Legislature(2001 - 2002)

02/21/2001 01:38 PM Senate JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     ALASKA STATE LEGISLATURE                                                                                   
                    SENATE JUDICIARY COMMITTEE                                                                                
                         February 21, 2001                                                                                      
                             1:38 p.m.                                                                                          
MEMBERS PRESENT                                                                                                               
Senator Robin Taylor, Chair                                                                                                     
Senator Dave Donley, Vice Chair                                                                                                 
Senator John Cowdery                                                                                                            
Senator Gene Therriault                                                                                                         
Senator Johnny Ellis                                                                                                            
MEMBERS ABSENT                                                                                                                
All Members Present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 84                                                                                                              
"An  Act exempting  joint  action agencies  from  regulation by  the                                                            
state  or municipalities;  relating  to the relationship  between  a                                                            
joint action  agency and  the public utilities  that form the  joint                                                            
action agency;  relating to powers and immunities  of a joint action                                                            
agency;  requiring  filing of  the joint  action  agency  agreement;                                                            
relating  to  the  financial  affairs  of  a  joint  action  agency;                                                            
declaring   certain   joint   action  agencies   to   be   political                                                            
subdivisions  for  certain  purposes;   relating  to  liability  and                                                            
indemnification  of officers, employees, and agents  of joint action                                                            
agencies; and defining  'agency agreement' as used with reference to                                                            
joint action agencies."                                                                                                         
     MOVED CSSB 84 (JUD) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 81                                                                                                              
"An Act  relating  to the nonademption  of property  transfers;  and                                                            
providing for an effective date."                                                                                               
     MOVED SB 81 OUT OF COMMITTEE                                                                                               
SENATE BILL NO. 37                                                                                                              
"An  Act relating  to  collective  negotiation  by  physicians  with                                                            
health  benefit plans;  and to  health benefit  plan contracts  with                                                            
individual competing physicians."                                                                                               
     MOVED CSSB 37 (JUD) OUT OF COMMITTEE                                                                                       
PREVIOUS COMMITTEE ACTION                                                                                                     
SB 37 - See Judiciary minutes dated 1/22/01.                                                                                    
WITNESS REGISTER                                                                                                              
Mr. Michael Schrader                                                                                                            
Ater Wynne, LLP                                                                                                                 
222 S.W. Columbia                                                                                                               
Portland, Oregon 97201                                                                                                          
POSITION STATEMENT:  Testified on SB 84                                                                                       
Mr. Brian Bjorkquist, Assistant Attorney General                                                                                
Department of Law                                                                                                               
1031 W. 4th Avenue, Suite 200                                                                                                   
Anchorage, Alaska 99501-1994                                                                                                    
POSITION STATEMENT:  Supports SB 84                                                                                           
Mr. Stephen Greer, Attorney                                                                                                     
4041 B Street, Suite 205                                                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified on SB 84                                                                                       
Mr. Kristopher Knauss                                                                                                           
Staff to Senator Pete Kelly                                                                                                     
Alaska State Capitol                                                                                                            
Juneau, Alaska 99801-1182                                                                                                       
POSITION STATEMENT:  Introduced SB 37                                                                                         
Mr. James Jordan, Executive Director                                                                                            
Alaska State Medical Association                                                                                                
4107 Laurel Street                                                                                                              
Anchorage, Alaska 99508                                                                                                         
POSITION STATEMENT:  Testified on SB 37                                                                                       
Mr. Michael Haugen                                                                                                              
Alaska Physicians and Surgeons                                                                                                  
4120 Laurel Street, #206                                                                                                        
Anchorage, Alaska 99508                                                                                                         
POSITION STATEMENT:  Testified on SB 37                                                                                       
Mr. Clyde Sniffen, Jr.                                                                                                          
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, Alaska 99811-0300                                                                                                       
POSITION STATEMENT:  Testified on SB 37                                                                                       
Ms. Sandy Perry-Provost                                                                                                         
Alaska Nurses Association                                                                                                       
3280 Foster Avenue                                                                                                              
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Testified on SB 37                                                                                       
ACTION NARRATIVE                                                                                                              
TAPE 01-4, SIDE A                                                                                                             
Number 001                                                                                                                      
CHAIRMAN ROBIN TAYLOR called  the Senate Judiciary Committee meeting                                                          
to  order  at  1:38  p.m.  Present  were Senator   Cowdery,  Senator                                                            
Therriault and Chairman  Taylor.  Senator Ellis arrived at 1:47 p.m.                                                            
and Senator Donley  arrived at 2:19 p.m.  Chairman  Taylor announced                                                            
the first order of business would be SB 84.                                                                                     
            SB 84-PUBLIC UTILITY JOINT ACTION AGENCIES                                                                      
SENATOR COWDERY  moved to adopt CSSB 84 (JUD), version  22-LS0504\J,                                                            
Cramer, as  a working draft.  There  being no objection,  the motion                                                            
MR. MICHAEL  SCHRADER  said he  was with  the law  firm Ater  Wynne,                                                            
which represents  the Four  Dam Pool Project  Management  Committee.                                                            
The  Four   Dam  Pool  purchasing   utilities  were  authorized   by                                                            
legislation  last  year to  purchase  Four  Dam Pool  projects  from                                                            
Alaska.   The vehicle  to purchase  the projects  is a Joint  Action                                                            
Agency (JAA),  which was authorized  under prior Alaska law.   There                                                            
was a  supplement to  the statute  allowing formation  of a  special                                                            
purpose JAA that is the  entity that will be purchasing the Four Dam                                                            
Pool  projects.   In the  process of  forming JAA,  the five  member                                                            
utilities ran  into a number of issues  in terms of the negotiation                                                             
of the JAA agreement  - the document that creates  this entity and a                                                            
number of technical  issues.  Some of the issues were  resolved just                                                            
by  the terms  and  negotiations  of  the agreement  -  others  were                                                            
resolved by either federal or state law.                                                                                        
MR. SCHRADER  said SB  84 would  address a number  of these  issues,                                                            
resolve them and allow  the divestiture of the Four Dam utilities to                                                            
go forward.  Being  a tax-exempt entity, both state  and federal, is                                                            
a key factor  for JAA and for the  economics of divestiture.   It is                                                            
essential for the purchasing  utilities that JAA be characterized as                                                            
a governmental  unit, exempt from  restrictions of federal  tax law.                                                            
A key factor  in having that governmental  status is eminent  domain                                                            
or condemnation  powers  that are granted  to JAA.   SB 84 makes  an                                                            
amendment to existing  law providing JAA expanded  eminent domain or                                                            
condemnation powers,  subject to significant limitations  but with a                                                            
sufficient  grant  of power  to assist  in  its application  to  the                                                            
Internal Revenue Service.                                                                                                       
Number 300                                                                                                                      
CHAIRMAN TAYLOR  said the first four sections of the  work draft are                                                            
existing law; the only  change is to add a new section entitled (o).                                                            
Sections 6 and  9 cover eminent domain, tax exemption,  and make JAA                                                            
a governmental body.                                                                                                            
MR. SCHRADER agreed that  the federal and state issues are addressed                                                            
in these sections.  Another  issue that arose when going through the                                                            
formation of JAA  had to do with JAA's status as a  regulated entity                                                            
by the Regulatory  Commission of Alaska  (RCA).  Currently,  four of                                                            
the five  member utilities  are exempt from  regulation by  the RCA.                                                            
The power sales  agreement is also  exempt from review and  approval                                                            
by RCA.  There  was a disconnect between the provision  in Title 42,                                                            
the RCA  provision, in terms  of the regulatory  status of JAA.   On                                                            
one hand there  were provisions that said the power  sales agreement                                                            
is exempt from review and  approval by the RCA but on the other hand                                                            
there was not  a provision covering the other aspects  of regulation                                                            
by  the RCA.    SB 84  that  creates  consistency  in terms  of  the                                                            
regulatory status of JAA  - this has been reviewed and approved.  As                                                            
long  as  JAA  has  outstanding   indebtedness  to   the  state,  in                                                            
connection  with  the acquisition  of  the  projects,  JAA would  be                                                            
exempt from  regulation by the RCA.   When the indebtedness  is paid                                                            
in  full,   JAA  becomes  subject   to  regulation  under   existing                                                            
provisions of statute.                                                                                                          
Number 503                                                                                                                      
SENATOR COWDERY asked if SB 84 addresses Kodiak.                                                                                
MR. SCHRADER  said SB 84 does not  address the regulatory  status of                                                            
the underlying  member utilities.  Of the five purchasing  utilities                                                            
only the Kodiak Electric  Association is a regulated utility.  SB 84                                                            
says the organization that is formed is exempt.                                                                                 
MR. SCHRADER  noted  another concern  arose about  the pass-through                                                             
liability of JAA.  It is  essential to the member utilities that JAA                                                            
operate as a separate  and distinct legal entity.   This is provided                                                            
for in statute,  but the concern is  that any claims or liabilities                                                             
of JAA would be passed-through  to the member utilities.  The member                                                            
utilities  obligations  to  JAA  are  defined  by  the  power  sales                                                            
agreement,  a long-term agreement  that has  been in place  and will                                                            
continue  to be  in place  following  the  divestiture transaction.                                                             
Additional  language in SB 84 makes  absolutely clear that  there is                                                            
no pass-through  liability - a claim against JAA cannot  be asserted                                                            
as a claim  against the member  utilities.   This is referred  to in                                                            
sections 6 and 13.                                                                                                              
Number 631                                                                                                                      
CHAIRMAN TAYLOR said if  these sections had not been added to SB 84,                                                            
communities could  have assumed large liabilities,  which would have                                                            
prevented the project from coming together.                                                                                     
MR. SCHRADER said this was a key factor in forming SB 84.                                                                       
Number 776                                                                                                                      
MR. BRIAN BJORKQUIST,  Attorney General  with the Department  of Law                                                            
(DOL) in  Anchorage, said  his primary client  agency is the  Alaska                                                            
Energy Authority.   In working with attorneys and  the Four Dam Pool                                                            
utilities  on SB 84, DOL's  concern with  the previous version  have                                                            
been worked  through and addressed.   DOL supports CSSB 84  and will                                                            
continue  to work  with the  utilities  and their  attorneys as  the                                                            
process goes forward.                                                                                                           
SENATOR COWDERY  moved CSSB 84 (JUD) from committee  with individual                                                            
recommendations.  There being no objection, the motion carried.                                                                 
Number 978                                                                                                                      
             SB 81-NONADEMPTION OF TRANSFERS IN TRUSTS                                                                      
SENATOR THERRIAULT,  sponsor of SB  81, said the bill is  a clean up                                                            
for a piece of legislation  that was passed last year - HB 275.  One                                                            
section of HB 275 had incorrect  language that rendered a portion of                                                            
the new law ineffective.  SB 81 proposes a fix for this problem.                                                                
SENATOR ELLIS  asked if SB 81 is the "clean-up of  the clean-up last                                                            
year that was the clean-up of the Joe Ryan trust bill."                                                                         
Number 1057                                                                                                                     
CHAIRMAN TAYLOR said seven  or eight bills have been passed over the                                                            
years tying  to keep up with supreme  court and tax court  changes -                                                            
trying to make Alaska an  attractive state for people to place their                                                            
money in trust.                                                                                                                 
SENATOR ELLIS  said a more comprehensive  look at SB 81 might  be in                                                            
CHAIRMAN TAYLOR  said he has received a report on  this question and                                                            
would be scheduling a meeting at a later time.                                                                                  
SENATOR THERRIAULT said  Section 1. AS 13.12.712(b), of HB 275, used                                                            
language such  as "authority of a  durable power of attorney  for an                                                            
incapacitated  principal."  This was incorrect language  with regard                                                            
to trusts -  when there is a trust  there are trustees.   This error                                                            
has been corrected.   The AG's office  has sent a memo saying  SB 81                                                            
appears to amend  AS 13.12.712 "to properly reflect  the purpose for                                                            
the entire  statute, namely the nonademption  of specific  transfers                                                            
in trusts."                                                                                                                     
Number 1220                                                                                                                     
SENATOR ELLIS  thanked Senator Therriault  for going to the  revisor                                                            
CHAIRMAN  TAYLOR said  Senator  Ellis' point  was a  very good  one.                                                            
Often  times  the  revisor  is not  consulted  and  bills  are  just                                                            
SENATOR  THERRIAULT  said  the  State  Affairs   Committee  saw  the                                                            
revisor's bill on 2/20/01.                                                                                                      
Number 1350                                                                                                                     
MR. STEPHEN  GREER,  Attorney,  testifying via  teleconference  from                                                            
Anchorage, said HB 275  was a complicated bill trying to give Alaska                                                            
citizens the  benefit of certain tax  selections.  Section  2, which                                                            
was a non-tax  provision,  attempted to make  the law applicable  to                                                            
wills equally applicable  to revocable trusts.  People use revocable                                                            
trusts to avoid  the expense of a probate proceeding.   SB 81 cleans                                                            
up HB 275 with respect to one particular section.                                                                               
CHAIRMAN TAYLOR asked for the definition of nonademption.                                                                       
MR.  GREER  said the  definition  means  not  extinguished.   As  an                                                            
example:  In  a will or trust if you  give a piece of property  to a                                                            
relative, and  that piece of property has been sold  by you prior to                                                            
your death - under the  general rule - this request would be adeemed                                                            
or extinguished  because the property does not exist  at the time of                                                            
death and the relative would not receive the property.                                                                          
MR. GREER said there are  a few instances when a specific bequest is                                                            
not  adeemed  or extinguished  and  SB 81  is  meant to  cover  this                                                            
situation with  respect to revocable trusts.  He gave  the following                                                            
examples for bequeaths not adeemed:                                                                                             
     The first  instance is when a property is being  condemned                                                                 
     and there  is an unpaid condemnation award for  the taking                                                                 
     of the property  - the person who would have received  the                                                                 
     property is  instead entitled to receive the condemnation                                                                  
     The second  instance is when a piece of property  has been                                                                 
     directed  to a  relative  and that  piece of  property  is                                                                 
     destroyed  and insurance proceeds remain unpaid  at death,                                                                 
     the  relative would  be entitled to  the unpaid insurance                                                                  
     Another  instance is  when a  person is the  obligee of  a                                                                 
     promissory note and that  person wants the note to go to a                                                                 
     relative   but  before  the   person's  death,  there   is                                                                 
     foreclosure on the note  and the property that was used to                                                                 
     secure  the  note  is  taken  back.   In  this  case,  the                                                                 
     relative would be entitled to that piece of property.                                                                      
     Section  (b) is  meant  to address  the situation  when  a                                                                 
     settlor makes  a specific bequest but becomes  incompetent                                                                 
     and  the trustee sells  the property.   In this case,  the                                                                 
     intended   recipient   of  the  specifically   bequeathed                                                                  
     property is  entitled to other properties of equal  value.                                                                 
MR. GREER  said all  of these examples  are in  conformity with  the                                                            
Uniform Probate Code.                                                                                                           
Number 1526                                                                                                                     
SENATOR  COWDERY asked  - for  a deed  of trust  - if  the value  is                                                            
larger after a  foreclosure than the balance of the  money owed - is                                                            
this an issue for SB 81?                                                                                                        
MR. GREER said the Uniform  Probate Code has contemplated this - the                                                            
excess value would go to the residuary estate.                                                                                  
SENATOR COWDERY  moved to pass SB 81 from committee  with individual                                                            
recommendations.  There being no objection, the motion passed.                                                                  
Number 1599                                                                                                                     
          SB 37-PHYSICIAN NEGOTIATIONS WITH HEALTH INSURE                                                                   
MR. KRISTOPHER  KNAUSS, staff to Senator Pete Kelly,  said questions                                                            
from the  Department of Law  (DOL), Division  of Insurance,  and the                                                            
Nurse Practitioners  and Midwives  (NPM), in  the last hearing  have                                                            
been  answered.   NPM was  concerned that  their  services could  be                                                            
negotiated out of physician  contracts with healthcare plans.  As SB
37 is  written this  is not so.   It is in  statute that those  with                                                            
special occupational licenses  from health care plans or health care                                                            
in general cannot be discriminated  against - the new amendment also                                                            
clarifies this point.                                                                                                           
Number 1698                                                                                                                     
CHAIRMAN  TAYLOR  said  there  were  concerns   about  enough  state                                                            
involvement  within  the  process  so that  under  federal  law  the                                                            
constraints  of the  anti-trust legislation  could  be avoided.   He                                                            
asked if SB 37 was sufficient  for allowing the state to participate                                                            
in these negotiations.                                                                                                          
MR. JAMES JORDAN,  Executive Director  for the Alaska State  Medical                                                            
Association,  testifying  via teleconference  from  Anchorage,  said                                                            
there is  sufficient regulatory  oversight in  SB 37 to provide  the                                                            
meeting  of the act  of oversight  test, not only  with the  various                                                            
guidelines  provided  for the  oversight agency  but  also the  AG's                                                            
MR. JORDAN said Texas enacted  a similar law in June of 1999 and has                                                            
been going  through  a process of  adopting regulations  to make  it                                                            
functional.   Washington  has a  law that allows  joint negotiation                                                             
under a state  action doctrine exception.   However, the  Washington                                                            
law did  not provide  for anything  more than  is currently  allowed                                                            
under new federal antitrust laws.                                                                                               
Number 1880                                                                                                                     
MR.  MICHAEL   HAUGEN,   Alaska  Physicians   and  Surgeons   (APS),                                                            
testifying via  teleconference from Anchorage, started  by answering                                                            
a  question  that  Senator Therriault   asked in  the  last  hearing                                                            
regarding  safe harbors.   APS has  talked with  the Alaska  Medical                                                            
Association's  (AMA) legal  department  and has done  its own  legal                                                            
analysis regarding  whether or not  SB 37 needs additional  language                                                            
to  protect  physicians  prior  to  active  negotiations  in  simply                                                            
getting together to discuss  the possibility of negotiation. Supreme                                                            
court cases  from the 1960's  say that provided  the applicants  are                                                            
working  in  good faith  to  apply  for state  protection  they  are                                                            
exempted  from any liability  under the Sherman  antitrust  laws and                                                            
the federal  antitrust rules.   The answer  to Senator Therriault's                                                             
question is  that provided the doctors  are acting in good  faith in                                                            
attempting to petition the AG to negotiate, they are protected.                                                                 
MR. HAUGEN  said APS suggests  the AG issue  a "Dear Doctor"  letter                                                            
stating the "do's  and don'ts" of getting together,  before the safe                                                            
harbor provided  under SB  37 goes into effect,  to let the  doctors                                                            
know they have to be organizing  in good faith and that there may be                                                            
areas they  should not  discuss until  the green  light is given  to                                                            
negotiate.   APS  does not  think  additional language  would  offer                                                            
additional protection.                                                                                                          
Number 2018                                                                                                                     
MR.  CLYDE  SNIFFEN, JR.,  Attorney  General,  DOL,  testifying  via                                                            
teleconference  from Anchorage, said  he had not seen the  amendment                                                            
or any answers to the questions  referred to by Mr. Knauss.  He does                                                            
not know how  the concerns he raised  at the last hearing  have been                                                            
addressed and  therefore cannot comment  on them.  DOL continues  to                                                            
have serious  concerns  with SB  37.  The  only provision  in  SB 37                                                            
allowing DOL the authority  to adopt regulations is specific only to                                                            
fee issues.    DOL also  has concerns  about geographic  and  market                                                            
power issues, they are  not well defined or related to anything that                                                            
would suggest  the markets that SB  37 focuses on have an  impact on                                                            
the ability to set prices.                                                                                                      
CHAIRMAN TAYLOR  asked if DOL had  prepared amendments to  take care                                                            
of these concerns.                                                                                                              
MR. SNIFFEN replied no.                                                                                                         
Number 2187                                                                                                                     
MS.  SANDY PERRY-PROVOST,  Alaska  Nurse Practitioners  Association                                                             
said she could not comment  on the amendment because the nurses have                                                            
not seen it yet.  She pointed  out that there is not an (o) under AS                                                            
23.50.020 in the amendment.                                                                                                     
SENATOR  THERRIAULT  asked  if  Chairman  Taylor  would  afford  the                                                            
drafter latitude in changing the language.                                                                                      
CHAIRMAN TAYLOR said the amendment is only conceptual.                                                                          
TAPE 01-4, SIDE B                                                                                                             
Number 2334                                                                                                                     
SENATOR  ELLIS  said  there  had been  a  request  from  the  Alaska                                                            
Optometric Association  (AOA) as well.  AOA supports SB 37 but wants                                                            
an amendment that would  encompass all the groups that have problems                                                            
with the bill.                                                                                                                  
CHAIRMAN  TAYLOR  said the  wording of  SB 37  is  to encompass  all                                                            
groups  that   would  be  defined   within  that  category   -  "the                                                            
performance  of  services   that  are  within  the  scope  of  their                                                            
occupational license."   The amendment was structured  to accomplish                                                            
this without listing each group.                                                                                                
CHAIRMAN  TAYLOR moved  to adopt  the conceptual  amendment.   There                                                            
being no objection, the motion carried.                                                                                         
SENATOR  COWDERY moved  to pass CSSB  37 (JUD)  from committee  with                                                            
individual recommendations.                                                                                                     
SENATOR ELLIS objected.                                                                                                         
SENATOR ELLIS  said there were still too many concerns  that had not                                                            
been addressed.                                                                                                                 
CHAIRMAN TAYLOR said he  shared some of the same concerns as Senator                                                            
Ellis about  the questions  on antitrust.   He  said he hoped  these                                                            
issues  would be  resolved before  SB 37  goes to the  Floor of  the                                                            
Senate.    Chairman  Taylor  said  the antitrust  issue  has  to  be                                                            
resolved or SB 37 will not have the desired effect.                                                                             
SENATOR  ELLIS noted  there is  a significant  fiscal  note and  the                                                            
discomfort  level would go up dramatically  if the fiscal  note were                                                            
to be  significantly  reduced  or wiped  out allowing  no  oversight                                                            
through the  AG's office.  He does  not object to the amendment  but                                                            
wondered  if there would  be restrictions  in other  parts of  SB 37                                                            
that would cause  concern that doctors would constrain  trade of the                                                            
concerned groups.                                                                                                               
CHAIRMAN TAYLOR said the  first section is just legislative findings                                                            
and the only real substance to the bill is the amended section.                                                                 
SENATOR  ELLIS  said, with  all  respect  to  the Chairman,  if  the                                                            
committee were  to move SB 37 he would have a hard  time feeling the                                                            
committee had done a full job.                                                                                                  
CHAIRMAN  TAYLOR  said  he shared  many  of those  concerns  and  he                                                            
assured Senator  Ellis that  if these issues  were not resolved,  he                                                            
would request SB 37 back to the Judiciary Committee.                                                                            
A roll  call was taken.   Senator Donley,  Senator Cowdery,  Senator                                                            
Therriault  and Chairman Taylor  voted "yea."   Senator Ellis  voted                                                            
"nay."    The  motion  carried  and CSSB  37  (JUD)  passed  out  of                                                            
committee with individual recommendations.                                                                                      
There  being no  further  business  to come  before  the  committee,                                                            
Chairman Taylor adjourned the meeting at 2:31 p.m.                                                                              

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