted that the                                                               
total expended was $149 million,  which averaged $4.5 million per                                                               
year.    He  acknowledged  that  the  $5  million  cap  had  been                                                               
sufficient; however,  he reiterated the department's  interest in                                                               
increasing the  statutory cap to  $50 million to allow  the state                                                               
to self-insure against catastrophic property losses.                                                                            
3:27:50 PM                                                                                                                    
MR. JORDAN  advanced to a  graph on slide  5 that showed  the 10-                                                               
year  history of  property premiums  and losses.   The  blue line                                                               
reflected property premiums, which  had increased from $2 million                                                               
in FY  10 to $5.1  million in FY 20.   The orange  line reflected                                                               
property losses  paid by the  state.  Losses remained  fairly low                                                               
except for three  spikes: $4 million in FY 15  due to the Crystal                                                               
Lake Hatchery  fire in March 2014;  $1.2 million in FY  20 due to                                                               
the  claims from  the  earthquake in  Anchorage  on November  30,                                                               
2018; $1 million in FY 20  due to retention paid for a Department                                                               
of Transportation  & Public Facilities (DOT&PF)  maintenance shop                                                               
snow collapse in McGrath.                                                                                                       
3:30:11 PM                                                                                                                    
MR.  JORDAN  turned  to  slide  6 and  reviewed  the  history  of                                                               
property premiums compared  to all premiums from FY 10  to FY 20;                                                               
property premiums  totaled $39 million, and  all premiums totaled                                                               
$80 million.   He said he hoped that HB  102 would create savings                                                               
for  the  department,  as increases  in  property  premiums  were                                                               
expected to  continue.  He  proceeded to slide 7,  titled "larger                                                               
claims paid  out of the  CRA (CAT  Fund)," which read  as follows                                                               
[original punctuation provided]:                                                                                                
        • AMHS LeConte Grounding May 2004; $1,187,330                                                                           
        • F&G Crystal Lake Hatchery fire March 2014;                                                                            
        • Alaska Aerospace Kodiak Launch Facility rocket                                                                        
          explosion August 2014; $1,513,667                                                                                     
     • PFAS claims starting in November 2017; $5,877,555                                                                        
        • Earthquake  related   claims    November   2018;                                                                      
3:31:58 PM                                                                                                                    
MR. JORDAN  moved to  slide 8,  which provided  a summary  of UGF                                                               
lapse appropriations  and read  as follows  [original punctuation                                                               
     ?The budget includes lapse appropriations to shore up                                                                      
     certain state accounts up to statutory limits                                                                              
      ?The Risk Management lapse appropriation is last to                                                                       
     ensure sufficient lapse for the other accounts                                                                             
        ?The total FY2021 projected UGF lapse is $110.7                                                                         
MR. JORDAN noted that slide 8  showed how the CAT Fund was funded                                                               
each year.                                                                                                                      
3:33:01 PM                                                                                                                    
CHAIR KREISS-TOMKINS said he was  thrilled about legislation that                                                               
would save money for the state operating budget.                                                                                
3:33:11 PM                                                                                                                    
REPRESENTATIVE   CLAMAN  questioned   how   much  the   insurance                                                               
companies were paying.                                                                                                          
MR. JORDAN offered  to follow up with  the requested information.                                                               
He believed  that during that  10-year period  [FY 10 to  FY 20],                                                               
the only claim of significance was the Alaska Aerospace claim.                                                                  
REPRESENTATIVE CLAMAN reasoned  that if the premiums  paid by the                                                               
state exceeded the losses paid  by the insurance companies, there                                                               
would be additional reason to pass HB 102.                                                                                      
MR. JORDAN relayed that there were  many years that the state did                                                               
not receive payments  from the insurance carriers  for the Alaska                                                               
Aerospace claim.                                                                                                                
3:35:19 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN  questioned how  the  CAT  Fund would  be                                                               
managed  if  there  were  no  claims and  a  large  cash  balance                                                               
MR. JORDAN  explained that the  fund had an  unencumbered balance                                                               
of $5 million which  could not be exceeded.  If  the bill were to                                                               
pass, he said, the fund would have  a balance of $50 million.  He                                                               
noted  that even  with  an unencumbered  balance  of $5  million,                                                               
there were  still $6.2  million in  encumbered claims  waiting to                                                               
settle.  He  added that there were years the  fund wasn't used at                                                               
all and years in which all of it was used.                                                                                      
3:36:44 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN questioned  whether  the management  plan                                                               
was optimized for total yield benefit.  He remarked                                                                             
     If  part of  it can  be invested  in a  way if  it does                                                                    
     build up  and somehow, we  know we have float,  and how                                                                    
     is  that  portion of  it  optimized  in a  way  that's,                                                                    
     maybe, semi-liquid  where it  could be  if you  have an                                                                    
     encumbrance  that  comes  upon  it  where  it's  liquid                                                                    
     enough where  you can  get it,  but it's  being managed                                                                    
     for optimum return rather than just in a cash account.                                                                     
3:37:25 PM                                                                                                                    
MR. JORDAN stated that the  interest (indisc.) account is managed                                                               
by the Department of Revenue (DOR).   He explained that the state                                                               
didn't get  any interest from  it, later adding that  the account                                                               
would have  a maximum of $50  million.  He deferred  the question                                                               
to DOR.                                                                                                                         
CHAIR  KREISS-TOMKINS  sought   to  confirm  that  Representative                                                               
Kaufman  had asked  if the  bill were  to pass,  whether the  $50                                                               
million balance would sit in the  bank and collect interest or be                                                               
managed for return.                                                                                                             
REPRESENTATIVE KAUFMAN  confirmed that  he was attempting  to ask                                                               
whether the fund would be managed with an investment profile.                                                                   
3:38:50 PM                                                                                                                    
LESLIE  ISAACS, Director,  Division  of Administrative  Services,                                                               
DOA,  said he  would have  to confer  with DOR  to ascertain  the                                                               
investment portfolio and whether it included the CAT Fund.                                                                      
CHAIR  KREISS-TOMKINS acknowledged  the  importance of  receiving                                                               
maximum return  if the fund were  to increase from $5  million to                                                               
$50 million.                                                                                                                    
3:39:36 PM                                                                                                                    
REPRESENTATIVE  VANCE asked  whether any  legislative action  was                                                               
required  to   accomplish  that   adjustment  and   maximize  its                                                               
potential.  She  acknowledged that $50 million  is very different                                                               
than $5 million,  adding that the legislature  should ensure that                                                               
it has the flexibility that Representative Kaufman spoke of.                                                                    
CHAIR KREISS-TOMKINS concurred.                                                                                                 
3:40:48 PM                                                                                                                    
REPRESENTATIVE EASTMAN asked what  regulations required the money                                                               
to be kept on hand.                                                                                                             
MR.  JORDAN said  there was  no requirement  that it  be kept  on                                                               
hand.  He  related that in 1988, the fund  was originally created                                                               
to handle  the large fluctuations in  claims.  He added  that the                                                               
account  was  being leveraged  to  potentially  handle the  self-                                                               
insured  aspect  of property  coverage  and  allow the  state  to                                                               
retain the current property insurance premium.                                                                                  
3:41:57 PM                                                                                                                    
REPRESENTATIVE EASTMAN asked  Mr. Jordan to contrast  the plan in                                                               
HB  102 to  a  competing plan  in which  costs  would be  treated                                                               
through the  annual appropriations process as  opposed to setting                                                               
aside the $50 million.                                                                                                          
MR. JORDAN  pointed out that the  CAT Fund was intended  to cover                                                               
unanticipated catastrophic  losses.  He conveyed  that the annual                                                               
actuarial  reports  anticipated  a  certain  amount  of  property                                                               
claims each  year.  He further  noted that aside from  the spikes                                                               
in FY 15  and FY 20, the property losses  ranged from $200,000 to                                                               
$1.5 million in the last 10 years.                                                                                              
REPRESENTATIVE  EASTMAN  asked  for  a  comparative  cost/benefit                                                               
analysis  between  HB  102  and  another  plan  in  which  annual                                                               
expenses were paid  on occurrence.  He questioned  the benefit of                                                               
HB 102 as opposed to "the wait-and-see approach."                                                                               
MR. JORDAN explained  that the state was buying  coverage for $50                                                               
million  in  catastrophic  losses.     Referencing  slide  5,  he                                                               
indicated that a  varying amount was paid; however,  if the state                                                               
were  to  pay  $6.5  million   for  coverage  next  year  without                                                               
incurring losses, the  $6.5 million would be "out the  door."  He                                                               
continued to  explain that  if [the $6.5  million] were  put into                                                               
the  account  and the  state  had  its  own fund  "sitting  there                                                               
waiting for a catastrophic loss,"  the premiums would be saved on                                                               
a  yearly  basis;  further,  the  savings  would  return  to  the                                                               
agencies in a "great reduction."                                                                                                
3:45:20 PM                                                                                                                    
REPRESENTATIVE  EASTMAN asked  why it's  more effective  and cost                                                               
efficient for the state to have  this fund as opposed to charging                                                               
property  damages   to  the  state  through   the  appropriations                                                               
CHAIR  KREISS-TOMKINS  sought   to  clarify  that  Representative                                                               
Eastman was  asking why the CAT  Fund existed and if  the McGrath                                                               
snowshed  were to  collapse  next year,  why  the state  couldn't                                                               
simply add that as a line item in the capital budget.                                                                           
REPRESENTATIVE EASTMAN confirmed that was his question.                                                                         
MR.  JORDAN  stated  that  Federal  Emergency  Management  Agency                                                               
(FEMA) required that  the state have catastrophic  insurance.  He                                                               
shared that  after the earthquake, several  buildings requested a                                                               
benefit from  FEMA which required  proof that the  buildings were                                                               
insured.   He  said  the fund  provided the  ability  to do  that                                                               
without buying  insurance.   He elaborated  that without  the CAT                                                               
Fund  or  purchased insurance,  FEMA  could  deny coverage  on  a                                                               
catastrophic loss, such as an earthquake, flood, or tsunami.                                                                    
3:48:18 PM                                                                                                                    
REPRESENTATIVE KAUFMAN  surmised that the $50  million figure was                                                               
derived from  analysis.  He said,  "This seems like a  good idea,                                                               
but those  numbers and  the evaluation of  those numbers  is what                                                               
would  prove  that  this  is  a good  idea  and  there's  not  an                                                               
opportunity being missed                                                                                                        
3:49:35 PM                                                                                                                    
REPRESENTATIVE CLAMAN sought to  clarify the difference between a                                                               
limit of  $5 million and  a limit of  $50 million.   He construed                                                               
that  the $5  million limit  was  utilized for  the retention  of                                                               
purchasing insurance, which  meant that the state  paid the first                                                               
$5 million on a claim and insurance covered the rest.                                                                           
MR.  JORDAN clarified  that the  retention  was $1  million.   He                                                               
explained  that  the  CAT  Fund  was  set  up  to  handle  large,                                                               
unanticipated  losses.   He  added  that  the fund  could  handle                                                               
losses over $1 million retention.                                                                                               
REPRESENTATIVE CLAMAN sought to confirm  that with $50 million in                                                               
the  fund,  the state  would  not  purchase excess  coverage  for                                                               
losses exceeding $1 million.                                                                                                    
MR.  JORDAN said  [DOA] didn't  intend on  purchasing any  excess                                                               
coverage  and planned  for  the CAT  Fund  to cover  unexpectedly                                                               
large  property  losses.    He  anticipated  that  aside  from  a                                                               
catastrophic  loss, nothing  would  exceed  "something that  [the                                                               
department] couldn't pay out of [its] yearly appropriations."                                                                   
REPRESENTATIVE CLAMAN surmised that  in areas outside of property                                                               
loss, the  state had  high retentions  but still  received excess                                                               
coverage in other areas of  potential exposure.  He asked whether                                                               
that was accurate.                                                                                                              
MR.  JORDAN   said  the  state  was   self-insured  for  workers'                                                               
compensation and general  liability.  He stated  that [should the                                                               
bill  pass], property  coverage  would be  added  to those  self-                                                               
insurance  programs.     He  noted  that   excess  insurance  was                                                               
purchased  for  aviation  and  marine, both  of  which  had  high                                                               
retentions and high excess limits.                                                                                              
REPRESENTATIVE  CLAMAN   sought  to  verify  that   Mr.  Jordan's                                                               
historical  analysis  was  that  the  state  didn't  need  excess                                                               
coverage in the areas it had chosen to self-insure.                                                                             
MR. JORDAN believed  that was an accurate  statement for property                                                               
coverage.  He  recalled that there was a cost  issue in the early                                                               
2000s when  the state elected  to self-insure for liability.   He                                                               
explained  that it  didn't make  sense to  purchase the  coverage                                                               
with the high  [cost of] premiums; at that time,  the state had a                                                               
limit of  $5 million on  liability and the premiums  were nearing                                                               
$2 million.                                                                                                                     
3:53:33 PM                                                                                                                    
REPRESENTATIVE  EASTMAN  questioned  whether  the  CAT  Fund  was                                                               
subject to reappropriation by the legislature.                                                                                  
MR. JORDAN deferred to Mr. Isaacs.                                                                                              
MR. ISAACS deferred to Ms. Harbour.                                                                                             
3:54:42 PM                                                                                                                    
PALOMA HARBOUR,  Fiscal Management Analyst, Office  of Management                                                               
& Budget, Office  of the Governor, in  response to Representative                                                               
Eastman,  answered  no,  it does  not  require  appropriation  to                                                               
REPRESENTATIVE  EASTMAN  asked   whether  the  legislature  could                                                               
reappropriate the money in the CAT Fund.                                                                                        
MS. HARBOUR  answered yes, the  legislature has the  authority to                                                               
take money out of Designated  General Funds, otherwise they would                                                               
be considered dedicated funds.                                                                                                  
REPRESENTATIVE  EASTMAN  questioned  whether  the  CAT  Fund  was                                                               
subject to the sweep.                                                                                                           
MS. HARBOUR replied in the affirmative.                                                                                         
3:55:40 PM                                                                                                                    
REPRESENTATIVE STORY  asked whether other states  pursued similar                                                               
practices regarding catastrophic insurance.                                                                                     
MR.  JORDAN  said  other  states  had  various  levels  of  self-                                                               
insurance.   He  reported  that public  entities  were moving  to                                                               
self-insure catastrophic losses because of increasing premiums.                                                                 
3:56:40 PM                                                                                                                    
MS.  HARBOUR corrected  her previous  statement, clarifying  that                                                               
the  CAT Fund  was  exempt  from the  sweep  because  it did  not                                                               
require further appropriation.                                                                                                  
REPRESENTATIVE STORY inquired about the outcome in other states.                                                                
MR. JORDAN  offered to follow  up with the successes  or failures                                                               
of this self-insurance program in other states.                                                                                 
3:57:28 PM                                                                                                                    
CHAIR  KREISS-TOMKINS asked  when the  state began  self-insuring                                                               
for workers' compensation and liability.                                                                                        
MR. JORDAN  recalled that worker's  compensation was in  the mid-                                                               
1990s; general liability was switched in 2003.                                                                                  
3:58:00 PM                                                                                                                    
CHAIR   KREISS-TOMKINS  questioned   whether  the   division  had                                                               
explored the  possibility of  providing risk  management coverage                                                               
for aviation and marine through the  CAT Fund if the fund grew to                                                               
$50 million.                                                                                                                    
MR.  JORDAN  confirmed  that  the  idea  was  considered.    More                                                               
specifically, he conveyed that the division had considered self-                                                                
insuring damages  on the hulls [vessels]  themselves; however, he                                                               
opined  that aviation  liability would  be less  feasible because                                                               
numerous  airports were  state-owned, and  the state's  liability                                                               
exposure  was $500  million.   He  said marine  was  in the  same                                                               
situation because of the Alaska  Marine Highway System (AMHS) and                                                               
its  passengers;  the liability  coverage  was  $1 billion.    He                                                               
opined  that  the CAT  Fund  wouldn't  cover  that if  there  was                                                               
catastrophic loss.                                                                                                              
CHAIR KREISS-TOMKINS  inquired about  the premium the  state paid                                                               
for the marine insurance policy.                                                                                                
MR.  JORDAN  believed  it  was   $3.8  million  for  vessels  and                                                               
CHAIR  KREISS-TOMKINS requested  that Mr.  Jordan follow  up with                                                               
the premium for aviation as well.                                                                                               
4:00:53 PM                                                                                                                    
CHAIR  KREISS-TOMKINS  conveyed  that   he  was  "foggy"  on  the                                                               
different interpretations of what was  sweepable.  He opined that                                                               
it was  problematic that there was  no definitive interpretation.                                                               
He asked  whether there was  an interpretation from  the attorney                                                               
general specifying that the CAT Fund was not sweepable.                                                                         
MS.  HARBOUR  stated that  according  to  court case  related  to                                                               
sweepable funds,  funds not subject to  further appropriation are                                                               
not sweepable.                                                                                                                  
4:02:15 PM                                                                                                                    
REPRESENTATIVE  VANCE requested  that  the  department provide  a                                                               
list of  all the  state's insurance  policies and  identify which                                                               
were self-insured along with the dates they became self-insured.                                                                
MR. JORDAN agreed to follow up with the requested information.                                                                  
4:03:04 PM                                                                                                                    
REPRESENTATIVE  KAUFMAN asked  for the  administrative/management                                                               
fees expressed as an expense ratio.                                                                                             
MS. HARBOUR  said OMB could  work with the Department  of Revenue                                                               
(DOR)  to provide  additional information.   She  noted that  the                                                               
fund was managed as General  Fund moneys because of its fluidity.                                                               
She  said  OMB  and  DOR   would  determine  whether  there  were                                                               
alternative options for investment.                                                                                             
4:04:30 PM                                                                                                                    
CHAIR   KREISS-TOMKINS   opined   that  HB   102   was   terrific                                                               
legislation.   He commended the  administration for  bringing the                                                               
proposal forward  and identifying possible  savings.  He  said it                                                               
made  no sense  to shovel  millions of  dollars out  to insurance                                                               
companies when the state needed every dollar it could get.                                                                      
CHAIR KREISS-TOMKINS announced that HB 102 was held over.                                                                       
4:05:31 PM                                                                                                                    
CHAIR KREISS-TOMKINS  provided closing remarks  on "housekeeping"                                                               
4:06:32 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
State Affairs  Standing Committee  meeting was adjourned  at 4:06                                                               

Document Name Date/Time Subjects
HB0102 version A.PDF HSTA 4/8/2021 3:00:00 PM
HB 102
HB102 BHR Memo HSTA 2-23-21.pdf HSTA 4/8/2021 3:00:00 PM
HB 102
HB102 Sectional Analysis version A 2-23-21.pdf HSTA 4/8/2021 3:00:00 PM
HB 102
HB102 Sponsor Statement 2-17-21.pdf HSTA 4/8/2021 3:00:00 PM
HB 102
HB102-DOA-DRM Catfund presentation 040121.pdf HSTA 4/8/2021 3:00:00 PM
HB 102
HB 106 Amendment A.1 - Vance 4.7.21.pdf HSTA 4/8/2021 3:00:00 PM
HB 106
HB 106 Legal Memo re Amendment A.1.pdf HSTA 4/8/2021 3:00:00 PM
HB 106
HB 102 Fiscal Note - DOA 4.8.21.pdf HSTA 4/8/2021 3:00:00 PM
HB 102