Legislature(2005 - 2006)SENATE FINANCE 532

05/07/2006 01:00 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change --
+ HB 51 EMPLOYER ASSN FOR WORKERS' COMP INS TELECONFERENCED
Heard & Held
+ HB 190 REQUIRED ID FOR PURCHASING ALCOHOL TELECONFERENCED
Heard & Held
+ HB 485 STATE PHARMACISTS/DOCTORS: EXEMPT SERVICE TELECONFERENCED
Moved HB 485 am Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
= HB 150 LICENSING RADIOLOGIC TECHNICIANS
Heard & Held
                            MINUTES                                                                                           
                    SENATE FINANCE COMMITTEE                                                                                  
                          May 7, 2006                                                                                         
                           1:14 p.m.                                                                                          
                                                                                                                                
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair  Lyda  Green  convened   the  meeting  at  approximately                                                               
1:14:18 PM.                                                                                                                   
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Lyda Green, Co-Chair                                                                                                    
Senator Gary Wilken, Co-Chair                                                                                                   
Senator Con Bunde, Vice Chair                                                                                                   
Senator Fred Dyson                                                                                                              
Senator Bert Stedman                                                                                                            
                                                                                                                                
Also  Attending:    MICHAEL PAWLOWSKI,  Staff  to  Representative                                                             
Kevin  Meyer;  RAY   HICKLE,  President,  Anchorage  Homebuilders                                                               
Association;  PAUL  LISANKIE,   Director,  Workers'  Compensation                                                               
Division, Department  of Labor  and Workforce  Development; LINDA                                                               
HALL, Director,  Division of  Insurance, Department  of Commerce,                                                               
Community  and  Economic  Development;  JANET  CLARKE,  Assistant                                                               
Commissioner, Department of Health  and Social Services; SHARLEEN                                                               
GRIFFIN,   Director,   Division   of   Administrative   Services,                                                               
Department of Corrections; PAUL  LABOLLE, Staff to Representative                                                               
Richard  Foster; HEATHER  BRADY,  Staff  to Representative  Harry                                                               
Crawford;  DOUG WOOLIVER,  Administrative Attorney,  Alaska Court                                                               
System; HEALTH HILYARD, Staff to Representative Tom Anderson;                                                                   
                                                                                                                                
Attending via  Teleconference:  From  an offnet  location: ROBERT                                                             
VOGEL,  Vice  President  of  Operations,  Pro  Group  Management,                                                               
representing  Anchorage Home  Builders Association;  DAVE KESTER,                                                               
Workers'   Compensation   Committee   of  Alaska;   MIKE   COMBS,                                                               
President,  Alaska   Independent  Insurance   Agent  Association;                                                               
KENTON  BRINE,  Property  Casualty  Insurance  Association;  From                                                               
Anchorage: DUANNE BANNOCK, Director,  Division of Motor Vehicles,                                                               
Department of Administration.                                                                                                   
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
HB  51-EMPLOYER ASSN FOR WORKERS' COMP INS                                                                                      
                                                                                                                                
The Committee  heard from  the sponsor,  the Department  of Labor                                                               
and Workforce Development, the  Department of Commerce, Community                                                               
and  Economic Development,  representatives  of the  construction                                                               
and   insurance   industries,   and   a   workers'   compensation                                                               
organization. The bill was held in Committee.                                                                                   
                                                                                                                                
HB 485-STATE PHARMACISTS/DOCTORS: EXEMPT SERVICE                                                                                
                                                                                                                                
The  Committee heard  from the  Department of  Health and  Social                                                               
Services  and  the  Department   of  Corrections.  The  bill  was                                                               
reported from Committee.                                                                                                        
                                                                                                                                
HB 190-REQUIRED ID FOR PURCHASING ALCOHOL                                                                                       
                                                                                                                                
The Committee  heard from the  sponsors, the Alaska  Court System                                                               
and  the  Department of  Administration.  The  bill was  held  in                                                               
Committee.                                                                                                                      
                                                                                                                                
HB 150-LICENSING RADIOLOGIC TECHNICIANS                                                                                         
                                                                                                                                
The Committee  heard from the  sponsor.   A motion to  report the                                                               
bill  from  Committee  failed  5-2,  and the  bill  was  held  in                                                               
Committee.                                                                                                                      
                                                                                                                                
1:14:41 PM                                                                                                                    
                                                                                                                                
                                                                                                                                
     CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 51(FIN)                                                                       
     "An Act  relating to associations of  self-insured employers                                                               
     for  purposes of  providing  workers' compensation  coverage                                                               
     and allowing employers who are  members of the same trade to                                                               
     form associations for  providing self-insurance for workers'                                                               
     compensation  coverage;  and   providing  for  an  effective                                                               
     date."                                                                                                                     
                                                                                                                                
                                                                                                                                
This was  the first hearing for  this bill in the  Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
MICHAEL   PAWLOWSKI,  Staff   to   Representative  Kevin   Meyer,                                                               
testified that  a single employer  is currently allowed  to self-                                                               
insure for workers' compensation  obligations, provided they meet                                                               
certain requirements.                                                                                                           
                                                                                                                                
This bill would  allow a group of smaller  employers to cooperate                                                               
with  each other  to meet  the same  requirements to  self-insure                                                               
their workers' compensation commitments.                                                                                        
                                                                                                                                
Co-Chair Green moved  for adoption of SCS HB 51  24-LSO233\R as a                                                               
working document, and objected for explanation.                                                                                 
                                                                                                                                
Mr. Pawlowski  continued that  the proposed  committee substitute                                                               
would "close loopholes"  in the bill. A provision  was deleted to                                                               
clarify  that the  association of  businesses  was considered  an                                                               
insurer, not an employer.                                                                                                       
                                                                                                                                
Mr.  Pawlowski located  another  change in  subsection (b)(7)  of                                                               
Sec. 21.77.040.  Board of directors; members;  duties; prohibited                                                               
acts., added by  Section 1 on page 5 lines  11-12, which required                                                               
that insurance  claims adjusters  employed by the  association be                                                               
residents  of the  State.  That provision  was  added to  address                                                               
"oversight" concerns voiced by the Division of Insurance.                                                                       
                                                                                                                                
Mr. Pawlowski  informed that an additional  modification was made                                                               
at  the  suggestion  of  the  Division  of  Insurance,  inserting                                                               
language to provide  a mechanism to "unwind"  the association and                                                               
go  into receivership,  and provides  a guarantee  mechanism. Mr.                                                               
Pawlowski  opined  that  the new  provisions,  coupled  with  the                                                               
requirement of  surety and solvency bonds,  auditing assessments,                                                               
and other  financial controls in  the bill render this  a "policy                                                               
decision".                                                                                                                      
                                                                                                                                
Mr. Pawlowski noted  that to conform to the intent  of the Senate                                                               
Labor and Commerce  Committee, page 16 of  the proposed committee                                                               
substitute contained  an amendment  adopted by that  committee to                                                               
the companion bill SB 241.                                                                                                      
                                                                                                                                
Mr. Pawlowski  concluded that  the bill  does not  address larger                                                               
issues  with  workers  compensation,  but  would  assist  smaller                                                               
employers by  allowing them to  "bind their  businesses together"                                                               
to self-insure for workers' compensation obligations.                                                                           
                                                                                                                                
1:19:18 PM                                                                                                                    
                                                                                                                                
ROBERT   VOGEL,  Vice   President   of   Operations,  Pro   Group                                                               
Management,  representing  Anchorage Home  Builders  Association,                                                               
testified via teleconference from an  offnet location that he was                                                               
available  to respond  to  questions. He  spoke  to the  proposed                                                               
legislation and its  relation to a similar practice  in the state                                                               
of Nevada.                                                                                                                      
                                                                                                                                
1:20:39 PM                                                                                                                    
                                                                                                                                
Senator Bunde understood  the program worked well  in Nevada, and                                                               
asked  if  the  bill  under consideration  incorporated  all  the                                                               
provisions of the Nevada law.                                                                                                   
                                                                                                                                
1:21:07 PM                                                                                                                    
                                                                                                                                
Mr.  Vogel responded  that 37  states have  comparable laws,  and                                                               
while there  are slight variations between  states, he considered                                                               
the bill a good "fit" within the framework of Alaska law.                                                                       
                                                                                                                                
Senator  Bunde  questioned  in  any  provisions  of  "substantial                                                               
benefit" may have been omitted.                                                                                                 
                                                                                                                                
1:22:02 PM                                                                                                                    
                                                                                                                                
Mr. Vogel did not believe so.                                                                                                   
                                                                                                                                
1:22:07 PM                                                                                                                    
                                                                                                                                
Senator Stedman  requested population comparisons, as  Nevada and                                                               
Alaska have different demographics.                                                                                             
                                                                                                                                
1:22:29 PM                                                                                                                    
                                                                                                                                
Mr.  Vogel replied  that when  the  law was  initially passed  in                                                               
Nevada in  1993, the population  was approximately  800,000. When                                                               
New  Mexico passed  a  corresponding law  in  1991, that  state's                                                               
population  was less  than  1 million.  Nevada  currently has  13                                                               
self-insured  groups,  including  auto  dealers,  home  builders,                                                               
trucking   groups,    and   municipalities.   New    Mexico   has                                                               
approximately  14 groups  of similar  businesses. By  comparison,                                                               
California passed its version of the  law in the early 1990s, but                                                               
had  no self-insured  groups form  until 2000.  Since that  time,                                                               
California  has instituted  workers'  compensation reform  bills,                                                               
and now  has over 20  self-insured groups, with  approximately 40                                                               
additional groups in the process of forming.                                                                                    
                                                                                                                                
1:24:41 PM                                                                                                                    
                                                                                                                                
Senator Bunde voiced concern that  self-insured groups may become                                                               
insolvent,  despite the  best intentions  of  those involved.  He                                                               
inquired  if  any  of  the  groups in  other  states  had  become                                                               
insolvent,  and  if so,  who  was  ultimately responsible  for  a                                                               
workplace injury claim.                                                                                                         
                                                                                                                                
1:25:19 PM                                                                                                                    
                                                                                                                                
Mr. Vogel reported that none of  the groups in Nevada have become                                                               
insolvent; conversely  they have  "done very well",  generating a                                                               
"healthy" surplus  over a  period of  ten years.  Likewise, self-                                                               
insured groups in New Mexico  and California recount no incidence                                                               
of  insolvency.  If a  group  did  become insolvent,  an  injured                                                               
worker  would  be covered  by  the  group's tangible  net  worth,                                                               
required by  the Alaska law to  be at least $10  million. The net                                                               
worth requirement is the strength  and credibility of that group.                                                               
Additionally,  every  group  has   excess  insurance  to  protect                                                               
against catastrophic losses.  He offered the example  of a worker                                                               
injured in  fire, one of the  most expensive types of  claims. In                                                               
that case, the qualified excess  insurer would protect the group,                                                               
requiring  perhaps  a  $500,000 deductible.  Furthermore,  groups                                                               
would be  required to  post solvency bonds,  security bonds  or a                                                               
letter of  credit in  the event  the group was  not able  to meet                                                               
their obligations.                                                                                                              
                                                                                                                                
1:28:25 PM                                                                                                                    
                                                                                                                                
Senator Bunde  expressed concern over the  possibility of "cherry                                                               
picking"   whereby  employers   with   low   rates  of   workers'                                                               
compensation  claims would  bind  together  to self-insure  their                                                               
obligations. This  would leave the  higher-risk employers  in the                                                               
traditional workers'  comp insurance pool, relative  injury rates                                                               
would increase,  and rates would  increase accordingly.  He asked                                                               
if  workers'  compensation costs  had  increased  in states  that                                                               
allow groups to self-insure.                                                                                                    
                                                                                                                                
Mr. Vogel  responded that  California experienced  an approximate                                                               
40  percent decrease  in  workers'  compensation insurance  costs                                                               
since reforms were instituted. The  advent of self-insured groups                                                               
in  New  Mexico  served  to help  strengthen  the  market.  While                                                               
insurance  rates had  been increasing,  the  introduction of  the                                                               
self-insured  group option  functioned to  stabilize the  market,                                                               
prompting  insurers to  reenter the  market with  lower insurance                                                               
rates. Similarly,  Nevada's workers' compensation arena  had been                                                               
a  monopolistic system  with  rising rates,  but  in the  several                                                               
years since the  law was enacted, rates had  decreased an average                                                               
of two to three percent per year.                                                                                               
                                                                                                                                
1:31:42 PM                                                                                                                    
                                                                                                                                
DAVE   KESTER,  Workers'   Compensation   Committee  of   Alaska,                                                               
testified  via   teleconference  from   an  offnet   location  in                                                               
opposition to  the bill.  He described  the bill  as unnecessary,                                                               
because regulations  currently exist  to allow for  the formation                                                               
of "reciprocal  insurance arrangements" for groups  of employers.                                                               
He  exampled the  Alaska Timber  Exchange,  the Alaska  Municipal                                                               
League  Joint   Insurance  Association,  and  the   Alaska  Rural                                                               
Electric Cooperative Association as  groups that have been formed                                                               
and successfully operate under current regulations.                                                                             
                                                                                                                                
1:33:43 PM                                                                                                                    
                                                                                                                                
Mr. Kester  observed that  the bill is  designed to  exempt self-                                                               
insured  groups  from  the  necessary  regulation  and  financial                                                               
oversight of  the Division of  Insurance. Without  this oversight                                                               
an injured  worker could experience  insolvency of the  group and                                                               
not receive adequate payment of  the workers' compensation claim.                                                               
He  also spoke  to the  "inadequate guarantee  mechanisms" within                                                               
the  bill,  and  was  troubled by  the  prospect  of  significant                                                               
financial  burden   forcing  a   small  member  employer   in  to                                                               
bankruptcy.                                                                                                                     
                                                                                                                                
Mr. Kester continued  that the proposed legislation  did not have                                                               
the support of  the Director of the Division  of Insurance, Linda                                                               
Hall. Her lack  of support should alert members  to problems with                                                               
the bill.                                                                                                                       
                                                                                                                                
1:37:37 PM                                                                                                                    
                                                                                                                                
MIKE  COMBS, President,  Alaska  Independent  Insurance Agents  &                                                               
Brokers  Incorporated,  testified   via  teleconference  from  an                                                               
offnet location  that the association  did not support  the bill.                                                               
The   legislature  adopted   significant   reforms  to   workers'                                                               
compensation  insurance  in  a recent  special  session  and  the                                                               
impacts of  those changes have  not had adequate time  to present                                                               
themselves.                                                                                                                     
                                                                                                                                
Mr.  Combs   furthered  that   while  the   proposed  legislation                                                               
contained joint  and several liabilities, there  was no provision                                                               
for  personal indemnification.  Therefore,  only business  assets                                                               
would be  available to an  injured worker seeking relief  under a                                                               
workers'  compensation  claim,  and   business  assets  could  be                                                               
protected  through actions  such as  incorporation. In  contrast,                                                               
under  the  "cross  liability"  provision  of  standard  workers'                                                               
compensation insurance plans, if  one employer becomes insolvent,                                                               
the other employers within the  state are responsible for payment                                                               
of the claim.                                                                                                                   
                                                                                                                                
Mr. Combs voiced concern regarding  the manner in which insurance                                                               
rates  would be  established, as  it  appeared that  none of  the                                                               
self-insured  groups  were members  of  the  National Council  on                                                               
Compensation Insurance,  and would  therefore not have  access to                                                               
those rates. He preferred reciprocal insurance arrangements.                                                                    
                                                                                                                                
1:41:35 PM                                                                                                                    
                                                                                                                                
KENTON BRINE,  Property Casualty Insurers  Association, testified                                                               
via   teleconference  from   an  offnet   location  in   Olympia,                                                               
Washington, in  opposition of  the bill.  He referenced  a single                                                               
claim in  the State of Alaska  that had warranted a  $7.7 million                                                               
"set-aside"  reserve  in  anticipation of  final  settlement.  He                                                               
offered  the $7.7  million claim  by a  single injured  worker as                                                               
evidence that the $10 million  guarantee provided for in the bill                                                               
was  inadequate. While  he was  not opposed  to the  formation of                                                               
self-insured  groups, he  desired stronger  financial protections                                                               
and  regulation. He  appreciated  and supported  reforms made  to                                                               
workers'   compensation  the   prior  legislative   session,  and                                                               
encouraged  the  Committee  to  continue  in  that  direction  by                                                               
rejecting the proposed bill.                                                                                                    
                                                                                                                                
1:45:27 PM                                                                                                                    
                                                                                                                                
RAY  HICKLE,   President,  Anchorage   Homebuilders  Association,                                                               
testified  in Juneau  in  support  of the  bill.  He stated  that                                                               
homebuilders  need some  "relief"  to  the workers'  compensation                                                               
issues, as  insurance rates  for carpenters  and roofers  are too                                                               
high. He spoke to the  Association's willingness to work with the                                                               
Committee  to revise  the bill  to  address any  concerns of  the                                                               
members.                                                                                                                        
                                                                                                                                
1:46:44 PM                                                                                                                    
                                                                                                                                
Senator Dyson asked the witness's  response to the statement that                                                               
this type  of an association  is already permissible  under state                                                               
law, and the proposed legislation is unnecessary.                                                                               
                                                                                                                                
1:47:09 PM                                                                                                                    
                                                                                                                                
Mr.  Hickle replied  that  "reciprocals are  top  heavy and  they                                                               
waste money."                                                                                                                   
                                                                                                                                
1:48:11 PM                                                                                                                    
                                                                                                                                
Senator Dyson  asked regarding the  statement that,  as proposed,                                                               
this bill  would not provide  adequate financial strength  of the                                                               
self-insured groups to address claims that would arise.                                                                         
                                                                                                                                
1:48:30 PM                                                                                                                    
                                                                                                                                
Mr.  Hickle   responded  that  self-insured  groups   would  have                                                               
"reinsurance"   with   joint    and   several   liabilities   for                                                               
catastrophic  events. Currently,  the requirements  for a  single                                                               
company to acquire  reinsurance include assets of  $5 million and                                                               
one hundred employees.                                                                                                          
                                                                                                                                
1:49:13 PM                                                                                                                    
                                                                                                                                
PAUL  LISANKIE,  Director,  Division  of  Workers'  Compensation,                                                               
Department  of  Labor  and Workforce  Development,  testified  in                                                               
Juneau that the  Department was not opposed to  the basic premise                                                               
of  self  insurance  for   workers'  compensation  liability.  He                                                               
informed  that the  State  has had  a  self-insurance program  in                                                               
operation  for 47  years, which  his  Department administers.  He                                                               
characterized the Department's program as "successful".                                                                         
                                                                                                                                
1:50:32 PM                                                                                                                    
                                                                                                                                
Mr.  Lisankie  identified   "distinctions"  between  the  State's                                                               
current  self-insurance  program  and the  proposed  legislation.                                                               
While the current  program requires a minimum net  asset value of                                                               
$5 million,  the Department's primary  focus, by statute,  is the                                                               
financial ability to pay of  the business wanting to self-insure.                                                               
He  considered the  $5  million net  asset  requirement a  "basic                                                               
qualification" of the program, not  a guarantee that the business                                                               
would  be approved  for  self-insurance.  Therefore, the  current                                                               
regulation provision  should be  considered as a  basic component                                                               
of any proposal. He noted  that the current program also contains                                                               
an  "excess   insurance"  stipulation  to  limit   the  company's                                                               
exposure in the case of  an extremely large workers' compensation                                                               
settlement,  such  as  a permanent  total  disability  case.  His                                                               
research revealed  several self-insured entities had  gone out of                                                               
business  for reasons  unrelated to  their workers'  compensation                                                               
liability.  This  is  illustrative   of  the  risks  involved  in                                                               
allowing a business  to self-insure. A company  that is currently                                                               
financially strong and meets  the requirements for self-insurance                                                               
of  workers' compensation  obligations could  stop operating  for                                                               
any  number  of reasons.  This  could  render an  injured  worker                                                               
unable to  collect their permanent total  disability payments. He                                                               
urged the Committee  to consider all risks  associated with self-                                                               
insurance of workers' compensation liability.                                                                                   
                                                                                                                                
1:53:53 PM                                                                                                                    
                                                                                                                                
Mr.  Lisankie told  of  a  case involving  Wein  Airlines and  an                                                               
injured worker.  Wein was  a self-insured  company that  had gone                                                               
out of  business. The Division  had to undertake great  effort to                                                               
secure  the  pass-through  funding  to provide  to  this  injured                                                               
worker. The  benefits were paid  for many years until  the former                                                               
worker  passed  away,   and  Mr.  Lisankie  used   this  case  to                                                               
illustrate how important  it is for a self-insured  company to be                                                               
able to pay long-term benefits  to injured workers, regardless of                                                               
the health of the company.                                                                                                      
                                                                                                                                
1:55:45 PM                                                                                                                    
                                                                                                                                
Senator Stedman recalled an earlier  comment that rates for self-                                                               
insurance  were approximately  30 to  40 percent  of the  cost of                                                               
traditional   workers'   compensation  insurance,   and   earlier                                                               
testimony that  13 businesses in  Nevada had opted out  of normal                                                               
workers'   compensation   to    form   their   own   self-insured                                                               
association.  He  wondered  if  Alaska would  be  faced  with  an                                                               
adverse   selection    of   traditional    workers   compensation                                                               
participants,  thus compounding  the difficulties  already facing                                                               
the workers' compensation system.                                                                                               
                                                                                                                                
1:56:37 PM                                                                                                                    
                                                                                                                                
Mr. Lisankie  replied that such  a scenario is a  viable concern,                                                               
considering  Alaska's   large  area  and  small   population.  He                                                               
reviewed other states in similar  situations. Of the seven states                                                               
with comparable  populations of fewer  than one million,  four of                                                               
those  states do  not  allow self  insurance  groups, with  Idaho                                                               
allowing only  electrical utility  companies to  self-insure. Two                                                               
of  the   states  that  allow  for   self-insurance  of  workers'                                                               
compensation  have  established  either  a  guarantee  "fund"  or                                                               
"mechanism". He  cited only  one state  similar in  population to                                                               
Alaska that allowed self-insurance  without a guarantee mechanism                                                               
of some form.                                                                                                                   
                                                                                                                                
1:57:53 PM                                                                                                                    
                                                                                                                                
Senator  Stedman  recounted   significant  workers'  compensation                                                               
reforms  made by  the legislature,  and understood  these reforms                                                               
had only  recently been  implemented and  their effects  were not                                                               
yet tangible.                                                                                                                   
                                                                                                                                
1:58:19 PM                                                                                                                    
                                                                                                                                
Mr. Lisankie shared his observation  that "things are starting to                                                               
improve." He considered the reforms  initiated by the legislature                                                               
as  the beginning  of the  improvement process,  but agreed  that                                                               
they had not had adequate time to manifest themselves.                                                                          
                                                                                                                                
1:58:51 PM                                                                                                                    
                                                                                                                                
Senator Olson commented that while  businesses may "come and go",                                                               
that is also true of insurance companies.                                                                                       
                                                                                                                                
1:59:13 PM                                                                                                                    
                                                                                                                                
Mr.  Lisankie agreed.  However, insurance  companies are  heavily                                                               
regulated, and  the State  has a guarantee  fund. He  opined that                                                               
insurance companies offer more security.                                                                                        
                                                                                                                                
2:00:02 PM                                                                                                                    
                                                                                                                                
Senator  Olson asked  the number  of self  insurance certificates                                                               
granted by the State.                                                                                                           
                                                                                                                                
2:00:14 PM                                                                                                                    
                                                                                                                                
Mr.  Lisankie responded  that a  total of  31 entities  are self-                                                               
insured in  Alaska, and of  those, 23 were private  companies and                                                               
eight were public agencies, governments and school districts.                                                                   
                                                                                                                                
2:00:37 PM                                                                                                                    
                                                                                                                                
Senator Olson  asked the discrepancy  between the $5  million and                                                               
$10 million tangible net worth requirements.                                                                                    
                                                                                                                                
2:00:57 PM                                                                                                                    
                                                                                                                                
Mr. Lisankie had not fully reviewed the proposed committee                                                                      
substitute, and presumed the differences were a technical                                                                       
drafting error.                                                                                                                 
                                                                                                                                
2:01:21 PM                                                                                                                    
                                                                                                                                
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce,  Community  and   Economic  Development,  testified  in                                                               
Juneau  to  her  "strong"  opposition to  this  legislation.  Her                                                               
statement was as follows.                                                                                                       
                                                                                                                                
     The opposition is  not just from the  Division of Insurance.                                                               
     Mr.  Lisankie from  the Department  of  Labor and  Workforce                                                               
     Development  has also  evidenced  that, as  have some  other                                                               
     groups. It's been  an uncomfortable position to be  in to be                                                               
     in strong  opposition to legislation proposed  by members of                                                               
     this body. It's  not something I've done often,  and I don't                                                               
     do it lightly.  It is a public policy decision  and I'd like                                                               
     to share some thoughts with you.                                                                                           
                                                                                                                                
     As the lead  regulator of the insurance  industry in Alaska,                                                               
     it is the  mission of the Division of Insurance  to do three                                                               
     things: one is  to enforce insurance statutes,  second is to                                                               
     protect  the  consumer, third  is  to  enhance the  business                                                               
     environment. I think this legislation  violates two of those                                                               
     things:  consumer  protection,  and  I will  speak  to  both                                                               
     these, and the enhancement of  the insurance business in our                                                               
     state.                                                                                                                     
                                                                                                                                
     I  speak  before you  today  to  present  my analysis  of  a                                                               
     proposal that I  think is not good public policy.  I had not                                                               
     seen the CS until  I came here today, I had  not asked for a                                                               
     CS  to be  done  in the  Senate. I  have  certainly made  my                                                               
     concerns about the bill known  from the time it started last                                                               
     year, and as I have worked  with one of the major sponsoring                                                               
     groups over  the course of  the summer. The concerns  that I                                                               
     have  as  we've gone  through  various  committees, as  I've                                                               
     voiced those  concerns repeatedly,  changes have  been made.                                                               
     I'm  not sure,  today I  have not  had a  chance to  look at                                                               
     this, to  have an idea  if my concerns  are met or  not. I'm                                                               
     going to  address those concerns.  It would appear  from the                                                               
     testimony some are met, some are not.                                                                                      
                                                                                                                                
     I will talk about my  four major concerns. One is liquidity.                                                               
     I'm  looking for  real money  to  pay real  claims. We  have                                                               
     certainly  increased  from  $5  million  to  $10  million  a                                                               
     tangible net  worth requirement for these  groups. It's left                                                               
     up  to the  Director to  define "tangible  net worth."  As I                                                               
     understand, tangible  means thing you can  touch, things you                                                               
     can  see. I'm  assuming when  some director  who follows  me                                                               
     makes  this  definition  it  will  include  buildings,  CATs                                                               
     [Caterpillar equipment],  trucks, whatever the  tangible net                                                               
     worth is. We  can't pay work comp claims  with buildings. We                                                               
     would guarantee a business would  go out of business if they                                                               
     had to  liquidate their assets  to pay work comp  claims. So                                                               
     I'm not  today convinced  that tangible  net worth  gives us                                                               
     the  protection  we're  looking  for.  One  of  the,  and  I                                                               
     certainly  will address  one of  the comments  asked earlier                                                               
     about  reciprocals and  why I  advocated that  early in  the                                                               
     process.                                                                                                                   
                                                                                                                                
     Guarantee fund  is my second  concern. I do  understand that                                                               
     the  CS that  I haven't  read contains  a provision  for the                                                               
     guarantee fund. I've been in  front of this body looking for                                                               
     solutions  to an  insolvent insurance  company.  There is  a                                                               
     mechanism and it's  worked. I will address that  later in my                                                               
     comments also. The licenses that  are required I believe are                                                               
     in the  CS. I have made  that an issue as  I've talked. It's                                                               
     disturbing to me  that I've had to go till  the third to the                                                               
     end day of  session and numerous committee  hearings to have                                                               
     somebody now, at the last  minute, bring these to the table.                                                               
     Process  to deal  with  an insolvent  group,  the version  I                                                               
     prepared my comments  on had an ability for  the Director if                                                               
     an   association   was    insolvent,   to   withdraw   their                                                               
     certificate.  It  had  no  process  to  do  that.  Insurance                                                               
     statutes   clearly,   in   chapter    78,   set   out   both                                                               
     rehabilitation  and liquidation  provisions. There  needs to                                                               
     be  a  mechanism, whether  this  bill  now includes  that  I                                                               
     really don't know.                                                                                                         
                                                                                                                                
     I would like to address some  of the comments that have been                                                               
     made as  I have  made my opposition  known. There's  been an                                                               
     indication from  a number of  people to me that,  "Well, you                                                               
     have the authority to decline  applications. If one of these                                                               
     associations comes  to you and presents  the application you                                                               
     can decline  it." I think  it is my obligation  under Alaska                                                               
     statute  to  try to  implement  the  things that  this  body                                                               
     passes.   I   can't   imagine  any   director   looking   at                                                               
     applications  and  being  able   to  deny  that  application                                                               
     because you  didn't think, you  didn't like,  the provisions                                                               
     of this particular  chapter. I don't operate that  way and I                                                               
     can't imagine you would tolerate  anyone operating that way.                                                               
     There are numerous financial  requirements as I've mentioned                                                               
     before.  The   most  important  element   to  me   today  is                                                               
     liquidity.  A  number  of  other   states  who  allow  self-                                                               
     insurance    associations    do   have    working    capital                                                               
     requirements. There needs to be  money. The excess insurance                                                               
     is  certainly  there.  Again, there  is  authority  in  this                                                               
     legislation for the Director to  make a determination of the                                                               
     level of  excess insurance. You  heard testimony  earlier of                                                               
     an insurance company having a  single claim reserved at $7.7                                                               
     million.  If  in  fact  I were  the  director  requiring  an                                                               
     applicant to provide  me evidence of insurance  of $10, $15,                                                               
     $20 million excess  insurance, I think I  would probably get                                                               
     push back  that those were  excessive, we don't  need those,                                                               
     our claims won't be that big.  So there's a lot of balancing                                                               
     here.                                                                                                                      
                                                                                                                                
     I would  also present to  you that  I don't think  this bill                                                               
     does  what it's  purported  to do.  We're  looking at  small                                                               
     employers.  In   this  bill  there  is   a  minimum  $10,000                                                               
     assessment from  each member, so  when you put  five members                                                               
     together  there's an  aggregate  assessment  of $300,000  to                                                               
     have  a  sufficient   size  to  begin  to   work.  But  each                                                               
     individual  member   must  have  a  minimum   of  a  $10,000                                                               
     assessment, and  because it's  self-insurance we  don't call                                                               
     it "premium"  we call  it "assessments."  Many of  our small                                                               
     businesses who are looking for  relief, and I will certainly                                                               
     grant they need relief, are not  going to be helped by this.                                                               
     They can't  pay $10,000.  That's what  we're looking  for is                                                               
     ability to find options for  those types of businesses. This                                                               
     is not going to do that.                                                                                                   
                                                                                                                                
     So what we're doing is  benefiting larger groups and leaving                                                               
     those that I see in this  point, most vulnerable to still be                                                               
     in  the   system  that,  admittedly  even   by  the  sponsor                                                               
     statements,  I'm  sorry,  not the  sponsor  statements,  the                                                               
     proponent statements, is a broken system.                                                                                  
                                                                                                                                
     My  other  major area  of  concern  is my  marketplace.  I'm                                                               
     responsible  for the  insurance marketplace.  Is it  working                                                               
     wonderfully?  Of course  not. But  am I  seeing good  things                                                               
     happen? I am. And I'd like to detail some of those.                                                                        
                                                                                                                                
     We  have  a  small  marketplace.  That's  been  alluded  to,                                                               
     questions  about  population.  As  we allow  more  and  more                                                               
     groups to  opt out of  that marketplace, our  market becomes                                                               
     less  and less  attractive.  We don't  have  people in  here                                                               
     trying  to  compete for  the  business.  There isn't  enough                                                               
     business here for them to truly  be able to use their assets                                                               
     and really  get a return  on those.  I believe the  term has                                                               
     already been  used and I've  used it. There is  certainly an                                                               
     ability to  do "cherry  picking". I've heard  testimony that                                                               
     "Well, we will  only take the best groups to  do this." What                                                               
     does that  mean to  an employer who's  had a  couple losses?                                                               
     And maybe isn't one of the best groups?                                                                                    
                                                                                                                                
     There's an  ability to  do safety  programs today.  I think,                                                               
     "Shame on any  employer who doesn't have  a safety program."                                                               
     That is  the best thing  to do for workers'  compensation. I                                                               
     looked  at  someone's  individual experience  this  week,  a                                                               
     member of  this body  who had,  it's called…  an "experience                                                               
     modification"  that gave  him a  thirteen percent  credit on                                                               
     his business  because he  had good  claims experience  as an                                                               
     individual.  Those  things  can  happen,  and  they  are  an                                                               
     impact.  There is  today legislation  that mandates  premium                                                               
     credits  for safety  programs. So  when we  allow groups  to                                                               
     pick off the  best accounts we're spreading the  risk over a                                                               
     lesser group of  employers who, maybe by no  reason of their                                                               
     own  have a  bad  accident. I've  insured employers,  worked                                                               
     with  employers, for  20  years in  Alaska.  I've seen  some                                                               
     incredibly  serious claims.  When  a steel  erector with  an                                                               
     employee-fall off  a roof, that's  a bad  experience. Didn't                                                               
     mean they  didn't have safety  programs. They did.  But they                                                               
     happen. Claims happen. It's very unfortunate.                                                                              
                                                                                                                                
     I'm going  to give  you some  regulatory examples  that I've                                                               
     gotten from  people around  the country who  sit in  my role                                                               
     that show  some need for  oversight and a different  kind of                                                               
     protection.  Recently  in  Kentucky,  a  self-insured  group                                                               
     became  insolvent. Court-ordered  $90.7 million  assessment,                                                               
     they  were able  to collect  $68 million  in cash  and notes                                                               
     from the group  members. There's a $22 million  gap there. I                                                               
     don't  know   where  that  comes  from.   I  understand  all                                                               
     employers in Kentucky are being  assessed for that. Ohio had                                                               
     a  scandal. Fifty  million dollars  in work  comp money  was                                                               
     invested in  rare coins. There  was also  a theft of  over a                                                               
     million  dollars.  We  regulate  the  kinds  of  investments                                                               
     groups  can  make.  New York  has  62  workers  self-insured                                                               
     trusts,   work  comp   trusts.  In   October  the   workers'                                                               
     compensation board  in New York  acknowledged that  at least                                                               
     half  were   operating  under-funded,  and  at   least  were                                                               
     assessing members to reduce shortfalls  that were running as                                                               
     high as  $15 million per  trust, $163 million  in aggregate.                                                               
     Kansas recently,  documents came out of  the 11 self-insured                                                               
     funds,  five   either  lost  money  or   had  negative  fund                                                               
     balances.                                                                                                                  
                                                                                                                                
     Self-insurance can  work, but  it has  the same  problems as                                                               
     insurance.  The costs  are high.  The cost  of systems,  the                                                               
     cost of  the benefits, are  high. I  have seen in  the three                                                               
     years I've  been in this  position starting  little glimmers                                                               
     of hope in our system. We  have an assigned risk pool. It is                                                               
     supported  solely  by insurance  companies.  It  has been  a                                                               
     deterrent  in our  marketplace of  competition. In  the last                                                               
     eight years  Alaska, for  the first time  in 2005,  had, did                                                               
     not lose  money in the assigned  risk pool. That makes  it a                                                               
     more  attractive   place  for  insurance  companies   to  do                                                               
     business.  Our market  shares in  the pool  in 2003  were 20                                                               
     percent. Twenty percent  of our premium was  in the assigned                                                               
     risk  pool. 2005,  we've dropped  that to  15 percent.  More                                                               
     accounts  are  being  written  outside of  that  pool  in  a                                                               
     traditional market.                                                                                                        
                                                                                                                                
     Our guarantee fund, I mentioned  that earlier, for me it was                                                               
     probably the  thing I  would point to  most since  I've been                                                               
     coming before  this legislature, the  ability to find  a fix                                                               
     for a huge  hole that left over 800 injured  workers with no                                                               
     benefits.  It  left  over  400   Alaskan  employers  with  a                                                               
     financial responsibility  they never expected to  have. This                                                               
     legislature  worked  with me  to  find  a solution.  We  did                                                               
     increase assessments; it has increased  the cost of workers'                                                               
     comp for the last couple  years. 2006 those assessments were                                                               
     no  longer made.  That fix  has worked,  and that  guarantee                                                               
     association   has  recouped   money  from   other  insolvent                                                               
     insurance company estates. I've  worked with them diligently                                                               
     to try to do that. We've seen that work.                                                                                   
                                                                                                                                
     I'm seeing  expansions of insurance companies  in our state.                                                               
     I've watched  two insurance companies  who had  one adjuster                                                               
     operating out  of their home  open claims  offices, increase                                                               
     their staff,  sign long-term leases.  Are they  writing tons                                                               
     of  business yet?  No. But  they are  really looking  at our                                                               
     market and  they're having an increased  renewed interest in                                                               
     expanding what they're doing here.                                                                                         
                                                                                                                                
      A member of  the House of Representatives,  just this week,                                                               
     told me a story of a  constituent that I would like to relay                                                               
     to  you. He  had  a constituent  who  was complaining  about                                                               
     having  to close  his business.  He could  no longer  afford                                                               
     workers'   compensation.  You   hear  those   comments  from                                                               
     constituents.  I hear  those comments  from employers.  This                                                               
     gentleman told him  that after we did reforms,  this year he                                                               
     had bids  from three  insurance companies, reduced  his cost                                                               
     by  $50,000. Some  of  the prior  speakers  are correct:  we                                                               
     haven't yet  the chance to  see the full effects  of reform,                                                               
     but I'm seeing signs in our workplace that this can work.                                                                  
                                                                                                                                
     California, from  July of 2003  to January 2006, has  seen a                                                               
     46  percent  decrease  in  their   premiums,  based  on  the                                                               
     California work comp study. They  also indicate in that same                                                               
     study  that without  the reform,  that  actually would  have                                                               
     been  a  60  percent  decrease over  what  they  would  have                                                               
     expected. Pennsylvania, rates have  dropped $100 million due                                                               
     to reforms.                                                                                                                
                                                                                                                                
     We have tried  to do reform. We did reform  last year. We've                                                               
     tried  to do  more.  I'm really  disappointed.  There are  a                                                               
     number of  groups who  have signed on  to support  this bill                                                               
     that did  not become involved  in the system reforms  we did                                                               
     last year, and  now they're looking for "carve  out". We can                                                               
     do a  better job. I  really think  it's not a  level playing                                                               
     field to  let them out of  a system that they  don't want to                                                               
     help  work with.  I prepared,  I believe  in Senate  Labor &                                                               
     Commerce, even, although  they looked at me like  I was nuts                                                               
     now.   Not  the   first   time.   We  have   [indiscernible]                                                               
     guidelines. If we're going to  look at something, we need to                                                               
     help our system. We need to  do something about the cost. It                                                               
     really doesn't  matter who  writes that  claim check  if the                                                               
     system costs  are X. I've  heard comments  about reciprocals                                                               
     being  top heavy,  charging too  much. If  you look  at this                                                               
     bill, 35  percent is allowed there  for administrative fees.                                                               
     That leaves 65  percent to pay claims. I  don't think that's                                                               
     really  any different  than  any  system I  see.  I see  the                                                               
     filings  from insurance  companies.  We're  seeing the  same                                                               
     expense  ratios at  the top;  what it  costs to  administer,                                                               
     what it costs  to do things. This isn't  that different. I'm                                                               
     not sure there's any savings here.                                                                                         
                                                                                                                                
     I  will  wrap  up,  thank   you  for  your  patience.  Self-                                                               
     insurance, in  itself, works well  in some  circumstances if                                                               
     safeguards in  place. I would  really like to work  with our                                                               
     system. I  think it's broken.  Director Lisankie and  I have                                                               
     worked relentlessly for two years  to work in that system. I                                                               
     have  sat in  this  chair and  proposed  solutions. I  don't                                                               
     think the solution is to let  more groups opt out. If Alaska                                                               
     addresses the  issues of cost,  it too will see  a reduction                                                               
     in  premiums. If  we  just think  changing  the entity  that                                                               
     writes  the checks  will  bring down  costs,  I think  we're                                                               
     mistaken. If  we think  claims can  be controlled  better by                                                               
     changing the  entity that handles  them, I'm  thinking we're                                                               
     facing potential harm to injured workers.                                                                                  
                                                                                                                                
      We have standards that have  to be met. There are standards                                                               
     that are not  in this bill where, in my  department, we have                                                               
     what  are called  "unfair  trade  practices." That  includes                                                               
     handling claims.  I have today  in my office a  very serious                                                               
     allegation  against a  company who's  handling claims.  They                                                               
     are  probably,   right  now,  subject  to   several  hundred                                                               
     thousand  dollars worth  of fines  for the  way they  handle                                                               
     claims. I want to make sure  that I still have that ability.                                                               
     I want to  make sure that those injured  workers are treated                                                               
     according to  our statutes. I  certainly mean  no disrespect                                                               
     for the sponsors  of this bill, but I really  would urge you                                                               
     to consider the pitfalls, and to oppose it.                                                                                
                                                                                                                                
2:18:18 PM                                                                                                                    
                                                                                                                                
Senator  Dyson  recalled  conversations  he  had  with  Ms.  Hall                                                               
several years  prior regarding methods  of reducing costs  in the                                                               
health  insurance   arena.  He  summarized  those   exchanges  as                                                               
indicating  that increased  numbers  of self-insured  individuals                                                               
had the effect of making  the health insurance industry in Alaska                                                               
less attractive to insurance companies,  and wondered if the same                                                               
was true for workers' compensation insurance companies.                                                                         
                                                                                                                                
2:19:15 PM                                                                                                                    
                                                                                                                                
Ms.  Hall affirmed.  She  explained that  the  same dynamics  and                                                               
"cost  drivers"  apply  with  fewer  participants  in  a  system.                                                               
Approximately 67  percent of  workers' compensation  expenses are                                                               
medical costs,  an increase from  40 percent five years  ago. The                                                               
increases in both fields are  due to increased self-insurance and                                                               
lack of regulation and oversight.                                                                                               
                                                                                                                                
2:20:09 PM                                                                                                                    
                                                                                                                                
Senator Stedman  understood Ms. Hall had  testified that workers'                                                               
compensation  issues appear  to be  improving, and  more insurers                                                               
are considering entering the market place.                                                                                      
                                                                                                                                
2:20:34 PM                                                                                                                    
                                                                                                                                
Ms.  Hall  clarified that  she  did  not  know of  new  companies                                                               
entering  the   marketplace,  but  those  that   currently  write                                                               
policies in  Alaska are  looking to  expand their  businesses and                                                               
increase  investment in  the State.  She expected  changes to  be                                                               
positive and  gradual. She divulged  that her office  was working                                                               
with one  new health insurance company,  something she considered                                                               
"a wonderful  step", and something  that had not  happened before                                                               
statutory and regulatory changes occurred.                                                                                      
                                                                                                                                
2:21:41 PM                                                                                                                    
                                                                                                                                
Senator Stedman had surmised the  Department did not support this                                                               
bill.                                                                                                                           
                                                                                                                                
2:22:04 PM                                                                                                                    
                                                                                                                                
Ms. Hall agreed that was an "accurate assessment".                                                                              
                                                                                                                                
2:22:22 PM                                                                                                                    
                                                                                                                                
Senator  Stedman offered  that when  both the  State's regulatory                                                               
department  and the  independent insurance  association oppose  a                                                               
bill affecting  the industry, the  legislature must  proceed with                                                               
caution.                                                                                                                        
                                                                                                                                
2:22:59 PM                                                                                                                    
                                                                                                                                
Co-Chair Green ordered the bill HELD in Committee.                                                                              
                                                                                                                                
2:23:07 PM                                                                                                                    
                                                                                                                                
                                                                                                                                
     HOUSE BILL NO. 485 am                                                                                                      
     "An Act  amending the  State Personnel Act  to place  in the                                                               
     exempt service  pharmacists and  physicians employed  in the                                                               
     Department  of   Health  and  Social  Services   or  in  the                                                               
     Department of  Corrections; and  providing for  an effective                                                               
     date."                                                                                                                     
                                                                                                                                
                                                                                                                                
This was  the first hearing for  this bill in the  Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
JANET CLARKE,  Assistant Commissioner,  Department of  Health and                                                               
Social  Services, testified  that  this bill  would transfer  the                                                               
pharmacist  job  class  into  exempt   status  from  the  current                                                               
placement in  classified status.  Currently ten positions  in the                                                               
Department of  Health and Social  Services and the  Department of                                                               
Corrections   would  be   affected  by   this  legislation.   The                                                               
Department  of  Health  and Social  Services  is  advocating  the                                                               
passage of  this bill  in an attempt  to address  difficulties in                                                               
recruiting  for these  positions.  Pharmacist  positions in  both                                                               
departments   require  specific   training.   For  example,   the                                                               
positions  within the  Department of  Health and  Social Services                                                               
call  for specialized  medical  credentials,  with the  pioneers'                                                               
homes necessitating geriatric experience and credentials.                                                                       
                                                                                                                                
Due to the specialized nature  of these positions, the Department                                                               
requested  they  be transferred  from  the  classified status  to                                                               
exempt  status,  as  they  are   more  similar  to  other  exempt                                                               
positions in the Department of Health and Social Services.                                                                      
                                                                                                                                
2:24:52 PM                                                                                                                    
                                                                                                                                
Senator Dyson asked  about bargaining unit issues  related to the                                                               
bill.                                                                                                                           
                                                                                                                                
2:25:07 PM                                                                                                                    
                                                                                                                                
Ms.  Clarke reported  that the  affected  individuals would  move                                                               
from their current bargaining unit participation.                                                                               
                                                                                                                                
Co-Chair Green had heard from  State departments about the "great                                                               
need" for  pharmacists and the  difficulties in hiring  under the                                                               
current job classification.                                                                                                     
                                                                                                                                
2:25:40 PM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken noted  the seven  fiscal notes  accompanying the                                                               
bill, of which six were  zero, with the Department of Corrections                                                               
fiscal note was  $30,000. The other departments  would absorb the                                                               
additional  costs  into  their  budgets  and  he  asked  why  the                                                               
Department of Corrections would not be able to do so as well.                                                                   
                                                                                                                                
2:26:08 PM                                                                                                                    
                                                                                                                                
Ms.  Clarke related  that  the Department  of  Health and  Social                                                               
Services  had  agreed  in  hearings   before  the  House  Finance                                                               
Committee to a zero fiscal note,  as the Department has many more                                                               
appropriation  components from  which to  absorb costs  than does                                                               
the Department of Corrections.                                                                                                  
                                                                                                                                
2:26:20 PM                                                                                                                    
                                                                                                                                
SHARLEEN GRIFFIN, Director,  Division of Administrative Services,                                                               
Department  of Corrections,  testified  that  the Department  has                                                               
only one  budget component for  pharmacy costs. The  previous two                                                               
years  witnessed  supplemental  appropriation requests  for  that                                                               
component.   The  State's   unhealthy  inmate   population  makes                                                               
absorbing additional personnel costs unfeasible.                                                                                
                                                                                                                                
2:27:39 PM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken  offered  a  motion  to  report  the  bill  from                                                               
Committee  with   individual  recommendations   and  accompanying                                                               
fiscal notes.                                                                                                                   
                                                                                                                                
Without  objection, HB  485  am, was  MOVED  from Committee  with                                                               
fiscal note  #3 for $30,700  from the Department  of Corrections,                                                               
and the  following zero fiscal  notes: #1 from the  Department of                                                               
Commerce, Community  and Economic Development; #8  from the House                                                               
Finance  Committee  for  the  Department  of  Health  and  Social                                                               
Services, Public Health Results Delivery  Unit (RDU); #9 from the                                                               
House Finance Committee  for the Department of  Health and Social                                                               
Services,  Behavioral  Health RDU;  #10  from  the House  Finance                                                               
Committee  for  the Department  of  Health  and Social  Services,                                                               
Health Care  Services RDU; #11  from the House  Finance Committee                                                               
for  the  Department  of  Health  and  Social  Services,  Alaskan                                                               
Pioneer Homes RDU;  and #12 from the House  Finance Committee for                                                               
the Department of Revenue, Tax and Treasury RDU.                                                                                
                                                                                                                                
2:28:01 PM                                                                                                                    
                                                                                                                                
                                                                                                                                
     SENATE CS FOR CS FOR HOUSE BILL NO. 190(JUD)                                                                               
     "An Act relating to the  purchase of alcoholic beverages and                                                               
     to access to licensed  premises; relating to civil liability                                                               
     for certain  persons accessing licensed  premises; requiring                                                               
     driver's licenses  and identification cards to  be marked if                                                               
     a person  is restricted  from consuming  alcoholic beverages                                                               
     as a  result of  a conviction or  condition of  probation or                                                               
     parole  and relating  to fees  for the  marked license;  and                                                               
     requiring  the   surrender  and  cancellation   of  driver's                                                               
     licenses under certain circumstances."                                                                                     
                                                                                                                                
                                                                                                                                
This was  the first hearing for  this bill in the  Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
PAUL LABOLLE,  Staff to Representative Richard  Foster, testified                                                               
that  this bill  would  attempt to  reduce  incidents of  Driving                                                               
Under the  Influence (DUI). Although Alaska  currently has strict                                                               
DUI  statutes,   approximately  30   percent  of   motor  vehicle                                                               
fatalities  involve  a  DUI.  This   bill  would  prohibit  those                                                               
convicted  of  a  DUI  from   consuming  alcohol  as  a  term  of                                                               
sentencing  and probation.  The term  Restriction on  Consumption                                                               
(ROC) would appear on their  drivers' license. The bill would not                                                               
require an  alcohol vendor to  card every customer, but  the bill                                                               
includes a  provision allowing  for a $1000  civil penalty  to be                                                               
levied by  a vendor that found  an individual to be  in violation                                                               
of the restriction while attempting to purchase alcohol.                                                                        
                                                                                                                                
2:30:18 PM                                                                                                                    
                                                                                                                                
Senator  Bunde  explained  the  civil  penalty  provision  as  it                                                               
related to  selling alcohol to  a minor.  In that case,  a vendor                                                               
who determines  an individual attempting  to purchase  alcohol is                                                               
not  of age  may  assess a  $1000 trespass  fee.  The method  had                                                               
worked well to discourage attempts  by minors to purchase alcohol                                                               
in Anchorage.                                                                                                                   
                                                                                                                                
2:31:13 PM                                                                                                                    
                                                                                                                                
Co-Chair  Green asked  if the  display of  "ROC" on  the drivers'                                                               
license is currently allowed.                                                                                                   
                                                                                                                                
Mr. Labolle replied that this bill would allow for the display.                                                                 
                                                                                                                                
2:31:30 PM                                                                                                                    
                                                                                                                                
Senator Bunde  was willing to  support the bill,  but anticipated                                                               
that  older  DUI  offenders  were  unlikely  to  be  carded  when                                                               
purchasing alcohol. He supposed the  threat of a $1000 fine could                                                               
provide enough of a deterrent  effect to discourage DUI offenders                                                               
from attempting to procure alcohol.                                                                                             
                                                                                                                                
2:32:39 PM                                                                                                                    
                                                                                                                                
Co-Chair Green asked if Members  supported the ROC designation on                                                               
an offender's drivers' license.                                                                                                 
                                                                                                                                
2:32:40 PM                                                                                                                    
                                                                                                                                
Senator  Dyson  commented  on   the  "significant"  and  possibly                                                               
"radical" measures  contained in  the bill. He  expressed concern                                                               
regarding  the  indeterminate  fiscal  note,  and  asked  if  the                                                               
anticipated  cost to  the Division  of Motor  Vehicles (DMV)  was                                                               
known.                                                                                                                          
                                                                                                                                
2:33:32 PM                                                                                                                    
                                                                                                                                
Mr.   Labolle  responded   that  the   DMV  had   testified  that                                                               
implementation  of  this program  is  within  its capability  and                                                               
"easy  to  do".  The  fiscal  note assigns  all  costs  and  fess                                                               
associated with  the printing of  the ROC designation to  the DUI                                                               
offender.                                                                                                                       
                                                                                                                                
2:34:06 PM                                                                                                                    
                                                                                                                                
Senator   Dyson   continued,   asking   if  it   would   be   the                                                               
responsibility of the  DUI offender to go to the  DMV and request                                                               
that the ROC designation be printed on their license.                                                                           
                                                                                                                                
2:34:40 PM                                                                                                                    
                                                                                                                                
Mr. Labolle affirmed.                                                                                                           
                                                                                                                                
2:34:56 PM                                                                                                                    
                                                                                                                                
Co-Chair   Green  asked   if   the   courts  currently   restrict                                                               
consumption.                                                                                                                    
                                                                                                                                
Mr. Labolle replied positively.                                                                                                 
                                                                                                                                
2:35:11 PM                                                                                                                    
                                                                                                                                
Senator  Dyson  recalled  previous technical  complications  with                                                               
relaying information  between the courts  and the DMV,  and asked                                                               
if their computer systems were now compatible.                                                                                  
                                                                                                                                
2:35:52 PM                                                                                                                    
                                                                                                                                
Mr. Labolle deferred to the Alaska  Court System or the DMV for a                                                               
response.                                                                                                                       
                                                                                                                                
2:36:06 PM                                                                                                                    
                                                                                                                                
Co-Chair Wilken  referenced a  letter from  the president  of the                                                               
Cabaret,  Hotel,  Restaurant  and Retailers  Association  (CHARR)                                                               
[copy not provided] that claimed  the bill "will require bars and                                                               
liquor  stores to  purchase  expensive  electronic equipment  and                                                               
hire  personnel to  operate that  equipment." He  asked regarding                                                               
this "equipment".                                                                                                               
                                                                                                                                
Mr. Labolle understood the letter was out of date.                                                                              
                                                                                                                                
2:37:04 PM                                                                                                                    
                                                                                                                                
HEATHER BRADY, Staff to  Representative Harry Crawford, testified                                                               
that  CHARR  had misunderstood  the  provisions.  While the  bill                                                               
requires the  DMV to make  the ROC restriction a  "scanable" item                                                               
when  possible, it  would also  require a  visual display  of the                                                               
restriction on the  license, so no additional  equipment would be                                                               
necessary.                                                                                                                      
                                                                                                                                
2:37:54 PM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken spoke  to a  memorandum  from legislative  legal                                                               
council dated  May 3, 2006  [copy not provided]  that questioned,                                                               
and  possibly  challenged,  the   bill  itself.  He  requested  a                                                               
response to that letter.                                                                                                        
                                                                                                                                
2:38:21 PM                                                                                                                    
                                                                                                                                
Mr.  Labolle   advised  that  the   concerns  addressed   in  the                                                               
memorandum related  to a  drafting disagreement  between Division                                                               
of  Legal and  Research Services  and the  Department of  Law. He                                                               
deferred to Doug Wooliver.                                                                                                      
                                                                                                                                
2:39:04 PM                                                                                                                    
                                                                                                                                
DOUG WOOLIVER, Administrative Attorney,  Alaska Court System, had                                                               
not seen the memorandum in  question. He understood the drafter's                                                               
concern  to "capture  municipal ordinances".  Nearly half  of all                                                               
misdemeanor DUIs are charged under  Anchorage municipal code, not                                                               
under State statutes.                                                                                                           
                                                                                                                                
2:40:09 PM                                                                                                                    
                                                                                                                                
Co-Chair Green suggested the memorandum  asked how the Department                                                               
of Administration  would garner all information  on previous DUIs                                                               
from other  states, and how  the Department would  identify those                                                               
on probation and implement the provisions.                                                                                      
                                                                                                                                
2:40:36 PM                                                                                                                    
                                                                                                                                
Mr.  Wooliver  was not  aware  of  how  the  DMV learns  of  DUIs                                                               
committed in other states.                                                                                                      
                                                                                                                                
2:41:02 PM                                                                                                                    
                                                                                                                                
Mr.  Wooliver  responded  to an  earlier  question  regarding  an                                                               
electronic  connection  to  relay judgments  between  the  Alaska                                                               
Court System and  the DMV. He informed that the  two agencies did                                                               
not  currently  have  such  a  system,  but  were  working  on  a                                                               
multiple-agency connection so the  courts could share information                                                               
with other affected departments more readily.                                                                                   
                                                                                                                                
2:41:45 PM                                                                                                                    
                                                                                                                                
Senator  Dyson  summarized  the current  method  of  transferring                                                               
information in  which one agency  must print out  the information                                                               
and the receiving  agency then must reenter  the information into                                                               
a separate system. This information  is of high importance to the                                                               
DMV as well  as police officers, who may need  to know as quickly                                                               
as possible if a warrant has been  issued for a person, if a home                                                               
has  a   foster  child,  or   other  important  factors   in  law                                                               
enforcement.  He asked  if a  computerized  system to  facilitate                                                               
information sharing was "months or years away".                                                                                 
                                                                                                                                
2:43:11 PM                                                                                                                    
                                                                                                                                
Mr.   Wooliver  estimated   the   State  was   years  away   from                                                               
implementing   the  ideal   system,   although   each  year   saw                                                               
improvements. It  is a very  costly project, and  all departments                                                               
involved must  receive upgrades.  For example, while  the Court's                                                               
computer system  has been improved,  the receiver must  also have                                                               
upgrades to take delivery of this information.                                                                                  
                                                                                                                                
2:44:09 PM                                                                                                                    
                                                                                                                                
Senator Dyson asked if completion  of the upgrades was two, five,                                                               
or ten years away.                                                                                                              
                                                                                                                                
2:44:24 PM                                                                                                                    
                                                                                                                                
Mr.  Wooliver  projected conclusion  within  a  five year  range.                                                               
However, other needs and priorities,  such as bail conditions and                                                               
collections  issues,   would  continue   to  be   identified  and                                                               
addressed.                                                                                                                      
                                                                                                                                
2:44:54 PM                                                                                                                    
                                                                                                                                
Senator  Bunde clarified  the  process by  which  a person  would                                                               
obtain   an  ROC   designated   drivers'   license.  If,   during                                                               
sentencing,  a  restriction  on  consumption  was  placed  on  an                                                               
individual,  that person  must surrender  their license  in court                                                               
upon sentencing. That  person must then go to the  DMV within two                                                               
days and  apply for  a new, restricted  license. The  process was                                                               
not as "voluntary" as it may have been portrayed.                                                                               
                                                                                                                                
Senator Bunde  asked about the  provisions inserted by  the House                                                               
Judiciary Committee  that had  caused concern  to members  of the                                                               
Division of Legal and Research Services.                                                                                        
                                                                                                                                
2:45:57 PM                                                                                                                    
                                                                                                                                
Mr.   Labolle  located   the  language   in  subsection   (a)  of                                                               
Sec.04.16.160. Privilege to  purchase alcoholic beverages., added                                                               
by Section 2  on page 2, lines  9 and 10, and  in AS 28.15.191(g)                                                               
added  by Section  7 on  page  4, lines  5 through  7. A  sponsor                                                               
amendment was  offered during a  hearing in the  Senate Judiciary                                                               
Committee, and  the adopted amendment  was an attempt  to broaden                                                               
the language to include as many violations as possible.                                                                         
                                                                                                                                
2:47:06 PM                                                                                                                    
                                                                                                                                
Senator Bunde  asked the sponsor's opinion  regarding the ability                                                               
to enforce the sections described in the memorandum.                                                                            
                                                                                                                                
Mr. Labolle had not received the memorandum.                                                                                    
                                                                                                                                
Senator  Bunde was  inclined to  support the  bill, and  asked if                                                               
deleting the provisions in question  would remove the requirement                                                               
for a concurrence vote.                                                                                                         
                                                                                                                                
Mr.  Labolle assumed  the deletion  would remove  the requirement                                                               
for concurrence,  but would exclude  approximately 50  percent of                                                               
DUI  convictions, those  charged under  the Anchorage  ordinance,                                                               
which are included under the current language.                                                                                  
                                                                                                                                
2:48:09 PM                                                                                                                    
                                                                                                                                
Senator  Bunde  suggested  removing   only  the  portion  of  the                                                               
provision that referred to out-of-state  convictions, as it would                                                               
be easier to facilitate communications  between the State DMV and                                                               
the Municipality of Anchorage than between states.                                                                              
                                                                                                                                
2:48:27 PM                                                                                                                    
                                                                                                                                
Mr. Labolle  would not  oppose the language,  and had  prepared a                                                               
draft of the amendment.                                                                                                         
                                                                                                                                
2:49:05 PM                                                                                                                    
                                                                                                                                
DUANNE BANNOCK, Director, Division  of Motor Vehicles, Department                                                               
of Administration,  testified via teleconference  from Anchorage,                                                               
that   the  Division   struggles   with   both  "practical"   and                                                               
"philosophical"  issues. He  explained  that he  could not  avoid                                                               
preparing an  indeterminate fiscal note,  as he did not  know the                                                               
number  of  drivers  who  would   be  affected  by  the  proposed                                                               
regulation.                                                                                                                     
                                                                                                                                
Mr.  Bannock  was  also  concerned that  the  definition  of  the                                                               
"restriction  on consumption"  was  not clear  in  the bill,  and                                                               
enforcement could  be an issue.  He asked if the  ROC designation                                                               
would   prohibit  a   person  from   both  entering   a  licensed                                                               
establishment  and  purchasing  alcohol, or  if  the  restriction                                                               
would be solely on the consumption of alcohol.                                                                                  
                                                                                                                                
2:53:03 PM                                                                                                                    
                                                                                                                                
Mr.  Bannock  directed  attention  to Sections  4  and  6,  which                                                               
instruct   the   DMV   to  cancel   the   drivers'   license   or                                                               
identification card of  a person charged with a  DUI offense upon                                                               
notification from the court. He  stated that the bill was unclear                                                               
as to whether the license was  to be surrendered to the arresting                                                               
officer,  the court,  or simply  cancelled in  the DMV  database.                                                               
After the  required cancellation,  the bill  did not  specify the                                                               
terms  of  the  cancellation,  or if  that  affected  a  person's                                                               
driving privilege. The bill also  failed to address other aspects                                                               
of licensing,  and he exampled  a case  of a person  who retained                                                               
their original "canceled"  license, and asked if it  would be the                                                               
responsibility of the DMV to monitor  the length of the ROC, then                                                               
"uncancel" a license  upon expiration of that  period. This would                                                               
be a burdensome requirement of the Division.                                                                                    
                                                                                                                                
2:55:31 PM                                                                                                                    
                                                                                                                                
Mr.  Bannock was  "worried" that  the DMV  would not  be able  to                                                               
satisfy the  intent of the  bill, which  he understood to  be the                                                               
reduction  of "death  and  injury caused  by  drunk drivers."  He                                                               
opined that  the proposed legislation would  not stop lawbreakers                                                               
from obtaining  and consuming  alcohol. It  would only  provide a                                                               
visual  notice of  the court  order. Most  adults are  not carded                                                               
when  purchasing alcohol.  He therefore  had no  expectation that                                                               
the  proposed legislation  would accomplish  the bill's  intended                                                               
goals.                                                                                                                          
                                                                                                                                
2:56:31 PM                                                                                                                    
                                                                                                                                
Senator Bunde  asked if it  was a crime  to drive with  a revoked                                                               
license.                                                                                                                        
                                                                                                                                
2:57:03 PM                                                                                                                    
                                                                                                                                
Mr. Bannock clarified that the  language speaks to "cancellation"                                                               
of  a  license,  not  revocation.  His  concern  in  that  regard                                                               
involved a  situation in which  a person's license  was cancelled                                                               
and  they never  went to  the DMV  to get  their restricted  ROC-                                                               
imprinted license.  If the period  of revocation had  expired but                                                               
that individual had not gone in to  the DMV to get a new license,                                                               
was that person driving with  a cancelled license in violation of                                                               
the law?                                                                                                                        
                                                                                                                                
Mr. Bannock continued  that in every other scenario  in which the                                                               
DMV becomes involved, there is an  action the driver must take at                                                               
the DMV  that triggers reinstatement  of driving  privileges. For                                                               
example,  if a  person is  involved in  an accident  that impacts                                                               
their  legal ability  to drive,  they must  present the  DMV with                                                               
proof  of insurance,  restitution or  other documentation  before                                                               
their driving privileges are reinstated.  This bill does not have                                                               
a requirement for such action, so  the burden would be on the DMV                                                               
to monitor restrictions and their expirations.                                                                                  
                                                                                                                                
2:59:13 PM                                                                                                                    
                                                                                                                                
Senator Olson  realized the complexity  related to this  bill and                                                               
the burden to  the Division. He asked if  Mr. Bannock anticipated                                                               
a reduction in DUI offenses if this bill became law.                                                                            
                                                                                                                                
2:59:46 PM                                                                                                                    
                                                                                                                                
Mr. Bannock  responded that he  "regretfully" did not  expect the                                                               
proposed legislation  would reduce  DUIs. Discussions  within the                                                               
Department did  not identify any  strong correlation  between the                                                               
restrictions in the legislation and a reduction of DUIs.                                                                        
                                                                                                                                
3:00:20 PM                                                                                                                    
                                                                                                                                
Senator Olson did not agree.                                                                                                    
                                                                                                                                
3:00:23 PM                                                                                                                    
                                                                                                                                
Senator  Bunde  asked if  the  restriction  on consumption  would                                                               
appear only on the physical drivers'  license or if it would also                                                               
be in the database used by police officers during routine stops.                                                                
                                                                                                                                
3:01:06 PM                                                                                                                    
                                                                                                                                
Mr. Bannock replied that he  assumed the restriction would appear                                                               
in  both locations.  This would  be  an important  factor in  the                                                               
legislation,  as   he  anticipated  many  people   would  not  be                                                               
compliant  with   this  law.  Therefore,  only   law  enforcement                                                               
personnel would have access to  the computerized information, and                                                               
any purveyor of alcohol would have  to rely on the printed ROC on                                                               
the identification.                                                                                                             
                                                                                                                                
3:01:53 PM                                                                                                                    
                                                                                                                                
Senator  Bunde remarked  that the  bill in  its current  form has                                                               
potential positive  effects. If a  person with an  ROC designated                                                               
license  happened  to be  carded  when  purchasing alcohol,  they                                                               
would be subject  to a $1000 fine. Additionally, if  a person who                                                               
failed  to go  to the  DMV and  apply for  their ROC  license was                                                               
stopped  while  driving, they  would  be  subject to  arrest  for                                                               
driving without a valid license.                                                                                                
                                                                                                                                
Mr. Bannock  agreed, a  driver could be  arrested for  failing to                                                               
obtain an ROC license, even if the restriction period had ended.                                                                
                                                                                                                                
3:02:41 PM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken  aligned  himself with  Mr.  Bannock's  concerns                                                               
about  the  bill.  He  continued   that  the  legislation  needed                                                               
refining and  further efforts to  ensure it would  accomplish its                                                               
goals before it became law. He  would not support the bill in its                                                               
current form,  but encouraged  continued efforts  on the  part of                                                               
the sponsor.                                                                                                                    
                                                                                                                                
3:03:30 PM                                                                                                                    
                                                                                                                                
Senator Dyson  identified with Co-Chair  Wilken comments.  He was                                                               
uncomfortable  with the  access issues  the proposed  legislation                                                               
raised. He identified  the goal of the  legislation as preventing                                                               
a  person  who  was  restricted   from  drinking  from  consuming                                                               
alcohol, not necessarily restricting  them from the premise where                                                               
alcohol  is served.  He contended  the bill  did not  address his                                                               
concern.                                                                                                                        
                                                                                                                                
3:05:02 PM                                                                                                                    
                                                                                                                                
Senator Bunde  wanted to  support this  bill, but  understood the                                                               
will of the Committee                                                                                                           
                                                                                                                                
The bill was HELD in Committee.                                                                                                 
                                                                                                                                
3:05:35 PM                                                                                                                    
                                                                                                                                
                                                                                                                                
     SENATE CS FOR CS FOR HOUSE BILL NO. 150(L&C)                                                                               
     "An Act requiring licensure of occupations relating to                                                                     
     radiologic technology, radiation therapy, and nuclear                                                                      
     medicine technology; and providing for an effective date."                                                                 
                                                                                                                                
                                                                                                                                
This was the  second hearing for this bill in  the Senate Finance                                                               
Committee.                                                                                                                      
                                                                                                                                
HEALTH HILYARD,  Staff to Representative Tom  Anderson, testified                                                               
that he was available to answer questions.                                                                                      
                                                                                                                                
3:06:22 PM                                                                                                                    
                                                                                                                                
Senator  Bunde  noted that  approximately  equal  numbers of  his                                                               
constituents support or  oppose this bill. He  was concerned that                                                               
the bill  would increase bureaucracy  by creating  another board.                                                               
He went on record in opposition of expanded bureaucracy.                                                                        
                                                                                                                                
3:07:12 PM                                                                                                                    
                                                                                                                                
Senator  Stedman  recalled  testimony  one  day  prior  that  the                                                               
legislation was unnecessary.                                                                                                    
                                                                                                                                
3:07:39 PM                                                                                                                    
                                                                                                                                
Co-Chair  Wilken   asked  what  "problem"  the   legislation  was                                                               
attempting to  resolve. He characterized  the bill as  "feel good                                                               
legislation" with  more potential to harm  rural communities than                                                               
to  improve  their health  and  safety.  He considered  the  bill                                                               
unnecessary and would not support it.                                                                                           
                                                                                                                                
3:08:16 PM                                                                                                                    
                                                                                                                                
Senator  Dyson  was of  the  opposite  opinion. This  bill  makes                                                               
allowances  to   get  the  level  of   training  and  supervision                                                               
necessary  in  remote  areas.   Dr.  Mandsager  had  successfully                                                               
explained  the need  for this  legislation due  to the  potential                                                               
harm from overexposure to radiation.                                                                                            
                                                                                                                                
3:09:06 PM                                                                                                                    
                                                                                                                                
Senator Hoffman opposed  this bill, as he surmised  it would only                                                               
cause "additional harm to Rural Alaska".                                                                                        
                                                                                                                                
3:09:21 PM                                                                                                                    
                                                                                                                                
Senator Olson commented that he supported education and training                                                                
for medical workers, but considered this legislation "a step too                                                                
far". The bill would cause a strain in Rural Alaska.                                                                            
                                                                                                                                
3:10:40 PM                                                                                                                    
                                                                                                                                
Senator Dyson offered a motion to report the bill from Committee                                                                
with individual recommendations and accompanying fiscal note.                                                                   
                                                                                                                                
Senator Hoffman objected.                                                                                                       
                                                                                                                                
A roll call was taken on the motion.                                                                                            
                                                                                                                                
IN FAVOR: Senator Bunde and Senator Dyson.                                                                                      
                                                                                                                                
OPPOSED: Senator Hoffman, Senator Olson, Senator Stedman, Co-                                                                   
Chair Wilken and Co-Chair Green.                                                                                                
                                                                                                                                
The motion FAILED (2-5).                                                                                                        
                                                                                                                                
The bill was HELD in Committee.                                                                                                 
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Lyda Green adjourned the meeting at 3:12:33 PM                                                                       

Document Name Date/Time Subjects