Legislature(2003 - 2004)

04/22/2004 09:03 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          April 22, 2004                                                                                      
                              9:03 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-04 # 90,  Side A                                                                                                            
SFC 04 # 90,  Side B                                                                                                            
SFC 04 # 91,  Side A                                                                                                            
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Gary Wilken convened  the meeting at approximately 9:03 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Fred Dyson                                                                                                              
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Senator Ben Stevens                                                                                                             
                                                                                                                                
Also Attending:  REPRESENTATIVE  WEYHRAUCH; DOUG WOOLVIER introduced                                                          
his daughter MOLLY  WOOLVIER, who was attending the  meeting as part                                                            
of Take Your Child  to Work Day; RICHARD, SCHMITZ,  Staff to Senator                                                            
John Cowdery; WENDY LINDSKOOG,  Director of External Affairs, Alaska                                                            
Railroad   Corporation,  Department   of   Community  and   Economic                                                            
Development;   ERNESTA   BALLARD,   Commissioner,    Department   of                                                            
Environmental  Conservation;  JON  TILLINGHAST,  Attorney,  Sealaska                                                            
Corporation;   LINDA   HALL,  Director,   Division   of   Insurance,                                                            
Department  of Community  and Economic Development;  PAUL  LISANKIE,                                                            
Director,  Division of Workers'  Compensation,  Department of  Labor                                                            
and Workforce Development;                                                                                                      
                                                                                                                                
Attending via  Teleconference:  From  an offnet location:  JEANNETTE                                                          
JAMES, former  Alaska State legislator;  PHILLIS JOHNSON,  Attorney,                                                            
Alaska   Railroad  Corporation;   ADRIAN   LECORNU,  Administrator,                                                             
Hydaburg Cooperative  Association;  CHUCK LUNDEEN, General  Counsel,                                                            
Liberty Northwest  Insurance; From Anchorage: LORI  WING, President,                                                            
Alaska Independent  Insurance Agents  and Brokers; KEVIN  DAUGHERTY,                                                            
Alaska Labor  and Management  Ad Hoc Committee;  From Kenai:  DENNIS                                                            
MURRAY,  Administrator,  Heritage  Place  Nursing Home,  and  former                                                            
president, Alaska State  Hospital and Nursing Home Association; PAUL                                                            
BRENNER,  Vice  President,  Quality  Management,  Central  Peninsula                                                            
General Hospital                                                                                                                
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
HB 213-PROVISIONAL DRIVER'S LICENSE                                                                                             
                                                                                                                                
The  Committee   heard  from  the   sponsor.  Two  amendments   were                                                            
considered and one was adopted. The bill moved from Committee.                                                                  
                                                                                                                                
SB  31-RAILROAD UTILITY CORRIDOR TO & IN CANADA                                                                                 
                                                                                                                                
The  Committee   heard  from  the   sponsor,  the  Alaska   Railroad                                                            
Corporation  and a  former legislator.  The bill  was reported  from                                                            
Committee.                                                                                                                      
                                                                                                                                
SB 378-POLLUTION DISCHARGE & WASTE TRMT/DISPOSAL                                                                                
                                                                                                                                
The   Committee  heard   from   the  Department   of  Environmental                                                             
Conservation   and  Native  Corporations.  The   bill  was  held  in                                                            
Committee.                                                                                                                      
                                                                                                                                
SB 311-INSURANCE & WORKERS' COMPENSATION SYSTEM                                                                                 
                                                                                                                                
The Committee  heard from the Department  of Community and  Economic                                                            
Development,  the Department  of  Labor and  Workforce Development,                                                             
industry  representatives, the  Alaska Labor  and Management  Ad Hoc                                                            
Committee and employers. The bill was held in Committee.                                                                        
                                                                                                                                
                                                                                                                                
     CS FOR HOUSE BILL NO. 213(FIN)                                                                                             
     "An Act relating to a provisional driver's license and to                                                                  
     issuance of a driver's license; and providing for an effective                                                             
     date."                                                                                                                     
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken reminded  that this bill,  "implements a  graduated                                                            
driver's license system."                                                                                                       
                                                                                                                                
REPRESENTATIVE WEYHRAUCH,  Sponsor, noted he was available to answer                                                            
any questions.                                                                                                                  
                                                                                                                                
Amendment  #1: This  amendment  deletes "for  the  first six  months                                                            
after   receiving   a  provisional   driver's   license"   from   AS                                                            
28.15.057(b)(1) amended  in Section 3 on page 2 line 20. The amended                                                            
language reads as follows.                                                                                                      
                                                                                                                                
                (1) operate a motor vehicle that is carrying any                                                                
     passengers                                                                                                                 
                                                                                                                                
Co-Chair Wilken moved for  adoption and objected for an explanation.                                                            
                                                                                                                                
Representative  Weyhrauch stated  this is  a technical amendment  in                                                            
that  the   six-month  provisional   driver's  license  is   already                                                            
addressed in Section 2.                                                                                                         
                                                                                                                                
Co-Chair Wilken removed  his objection and the amendment was ADOPTED                                                            
without objection.                                                                                                              
                                                                                                                                
Amendment #2:  This amendment inserts a new bill section  on page 1,                                                            
following line 3 to read as follows.                                                                                            
                                                                                                                                
     Section 1. AS 28.05.095(e) is amended to read:                                                                             
          (e) Notwithstanding any other provision of law, a peace                                                               
     officer  may not stop  or detain a motor  vehicle to  determine                                                            
     compliance with (a)  of this section, or issue a citation for a                                                            
     violation of (a) of this section, unless                                                                                   
           (1) the driver has a provisional license; or                                                                       
                (2) the peace officer has probable cause to stop or                                                           
     detain the motor vehicle other than for a violation of (a) of                                                              
     this section.                                                                                                              
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
Senator Bunde moved for adoption.                                                                                               
                                                                                                                                
Co-Chair Wilken objected for discussion purposes.                                                                               
                                                                                                                                
Senator Bunde  assured this amendment is not intended  to make "life                                                            
difficult" for those with  provisional driver's licenses, but rather                                                            
to stress  the  importance of  wearing  seat belts  and to  creating                                                            
habits for rest of the driver's life.                                                                                           
                                                                                                                                
Representative Weyhrauch did not object to the amendment.                                                                       
                                                                                                                                
Senator Dyson  noted that a peace  officer could not stop  a vehicle                                                            
for  this  offense  unless  the  driver  has  provisional   driver's                                                            
license.                                                                                                                        
                                                                                                                                
Senator Bunde  replied that  the peace officer  could recognize  the                                                            
younger age of the driver.                                                                                                      
                                                                                                                                
Senator Dyson surmised this would encourage profiling.                                                                          
                                                                                                                                
Senator  Bunde remarked that  if successful  in increasing  seatbelt                                                            
use, such profiling would be acceptable.                                                                                        
                                                                                                                                
Senator Dyson expressed, "Pragmatists scare me."                                                                                
                                                                                                                                
Senator Olson  predicted that the  efforts required to enforce  this                                                            
law could encumber  peace officers,  in that it would divert  energy                                                            
from higher priorities.                                                                                                         
                                                                                                                                
Co-Chair Green  asked if this provision would apply  to all licensed                                                            
drivers in the State.                                                                                                           
                                                                                                                                
Senator Bunde  replied that  any driver in  this age group  could be                                                            
affected. He pointed  out that State law requires  seat belt use and                                                            
the only "nuance"  is that for older  drivers, seat belt  violations                                                            
could only be issued as a secondary offense.                                                                                    
                                                                                                                                
Co-Chair  Green referenced  other  pending legislation  would  allow                                                            
seat belt use  violations to be issued  as a primary offense  to all                                                            
drivers.                                                                                                                        
                                                                                                                                
Senator Bunde  affirmed, but noted  that this other legislation  has                                                            
yet to pass the House of Representatives.                                                                                       
                                                                                                                                
Co-Chair  Green  asked  if  that  legislation  passes  whether  this                                                            
provision is necessary.                                                                                                         
                                                                                                                                
Senator Bunde answered that it would not.                                                                                       
                                                                                                                                
Senator  Olson  posed  a  situation  of  an  older  vehicle  without                                                            
installed  seatbelts,  and asked  what  assurance drivers  of  those                                                            
vehicles have that they would not be issued citations.                                                                          
                                                                                                                                
Senator Bunde remarked that Alaska law requires seatbelt use.                                                                   
                                                                                                                                
Senator  Olson   qualified  that   vehicles  without  manufacturer-                                                             
installed seatbelts are exempt.                                                                                                 
                                                                                                                                
Senator Bunde  informed that 30 years  ago he was able to  install a                                                            
seatbelt in a vehicle and he surmised this could still be done.                                                                 
                                                                                                                                
Senator  Olson  contended  that  installation   standards  are  more                                                            
stringent today than 30 years ago.                                                                                              
                                                                                                                                
Co-Chair  Wilken  removed  his  objection  to the  adoption  of  the                                                            
amendment.                                                                                                                      
                                                                                                                                
Co-Chair Green objected to the adoption of the amendment.                                                                       
                                                                                                                                
Senator  Hoffman asked  about issuing  citations  to a driver  seven                                                            
months after  receiving  a driver's license,  essentially  one-month                                                            
after completion of the provisional driver's license term.                                                                      
                                                                                                                                
Senator Bunde replied that no primary citation would be issued.                                                                 
                                                                                                                                
Senator  B.   Stevens  requested   the  sponsor's  opinion   on  the                                                            
amendment.                                                                                                                      
                                                                                                                                
Representative Weyhrauch  reiterated that he would not object to the                                                            
amendment.  He  understood  from  conversations  with  Alaska  State                                                            
Troopers  that  they  stop  teen  drivers  without  hesitation  upon                                                            
observation  of driving violations.  He surmised  that witnessing  a                                                            
young driver with  several young passengers in the  vehicle would be                                                            
probable  cause for a peace  officer to stop  the vehicle and  check                                                            
whether the driver has  a provisional driver's license. He commented                                                            
that helmet  use is required of teen  drivers of motorcycles,  while                                                            
not required  of adult  drivers, and therefore  the distinction  has                                                            
been established for higher safety requirements based on age.                                                                   
                                                                                                                                
Co-Chair  Wilken understood  sponsor did not  oppose the  amendment,                                                            
but   would  prefer   that   a  Senate   committee   substitute   be                                                            
uncontentious   and   receive    concurrence   in   the   House   of                                                            
Representatives.                                                                                                                
                                                                                                                                
Representative  Weyhrauch replied he is not concerned  that adoption                                                            
of this amendment would  hamper the bill's ability to pass the House                                                            
of  Representatives.  He  explained   that  an  amendment  to  allow                                                            
seatbelt  violations as a  primary offense  for drivers of  all ages                                                            
would  present   significant   challenges   with  passage  of   this                                                            
legislation.                                                                                                                    
                                                                                                                                
Co-Chair Green asked for  clarification that the amendment pertained                                                            
to violation of seatbelt requirements.                                                                                          
                                                                                                                                
Senator Bunde reported  that it was discussed whether to include the                                                            
"entire seatbelt  bill" in this legislation, but he  agreed with the                                                            
sponsor  that  the  provisional  driver's  license  program  is  too                                                            
important to jeopardize  with any opposition to the  seatbelt issue.                                                            
Therefore, he pointed out  this amendment only applies to holders of                                                            
a provisional driver's license.                                                                                                 
                                                                                                                                
A roll call was taken on the motion to adopt Amendment #2.                                                                      
                                                                                                                                
IN FAVOR: Senator B. Stevens, Senator Bunde and Co-Chair Wilken                                                                 
                                                                                                                                
OPPOSED: Senator Olson,  Senator Dyson, Senator Hoffman and Co-Chair                                                            
Green                                                                                                                           
                                                                                                                                
The motion FAILED (3-4)                                                                                                         
                                                                                                                                
The amendment FAILED to be adopted.                                                                                             
                                                                                                                                
Co-Chair Green offered  a motion to report the bill, as amended from                                                            
Committee with  individual recommendations  and accompanying  fiscal                                                            
note.                                                                                                                           
                                                                                                                                
There was no objection  and SCS CS HB 213 (FIN) MOVED from Committee                                                            
with   fiscal  note   #1  for   $13,600  from   the  Department   of                                                            
Administration.                                                                                                                 
                                                                                                                                
DOUG  WOOLVIER  introduced  his daughter  MOLLY  WOOLVIER,  who  was                                                            
attending the  meeting as part of  Take Your Child to Work  Day. Ms.                                                            
Wooliver  is seven years  old, resides in  Anchorage and was  on her                                                            
first visit to Juneau.                                                                                                          
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 31(RES)                                                                                             
     "An Act relating to  a transportation corridor for extension of                                                            
     the Alaska  Railroad to Canada  and to extension of  the Alaska                                                            
     Railroad  to connect with the North American  railroad system."                                                            
                                                                                                                                
                                                                                                                                
This  was the third  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken stated  this bill,  sponsored  by Senator  Cowdery,                                                            
"authorizes  [the]  Alaska  Railroad   Corporation  to  delineate  a                                                            
transportation  and utility corridor from Eielson  Air Force Base to                                                            
the Alaska-Canada border."                                                                                                      
                                                                                                                                
RICHARD, SCHMITZ,  Staff to Senator John Cowdery,  testified that no                                                            
changes have  been proposed to this  legislation since the  previous                                                            
hearing.  He  stressed  the  importance  that it  passes  into  law,                                                            
expounding on the support  and importance to establish a corridor to                                                            
extend  the railroad  into Canada.  He reminded  of the significant                                                             
discussion  held in the  Senate Resources  Committee and efforts  to                                                            
resolve  certain  issues.  He  noted  that  the  provisions  of  the                                                            
legislation  would not be  immediately implemented,  as other  steps                                                            
must be first taken.                                                                                                            
                                                                                                                                
Co-Chair Wilken  asked if the Alaska  Railroad Corporation  supports                                                            
this legislation.                                                                                                               
                                                                                                                                
WENDY  LINDSKOOG,  Director  of External  Affairs,  Alaska  Railroad                                                            
Corporation,  Department  of  Community  and  Economic Development,                                                             
affirmed.                                                                                                                       
                                                                                                                                
Senator Hoffman clarified that the Railroad supports the bill.                                                                  
                                                                                                                                
JEANNETTE  JAMES,  former Alaska  State  legislator,  testified  via                                                            
teleconference  from  an  offnet  location  in her  position  as  an                                                            
advisor  to the  Murkowski  Administration  on railroad  issues,  in                                                            
support of the  bill. She stated that the legislation  has undergone                                                            
compromises and that it should be advanced.                                                                                     
                                                                                                                                
Co-Chair  Wilken noted new  fiscal zero notes  being distributed  to                                                            
the Committee.                                                                                                                  
                                                                                                                                
Senator   Bunde  understood   ownership  of   this  land  would   be                                                            
transferred to  the Railroad, which would maintain  complete control                                                            
of the  land and could  restrict access to  citizens. He  questioned                                                            
how this would have cost to the State.                                                                                          
                                                                                                                                
Mr. Schmitz replied that  access to the land would not be restricted                                                            
until  track is  actually  laid. He  stated this  legislation  would                                                            
transfer  ownership of a  200-foot corridor  in locations where  the                                                            
railroad would  cross State-owned  land. He noted that the  Railroad                                                            
would  be  required  to  negotiate  right  of  ways  separately  for                                                            
federally-owned  land,   lands  owned  by Native   corporations  and                                                            
privately-owned lands.                                                                                                          
                                                                                                                                
Senator  Bunde  contended that  the  200-foot  corridor,  therefore,                                                            
could not be  otherwise disposed of  by the State, which  would be a                                                            
financial loss.                                                                                                                 
                                                                                                                                
Ms. James countered  that this argument "falls on  its face" because                                                            
the  land would  transfer  from one  State  entity to  another.  She                                                            
explained  that  if  the  railroad   were  not  constructed  on  the                                                            
property, ownership would transfer back to the State.                                                                           
                                                                                                                                
Senator  Bunde  remarked   that  this  legislation  would   transfer                                                            
ownership  from a  State entity  to  a "quasi-private"  entity,  not                                                            
subject to administrative  and procedures statutes. He disputed this                                                            
transfer would not have a zero fiscal impact.                                                                                   
                                                                                                                                
Ms. Lindskoog  detailed  that as  a compromise  a 200-foot  corridor                                                            
within a 500-foot corridor  would be transferred to the Railroad fee                                                            
simple. She  noted that  the Department of  Natural Resources  would                                                            
reserve oil  and gas mineral  rights and that  the State would  have                                                            
control over the  placement of railroad crossings.  She also pointed                                                            
out that the State  would have rights to utilize the  property for a                                                            
natural gas pipeline.  As a result of these differences,  she stated                                                            
the  proposed  land  would  be  unlike  traditional  Railroad-owned                                                             
property.                                                                                                                       
                                                                                                                                
Senator Bunde  informed that ownership  of subsurface rights  is not                                                            
transferred  to  any  landowner  and  he  therefore  maintained  his                                                            
disagreement.                                                                                                                   
                                                                                                                                
Senator  Olson   asked  how  access   for  recreation  and   hunting                                                            
activities would be protected.                                                                                                  
                                                                                                                                
Ms.  Lindskoog  reminded  that  people  are not  allowed  access  to                                                            
airport runway  tarmacs because of  safety issues. She replied  that                                                            
the Railroad  and the Department of  Natural Resources would  review                                                            
user needs  closely to determine where  crossings would be  located.                                                            
                                                                                                                                
Senator Olson expressed  concern about complaints from hunters cited                                                            
with  trespassing  for  crossing   the  tracks  "in  the  middle  of                                                            
nowhere".                                                                                                                       
                                                                                                                                
Ms. Lindskoog  asked if Senator Olson  suggests that hunters  should                                                            
have a right to access the right of way.                                                                                        
                                                                                                                                
Senator  Olson  "expressed  discomfort"  that  hunters would  be  in                                                            
violation of trespassing laws.                                                                                                  
                                                                                                                                
Senator  Dyson asked  if Railroad  rights  of way  have more  access                                                            
restrictions than a highway.                                                                                                    
                                                                                                                                
Ms.  Lindskoog  surmised   they  do  not.  She  furthered  that  the                                                            
Department  of Natural  Resources  would retain  significantly  more                                                            
control over  these lands  than currently  exercised with the  route                                                            
between  Seward  and Fairbanks.  She  stated that  if  an area  were                                                            
commonly  used  for hunting,  it  would  likely  be assumed  that  a                                                            
crossing would be located at the site.                                                                                          
                                                                                                                                
Senator  Dyson noted  the assumption  that people  hunting or  berry                                                            
picking would have the  wherewithal to move off the highway to avoid                                                            
a passing  truck. He opined  that designated  railroad crossings  in                                                            
remote areas would be impractical.                                                                                              
                                                                                                                                
Ms. Lindskoog informed  that jaywalkers are not always ticketed. She                                                            
stressed that the trespass laws are intended for safety.                                                                        
                                                                                                                                
Co-Chair Wilken characterized  crossing of the Railroad as potential                                                            
trespassing and pitching of a tent on the rails as trespassing.                                                                 
                                                                                                                                
Mr.  Schmitz   outlined   possible  signage   to  alert  people   of                                                            
trespassing   laws  and   safety   concerns.  He   assumed  that   a                                                            
"commonsense  approach"  would be adopted.  He stated  that in  many                                                            
rural areas, warning signs  are all that is necessary, as opposed to                                                            
a commuter  train in an urban area  with would likely be  fenced off                                                            
                                                                                                                                
Senator Bunde  knew of specific duck  hunters cited for trespassing                                                             
along the  Railroad. He  emphasized that  this legislation  does not                                                            
provide a "typical transfer"  of property and that if undertaken the                                                            
Railroad would receive  sole control over the land. He remarked that                                                            
if the decision  is to "give away  our natural resources"  this fact                                                            
must be understood fully.                                                                                                       
                                                                                                                                
Senator Olson  asked what party would  retain the power of  imminent                                                            
domain.                                                                                                                         
                                                                                                                                
Ms. Lindskoog replied that the Railroad would have this power.                                                                  
                                                                                                                                
PHILLIS JOHNSON,  Attorney, Alaska  Railroad Corporation,  testified                                                            
via  teleconference  from an  offnet location,  to  affirm that  the                                                            
Railroad holds  the power of eminent  domain just as the  Department                                                            
of  Natural Resources  and  utility  corporations  do  for lands  it                                                            
administers.  However, she pointed  out that the Railroad  has never                                                            
exercised the power of  eminent domain. She noted that in some areas                                                            
of  the proposed  route  the entire  width of  the  corridor is  not                                                            
needed.  She stated  this was established  as a  compromise in  this                                                            
legislation and  that corridor width is commonly negotiated  in land                                                            
transfers as a "last resort".                                                                                                   
                                                                                                                                
Ms.  Johnson  also  commented  that as  a  lawyer  representing  the                                                            
interest  of  the  Railroad,  she is  always  mindful  of  potential                                                            
litigation  relating to trespassing  issues.  She stressed  that the                                                            
transfer of  title is important to  the State, whether the  Railroad                                                            
obtains fee simple  title or "other mechanism" to  utilize the land,                                                            
such  as  a  permit  from  the  Department  of  Natural   Resources.                                                            
Regardless,  she  stressed, safety  concerns  would  remain and  the                                                            
issue of "tunneling" people must be addressed.                                                                                  
                                                                                                                                
Senator Dyson strongly  supported this bill and suggested the safety                                                            
issues could be  addressed "in another forum". He  viewed land owned                                                            
by the Railroad  to be held  in trust for  the people of Alaska  and                                                            
that access  should not be limited.  He was offended with  "what the                                                            
Railroad  has done in  Whittier" indicating  the extensive  barriers                                                            
erected to  prevent trespassing.  He stressed  that common  sense is                                                            
expected when near railroad  tracks and opined that most persons hit                                                            
by a  train likely  "deserve  it." He  expressed  that the  Railroad                                                            
should  hold the land  proposed in  this legislation,  not only  for                                                            
Railroad purposes, but also for Alaskans in general.                                                                            
                                                                                                                                
Co-Chair Green stated that  although she agreed with Senator Dyson's                                                            
comments  about railroad  crossings, major  liability issues  exist.                                                            
She spoke of "major issues"  with access to Railroad property in the                                                            
Mat-Su.  She spoke  of  attempts to  change  casual use  at a  "non-                                                            
official"  crossing an established  crossing  through repeated  use.                                                            
She  stated that  the Railroad  insists  upon involvement  in  these                                                            
decisions.  She remarked that any  land transferred to the  Railroad                                                            
with the expectation that  the land would be used for the benefit of                                                            
the public would not occur.  Rather, this land would be utilized for                                                            
the Railroad's purpose  and to generate profit for the Railroad. She                                                            
was unsure  how a dividend  program could  be established to  ensure                                                            
benefit  for all  Alaskans,  or of  a method  to promise  access  to                                                            
everyone.                                                                                                                       
                                                                                                                                
Senator Dyson  offered a  motion to report  the bill from  Committee                                                            
with individual recommendations and new fiscal notes.                                                                           
                                                                                                                                
Senator Bunde  objected. He  remarked that  the zero amounts  of the                                                            
fiscal notes  are disingenuous. He  expounded that this legislation                                                             
involves  the  transfer  of  State assets  and  suggested  that  the                                                            
legislature is "sometimes…too flexible."                                                                                        
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN  FAVOR:  Senator B.  Stevens,  Senator  Dyson,  Senator  Hoffman,                                                            
Senator Olson, Co-Chair Green and Co-Chair Wilken                                                                               
                                                                                                                                
OPPOSED: Senator Bunde                                                                                                          
                                                                                                                                
The motion PASSED (6-1)                                                                                                         
                                                                                                                                
CS SB 31  (RES) MOVED from  Committee with  three zero fiscal  notes                                                            
from  the  Department  of  Natural  Resources,  dated  1/23/04,  the                                                            
Department of  Transportation and Public Facilities,  dated 1/28/04,                                                            
and the  Department of  Community and Economic  Development,  Alaska                                                            
Railroad Corporation, dated 4/22/04.                                                                                            
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 378                                                                                                        
     "An Act relating  to regulation of the discharge  of pollutants                                                            
     from  timber-related  activities under  the National  Pollutant                                                            
     Discharge  Elimination System; relating to waste  treatment and                                                            
     disposal  permits; making conforming amendments;  and providing                                                            
     for an effective date."                                                                                                    
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken stated  this bill,  sponsored by  the Senate  Rules                                                            
Committee   at  the  request  of   the  Governor,  "authorizes   the                                                            
Department of Environmental  Conservation to administer the National                                                            
Pollutant Discharge Elimination Permit for the timber industry."                                                                
                                                                                                                                
ERNESTA   BALLARD,   Commissioner,   Department   of  Environmental                                                             
Conservation, informed  that 21 years ago she served as the Regional                                                            
Administrator   for   the  federal   Department   of  Environmental                                                             
Protection  Agency  (EPA)  and  traveled  to  Alaska  to  meet  with                                                            
Governor  Sheffield  and  the  commissioner  of  the  Department  of                                                            
Environmental  Conservation.  She reported  that she recommended  at                                                            
that time  that to protect  its waters and  also allow for  resource                                                            
development,  the State should  assume primacy  on waters.  However,                                                            
she remarked  that the State did not  and since that date,  45 other                                                            
states have done so, leaving  Alaska as one of five that do not have                                                            
primacy. She told of the  advantages to the states that have assumed                                                            
primacy  in  streamlining  and  establishment  of  state  standards,                                                            
administrative  procedures  and appeal procedures.  She stated  that                                                            
because Alaska  does not have primacy, the EPA writes  permits and a                                                            
second process for State approval is required.                                                                                  
                                                                                                                                
Ms. Ballard explained  that this legislation would  apply to timber-                                                            
related activities as a  pilot project, with the intention to expand                                                            
to other development activities in the future.                                                                                  
                                                                                                                                
JON  TILLINGHAST,   Attorney,  Sealaska  Corporation   testified  in                                                            
support  of the  bill.  He commented  that it  is  "no secret"  that                                                            
Alaska's  timber industry  was  "on the  ropes" and  expressed  this                                                            
legislation  would assist the industry  and other industries  in the                                                            
future.                                                                                                                         
                                                                                                                                
Senator Olson  surmised the  witness' assertion  is to the  "best of                                                            
your knowledge".                                                                                                                
                                                                                                                                
Mr. Tillinghast affirmed, noting his knowledge is first hand.                                                                   
                                                                                                                                
ADRIAN  LECORNU, Administrator,  Hydaburg  Cooperative Association,                                                             
testified via teleconference  from an offnet location, asked whether                                                            
the  assumption  of partial  primacy  for  the timber  sector  would                                                            
stipulate  that the State  would require Klukwan,  Inc. to  obtain a                                                            
National Pollution Discharge Elimination System (NPDES) permit.                                                                 
                                                                                                                                
                                                                                                                                
SFC 04 # 90, Side B 09:50 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Mr.  LeCornu  continued  that  a  Ninth  Circuit  Court  of  Appeals                                                            
opinion, issued  in November 2002 relating to a case  brought by the                                                            
League of Wilderness  Defenders clarifies that the  NPDES permitting                                                            
is  required for  aerial  spraying  of pesticides.  He  relayed  the                                                            
Association's  concerns that the consumption  of partial  primacy by                                                            
the State would  further erode the community's "voice"  as an Alaska                                                            
Native  Tribe. He  opined that  the State  has not  "demonstrated  a                                                            
willingness  to listen"  to  the concerns  of tribal  members  about                                                            
proposed pesticide spraying on Long Island.                                                                                     
                                                                                                                                
Mr.   LeCornu  asserted   this   legislation  would   limit   public                                                            
participation  by eliminating public notice of proposed  permits. He                                                            
stated that permits could  be issued for spraying near Hydaburg with                                                            
no notice or  opportunity for comment  given to residents.  He added                                                            
that public hearings  located in Ketchikan, for activities  proposed                                                            
for Prince  of Wales Island, would  present a hardship for  Hydaburg                                                            
residents wishing to participate.                                                                                               
                                                                                                                                
Co-Chair  Wilken requested  the Department  respond to the  concerns                                                            
voiced by the witness.                                                                                                          
                                                                                                                                
Ms. Ballard responded  the matter to which the witness  testified is                                                            
a different,  pesticide  program,  rather than  the water  discharge                                                            
program  addressed  in this  legislation.  She understood  that  the                                                            
concerns  relate  to  the  public  hearing   process  for  a  permit                                                            
application   submitted  by  the   Klukwan  Corporation   requesting                                                            
authority  for aerial  pesticide application  on  Long Island,  near                                                            
Hydaburg.   She   informed   that   Department    of  Environmental                                                             
Conservation regulations  require that the Klukwan  Corporation must                                                            
hold public  hearings, which  have not been  scheduled and  location                                                            
has  not been  determined.  She also  noted  that questions  of  the                                                            
Department  of  Environmental  Conservation  and the  Department  of                                                            
Natural Resources  must be answered before the application  could be                                                            
accepted.                                                                                                                       
                                                                                                                                
Co-Chair Wilken requested  witness contact the Department to resolve                                                            
this issue.                                                                                                                     
                                                                                                                                
Mr. LeCornu agreed to do so.                                                                                                    
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 311(JUD)                                                                                            
     "An Act providing for a special deposit for workers'                                                                       
     compensation  insurers; relating  to the board of governors  of                                                            
     the Alaska  Insurance Guaranty Association; stating  the intent                                                            
     of  the legislature,  and setting out  limitations,  concerning                                                            
     the  interpretation,   construction,   and  implementation   of                                                            
     workers'  compensation  laws;  relating  to  restructuring  the                                                            
     Alaska  workers' compensation  system;  eliminating the  Alaska                                                            
     Workers'   Compensation  Board;  establishing   a  division  of                                                            
     workers'  compensation  within  the  Department  of  Labor  and                                                            
     Workforce  Development  and assigning  certain Alaska  Workers'                                                            
     Compensation   Board   functions  to   the  division  and   the                                                            
     Department  of Labor and Workforce Development;  establishing a                                                            
     Workers'  Compensation  Appeals Commission;  assigning  certain                                                            
     functions  of the  Alaska Workers'  Compensation  Board to  the                                                            
     Workers'  Compensation  Appeals  Commission  and  the  Workers'                                                            
     Compensation   Hearings  Board;  relating  to  agreements  that                                                            
     discharge   workers'  compensation  liability;   providing  for                                                            
     hearing examiners  and hearing panels in workers'  compensation                                                            
     proceedings;   relating   to  workers'   compensation   awards;                                                            
     relating  to an employer's failure  to insure and keep  insured                                                            
     or provide  security; providing  for appeals from compensation                                                             
     orders;   relating   to  workers'   compensation  proceedings;                                                             
     providing  for supreme court  jurisdiction of appeals  from the                                                            
     Workers'  Compensation  Appeals  Commission;  providing  for  a                                                            
     maximum amount  for the cost-of-living adjustment  for workers'                                                            
     compensation  benefits; providing for administrative  penalties                                                            
     for  employers  uninsured  or  without  adequate  security  for                                                            
     workers'  compensation;  relating  to assigned  risk pools  and                                                            
     insurers; and providing for an effective date."                                                                            
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Wilken stated  this bill,  sponsored by  the Senate  Rules                                                            
Committee  at  the  request  of  the  Governor,   "changes  the  way                                                            
workmans' compensation  disputes and appeals are resolved.  Under SB
311,  appeals   are  reviewed   by  the   newly  created   Workmans'                                                            
Compensation   Commission,  which  is  composed  of   three  persons                                                            
experienced  in  practicing  Workmans' compensation   law in  Alaska                                                            
instead of the Alaska Superior Court."                                                                                          
                                                                                                                                
LINDA  HALL,   Director,  Division   of  Insurance,  Department   of                                                            
Community  and Economic  Development,  noted the  complexity of  the                                                            
legislation and testified as follows.                                                                                           
                                                                                                                                
     With this Committee  previously, I have discussed the financial                                                            
     crisis  in  the Alaska  Insurance  Guarantee  Association.  The                                                            
     other area  of tremendous concern to me today  is the lack of a                                                            
     healthy workers'  compensation insurance environment.  I'd like                                                            
     to  give  a  little  background  on  the  problems  that  we're                                                            
     encountering.  We have had for  the past five years,  a lack of                                                            
     profitability  in out market,  which is making it unattractive                                                             
     to insurers.  Losses have ranged from a low of  99.9 percent to                                                            
     a high  of 154 percent. At that  high, insurance companies  are                                                            
     spending  $1.54  for  every  dollar  of workers'  compensation                                                             
     premium they collect.  Alaska carriers are loosing five percent                                                            
     more money in Alaska than the national average.                                                                            
                                                                                                                                
     The second  area that has created  a problem has been  the cost                                                            
     of workers' compensation  claims. As everyone is aware, cost of                                                            
     medical  benefits  has increased  substantially  over the  past                                                            
     several years. We  have seen double-digit increases in the cost                                                            
     of  medical care.  This  is accepted  and at  least  understood                                                            
     usually in  the health insurance arena, but sometimes  we don't                                                            
     make that  connection with the  cost of workers' compensation.                                                             
     It does have a dramatic impact on the cost of claims.                                                                      
                                                                                                                                
     Major  cost  drivers  in  the  state  of  Alaska  for  workers'                                                            
     compensation insurance  are physician's fees, [which] are among                                                            
     the highest  in the country.  We have a permanent partial  cost                                                            
     per  case  that  is 40  percent  higher  than  the countrywide                                                             
     average. We have lengthening  duration of claims, as we have an                                                            
     aging workforce. I  think maybe we heal less quickly. We have a                                                            
     claim  frequency  in  our temporary  total  that  is total  the                                                            
     countrywide  average.  These cost  drivers affect  the cost  of                                                            
     claims, which  in turn certainly impact the cost  of insurance.                                                            
                                                                                                                                
     As I think  everyone is aware,  I've talked about it  with this                                                            
     group  before,  we  have  had substantial   premium  increases.                                                            
     Effective  January 1  of this year,  the average rate  increase                                                            
     was  21.2 percent.  As the  cost of  claims  is increased,  the                                                            
     actuarial  analysis of historical  claims cost and projections                                                             
     into the  future indicated the  need for that substantial  rate                                                            
     increase.  The change  was an  average. We  actually have  seen                                                            
     ranges  from a 15 percent  reduction in  costs to a high  of 57                                                            
     percent increase  in people's workers' compensation.  We had 17                                                            
     classifications that had increases in excess of 50 percent.                                                                
                                                                                                                                
     Combining  that increase in premium  with the assessments  that                                                            
     are  occurring for the  deficit in  the Guarantee Association,                                                             
     has  combined  to  make  dramatic  increases  in  the  cost  of                                                            
     workers' compensation.                                                                                                     
                                                                                                                                
     The fourth  factor that is impacting our workers'  compensation                                                            
     market is the assigned  risk pool. It's another factor that has                                                            
     made the  Alaska marketplace increasingly unattractive.  Due to                                                            
     the  mandatory  nature  of workers'  compensation,   we have  a                                                            
     mechanism  called  the  "assigned  risk  pool",  where,  if  an                                                            
     employer  is  unable to  obtain  insurance in  the traditional                                                             
     market,  they can obtain insurance  in the assigned  risk pool.                                                            
     Currently,  17 percent  of the market  is in the assigned  risk                                                            
     pool.  When  the cost  of  claims  in the  assigned  risk  pool                                                            
     exceeds the  cost of the premiums collected,  the difference is                                                            
     charged back to insurance  companies. Over the past five years,                                                            
     Alaska has  had the highest charge of any state  for the losses                                                            
     in  the  assigned  risk  pool. This  charges  range  from  four                                                            
     percent  to six percent. It's  an additional cost to  insurance                                                            
     companies,  comes  directly out  of their  operating costs  and                                                            
     makes doing business in Alaska very expensive.                                                                             
                                                                                                                                
     Overall,  we have a workers'  compensation environment  that is                                                            
     becoming very expensive  for employers and very unattractive to                                                            
     insurers.                                                                                                                  
                                                                                                                                
     As these  issues became  apparent, staff  from the Division  of                                                            
     Insurance,  the Department of  Labor and Workforce Development                                                             
     and the Department  of Law have met to attempt  to find ways to                                                            
     overcome  these  challenges.   We  cannot  continue  to  merely                                                            
     increase workers'  compensation premiums for employers. We must                                                            
     look  to find ways to  stem the increasing  costs of  providing                                                            
     benefits to workers.                                                                                                       
                                                                                                                                
     We've looked  at a number of options, ranging  from the cost of                                                            
     medical  benefits,   provider  fee  payments,  definitions   of                                                            
     compensability,  and  a variety  of technical  terms that  deal                                                            
     with the benefit system.                                                                                                   
                                                                                                                                
     SB 311 makes some  insurance changes to enhance our marketplace                                                            
     and  it  proposes   a  change  in  the  workers'  compensation                                                             
     adjudicatory  process   that we  feel  will  bring  about  more                                                            
     efficiencies,   more  predictability.  We  desperately  need  a                                                            
     healthy workers' compensation  marketplace in Alaska. We need a                                                            
     market  that's sustainable,  that will  encourage companies  to                                                            
     continue  to  do business,  to  attract  new markets.  We  need                                                            
     compensation  insurance  that is available  and affordable  for                                                            
     employers  to  continue to  develop  jobs to  sustain  economic                                                            
     development.                                                                                                               
                                                                                                                                
     This bill  is fairly unique in  that it's a cross departmental                                                             
     effort  to find  solutions to  the issues.  I will address  the                                                            
     insurance  pieces  of  the bill,  Director  Paul  Lisankie  and                                                            
     Deputy  Attorney  General  Scott  Nordstrad  will  address  the                                                            
     Department of Labor,  workers' compensation pieces of the bill.                                                            
                                                                                                                                
     Realizing  that the bill  is fairly long,  there are only  four                                                            
     sections that I would  like to address for insurance. Section 3                                                            
     is a  requirement for  an increase in  the deposit required  of                                                            
     insurance   companies  writing   workers'  compensation.   This                                                            
     deposit  will be for the protection  of Alaskans covered  under                                                            
     the  workers' compensation  system.  As you've  seen, and  this                                                            
     body has passed a  bill funding the current deficit in the AIGA                                                            
     [Alaska   Insurance   Guarantee  Association]   these   special                                                            
     deposits  would go to  the Guarantee  Association, which  would                                                            
     diminish the need  for assessments that we're currently facing.                                                            
                                                                                                                                
     Section   4  really  makes  that  an  order  of   priority  and                                                            
     bankruptcy.                                                                                                                
                                                                                                                                
     Section 5 changes  the composition of the Board of Governors of                                                            
     the  Guarantee Association.  Currently,  insurance - there  are                                                            
     seven  insurance company  members and  two public members.  The                                                            
     proposal   is  to   change  that   composition   so  that   all                                                            
     stakeholders  have  a seat  at  the table.  We've  seen what  a                                                            
     dramatic impact in  solvencies can have on both injured workers                                                            
     and on employers and  I'd like to see more people at the table.                                                            
                                                                                                                                
     Section  105  is  the  other  insurance  section  I'd  like  to                                                            
     discuss.  Section 105 repeals  the 25 percent statutory  cap on                                                            
     surcharges  on the assigned risk  pool. The assigned  risk pool                                                            
     currently  has a statutory cap  of 25 percent. I feel  strongly                                                            
     the  pool  must be  self-funding.  Premiums  have  lagged  well                                                            
     behind  the cost  of claims in  the pool.  Nearly 6,000  of the                                                            
     8,800  policies in the  pool will have  premiums under  $3,000.                                                            
     The  average cost of  claim in Alaska  today is $19,363.  So we                                                            
     have an $800  premium and a $19,000 claim. That  is an average.                                                            
     The  pool has lost money  at an even  more rapid rate  than the                                                            
     traditional  insurance market. Small employers  are the bulk of                                                            
     these  6,000 policies. They are  just as likely to have  claims                                                            
     even  though probably  not as  many as larger  employers.  As I                                                            
     described   in  the  introduction,  the  financial   burden  on                                                            
     insurance  companies from  the Alaska  assigned risk pool,  has                                                            
     contributed  dramatically  to  the  overall  attractiveness  of                                                            
     Alaska  to insurers.  We have a fragile  insurance marketplace                                                             
     and we're  looking for solutions to bring about  change to that                                                            
     marketplace  so  that we  can have  an  impact on  the cost  of                                                            
     workers' compensation.                                                                                                     
                                                                                                                                
Co-Chair Green interrupted to question the section of the bill the                                                              
witness was explaining.                                                                                                         
                                                                                                                                
Ms. Hall corrected that Section 106 pertains to the assigned risk                                                               
pool, as she was discussion.                                                                                                    
                                                                                                                                
Co-Chair  Wilken  announced  as  much time  as  necessary  would  be                                                            
allotted for  consideration of this  bill due to the importance  and                                                            
complexity of the matter.                                                                                                       
                                                                                                                                
PAUL  LISANKIE,   Director,  Division   of  Workers'  Compensation,                                                             
Department  of  Labor  and  Workforce  Development   testified  that                                                            
several  features  in  bill  would  affect  the  administration   of                                                            
workers'  compensation insurance  in Alaska.  He stressed that  this                                                            
bill proposes  no changes to workers' compensation  benefits payable                                                            
to  residents  of Alaska,  although  the  calculation  of rates  for                                                            
nonresidents  would  be changed.  He explained  this  is to  prevent                                                            
injured nonresidents  from receiving  higher benefit payments  while                                                            
residing outside the State.                                                                                                     
                                                                                                                                
Mr.  Lisankie  furthered   this  bill  would  formally   divide  the                                                            
functions of the  Workers' Compensation Board into  adjudication and                                                            
administration. He informed  that the Division currently assists the                                                            
Board  in all  Board functions,  although  this is  not required  by                                                            
statute.  He stressed the  need to "informally"  insure that  claims                                                            
are not  decided as  a result of  the current  practice whereby  the                                                            
Division and  the Board both investigate  claims, accuse  parties of                                                            
wrongdoing and issue joint  determinations. Due process constraints,                                                            
he  specified,  provide  that the  party  charging  and prosecuting                                                             
matters could not be the  same party that judges upon those matters.                                                            
He noted  this  bill would  make a  formal distinction  between  the                                                            
Division, which  would undertake administrative,  investigative  and                                                            
prosecutorial  activities, and  the Board,  which would resolve  any                                                            
disputes between the Division and the party.                                                                                    
                                                                                                                                
Mr.  Lisankie  told of  the  proposed establishment  of  a  Workers'                                                            
Compensation Appeals Commission  in this legislation. He stated this                                                            
Commission would  hire and retain hearing examiners,  who along with                                                            
the current  panel members would undertake  the initial hearings  in                                                            
disputed  claims  for benefits  and  accusations  against  employers                                                            
failing to provide insurance.                                                                                                   
                                                                                                                                
Mr. Lisankie then  shared that currently, if the Division  discovers                                                            
an employer  failing to  provide insurance,  the only sanction  that                                                            
could be  imposed is closure  of the business  if such insurance  is                                                            
not  purchased;   however,  he  remarked  that  once   insurance  is                                                            
purchased, no  other consequences could be imposed  on the employer.                                                            
He stated  that this  legislation  would impose  penalties of  up to                                                            
$100  per  day,  per employee  that  the  employer  fails  to  carry                                                            
insurance.  He  expressed  the intent  is  to strengthen  cease  and                                                            
desist  orders,  and  to  show  to  employers  that  this  issue  is                                                            
critical.  He asserted  that employers  failing  to carry  insurance                                                            
place the physical  health of employees  at risk, and also  provides                                                            
an unfair  fiscal  advantage against  other employers  who  lawfully                                                            
purchase this insurance.                                                                                                        
                                                                                                                                
Mr. Lisankie  listed the motivation  behind the proposed  changes is                                                            
greater consistency  of decisions  and predictability of  decisions.                                                            
He remarked  that injured workers  would have more certainty  of the                                                            
benefits  they would receive.  He gave the  history of the  Workers'                                                            
Compensation  Board  established  at statehood  in  1959 with  three                                                            
members, with  no question as to who  resolved the issues.  However,                                                            
he noted  that with  increased population  in the  State, the  Board                                                            
membership expanded  to the current seven panels,  with the 14 total                                                            
members  appointed by  the Governor  to seats  designated for  labor                                                            
interests and industry  interests, and confirmed by the Legislature.                                                            
Each panel, he informed,  independently decides how to interpret and                                                            
implement the workers'  compensation laws and are not required to be                                                            
consistent with the other panels.                                                                                               
                                                                                                                                
Mr. Lisankie noted  that if a party is dissatisfied  with the ruling                                                            
of  a panel,  they are  entitled  to an  appeal through  the  Alaska                                                            
superior  court, which  serves as  the appellate  body. He  remarked                                                            
that most superior  court judges do  not have expertise in  workers'                                                            
compensation  law. He furthered that  the decisions of the  superior                                                            
court are  binding but that  panels are not  required to follow  the                                                            
rulings in future cases.                                                                                                        
                                                                                                                                
Mr. Lisankie explained  that this bill would eliminate  the superior                                                            
court from the workers'  compensation appeal process and establish a                                                            
commission to address appeals.  This commission of three members, he                                                            
said, would  issue binding decisions  that would set precedence  for                                                            
future cases.  He qualified  that the Alaska  Supreme Court  remains                                                            
the sole  arbiter  of law  in the State  and that  final  commission                                                            
decisions could be appealed  to the Supreme Court. He indicated that                                                            
precedence  set by the commission  would continue to apply  to other                                                            
ongoing cases until overturned by the Supreme Court.                                                                            
                                                                                                                                
Mr. Lisankie  predicted that the consistency  and predictability  of                                                            
decisions  would result in  less litigation  and be less costly.  He                                                            
informed that  the proposed changes in this legislation  are similar                                                            
to the  laws of  some other states.  He anticipated  that  insurance                                                            
providers  currently  not  issuing   policies  in  Alaska  would  be                                                            
encouraged  to participate  in the Alaska  marketplace knowing  that                                                            
their experiences  here would be similar  to those in other  states.                                                            
                                                                                                                                
LORI  WING,  President,  Alaska  Independent  Insurance  Agents  and                                                            
Brokers,  testified  via  teleconference  from  Anchorage  and  read                                                            
testimony into the record as follows.                                                                                           
                                                                                                                                
     Our association, the AIIAB represents in the insurance                                                                     
     marketplace  employers from Ketchikan to Barrow,  from Kaktovik                                                            
     to  Adak.  Our clients  are  governmental  entities,  privately                                                            
     held,  and  publicly  traded  corporations,  limited  liability                                                            
     companies,  and joint  ventures. They  are for-profit  and not-                                                            
     for-profit;  they are large and  small. All together  they make                                                            
     up  the business  community, the  economic base  of the  State.                                                            
     Each  of  these  entities   is  required  to  comply  with  the                                                            
     respective  statutes that  are often referred  to as the  "Work                                                            
     Comp  Act". Each  of these  entities contribute  a significant                                                             
     portion of their revenues  to a work-comp program regardless of                                                            
     whether they are insurers  to a commercial insurance product or                                                            
     self insured  through an alternative risk financing  technique.                                                            
                                                                                                                                
     The  past  few  years,  these  employers,  regardless  of  what                                                            
     mechanism  they  have  chosen  to  comply with  the  Act,  have                                                            
     experienced   significant   increased   costs.   The  cost   of                                                            
     insurance,  reinsurance,  claims and  the associated  expenses;                                                            
     the  costs have  increased.  For those  that  have purchased  a                                                            
     commercial  insurance  product, the  cost is  reflected in  the                                                            
     insurance  premium.   For  those  self-insuring,  the  cost  is                                                            
     reflected  in the  direct payment  of claims.  Regardless,  the                                                            
     employer is paying the cost, the increased cost.                                                                           
                                                                                                                                
     We,  the AIIAB,  as an association,  agree  that some of  these                                                            
     costs  are difficult to control.  Workers' compensation  claims                                                            
     are every bit as much  subject to the increased cost of medical                                                            
     care as  a health or medical  insurance program. But  there are                                                            
     some  costs  we think  can be  controlled.  Costs  that can  be                                                            
     quantified,  defined, not subjected  to the opinion  to what is                                                            
     commonly  referred to  as [indiscernible].  Those costs  can be                                                            
     controlled.  Our hope is that Senate Bill 311  will allow those                                                            
     costs  to be  quantified, defined  once and  for all,  allowing                                                            
     rate-making organizations  and insurers to adequately trend and                                                            
     price  the cost  of workers'  compensation,  making the  recent                                                            
     rate  premium or  claim  cost, the  increases or  a portion  of                                                            
     those costs, unnecessary.                                                                                                  
                                                                                                                                
     I  can  tell you  that  I  personally  deal  with a  client,  a                                                            
     regional  hospital  out in  Dillingham.  Their  work comp  this                                                            
     year,  based on the rate increases  as of January 21st  will go                                                            
     from  $391,000  to  $524,000  without changing  the  payroll  a                                                            
     penny.                                                                                                                     
                                                                                                                                
     Senate  Bill 311 does not limit  or eliminate any benefits  due                                                            
     an  injured worker  or an  injured  employee, but  it may  help                                                            
     reduce the cost of  complying with the Act to employers. It may                                                            
     help,  and  we  believe  it  will,  make  those  corporations,                                                             
     governmental  entities, and other organizations  from Ketchikan                                                            
     to Barrow,  from Kaktovik to  Adak, remain viable, profitable,                                                             
     Alaskan employers.                                                                                                         
                                                                                                                                
     We the AIIAB  respectfully request that you the  members of the                                                            
     Senate  Finance Committee,  refer the bill  on and we  ask that                                                            
     your colleagues, regardless  of they're Republican or Democrat,                                                            
     do  the same.  We,  those that  deal  with the  employers,  the                                                            
     insurers,  the few that  we have in  this State, the  adjusters                                                            
     and attorneys,  the employees and the claimants,  are confident                                                            
     that  this bill will  help stabilize  and hopefully reduce  the                                                            
     costs associated  with compliance with the mandates  defined in                                                            
     this  Act. We are  confident  Senate Bill 311  will help  those                                                            
     employers that are the economic base of this State.                                                                        
                                                                                                                                
Senator Hoffman remarked  upon the significant cost increase for the                                                            
Bristol Bay Health Corporation  and asked how this bill would reduce                                                            
those costs.                                                                                                                    
                                                                                                                                
Ms. Wing  was  unsure this  legislation  would affect  rates in  the                                                            
current year,  but predicted  that cost reductions  would begin  the                                                            
following year and continue for several years.                                                                                  
                                                                                                                                
Senator  Hoffman  asked what  emphasis  should  the State  place  on                                                            
reducing claims through promotion of workplace safety.                                                                          
                                                                                                                                
Ms. Wing  admitted this  is a  viable component,  but stressed  that                                                            
regardless  of how safe a  workplace is,  injuries occur. She  noted                                                            
that all employers she works with emphasize safety.                                                                             
                                                                                                                                
Senator  Olson  asked whether  the  witness  supports  the  proposed                                                            
appeals commission  of three attorneys,  or predicts the  commission                                                            
would complicate future matters.                                                                                                
                                                                                                                                
Ms. Wing  expressed  the association  supports the  bill as  written                                                            
with the three attorney positions.                                                                                              
                                                                                                                                
KEVIN  DAUGHERTY,  Alaska Labor  and  Management Ad  Hoc  Committee,                                                            
testified via teleconference  from Anchorage that this bill does not                                                            
reflect  the process  of the  Ad Hoc  Committee, which  has been  in                                                            
place  since  1981.  He reminded   that during  the  1990s,  Ad  Hoc                                                            
Committee  efforts  reduced premiums  for  employers a  total of  49                                                            
percent. He  cited this as an example  of the ability of  the Ad Hoc                                                            
Committee to protect benefits  and provide for a more cost effective                                                            
system. He  charged that this bill  departs from the actions  of the                                                            
Committee  and instead proposes  to replace  a "common-sense  layman                                                            
board" with three "so-called expert" attorneys.                                                                                 
                                                                                                                                
Mr.  Daugherty remarked  this  would  not provide  better  "decision                                                            
making", stressing  this is not only his opinion,  but also reflects                                                            
the assessment  of the National Commission of Compensation  Insurers                                                            
(NCCI). He  relayed the process in  which a Pacific Northwest  panel                                                            
within the Commission  reviews all proposed legislation  relating to                                                            
insurance  matters  in  the  region.  He  pointed  to  the  lack  of                                                            
documentation in this legislation  of any actual economic savings to                                                            
employers.  He provided the  phone number  of the Commission,  (503)                                                            
624-5890  to  allow  Members  to  obtain  more  information  and  he                                                            
qualified that the Commission  has not taken an official position on                                                            
this bill.                                                                                                                      
                                                                                                                                
Mr. Daugherty  cited  the 2002  Workers' Compensation  Board  Annual                                                            
Report, the most recent  available, noting that total death benefits                                                            
paid to all survivors in  Alaska was $3.2 million, compared to $7.06                                                            
million  paid  to attorneys  representing  insurance  companies.  He                                                            
surmised  that if  currently,  over  double the  amount  is paid  to                                                            
attorneys than  survivors, the system should be made  more efficient                                                            
rather than adding  more attorneys and appeals. He  pointed out that                                                            
this legislation does not  provide that additional benefits would be                                                            
provided for injured workers or survivors.                                                                                      
                                                                                                                                
Mr. Daugherty  next referenced a fiscal  note from the Alaska  Court                                                            
System projecting an implementation  cost of approximately $500,000.                                                            
He  also  predicted  the  cost  of a  new  office  for  the  appeals                                                            
commission   would  be  approximately   $500,000,  plus   additional                                                            
expenses  for  support  staff.  He  reiterated   that  no  increased                                                            
benefits  would be  provided for  injured workers  or survivors  and                                                            
that cost savings would not be realized for employers.                                                                          
                                                                                                                                
CHUCK  LUNDEEN,  General   Counsel,  Liberty  Northwest   Insurance,                                                            
testified  via teleconference   from an  offnet location,  that  the                                                            
Oregon-based  company  has staff  located  in Anchorage  and  writes                                                            
workers'  compensation  insurance policies.  He  furthered that  the                                                            
company insures  20 percent of Alaska's assigned risk  pool and over                                                            
125  Alaskan  employers  on  a  voluntary  underwriting   basis.  He                                                            
supports  bill because  it provides  a "clear  statement of  purpose                                                            
that  all parties  will  receive  impartial  fair treatment  in  the                                                            
dispute resolution  process". He opined  this is good for  employers                                                            
and workers.                                                                                                                    
                                                                                                                                
Mr. Lundeen  further supported the  bill because it streamlines  the                                                            
litigation  process and would  produce faster  results, which  would                                                            
also  benefit injured  workers  and employers  and  reduce costs  as                                                            
well.  He explained  that  the  elimination  of involvement  of  the                                                            
superior court would save  money. He then spoke to the "precedential                                                            
value" of the  decisions of the proposed appeals commission  in that                                                            
they would provide to all parties understanding of Alaska law.                                                                  
                                                                                                                                
Mr.  Lundeen  was  uncertain  whether the  NCCI  had  reviewed  this                                                            
legislation,  but he  expressed intent  to bring  the matter  to the                                                            
organization's  attention. He told of his 20 years  in the insurance                                                            
industry  and  assessed  this legislation  would  reduce  costs.  He                                                            
compared it to  similar legislation adopted in the  state of Oregon,                                                            
which has resulted in reduced costs.                                                                                            
                                                                                                                                
Senator Hoffman  surmised  the intent to  streamline the process  to                                                            
save premium  costs, although the  addition of the commission  would                                                            
increase expenditures.  He therefore concluded that any cost savings                                                            
must be garnered  from reduced benefits.  He understood that  judges                                                            
must be impartial  in interpreting the law and asked  how the number                                                            
of claims awarded  or the amount of  benefits paid would  be reduced                                                            
to meet the goals.                                                                                                              
                                                                                                                                
Mr. Lundeen  responded  that the "body  of law"  if adopted  in this                                                            
legislation  would,  over  time,  result  in  claims  adjustors  and                                                            
attorneys representing  injured workers would make  better decisions                                                            
whether to  litigate or settle claims.  He doubted this legislation                                                             
would affect benefits or  compensability standards or make it easier                                                            
to deny a claim. He predicted  the cost savings would be realized as                                                            
a result of a streamlined process.                                                                                              
                                                                                                                                
Senator   Hoffman  referenced   Ms.  Hall's   presentation   listing                                                            
statistics  proposing that this legislation  would better  align the                                                            
State  with the national  averages  and potentially  result in  cost                                                            
savings. He asked Mr. Lundeen's comment on this information.                                                                    
                                                                                                                                
Mr. Lundeen  replied that this bill  is a portion of the  process of                                                            
reviewing and  revising the workers'  compensation system  in Alaska                                                            
to  address  cost   drivers.  He  reiterated  his  prediction   this                                                            
legislation  would  reduce litigation,  which  is more  costly.   He                                                            
qualified  this bill is not  a "cure all"  but is a "positive  first                                                            
step".                                                                                                                          
                                                                                                                                
Senator Hoffman  again asked how this legislation  would "reduce the                                                            
claims".                                                                                                                        
                                                                                                                                
Mr. Lundeen  responded  it would not,  but rather  would reduce  the                                                            
number of litigated  claims due to consistent interpretation  of the                                                            
law.                                                                                                                            
                                                                                                                                
                                                                                                                                
SFC 04 # 91, Side A 10:38 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Mr. Lundeen continued  that in situations of uncertainty,  attorneys                                                            
advise litigation.  He remarked that current interpretations  of the                                                            
workers' compensation laws are inconsistent.                                                                                    
                                                                                                                                
DENNIS  MURRAY,  Administrator,  Heritage  Place Nursing  Home,  and                                                            
former   president,   Alaska  State   Hospital   and  Nursing   Home                                                            
Association, testified  via teleconference from Kenai, in support of                                                            
the bill, as proposed  and recommended against adoption  of proposed                                                            
amendments.  He  opined  that  the  proposed  amendments  would  not                                                            
improve the system,  noting the premium increase of  160 percent for                                                            
the company.  He told  of a study  conducted by  the Association  of                                                            
nursing  homes  in Alaska  that  found  that  workers' compensation                                                             
premiums  had increased 100  percent. He  relayed the Department  of                                                            
Law determined  this legislation is more consistent  with operations                                                            
in other states.                                                                                                                
                                                                                                                                
PAUL BRENNER, Vice President,  Quality Management, Central Peninsula                                                            
General Hospital, testified  via teleconference from Kenai, that the                                                            
proposed amendments  seem to remove the strengths  of the bill would                                                            
make it ineffective.  He supported  the creation of the Commission,                                                             
predicting  it  would  bring  continuity  to  workers  compensation                                                             
system.   He  told   of  the   significant  increase   in   workers'                                                            
compensation claims  and the desire for resolution  of the situation                                                            
and predictability of the process.                                                                                              
                                                                                                                                
Co-Chair Wilken ordered the bill HELD in Committee.                                                                             
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Gary Wilken adjourned the meeting at 10:44 AM                                                                          

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