Legislature(1999 - 2000)
04/26/2000 09:12 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 26, 2000
9:12 A.M.
TAPES
SFC-00 # 104, Side A and Side B
CALL TO ORDER
Co-Chair John Torgerson convened the meeting at
approximately 9:12 AM
PRESENT Co-Chair John Torgerson, Co-Chair Sean Parnell,
Senator Al Adams, Senator Dave Donley, Senator Lyda Green,
Senator Pete Kelly, Senator Loren Leman, Senator Gary
Wilken, Senator Phillips.
Also Attending: SENATOR TIM KELLY; ALISON ELGEE, Deputy
Commissioner, Department of Administration; PAUL GROSSI,
Director, Division of Workers' Compensation, Department of
Labor and Workforce Development; DON ETHERIDGE, Lobbyist,
AFL-CIO, Juneau; PAT DAVIDSON, Legislative Auditor,
Legislative Audit Division.
Attending via Teleconference: PAUL LYLE, Fairbanks; JOHN
ATHENS, Fairbanks; KEVIN DOUGHERTY, Alaska Labor Union,
Anchorage.
SUMMARY INFORMATION
SB 298-PAY RAISE FOR NON-UNION STATE EMPLOYEES
SB 219 was HELD in Committee for further consideration.
HB 419-WORKERS' COMPENSATION
SCS CS HB 419 (FIN) was reported out of Committee with
"individual recommendations" and with fiscal notes by the
University of Alaska dated 4/24/00 and the Office of
Management and Budget dated 4/24/00.
SENATE BILL NO. 298
"An Act relating to the compensation of certain public
employees and officials not covered by collective
bargaining agreements; and providing for an effective
date."
ALISON ELGEE, Deputy Commissioner, Department of
Administration, stated that SB 298 was introduced to
provide non covered employees of the Executive Branch, the
Legislature and the Judicial Branch similar increases to
the collectively bargained contracts before the Committee.
She noted that the legislation would provide employees in
FY 2001, a benefit of $1200 dollars payable on a $50 dollar
per pay period to employees employed in the year prior to
2000 for each pay period that they were employed. In FY
2002, the bill includes a wage increase of 2%; FY 2003, an
increase of 3%. She referred to the sectional analysis
included in member's packets.
Senator Adams inquired if the work draft was supported by
the Administration. [Copy on File].
Ms. Elgee commented that she had just received a copy of
the committee substitute. It appears that there are
substantive changes. The draft proposes a 2% increase in
FY 2003 rather than the 3% recommended. The draft also
proposes a benefit payment of $800 dollars instead of
$1200. The draft version appears to limit the employee
contribution to health insurance in FY 2003 from $630
proposal to $600 dollars.
Co-Chair Parnell referenced Section 8, Page 4, which
addresses the lump sum payment. He asked if the Governor,
Lt. Governor, and legislators would be included in the
increase for health benefits.
Ms. Elgee explained that health benefits were set for all
members of the select benefits plan by the Commissioner and
included everyone that participates. It is necessary that
there is a statutory change regarding pay increases. SB
298 does provide for pay increases for legislators in
future years.
Co-Chair Parnell questioned when pay increases would take
affect.
Ms. Elgee reiterated that the first pay raise would be July
1, 2001 at 2%; the next would be at 3% in July 2002.
Co-Chair Parnell stated that the "lump sum distribution"
was not considered a pay raise.
PAUL LYLE, (Testified via Teleconference), Fairbanks,
advised that the committee substitute was not available
through the Legislative Information Office. He noted that
he did not object to any of the changes proposed, however,
requested information on changes made to the work draft.
JOHN ATHENS, (Testified via Teleconference), Fairbanks,
inquired if the work draft had been adopted by the
Committee. He requested time to give testimony on that
version.
Co-Chair Torgerson indicated that the work draft had just
been faxed to all Legislative Information Offices.
DON ETHERIDGE, Lobbyist, AFL-CIO, Juneau, spoke in favor of
the proposed legislation. He noted that the AFL-CIO
believes that all public employees should receive the
proposed increases. He acknowledged that Legislator's
should also receive the proposed increase.
SENATOR TIM KELLY spoke to the proposed committee
substitute. He commented that the work draft was a counter
proposal to that submitted by the Governor.
Senator Kelly pointed out that the work draft proposes five
changes. The first change would be to the salaries of
department heads with an effective date of January 2003.
In relationship to monetary terms, the work draft would
lower the bonus from $1200 dollars to $800 dollars, and it
would lower the rate in the third year from 2% to 3%. It
would also cap health care benefits in the third year, from
$630 to $600. He added that the proposed draft does not
include the Legislature, Governor or Lt. Governor in the
lump sum pay out. He proposed that the effective date
occur during the next administration.
Senator T. Kelly pointed out the cost analysis of the bid.
[Copy on File]. The analysis indicates that there would be
a savings from the Governor's bill of $1.8 million dollars,
with a $2.8 million dollar savings over the three-year
course of the bill. He voiced concern that the total cost
would be $100.5 million dollars over a three-year period,
and that would increase the fiscal gap.
Senator Adams questioned how the work draft would affect
the other contracts, asking if those twelve contracts would
be separate.
Senator Tim Kelly replied that the contracts all call for a
$1200 dollar signing bonus. Additionally, they call for a
$515 dollar health benefit in the first year, and a $575
health benefit in the second year. All twelve contracts
max out with a $630 dollar health benefit in the third
year. He continued that all contracts call for a 2%
increase in the second year and a 3% increase in the third
year. He outlined the differences.
Senator Adams understood the only changes made would be to
the Executive and Legislative Branches.
Senator Tim Kelly acknowledged that was true and that the
legislation would not address the twelve contracts now
before the Legislature.
Co-Chair Parnell asked the effect of Section 11.
Senator T. Kelly stated that section indicates that the
legislation, a pay raise for non-union State employees,
would not go into effect until a majority of the Unions
contract with them.
Co-Chair Parnell MOVED that work draft 1-GS208\H,
Lauterbach, 4/25/00, be the version of the bill before the
Committee.
Senator Adams OBJECTED.
Following a brief at-ease, Senator Adams explained his
objection. He pointed out that the work draft would treat
State employees differently.
Senator T. Kelly responded that if in fact the twelve
negotiated contracts were approved by the Legislature, he
believed that the bill would revert back to the Governor's
position. At this time, he did not believe that there was
sufficient support in the Legislature to pass the
negotiated contracts.
Senator T. Kelly suggested that the proposed legislation
could be available to the Unions to help avert a public
employees strike. He argued that such a strike would be
counter productive.
Senator Adams recommended that the contracts be placed on
the floor so that the full Legislature could vote on them.
At that time, there would be something substantial to
negotiate. He noted that action would publicly indicate
each legislator's position.
A roll call vote was taken on the motion to adopt the work
draft.
IN FAVOR: Donley, Leman, Wilken, P. Kelly, Green,
Phillips, Parnell, Torgerson
OPPOSED: Adams
The MOTION PASSED (8-1).
Co-Chair Torgerson advised that the bill would be HELD in
Committee for further discussion.
SB 219 was HELD in Committee for further consideration.
SENATE CS FOR CS FOR HOUSE BILL NO. 419(JUD)
"An Act relating to the weekly rate of compensation
and minimum and maximum compensation rates for
workers' compensation; specifying components of a
workers' compensation reemployment plan; adjusting
workers' compensation benefits for permanent partial
impairment, for reemployment plans, for rehabilitation
benefits, for widows, widowers, and orphans, and for
funerals; relating to permanent total disability of an
employee receiving rehabilitation benefits; relating
to calculation of gross weekly earnings for workers'
compensation benefits for seasonal and temporary
workers and for workers with overtime or premium pay;
setting time limits for requesting a hearing on claims
for workers' compensation, for selecting a
rehabilitation specialist, and for payment of medical
bills; relating to termination and to waiver of
rehabilitation benefits, obtaining medical releases,
and resolving discovery disputes relating to workers'
compensation; setting an interest rate for late
payments of workers' compensation; providing for
updating the workers' compensation medical fee
schedule; and providing for an effective date."
Co-Chair Torgerson asked what the impact of the legislation
would be on private employers throughout the State.
PAUL GROSSI, Director, Division of Workers' Compensation,
Department of Labor and Workforce Development, commented
that the legislation would increase the premium rates
between 7.7% and 8.9%.
Co-Chair Torgerson asked how much that would amount to.
Mr. Grossi replied that the expense would amount to
approximately $15 million dollars per year.
Co-Chair Torgerson suggested that action appears to be an
additional tax.
Senator Donley interjected that the rates had dropped over
43% over the past twelve years.
Mr. Grossi corrected that the overall premium rate had
decreased over 30% since 1988.
Senator Green asked if the premium tax would increase.
Mr. Grossi advised that the premium tax rate was set at
2.7%. If the overall premium increases, there will be
additional funds.
Senator Green argued that the premium tax increases as the
premium rate increases.
Co-Chair Torgerson asked the reference on Page 9, Sub-
paragraph (Q).
Mr. Grossi replied that section was an amendment added in
the Senate Judiciary Committee. The amendment stipulates
that the check must be drawn on a state or federal
financial institution, which it is hoped would provide an
assurance policy.
Co-Chair Torgerson asked if checks were being issued which
were not drawn on federal or state financial institutions.
Senator Donley explained that in the Senate Judiciary
Committee, testimony was received that some insurers were
paying benefits to workers with checks drawn on very slow
paying banks. The Division has been trying to regulate
this concern through various policies. The addition of
that language makes it clear that they must be drawn on
United States (U.S.) banks.
Co-Chair Torgerson referenced Page 9, Subsection 15 and
asked if that information had been analyzed out past one
year.
st
Mr. Grossi replied that it was established during the 1
year effect on the premium. He acknowledged that the
average change has been 2% or less for the past four or
five years.
Co-Chair Torgerson inquired the current anticipated rate
change.
Mr. Grossi explained that the rates would change from $700
to $772. He pointed out that the change would address one
of the audit concerns. The Legislative Budget and Audit
Committee (LBA) recommended that the benefit be indexed.
He noted that it was indexed at the Alaska average equal
wage, which is a more accurate reflection of the change for
the wages than the overall cost of products.
Co-Chair Torgerson referenced Page 4, Line 17, and asked if
that was tied into the previous section.
Senator Donley agreed it did apply back to that section.
Co-Chair Torgerson questioned the 105%.
Mr. Grossi explained that in current law, the maximum for
worker's compensation benefits has been established at $700
dollars and for retraining benefits, it was set at $750
dollars. The proposed language provides the same ratio.
Co-Chair Torgerson clarified that the language would only
apply to the re-training portion. He asked if benefits had
been included in Section 15.
Mr. Grossi advised that the calculation in Section 15 was
divided by all the jobs, thus, providing the average.
Co-Chair Torgerson asked if that meant there were no
benefits.
Mr. Grossi interjected that wages had been calculated into
that number.
Senator Green questioned why Section 5 provided a different
formula than the rest of the bill.
Mr. Grossi responded that Section 5 was not based on wages
but instead based on the cost of education and for re-
training purposes. The audit did recommend that language.
Senator Green inquired if there was a formula in statute
that would be more appropriate than figures determined on a
maximum.
Co-Chair Parnell referenced Section 13 and asked its
purpose.
Mr. Grossi commented that section resulted from a court
case. The statute is present in current law, however, it
was interpreted by the Supreme Court. The purpose of that
section resulted from a failure to prosecute.
Discussion followed between Co-Chair Parnell and Mr. Grossi
regarding the amount of time that it takes the average
claim to move through the system.
Senator Phillips indicated that he had two amendments to
the bill, which resulted from an audit request a couple
months ago.
Co-Chair Torgerson asked if a flat rate index had been a
part of the audit recommendations.
PAT DAVIDSON, Legislative Auditor, Legislative Audit
Division, advised that in the audit, a deterioration was
seen of the flat amount in statute. The audit recommended
that it be increased to something reflecting a more current
purchasing power. She commented that it is up to the
Legislature to periodically update those or establish a
mechanism that automatically allows for some indexing.
Senator Donley MOVED to adopt Amendment #1, 1-LS1418\N.1,
Ford, 4/20/00. [Copy on File]. He noted that the
amendment would address how the surviving widow is paid.
He emphasized that the increase would be significant to
those families that have lost a worker on the job. The
amendment would change the current ten-year rule to twelve
years.
Senator Green OBJECTED for the purpose of a question.
Senator Adams noted his support of the amendment. He asked
why "20 years" had been changed to "12 years".
Senator Donley replied that "10 years" in existing statute
was totally an arbitrary number. He wanted to make an
incremental increase.
Senator Green WITHDREW her OBJECTION to Amendment #1.
There being NO further OBJECTIONS to Amendment #1, it was
adopted.
Senator Donley MOVED to adopt Amendment #2, which would add
a benefit to families that suffer the death of a worker.
Currently, the only benefit paid is $2500 dollars for
funeral expenses.
Senator Green suggested that there probably would be other
insurance coverage available to the family.
Senator Donley advised that Amendment #2 would not affect
the funeral coverage in any way and that the two concepts
were not related.
Co-Chair Torgerson clarified that with passage of the
amendment, $5000 dollars would be given for the funeral
expenses and a $5000 dollars additional payment would be
given to the family of the deceased.
Co-Chair Parnell questioned if the concept was being
implemented in the appropriate manner. Under current
statute, the family receives $2500 dollars for the costs
associated with reasonable funeral expenses; that amount
would be raised to $5000 dollars. If there is a widow or
widower, they will receive 80% of the weekly wage of the
deceased in addition to the funeral benefits. He
recommended that the weekly wage be further adjusted rather
than disbursing a lump sum.
Senator Donley stated that the proposed amendment would
provide for better public policy. If the worker had not
died, the family would continue to receive 100% of the
worker's salary. Under the current system, the family
would receive a reduced percentage of that salary. He
emphasized that is not a gift, it is part of that worker's
employment package. At this time, only the funeral costs
are being recovered. He emphasized that with a
catastrophic loss, there are a lot of immediate costs
incurred by the family and that a worker's compensation
check does not make allowance for all those costs. Senator
Donley stressed that $5000 dollars was a reasonable amount.
Senator Green asked the consequences of adding on the
employer's costs and how it would impact the rate.
Tape: SFC - 00 #104, Side B 10:05 A.M.
Senator Green assumed that the concern should be addressed
in the employee's contracts rather than through the
proposed amendment.
Co-Chair Torgerson responded that the amendment would
include more than just the employees of the State of
Alaska.
Senator Wilken asked the approximate number of employees
lost on the job each year.
Senator Donley replied that between 20-30 people die on the
job each year.
Co-Chair Parnell voiced a conflict of interest as he is an
employer in private practice that would be impacted by the
amendment.
Senator Green OBJECTED to the adoption of Amendment #2.
A roll call vote was taken on the motion.
IN FAVOR: Wilken, P. Kelly, Phillips, Donley, Leman,
Adams, Parnell, Torgerson
OPPOSED: Green
The MOTION PASSED (8-1).
Senator Phillips MOVED to adopt Amendment #3, 1-LS1418\N.2,
Ford, 4/26/00. [Copy on File].
Co-Chair Torgerson OBJECTED for the purpose of discussion.
Ms. Davidson explained that the audit recommended various
issues to help the Worker's Comp Division to streamline and
become more efficient. One item noticed by Legislative
Audit, which was causing some inefficiencies was that
either the insurers and/or the insure adjusters were not
filing notices in a timely manner. Currently, there is
nothing in place to encourage them to file in a timely
manner.
The Division's intent in encouraging them to enhance
reporting was to allow the agency to develop a sanction or
impose a fine to encourage the adjusters to get the
information into the office in a more timely manner. Ms.
Davidson noted that the amendment would address that
concern. She asked if the Board should define it or if the
Division should attend to that.
Senator Green indicated a conflict of interest.
Mr. Grossi believed that the language would work fine as
written in the amendment. He agreed that it would be
simpler if the Department could issue the penalty.
Senator Green stated that a 10-day grace period was a very
short period of time for an insurer to get established if
the person was not going to renew their policy.
Co-Chair Torgerson asked how long the 10-day policy had
been in law.
Mr. Grossi replied that it has been in place since the
inception of the law.
Senator Green countered that it is not in existing law and
that the 10-day currently applies only to the employer.
Mr. Grossi agreed. The insurance company would have the
best information on that situation. There are arrangements
that allow for the cancellation of a policy.
Co-Chair Parnell questioned what the problem was that the
amendment intended to fix.
Ms. Davidson replied that during the course of the audits,
it was found that adjusters and insurers were notifying the
Division in an untimely manner regarding whether or not the
employer remained insured.
Co-Chair Parnell asked current law.
Ms. Davidson noted that there is no sanction if it is not
reported timely and that currently, it is the employer's
responsibility to report.
Co-Chair Parnell pointed out that at this time, they are
not required to report under that section. He asked if
there was another section that required the reporting.
Ms. Davidson stated there is under Section AS 27.30.030,
Subsection 5.
Co-Chair Parnell repeated that if currently, there is no
requirement for insurers to give notice of every
cancellation in the State, then what problem is being
fixed.
Ms. Davidson responded that currently, the people who are
doing the annual reporting are the adjusters and/or the
insurers on behalf of the employer. The responsibility is
the employers, but it tends to be the insurance agency that
does it.
In response to Co-Chair Parnell, Ms. Davidson explained
that AS 23.30.0305 stipulates that the termination of the
cancellation policy is not effective as the insured
employees care covered until 20 days after receiving
written notice of the termination.
Co-Chair Parnell asked if that would be the employers duty.
Ms. Davidson replied it was, however, it is ultimately the
insurer's responsibility.
Co-Chair Parnell asked why the insurance companies were not
doing the reporting. He voiced caution in establishing a
dual system and penalty.
Ms. Davidson interjected that under AS 23.30.085(a), the
employer is subject unless exempted, and shall initially
file evidence of compliance with the insurance provisions
of that chapter in a form prescribed by the Board. She
noted that the two recommendations were:
· Filing the notices in a timely manner; and
· Sanctions for uninsured workers.
She continued that the Division has been recommending that
AS 23.30.085 impose sanction.
Co-Chair Parnell pointed out that AS 23.30.085, already
contains a provision that if an employer fails, refuses or
neglects to comply with that section, they would be subject
to consequences listed in AS 23.30.070.
Ms. Davidson pointed out that reference does not impose a
penalty unless a compensable injury has occurred.
Co-Chair Parnell asked if there was in law, a requirement
that an employer maintain insurance coverage, indicating
nothing that would impose a penalty without compensable
injury.
Ms. Davidson acknowledged that was true.
Co-Chair Parnell asked how Amendment #3 would address that.
Ms. Davidson replied that motion would be referenced in
Amendment #4. [Copy on File].
A roll call vote was taken on the motion to adopt Amendment
#3.
IN FAVOR: Phillips, Donley, Leman
OPPOSED: P. Kelly, Green, Adams, Wilken, Parnell,
Torgerson
The MOTION FAILED (3-6).
Senator Phillips MOVED to adopt Amendment #4, 1-LS1418\N.3,
Ford, 4/26/00. [Copy on File]. He indicated that the
amendment would address Recommendation #5 provided in the
audit.
Ms. Davidson stated that the amendment would move toward
the statutory construction that would prevent the Board
from issuing sanction against the uninsured employer
without a compensable injury having to occur. She stated
it was intended to eliminate that and allow the Board to
place penalties on an uninsured employer prior to a claim
being filed.
Co-Chair Parnell OBJECTED for the purpose of discussion.
Current statute indicates in AS 23.30.080(b) that if an
employer fails to insure or provide security, the Board may
issue a "stop order" prohibiting the use of employee labor
by the employer until the employer provides the security.
He noted that there are penalties for avoiding a stop order
in place.
Ms. Davidson commented that she was not sure that the
amendment was addressing the recommendation being made by
the Legislative Budget and Audit Committee. She agreed
that it was focused more on the compensation to a worker,
which would imply that there had been an injury.
Ms. Davidson offered to work with the Legislative Legal
office to address the concerns of the Audit Division.
Senator Donley recommended that when working with the
amendment to word it so that it not require a title change.
Co-Chair Torgerson agreed.
The Committee had an at-ease from 10:30 A.M. until 10:55
A.M. in order to confer with the Legislative Legal Division
on Amendment #4.
KEVIN DOUGHERTY, (Testified via Teleconference), Alaska
Labor Union, Anchorage, stated that he supported the bill.
He noted that it would have benefits for all State workers.
He did not comment on the amendments.
Senator Phillips MOVED an amendment to Amendment #4.
Following "shall" on Line 8, delete "Board" and insert "may
access a civil penalty of up to $1000 dollars per day".
Senator Green OBJECTED. She asked if that language would
be more appropriate in AS 28.30.085.
Ms. Davidson explained that the intent of the audit was to
give the Board more options so as to deal with uninsured
employers. Currently, there exist some penalties if an
employer avoids a stop order. The drafter recommended
using "may" rather than "shall" to help bring employers
into compliance.
Co-Chair Torgerson asked if that would satisfy the
requirement of the audit.
Ms. Davidson replied it would.
Mr. Grossi noted that at this time, the agency could
investigate and prosecute only through the Department of
Law. The proposed language would give the Board more
authority to penalize against an uninsured employer.
Co-Chair Parnell asked if it was necessary, given that
there already exists a civil penalty.
Mr. Grossi explained that a stop order occurs once the
person has gone to the Board. If they still fail to comply
with that order, then the $1000 dollar penalty would apply.
The penalty could be assessed for failure prior to the stop
order.
Co-Chair Parnell asked how the provision would be
implemented.
Mr. Grossi responded that the potential uninsured employer
would still have to be investigated, which is currently
happening. When the Board finds someone that does not have
insurance, they comply at that point.
Co-Chair Parnell asked what the Department of Labor and
Workforce Development does in that situation.
Mr. Grossi commented that the Department then goes through
various records that help to identify employers that might
be out of compliance. The investigator then writes the
necessary letters. The amendment would allow for an
employer not in compliance, so that the Board could
implement a penalty.
A roll call vote was taken on the motion to adopt the
amendment to the Amendment #4.
IN FAVOR: Donley, Wilken, Phillips, Torgerson
OPPOSED: Green, Leman, P. Kelly, Parnell
Senator Adams was not present for the vote.
The MOTION FAILED (4-4).
Senator Wilken asked if the legislation would address
controverted claims. He asked that the Department report
back to the Legislature next year regarding the concern of
controverted claims.
Senator Phillips WITHDREW Amendment #4. There being NO
OBJECTION, it was withdrawn.
In response to Senator Green, Co-Chair Torgerson asked the
Department of Labor and Workforce Development if fringe
benefits were included in the compensation rate.
Mr. Grossi answered that they are based strictly on wages.
Senator Donley MOVED to report SCS CS HB 419 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it
was so ordered.
SCS CS HB 419 (FIN) was reported out of Committee with
"individual recommendations" and with fiscal notes by the
University of Alaska dated 4/24/00 and the Office of
Management and Budget dated 4/24/00.
ADJOURNED
Senator Torgerson RECESSED the meeting at 11:05 AM to Call
of Chair.
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