Legislature(2001 - 2002)
04/08/2002 04:21 PM Senate FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 08, 2002
4:21 PM
TAPES
SFC-02 # 50, Side A
CALL TO ORDER
Co-Chair Pete Kelly convened the meeting at approximately 4:21 PM.
PRESENT
Senator Pete Kelly, Co-Chair
Senator Jerry Ward, Vice Chair
Senator Loren Leman
Senator Lyda Green
Senator Alan Austerman
Senator Lyman Hoffman
Senator Donald Olson
Senator Gary Wilken
Also Attending: REPRESENTATIVE VIC KOHRING; AMY ERICKSON, staff to
Representative Lisa Murkowski; RICH MOSTRIANO, Director, Division
of Labor Standards and Safety, Department of Labor and Workforce
Development; REMOND HENDERSON, Director, Division of Administrative
Services, Department of Labor and Workforce Development
Attending via Teleconference: There were no teleconference
participants.
SUMMARY INFORMATION
SB 185-PCE BASED ON HIGHEST COST
This bill was scheduled but not heard.
HB 389-MUNI TAX EXEMPTION: DETERIORATED PROPERTY
The Committee heard from the sponsor and reported the bill from
Committee.
HB 262-BUILDING SAFETY ACCOUNT
The Committee heard from the sponsor and the Department of Labor
and Workforce Development. The bill was held in Committee.
SB 277-DEFINITIONS OF FISHERIES BUSINESSES
The bill moved from Committee without further discussion.
CS FOR HOUSE BILL NO. 389(CRA)
"An Act eliminating the delayed repeal of a provision
authorizing an exemption from and deferral of municipal
property taxes on certain types of deteriorated property; and
providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
REPRESENTATIVE VIC KOHRING, sponsor, testified the bill modifies AS
29.45.050, which allows municipalities to exempt certain properties
from property taxes. He exampled historical sites and property
owned by non-profit organizations. He noted deteriorated properties
are also addressed in this legislation.
Representative Kohring reminded the Committee of the legislation
that created this statute in 1998, which would expire on July 1,
2002. This bill, he stated, eliminates the sunset provision in
current statute.
Representative Kohring informed that the House Community and
Regional Affairs Committee decided to eliminate the sunset
provision rather than extend the date because the standards and
safeguards contained in the statute are adequate to prevent abuse
of the tax exemption. He gave as an example the requirement that
before property could receive this exemption, it must meet certain
safety requirements established by the local municipality.
Representative Kohring noted the long vacant and decrepit McCabe
building located in the Ship Creek area of downtown Anchorage and
detailed efforts to renovate the building to operate as a hotel. He
relayed that because of the national events of September 11, 2001,
financing has been more difficult to secure. He remarked this
legislation would assist the financing process.
Senator Leman reiterated statements he made when this bill was
heard in the Senate Labor and Commerce Committee that he supported
the original legislation, which expanded the expiration date rather
than repeal it. However, because amending the bill would require a
title change, he would not propose reinstating a sunset date.
Representative Kohring voiced appreciation.
Senator Olson asked if there were other "major pieces of real
estate" that would be impacted either positively or negatively by
this legislation.
Representative Kohring listed the Knik Power Plant located on First
Avenue in Anchorage and a vacant dairy in downtown Palmer.
Senator Leman clarified for Senator Green this statute applies to
buildings at least 15 years of age.
Senator Leman offered a motion to report CS HB 389 (CRA) from
Committee with accompanying zero fiscal note from the Department of
Community and Economic Development.
There was no objection and the bill MOVED from Committee.
HOUSE BILL NO. 262
"An Act relating to accounting for and appropriations of
receipts from fees collected by the Department of Labor and
Workforce Development for certain inspections and for certain
plumbing and electrical worker certificates of fitness;
establishing a building safety account; and providing for an
effective date."
AT EASE 4:29 PM / 4:34 PM
AMY ERICKSON, staff to Representative Lisa Murkowski, sponsor of
the bill, read a statement into the record as follows.
It is a "fees-for-service" measure establishing a building
safety account to allow the department to collect fees to
support its Mechanical Inspections program and more
importantly to catch up on the serious and sizable backlog of
boiler and elevator inspections.
Currently, the Mechanical Inspection section generates just
over $1 million in general funds and is allocated about
$695,000. House Bill 262 allows the department to collect fees
and gives the authority to utilize all the money generated
from those fees.
Fees range from $40 to about $105 depending on the type of
vessel; certificates of fitness for both electricians and
plumbers also generate fees.
The sizable backlog of boiler and elevator inspections is a
growing safety concern. The backlog has reached about 6,000
for boiler vessels and 300 for elevators. Incidentally, the
Americans with Disabilities Act has caused the number of
elevators to roughly double in the last eight years.
Passage of HB 262 will give the Mechanical Inspections program
the ability to restore three new inspectors to the program and
to generate enough revenue to eliminate the backlog of boilers
and elevators in approximately two years.
Senator Olson asked the consequences of the backlog of elevator
inspections and whether there are significant unaddressed
violations.
Ms. Erickson stated the Department "red tags" the boilers that have
failed an inspection and those boilers have a certain amount of
time to comply with safety requirements.
Senator Olson understood the process but wanted to know the "danger
to society".
Ms. Erickson did not know the extent of the danger, but stressed
the backlog is "sizable".
RICH MOSTRIANO, Director, Division of Labor Standards and Safety,
Department of Labor and Workforce Development, listed the 6,000
boiler inspections and 300 elevator inspections overdue.
Senator Olson asked how a repaired boiler or elevator has a "red
tag" removed, and the length of time entailed before operation
could resume.
Mr. Mostriano detailed the self-abatement procedure whereby the
owner notifies the Department, using a certain pink card avowing
that the necessary compliance action has been taken, and is allowed
to resume operation. He noted a re-inspection is conducted at a
later date to verify the delinquency has been corrected.
Senator Green asked the effect this legislation would have on the
regular budget process and how the annual appropriation to the
Mechanical Inspections program would be determined. She asked if
this legislation stipulates that all revenue generated from the
inspection program could only be appropriated for that purpose. She
commented that if "every function of state government could charge-
back" the amount that agency earned, it might be an acceptable
practice, but she was unsure.
REMOND HENDERSON, Director, Division of Administrative Services,
Department of Labor and Workforce Development, replied that funding
for the Mechanical Inspections program would be included in the
annual budget review process as is currently practiced. He assured
the only change is the funding source for this program from general
fund/program receipts to the Building Safety Account fund.
Co-Chair Kelly stated the Legislature would retain the ability to
appropriate these funds for any purpose, exampling public safety
activities.
Mr. Henderson explained this bill establishes the Building Safety
Account in which the program receipts from the Mechanical
Inspections would be deposited.
Co-Chair Kelly ascertained this is an "easy budgeting move more
than anything else."
Mr. Henderson affirmed and added that the program receipts would no
longer be considered general funds for budget purposes, although
this would not be a designated fund and therefore could be used for
purposes other than the Mechanical Inspections program.
Senator Green asked the consequences if the Legislature determined
to appropriate those funds to another use.
Mr. Henderson replied there would be no funds available to pay the
expenses related to the inspections.
Co-Chair Kelly qualified a general fund appropriation could fund
the program.
Senator Green surmised this legislation would be "further
subverting the freedom of the budget process". She anticipated if
this account were created and the funds were appropriated for other
purposes, the Legislature would receive complaints attesting that
building safety is compromised.
Senator Ward asked about the relationship of the inspection backlog
to the Americans with Disabilities Act (ADA).
Mr. Henderson responded the backlog of elevator inspections is a
result of the ADA.
Senator Ward asked the amount of time to eliminate the backlog
without this legislation and utilizing the current funding
mechanism.
Mr. Mostriano informed the number of new boiler inspections is
currently maintained at one level with no reduction in backlog. He
warned that so long as construction continues there would be no
reduction in the backlog. Relating to elevators, he informed the
state has only one inspector and did not expect this backlog to
abate without changes.
Senator Ward shared he had hired a private inspector to inspect his
boiler when he was obtaining refinancing. He asked if utilizing
private inspectors could reduce the backlog.
Mr. Mostriano explained that when an insurance company is
considering issuing a policy it often employs a private inspector,
but this is the only instance where private inspections occur.
Senator Ward asked if it is possible that some of the 6,000 boilers
have already been inspected.
Mr. Mostriano answered no and explained that if a boiler is
privately inspected, the Department must still issue a certificate
of operation before the inspection is complete. Therefore, he
stated, the Department is aware of all private inspections.
Senator Hoffman referenced fiscal note #3, which indicates three
full time positions would be added in FY 03 and the backlog would
be eliminated by FY 07, at which time one of the new positions
would no longer be necessary. He asked why additional expenditures
and program receipts are not reflected for FY 05 and FY 06.
Mr. Henderson responded the fiscal note listed the additional costs
of hiring and training new inspectors in FY 03 and FY 04.
Mr. Henderson continued it was determined to be unnecessary to list
additional operating costs in FY 05 and FY 06 those years because
the program would be operating at "maintenance level".
Senator Hoffman countered the fiscal note should account for the
three positions included on the Department's payroll until FY 07.
He surmised the fiscal note does not reflect the intent of the
Department.
Mr. Henderson told of discussions with the Division of Legislative
Finance where it was agreed there were different ways the fiscal
note could be written and it was determined this is the most
appropriate method to show the costs.
Senator Hoffman opined, "[It] may be the most appropriate way but
it's [also] the most deceiving way."
Senator Austerman clarified the FY 05 and FY 06 expenditures are
not reflected on the fiscal note because they would be paid from
the Building Safety Account.
Mr. Henderson affirmed.
Senator Austerman reiterated that appropriations from the Building
Safety Account would require approval in the operating budget.
Mr. Henderson again affirmed.
Senator Austerman asked if other "accounts" in the Department of
Labor and Workforce Development operate in this manner.
Mr. Henderson answered yes and listed a workers' safety account
that funds Occupational Safety and Health Administration (OSHA)
programs, and an account that funds the workers' compensation
program.
Senator Austerman asked the benefit of this legislation to the
Department of Labor and Workforce Development.
Mr. Henderson responded that with general funds, budget limitations
are imposed by the Legislature when determining general fund
appropriations, and that the three additional inspector positions
had been requested in the past but were not funded because of those
limitations. Under this legislation, he explained, the expenses are
"off budget" and the program is self-sufficient.
Senator Ward revisited the matter of private inspectors and asked
why he had to pay for this inspection rather than have the
Department perform the inspection.
Mr. Mostriano informed Senator Ward he could have requested the
Department perform the inspection.
Senator Ward had made such a request and was told there would be a
two-month wait.
Mr. Mostriano stressed this is the backlog at issue.
Senator Ward asked why others are provided this service without
charge.
Mr. Mostriano corrected the Department collects an inspection fee.
He compared this to the process of private inspectors, who assess
travel, time, and inspection charges, whereas the state charges a
flat fee based on the average cost of all inspections. He noted the
cost of a state-conducted inspection is less than a private
inspection.
Senator Ward argued public employees should not perform this
service and that ordinary workers should not have to pay this cost.
Co-Chair Kelly pointed out this is a fee-based service.
AT EASE 4:55 PM / 4:55 PM
Mr. Henderson clarified the question is why not have private
inspectors.
Mr. Mostriano informed that only board certified inspectors could
perform these inspections and that the Department and insurance
companies are the only employers of inspectors. He pointed out that
if an insurance company does not offer coverage for an area, it
would not employ an inspector to perform in that area.
Senator Ward asked how many of the 6,000 boilers with overdue
inspections are located in areas more than 50 miles from a private
inspector.
Mr. Mostriano stated information is not currently available but
that he would provide it once a new computer program is in
operation.
Mr. Henderson pointed out discussion has focused on the merits of
the inspection program, however this legislation does not change
the program, it only changes the accounting procedure.
Senator Austerman commented this legislation allows the Department
to operate without utilizing general funds.
Mr. Mostriano affirmed.
Senator Austerman relayed a question he raised when the bill was
heard in the Senate Labor and Commerce Committee regarding the
"total dollar values" of the revenue collected compared to the
number of employees.
Mr. Henderson replied there is not a "one to one ratio" for all the
positions, explaining that only the boiler pressure inspection,
vessel inspection and elevator inspection positions generate fees.
He informed the Department collects approximately $400,000 annual
from electrical inspections, and $150,000 from plumbing
inspections, but that these revenues are not generated from fees.
He explained the fees for these inspections are generated by
Certificates of Fitness, i.e., a license to inspect, for
electricians and plumbers.
Mr. Henderson stated the addition of boiler and elevator inspection
positions would allow more inspections to occur and subsequently
increase revenue by approximately $200,000 and $50,000 respectively
for each function.
Senator Ward assumed most inspections are requested because of the
need for a Certificate of Occupancy.
Mr. Mostriano affirmed and furthered that once a new boiler is
inspected, that inspection is noted and the boiler is scheduled for
re-inspection every two years.
Senator Ward exampled the rural community of Savoonga and asked if
once construction is completed a project in that community, whether
the owner could operate the boiler before receiving a Certificate
of Occupancy.
Mr. Mostriano answered no, and explained that when notified of new
construction, the Department "makes every effort" to perform the
inspection at the time of completion.
Co-Chair Kelly asked if the owner could hire a private inspector to
perform the inspection if the Department was unable to reach the
located due to its backlog.
Mr. Mostriano responded this could only be done through an
insurance company. In the case of Savoonga, he surmised the
insurance company would be unwilling to send a private inspector to
the area unless the company was issuing a policy on the building.
Senator Hoffman rhetorically asked the rating of this legislation
on a scale of one to ten of "the smoke and mirrors concept of
budgeting".
Senator Austerman predicted if additional inspectors were employed,
the program would become more efficient rather than less so. He
listed the estimated revenue changes included in the fiscal note
and disagreed with their accuracy. He did not approve of adding
positions, while "going off budget". He furthered that the
Legislature should be forthright in presenting the budget;
including all expenditures from every funding source. He opined
that not doing so is "deceiving to the public".
Senator Olson referenced the Workers' Safety Account and the
Workers' Compensation Account and asked if there have been problems
associated with their methods.
Senator Austerman asserted, "It bothers me" and explained this
practice does not reflect the budget accurately. He noted that each
year 300 to 500 new state employees are added and that these
positions are not completely funded with either general funds or
federal funds.
Co-Chair Kelly pointed out that in using the fiscal note process,
the new positions are voted on by the entire Legislature rather
than included in the larger budget. He remarked that if there is a
problem relating to the number of inspectors, the issue could be
voted upon.
Senator Austerman did not disagree. He also did not oppose boiler
inspectors. However he noted the state is receiving less oil
revenue and that if the program needs funding, the Legislature
should fund it instead of depending on the Department to craft ways
to operate around the system.
Co-Chair Kelly referenced earlier legislation, which he did not
detail, but cited the provisions in this bill is not unusual
considering the earlier legislation.
Senator Olson noted there is no backlog of elevator inspections in
Savoonga.
Co-Chair Kelly ordered the bill HELD in Committee.
AT EASE 5:10 PM / 5:12 PM
CS FOR SENATE BILL NO. 277(RES)
"An Act relating to the tax levied on pollock processed by a
floating fisheries business; and providing for an effective
date."
This was the second hearing for this bill in the Senate Finance
Committee.
Senator Austerman offered a motion to report CS SB 277 (RES) from
Committee with a 3/2/2002 Department of Revenue zero fiscal note.
Senator Green objected.
A roll call was taken on the motion.
IN FAVOR: Senator Leman, Senator Ward, Senator Austerman, Senator
Hoffman and Co-Chair Kelly
OPPOSED: Senator Green
ABSENT: Senator Olson and Co-Chair Donley
The motion PASSED (6-3-2)
The bill MOVED from Committee.
ADJOURNMENT
Co-Chair Pete Kelly adjourned the meeting at 05:14 PM
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