Legislature(1995 - 1996)
04/04/1996 09:25 AM Senate FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
MINUTES SENATE FINANCE COMMITTEE April 4, 1996 9:25 a.m. TAPES SFC-96, #68, Side 1 (000-575) SFC-96, #68, Side 2 (575-046) CALL TO ORDER Senator Rick Halford, Co-chairman, convened the meeting at approximately 9:25 a.m. PRESENT In addition to Co-chairmen Halford and Frank, Senators Donley, Phillips, Rieger, and Zharoff were present. Senator Sharp did not attend. ALSO ATTENDING: Senator Torgerson; Jeff Bush, Deputy Commissioner, Dept. of Commerce and Economic Development; Jay Livey, Deputy Commissioner, Dept. of Health and Social Services; Tom Boutin, State Forester, Division of Forestry, Dept. of Natural Resources; Jim Nordlund, Director, Division of Public Assistance, Dept. of Health and Social Services; Glenda Straube, Director, Child Support Enforcement Division, Dept. of Revenue; Robert V. Berryhill, American Association of Retired Persons; Kip Knudson, aide to Representative Hanley; Mark Mickelson, Coordinator, JPTA/Service Delivery Area Program, Division of Rural and Community Development, Dept. of Community and Regional Affairs; Barbara Cotting, aide to Representative James; Daniella Loper, aide to Representative Porter; and aides to committee members and other members of the legislature. ALSO PARTICIPATING VIA TELECONFERENCE: Lamar Cotten, Deputy Commissioner, Dept. of Community and Regional Affairs, Anchorage; Dan Bockhorst, Local Boundary Commission, Dept. of Community and Regional Affairs, Anchorage; Pat Poland, Director, Division of Municipal and Regional Assistance, Dept. of Community and Regional Affairs, Anchorage; Jay Dulany, Director, Division of Motor Vehicles, Dept. of Public Safety, Anchorage; John Suddock, Trial Lawyer, Anchorage; Angela Salerno, Hosanna Lee, Debbi Brown (Beyond Shelter) and Tim Rogers (MOA), Anchorage; Paul Weir, Glennallen; Louise Charles and Luic Beach, Fairbanks; and Jennie Johnston, MatSu. SUMMARY INFORMATION SB 98 - PERSONAL RESPONSIBILITY ACT Co-chairman Halford announced that discussion of SB 98 would be rescheduled to next week. SB 280 - MANDATORY INCORPORATION OF CERTAIN BOROUGHS Continued discussion was had with Senator Torgerson, and via teleconference with Lamar Cotten, Dan Bockhorst, Pat Poland, and Paul Weir. Amendment No. 2, by Senator Rieger, was withdrawn and Revised Amendment No. 2 was offered and adopted. CSSB 280 (Fin) was then REPORTED OUT of committee with accompanying fiscal notes 1 through 10. HB 158 - CIVIL LIABILITY Teleconference testimony was given by John Suddock from Anchorage. Discussion was had with Jeff Bush and Daniella Loper. Amendments 1, 3, 4, 5, and 6 were adopted. Amendment No. 7 was discussed but not offered. The bill was held in committee for further review and consideration of remaining amendments. HB 212 - TIMBER MANAGEMENT & STATE LAND CLASSIFICATION. Testimony was presented by Barbara Cotting on behalf of Representative James. SCS CSHB 212 (Res) was then REPORTED OUT of committee with a ($3.0) fiscal note from the Dept. of Natural Resources, $19.6 note from the Dept. of Fish and Game, and zero note from the Dept. of Environmental Conservation. HB 468 - APPROP: SUPPLEMENTAL & OTHERS Co-chairman Frank announced that the supplemental would be rescheduled for hearing next week. CS FOR HOUSE BILL NO. 212(FIN) An Act relating to the management and sale of state timber and relating to the administration of forest land and classification of state land. Co-chairman Halford directed that CSHB 212 (Fin) be brought on for discussion and referenced SCS CSHB 212 (Res). BARBARA COTTING, aide to Representative James, came before committee. She directed attention to a sponsor statement and bill analysis (copies on file in the original Senate Finance Committee file for HB 212). She explained that the bill was introduced at the request of constituents in the timber industry in Fairbanks. It has subsequently received wide state support. Interested constituents are operators of small timber businesses in local communities. Operations have been impacted by overly complicated procedures that must be endured to secure timber from the state. It is not a lack of timber but inability of the Dept. of Natural Resources to allow harvesting that has caused the problem. Current Title 38 statutes, requiring five-year planning and three-year updates, make continuation of an ongoing industry very difficult. Well-managed timber harvesting not only creates and supports jobs and a healthy economy, it creates and supports healthy forests. Communities are prohibited from developing basic timber industries necessary for maintaining strong forest ecology and a strong economic environment. HB 212 provides flexibility to the division of forestry to meet the needs of small timber operators in a timely manner. It also makes small adjustments to Title 28 and 41 intended to secure a sustainable forest products industry. A truly cooperative effect stemming from introduction last year and work during the interim resulted in the bill in its current form. In response to a question from Senator Randy Phillips regarding the planning process, Ms. Cotting advised that sales of ten acres or less would be exempt from all requirements of the forest land use plan. An additional key provision is that small sales are defined as 160 acres or less. The division of forestry will closely monitor sales. TOM BOUTIN, State Forester, Division of Forestry, Dept. of Natural Resources, came before committee. In response to an inquiry from Senator Zharoff regarding operation of the ten- acre exemption, Mr. Boutin explained that sales now "have to go through two, separate, unrelated processes." They have to be in the five-year schedule for at least the two prior years. Each sale also has to have a forest land-use plan. The latter is used to substantiate the best-interest finding needed for disposal of any state land-use resource. Section 1 of the bill remove the requirement for sales of ten acres or less. It would also mean that the department would not have to prepare a plan when it sells timber and is not involved in the harvest. He cited, as an example, a raft of timber stolen from state land which was ultimately made available for fire wood because sale by the state would have required the expensive public process involved in developing a land use plan. Section 1 would have alleviated that situation. Mr. Boutin cited the situation at the Ft. Knox project as a further example. Co-chairman Halford asked if the department supports the bill. Mr. Boutin replied that all concerns raised when the bill was introduced have now been answered. He acknowledged concern by the environmental community regarding exemption of sales of 160 acres or less. Aside from emergency situations, the division is committed to "having every sale in the five-year schedule." The division will work on a department order that will define that. Information from operators indicates that the market window can open and close in a two-year period. Co-chairman Frank MOVED for passage of SCS CSHB 212 (Res) with individual recommendations and accompanying fiscal notes. No objection having been raised, SCS CSHB 212 (Res) was REPORTED OUT of committee with a ($3.0) fiscal note from the Dept. of Natural Resources, $19.6 note from the Dept. of Fish and Game, and a zero note from the Dept. of Environmental Conservation. Co-chairmen Halford and Frank and Senator Rieger signed the committee report with a "do pass" recommendation. Senators Donley, Phillips, and Zharoff signed "no recommendation." SENATE BILL NO. 280 An Act relating to the mandatory incorporation of certain boroughs in the unorganized borough. Senator Torgerson, sponsor of the legislation, came before committee. He noted that at a previous hearing, the committee held Amendment No. 2 for discussion at this time. Senator Rieger, sponsor of the amendment, voiced his understanding that the Local Boundary Commission is strongly opposed to the amendment. He said he did not wish to impede progress of the bill because of that objection. Senator Rieger said that, in researching the issue further, he came across statutes that appear to be contrary to the intent of self-determination and which do not remove the power of the Local Boundary Commission to review changes in municipal governments. He said that text from the statutes was attached to an amendment he wished to offer as Revised Amendment No. 2. Senator Rieger next read wording from AS 29.05.011(a)(5) and 29.05.021. He suggested that petition to the Local Boundary Commission reflects desire for a local government. The proposed amendment repeals statutory provisions cited above. Senator Torgerson concurred in withdrawal of Amendment No. 2. He acknowledged that while he agreed with what the amendment attempts to do, it raises many questions, constitutional issues, and problems for the Local Boundary Commission. Speaking to Revised Amendment No. 2, Senator Torgerson expressed agreement, saying that he was not previously aware that language within AS 29.05.011 and 29.05.021 existed. Co-chairman Halford raised questions regarding footnote information attached to the above-cited statutes. LAMAR COTTON, Deputy Commissioner, Dept. of Community and Regional Affairs, spoke via teleconference from Anchorage and introduced DAN BOCKHORST, Local Boundary Commission staff. Mr. Bockhorst spoke to case law relating to municipal extension and the issue of cohesiveness. Senator Rieger MOVED for adoption of Revised Amendment No. 2. Senator Zharoff OBJECTED and inquired concerning the number of unincorporated communities. Mr. Bockhorst attested to 68 or 70 in the unorganized borough. He explained that language to be removed by the second citation in Revised Amendment No. 2 applies to any class of city. Language in the first citation applies only to first-class and home-rule cities. In response to a further question from Senator Zharoff regarding removal of language relating to a demonstrated need for city government, Mr. Bockhorst explained that it is currently one of the standards used by the Local Boundary Commission in evaluating applications. It reflects an attempt by the legislature to ensure that city governments are formed only where there is a need for local government services. Removal would make it easier to form city governments. Senator Randy Phillips asked if removal poses a constitutional problem. Mr. Bockhorst said he saw none. He cited Article X, Sec. 1, of the Alaska Constitution which calls for a minimum of local government units. The state supreme court has interpreted that to mean "a minimum number of local government units." The commission is sensitive to that issue. The proposed amendment does not pose a substantial problem for either the Local Boundary Commission or the Dept. of Community and Regional Affairs. In response to an additional question regarding removal of AS 29.05.021, Senator Rieger explained that it eliminates some of the prohibitions and gives greater variety to the form of local government the local population might prefer. The existing statute is poor public policy in that it, in effect, says that a community cannot do what it might wish to do. It would have to annex to another community or allow some other form of government to provide local services. Co-chairman Halford concurred in need for removal. However, he expressed concern over removal of 29.05.011(5), relating to demonstrated need. He suggested it might send a signal the legislature does not intend to send. Senator Rieger voiced his belief that the Local Boundary Commission would defer to the desires of the local population. AS 29.05.011(5) is extremely vague and injects uncertainty as to how it will be used by the Local Boundary Commission. The paramount concern should be the desire of local citizens. Senator Torgerson noted that following the petition and other activities necessary to establish a city, there has to be a vote of those in the impacted area. If there is no demonstrated need for establishment of the city, it will be voted down. Co-chairman Halford called for a show of hands on adoption of Revised Amendment No. 2. Co-chairman Frank inquired concerning the department and Local Boundary Commission position on the amendment. PAT POLAND, Director, Division of Municipal and Regional Assistance, Dept. of Community and Regional Affairs, advised via teleconference from Anchorage that the department was comfortable with the amendment. It does not effect a substantial change, and it removes confusion surrounding formation of cities and service areas. PAUL WEIR next testified via teleconference from Glennallen. He voiced opposition to forcing communities into boroughs and asked how residents of Anchorage, Fairbanks, and Juneau would gain by that action. Senator Torgerson explained that the proposed legislation represents a move to equalize taxation and education. Mr. Weir again protested against need to undergo the rigors of planning, zoning, and other necessities of incorporation. Senator Torgerson explained that an amendment made at the previous hearing took care of that problem. If the bill is adopted as now written, there will be a vote in each unorganized area. Residents will have a choice of either forming or not forming a borough. If residents choose not to form, the state assessor will construct a mill rate or mill rate equivalency for the local contribution to education, per the other fifteen boroughs in Alaska. The word "mandatory" was removed from the bill. The compromise recognizes that in some areas of Alaska it may not make sense to form a borough government. Co-chairman Halford again called for objections to Revised Amendment No. 2. Senator Zharoff maintained his OBJECTION. The Co-chairman again called for a show of hands. Revised Amendment No. 2 was ADOPTED on a vote of 4 to 2 (Co-chairman Frank and Senator Zharoff were opposed, and Senator Sharp was absent from the meeting.) Senator Zharoff advised members that he might subsequently offer an amendment to impose a six percent state sales tax on communities that do not currently have one. In response to suggestions that the amendment would be unpopular, Senator Zharoff stressed that it would create equity to offset educational assessments against unincorporated communities. END: SFC-96, #68, Side 1 BEGIN: SFC-96, #68, Side 2 Discussion of sales versus property tax options followed among committee members. Senator Rieger MOVED for passage of CSSB 280 (Fin) with individual recommendations and accompanying fiscal notes. Senator Zharoff OBJECTED. Co-chairman Halford called for a show of hands. CSSB 280 (Fin) was REPORTED OUT of committee on a vote of 5 to 1. The following fiscal notes accompanied the bill: Dept. of Administration 0 Dept. of Commerce and Economic Development 0 Dept. of Community and Regional Affairs (State Assessor) 63.5 (Local Boundary Commission) 15.6 Dept. of Education 0 Dept. of Law 0 Dept. of Natural Resources 0 Dept. of Public Safety 0 Dept. of Transportation and Public Facilities 0 Office of the Governor/Elections 25.4 Co-chairmen Frank and Halford and Senators Donley, Phillips, and Rieger signed the committee report with a "do pass" recommendation. Senator Zharoff signed "do not pass." CS FOR HOUSE BILL NO. 158(FIN) am(ct rls pfld)(efd fld) An Act relating to civil actions; amending Alaska Rule of Civil Procedure 95. Co-chairman Halford directed that CSHB 158 (Fin)am (ct rls pfld)(efd fld) be brought on for discussion and referenced SCS CSHB 158 (Jud). JOHN SUDDOCK, Trial Lawyers' Association, testified via teleconference from Anchorage. He suggested that the "overall drift" of the legislation is to benefit people charged with wrongdoings and to disadvantage victims of crime. In that sense, the bill is at odds with the current philosophy of individual responsibility. Legislative tightening of criminal and welfare provisions are intended to make wrongdoers and welfare recipients more responsible. The proposed bill appears to swim against that stream in that it makes corporate and insurance interests less responsible. Mr. Suddock voiced his understanding that there would be an attempt to "try to amend out one of the few saving graces of the bill"--the insurance rate rollback. The proposed bill represents poor legislation against the broad interest of public policy. Inclusion of the rollback at least ensures that the public gets something in return for giving up its rights. Mr. Suddock next addressed a technical provision relating to an offer of judgment which he termed "widely misunderstood." Provisions currently penalize a person who receives an offer, does not take the offer, and then does less well at trial. As a penalty, the party pays partial attorney fees to the other side and receives a severely reduced rate of interest on the judgment. That causes attorneys for plaintiffs considerable fear. The proposed bill contains a "far more Draconian, severe form of offer of judgment that in many cases will make the court system unavailable to injured people . . . ." It raises the ante for failure of prediction. Unless the plaintiff guesses "what's going to happen with 95 percent accuracy," the plaintiff will have to pay the actual attorney fees of the other side even if the plaintiff wins the case. The other side is often large institutions. These are well-funded corporate interests (insurance companies etc.) that can afford to sit down with those stakes on the table and afford to win and lose. The average individual will be disadvantaged by inability to predict what the award might be. Entry into the criminal justice system will place one's home and retirement at peril (even if the individual is injured, is right, and his attorney is a 93 percent "good guesser"). Mr. Suddock noted the Senate Judiciary Committee attempt to ameliorate the foregoing provision by requiring evaluation of only one joint-offer in cases of multiple defendants. He encouraged retention of that provision if the current plea to eliminate offer of judgment provisions is not heeded. Speaking to punitive damages, Mr. Suddock said that the bill places an arbitrary limit on ability of juries to punish the type of corporate interest that makes money by "stealing small amounts from lots of people." It also allocates 50 percent of the punitive damage recovery to the state. He referenced an amendment by Senator Rieger to increase the amount of punitive damages flowing to the state to 90 percent. If that increase is adopted, the legislature might as well eliminate punitive damages since the additional expense and risk of pursuing them would not be justified. Following Mr. Suddock's testimony, Co-chairman Halford directed that the meeting be briefly recessed pending arrival of the sponsor of the legislation. RECESS - 10:10 A.M. RECONVENE - 10:30 A.M. Senator Rieger directed attention to Amendment No. 1 which he explained was prepared by Mike Ford, a Legislative Legal Services Attorney, to correct a drafting error within SCS CSHB 158 (Jud). The error would have inadvertently repealed the collateral benefit section under medical malpractice. He then MOVED for adoption. No objection having been raised, Amendment No. 1 was ADOPTED. Senator Rieger advised that he would not offer Amendment No. 2 since it would effect the same change made by Amendment No. 1. Senator Rieger advised that Amendment No. 3 relates to punitive damages. He voiced concern over ability of the civil liability system (intended to make whole, individuals who have been damaged by the action of others) to apply punitive damages which are "almost the same as criminal fines." The proposed bill would thus deposit 90 percent of punitive damages to the general fund. Senator Rieger then MOVED for adoption. No objection having been raised, Amendment No. 3 was ADOPTED. Senator Rieger directed attention to Page 2, line 29, and noted references to construction, design plans, etc. It appears that the body of statutes relates to construction of a facility. The statute of limitations at the bottom of Page 2 appears to apply more broadly than that. It says that one cannot bring any action based on construction- related activity. Amendment No. 4 attempts to clarify that the statute of repose refers to design, planning, construction--improvements to real property. That parallels language used elsewhere. DANIELLA LOPER, aide to Representative Porter, came before committee. She raised concern regarding placement of wording within the amendment, suggesting that there may be other kinds of property damage unrelated to construction. Senator Rieger explained that his amendment attempts to clarify that the actions being brought via the introductory clause are the same as the causes and circumstances referred to in the remainder of Sec. 2. Ms. Loper said she had no problem with Amendment No. 4. Senator Rieger MOVED for adoption of Amendment No. 4. Senator Donley OBJECTED. Co-chairman Halford called for a show of hands. Amendment No. 4 was ADOPTED on a vote of 4 to 2. Senator Rieger noted that Sec. 7 of the bill would reverse existing law which says that the court may not require security to be posted and would instead require that security be posted. He said that while he had no problem with the general policy, the provision as presently worded leaves no ability for all parties, including the court, to agree that posting of security is not advisable because of associated expenses or for other reasons. Amendment No. 5 provides some flexibility for this new policy. Mr. Loper advised of no objection to the change. Co-chairman Halford called for a show of hands on adoption. Amendment No 5 was ADOPTED on a vote of 4 to 2. Senator Rieger directed attention to Amendment No. 6 and explained that it clarifies language at Page 5, line 16, referring to specification of increases in future payments for anticipated inflation. A reading of existing language raises questions concerning whether "someone might be put in a position of having to estimate what future inflation is and then actually specify the dollar amount of the payment." The amendment clarifies that an order could specify the way that inflation is calculated rather than the actual result of that calculation. The amendment also provides more latitude in choosing the index. Brief discussion followed between Senator Donley and Ms. Loper regarding the source of the original language. In response to a question from Co-chairman Frank, Senator Rieger advised that the court could decide on the index on a case-by-case basis or adopt a court rule most practical for implementation. Discussion followed among members concerning whether adoption of Amendment No. 6 should be divided into two questions. Additional discussion ensued regarding selection of a particular formula versus the formula specified in language to be deleted by the amendment. Ms. Loper voiced support for the amendment. Co-chairman Halford called for a show of hands. Amendment No. 6 was ADOPTED on a vote of 4 to 2. Senator Rieger directed attention to Amendment No. 7 and explained that it addresses the question of what happens when a party is partially at fault for damages, but suit cannot be brought against that person. Can a jury or judge, in allocating fault, determine how much fault applies to that person (even though they cannot be sued) and allocate the remainder of the fault to defendants? Or, do defendants have their share of fault proportionately increased to bear 100 percent of the fault? As presently written, the bill incorporates the latter approach. The proposed amendment applies the former approach and deletes Sec. 9, which allocates 100 percent fault to remaining defendants. Co-chairman Halford cited an example of a 20-year old hanger roof which fails and damages a helicopter and asked how fault would be apportioned between those responsible for design, construction, ownership, and maintenance should those responsible for design be liable but protected from suit by the statute of limitations. JEFF BUSH, Deputy Commissioner, Dept. of Commerce and Economic Development, came before committee. He explained that the bill as presently written would assign 100 percent of liability to "whatever defendants are in the court." That would presumably be the owner who provided maintenance. Mr. Bush said that if the foregoing provision is removed and allocation against the designer is allowed but no liability is attached, an "empty chair" situation is created. That guarantees that defendants will point to that empty chair and claim that the design defect was responsible for the injury. If the designer was 60 percent responsible and the owner 40 percent responsible, the likelihood is that the jury will eventually find it was 80 or 90 percent the responsibility of the designer because no one was there to say that it was not. Co-chairman Halford suggested that the same thing happens under current law in cases where the designer is judgment proof because of death, bankruptcy, etc. Senator Rieger acknowledged that the alternative proposed by Amendment No. 7 might not be better than existing language within the bill. Both have flaws. He advised that he would not offer the amendment, but he reiterated that there is a problem in the bill as presently drafted. Senator Donley noted need to attend the Senate Floor Session. SCS CSHB 159 (Jud) was HELD in committee for further review. SENATE BILL NO. 98 An Act making changes related to the aid to families with dependent children program, the Medicaid program, the general relief assistance program, and the adult public assistance program; directing the Department of Health and Social Services to apply to the federal government for waivers to implement the changes where necessary; relating to eligibility for permanent fund dividends of certain individuals who receive state assistance, to notice requirements applicable to the dividend program; and providing for an effective date. Co-chairman Halford announced that SB 98 would be rescheduled for hearing during the coming week. ADJOURNMENT The meeting was adjourned at approximately 11:00 a.m.