Legislature(1993 - 1994)
03/02/1993 02:35 PM Senate L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE LABOR AND COMMERCE COMMITTEE March 2, 1993 2:35 p.m. MEMBERS PRESENT Senator Tim Kelly, Chairman Senator Steve Rieger, Vice-Chairman Senator Georgianna Lincoln MEMBERS ABSENT Senator Drue Pearce Senator Judy Salo OTHERS PRESENT Senator Jay Kerttula COMMITTEE CALENDAR SENATE BILL NO. 99 "An Act relating to the improvement of state finances through reduction of operating costs of certain state agencies and establishment of certain fees; and providing for an effective date." SENATE BILL NO. 86 "An Act relating to funds transfers under the Uniform Commercial Code; changing Alaska Rule of Civil Procedure 82; and providing for an effective date." SENATE BILL NO. 112 "An Act relating to the Uniform Commercial Code; amending Alaska Rules of Civil Procedure 8 and 82, and Alaska Rule of Evidence 402; and providing for an effective date." PREVIOUS SENATE COMMITTEE ACTION SB 99 - See Labor & Commerce minutes dated 2/16/93 and 2/23/93. SB 86 - NONE. SB 112 - NONE. WITNESS REGISTER Josh Fink, Committee Aide Senator Tim Kelly State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Testified on SB 99. Bill Kelder, Aide Senator Jay Kerttula State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Testified on SB 86. Arthur Peterson Uniform Law Commissioner for Alaska Dillon & Finley One Sealaska Plaza, Suite 202 Juneau, Alaska 99801 POSITION STATEMENT: Testified on SB 86. Gerald Kurtz, Attorney Uniform Law Commissioner for Alaska Anchorage, Alaska POSITION STATEMENT: Testified on SB 86. Pat Crandall National Bank of Alaska Alaska Bankers Association 123 Seward Street Juneau, Alaska 99801 POSITION STATEMENT: Supported SB 86. Willis Kirkpatrick, Director Banking, Securities and Corporations Commerce and Economic Development P.O. Box 110806 Juneau, alaska 99811-0806 POSITION STATEMENT: Testified on SB 86. ACTION NARRATIVE TAPE 93-16, SIDE A Number 001 CHAIRMAN TIM KELLY called the Labor and Commerce Committee meeting to order at 2:35 p.m. SENATOR KELLY returned SB 99 (FINANCIAL ADMINISTRATION OF STATE GOVERNMENT) by request of the Governor, to committee, and asked his committee aide, JOSH FINK, to give an update on the bill. MR. FINK said the fiscal notes would all have to be updated, and he reviewed the substantive changes in the committee substitute. He explained the first change was in Section 44, which did not appear in the earlier version, but would change the manner in which hunting and fishing license vendors are compensated. MR. FINK reported the second change in Sections 46 and 72, would establish a statutory two-year term for both initial and renewal certificates of fitness, rather than allowing the Department of Labor to determine the terms by regulation. He explained that Section 72 is a transitional provision to allow the department to switch from the current one and three year terms to the new two-year terms. In addition, the department was given the power to adopt regulations to implement the transition. SENATOR KELLY clarified the present draft of SB 99 was designated as the J version. MR. FINK explained Section 47 was rewritten to establish the fees by statute rather than regulation and Section 48 establishes the fee by statute and eliminates an exception for state employees. MR. FINK said Section 49 would set the fee for an employment agency permit at $100 for two years, the duration of the permit is set in statute, and the application fee is retained at $10. MR. FINK said the last changes were in Sections 66 and 67, and he described a mix of statute and regulation for setting fees by the Division of Parks. SENATOR RIEGER referred to page 20, lines 9 through 23, and asked if the $1 admission would always be the same, and he was told the admission could not be other than $1. SENATOR RIEGER also expressed concern on line 16, (12), because he thought there are places where a parking fee should not be charged. SENATOR KELLY, in reference to line 22, thought $2 for each person over 10 years of age was excessive. MR. FINK said the age should be 18 years of age. SENATOR RIEGER moved to adopt CS FOR SENATE BILL NO. 99(L&C). Without objections, so ordered. SENATOR RIEGER moved to adopt the change in line 22 of page 20 to read: $2 for each person over 18 years of age. Without objections, so ordered. SENATOR RIEGER still found objections with Section 33 on page 11, line 3, which would allow the Office of Public Advocacy to charge and collect fees and also waive collection in certain instances. SENATOR KELLY thought it might be changed in the Finance committee, but MR. FINK said a letter of intent had been delivered to the office which discusses SENATOR RIEGER'S concerns. Number 120 SENATOR RIEGER moved to pass CS FOR SENATE BILL NO. 99(L&C) from committee with individual recommendations. Without objections, so ordered. SENATOR KELLY introduced SB 86 (FUND TRANSFERS UNDER THE UNIFORM COMMERCIAL CODE) and asked who was going to explain the bill. BILL KELDER, Aide to SENATOR KERTTULA, said a copy of the explanation had been delivered to the committee member offices, but he deferred to ARTHUR PETERSON, who is a Uniform Law Commissioner for Alaska. GERALD KURTZ, who is also a Uniform Law Commissioner for Alaska, was Off-Net from Anchorage on the teleconference network. MR. PETERSON explained that although he was now an attorney in private practice with Dillon & Findley, he was appearing in his role as a Uniform Law Commissioner for Alaska. He testified in support of SB 86 and urged the committee to favorably report it from committee. Number 164 MR. PETERSON said the bill was supported by the American Bar Association, the American Law Institute, the American Bankers Association, and was developed by the National Conference of Commissioners and Uniform State Laws. MR. PETERSON said the purpose of the bill was to recognize modern electronic technology and modern business practices. He said it would provide legislative answers to the great number of questions that arise in the new way of doing business, is vastly preferable to the current system, and has been enacted by 44 states. Enactment by all states would retain this subject for handling by the states and would preclude federal intervention. MR. PETERSON said the bill covered two areas, wholesale wire transfers, and non-consumer automated payments, which are similar. He explained it parallels, and is consistent with, a related federal act and with the rules that govern the two principle national wire systems, the FedWire and the CHIPS (Clearing House Interbank Payment Systems). MR. PETERSON said he preferred to answer questions at this point, and he noted another Uniform Law Commissioner for Alaska, GERALD KURTZ, who has a great deal of experience in commercial law, was on the teleconference from Anchorage. Number 201 SENATOR RIEGER questioned the national act, and MR. PETERSON explained the federal act was the Electronics Transfer Act, which covers only consumer transactions, such as an automated teller machine or credit card transactions. He also explained this act is uniform among all the other states and with the two national wire systems. The only changes he noted were to comply with Alaska's requirements of style and numbering adjustments; otherwise, it is the national version. SENATOR KELLY invited MR. KURTZ in Anchorage, to testify on SB 86. MR. KURTZ reviewed some of the provisions specific to Alaska, and he thought it was important that 44 other states had adopted the act. He explained it was quite critical to those business people, who were trying to hold down the cost of business and consumer transactions and keep up with the rest of the world on the subject of both SB 86 and SB 112. PETE CRANDALL, representing the National Bank of Alaska and the Alaska Bankers Association, urged the committee's support of SB 86. He explained it would provide clear lines of responsibility for all parties utilizing electronic funds transfers and would reduce, or eliminate, legal disputes between all parties that conduct business in this manner. He said it could also eliminate disputes that could arise between the State of Alaska and other states, since it provides clear, fair, and sound rules for all parties - not just bankers. Number 269 SENATOR KELLY asked WILLIS KIRKPATRICK if the Division of Banking supported the bill, and MR. KIRKPATRICK responded they supported the bill - and it had no fiscal note. SENATOR RIEGER asked MR. CRANDALL what happened when funds were erroneously sent, and who was responsible for the loss of interest in the transaction. MR. CRANDALL explained both the senders and the receivers have some responsibilities, but the act would clearly define the rules, and he gave an example. SENATOR RIEGER said he was looking from the standpoint of the owner of the funds, who directs the bank to transfer some funds, if the deal goes wrong. He asked if he would still get his interest, and at what rate of interest, while the problem is being sorted out. MR. PETERSON assured SENATOR RIEGER he would not suffer because the bank, or whoever made the error, would bear the burden of his loss, but the rate of interest would be under law of the state. He quoted the supporting Alaska statute, AS 45.45.10, which is essentially market rate. SENATOR KELLY asked for further questions. SENATOR LINCOLN quoted SENATOR KERTTULA as expecting the bill to bring the state laws into compliance with federal law, otherwise, the federal government will perform the regulatory and enforcement duties related to the fund transfers. She asked for a meaning of his quote. Number 299 MR. PETERSON referred to his previous testimony that the federal government wishes to be assured that all states deal with fund transfers in the same way for a nation-wide system. He explained if the states don't conform, then either Congress or the appropriate federal regulatory agencies would intervene. He also explained it was important for Alaska to have a model version of the act, and he said the two federal wire services had adopted the language produced by the Uniform Law Commissioners. He said the state statute is consistent with federal law on the books, but he expressed the fear that if the states don't act, the federal government would expand its area of regulation. SENATOR LINCOLN, in reference to those states without similar legislation, asked if their regulations would be replaced by the federal government. MR. PETERSON explained if the states fail to act, they would place their commercial climate at a great disadvantage. He explained that if all states cannot implement the Uniform Act, that encourages the federal government to intervene, if they feel it is required. SENATOR KELLY noted a list of those 45 states who have acted on the Uniform Commercial Code, and he asked why this has happened so quickly. MR. PETERSON explained the UCC had swept the country because of the great push to make uniform all of the laws to keep pace with the strides in the business world, and he reviewed the bill from last session on this subject. Number 347 SENATOR RIEGER asked about the rate of interest on page 37 of the bill, as to whether it referred to the various financial institutions. MR. PETERSON explained, as a depositor, a rate would be set in the contract with the bank. After a few more questions on the subject, SENATOR RIEGER moved to pass SENATE BILL NO. 86 from committee with individual recommendations. Without objections, so ordered. SENATOR KELLY introduced CS FOR SENATE BILL NO. 112(L&C) (UNIFORM COMMERCIAL CODE REVISIONS), sponsored by SENATOR JAY KERTTULA, and invited ARTHUR PETERSON, Uniform Law Commissioner for Alaska, to explain the bill. MR. PETERSON explained that although he was now an attorney in private practice with Dillon & Findley, he was appearing in his role as a Uniform Law Commissioner for Alaska, and he strongly supported SB 112. MR. PETERSON said the bill was a faithful adherence to the national uniform versions and covers three areas: (1) a new article 2A on personal property leasing (Section 125 of the bill), (2) amendments to the UCC's articles 3 and 4, regarding negotiable instruments, bank deposits, and collections (Sections 14 through 117 and 127 of the bill), and (3) repeal of UCC's article 6 on bulk sales (Section 127 of the bill). He explained Alaska's numbering system was different, and he preferred to refer to the article numbers. Number 382 MR. PETERSON said the Labor and Commerce Committee Substitute for SB 112 before the committee was a faithful reproduction, which makes a couple of technical corrections. He noted an additional typo on line 27, which would insert "lessor or" in front of "lessee," and he said he had discussed it with the drafting department. MR. PETERSON said there was presently no law on the subject of Personal Property Leasing, which means that any questions that arise go to litigation depending on the disagreement, go to the courts, and provide activity for attorneys, when statutory authority should provide the necessary guidance. He reviewed the items that fall under personal property and said the current absence of these rules inspires litigation. He explained a national system was needed since commerce was conducted across state lines. MR. PETERSON noted that the Negotiable Instruments articles of the UCC had not been revised in about 30 or 40 years, and he reviewed the proliferation of negotiable instruments from 9 billion in the late 1950 to 48 billion checks now. He explained SB 112 recognized the need to provide a number of simple and fair answers on a national basis. In the Bulk Sales area, MR. PETERSON noted it was a sale out of the ordinary course of business or a "bulk transfer," and he explained, under the old law, there was a great concern for the creditors, leaving the buyers to fend for themselves. He described new laws have partially overlapped article 6, and more sophisticated and wide-spread inventory financing under article 9 of the UCC have provided even more significant protection for creditors. He reviewed a letter from a group of 16 Alaska business law attorneys listing their reasons for unanimously supporting SB 112. Number 447 SENATOR LINCOLN asked MR. PETERSON to point out the difference between the original bill and the changes made in the Labor and Commerce Committee. MR. PETERSON listed the changes which dealt with the insertion of words to avoid changing the citations every time another chapter is added, to correct typos, to promote consistency with the national version, to resolve inconsistencies, to correct significant punctuation, and to add relevant language. Number 511 SENATOR LINCOLN discussed some of the inconsistent language with MR. PETERSON, and MR. PETERSON agreed she was correct. SENATOR RIEGER had a question on page 93 with the use of the word, unconscionability, and MR. PETERSON directed him to line 15 (d) to read the modification to be sure the national approach prevails, within the context of Alaska Rule of Civil Procedure 82 dealing with a consumer lease. SENATOR RIEGER was still concerned with an "unconscionable clause" in a contract, and he gave an example of its use being a blank check in a contract. MR. PETERSON used a similar example to explain the need for a nationally uniform system of rights and obligations. SENATOR KELLY said the bill would be discussed at the next meeting, and he invited GERALD KURTZ, a Uniform Law Commissioner in Alaska, to testify from his off-net site in Anchorage. MR. KURTZ explained that in addition to a tremendous increase in the number of checks, electronic transfers have become the way of doing business without any modification of the law. He suggested, in the personal property leasing, to read a few car ads to get an idea of personal property leasing on the car business. He said those two areas of the legislation were catching up with the times and need to be adopted. Number 565 In response to SENATOR RIEGER's question on the attorney's fees, said the key word in the legislation was "reasonable," and he claimed a typical Alaskan judge is quick to crawl all over an attorney who tries to continue litigation where there is no reason. They continued a discussion of attorney fees. SENATOR KELLY checked with MR. KIRKPATRICK, MR. CRANDALL, TAPE 93-16, SIDE B Number 001 and GARY AMANDOLA for their opinions on the bill. There being no further business to come before the committee, the meeting was adjourned at 3:30 p.m.
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