Legislature(1997 - 1998)

02/05/1998 01:40 PM Senate L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
         SENATE LABOR AND COMMERCE COMMITTEE                                   
                   February 5, 1998                                            
                      1:40 P.M.                                                
                                                                               
MEMBERS PRESENT                                                                
                                                                               
Senator Loren Leman, Chairman                                                  
Senator Jerry Mackie, Vice Chairman                                            
Senator Tim Kelly                                                              
Senator Mike Miller                                                            
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
Senator Lyman Hoffman                                                          
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
SENATE BILL NO. 254                                                            
"An Act relating to levy, execution, garnishment, attachment, or               
other remedy for the collection of debt as applied to a permanent              
fund dividend."                                                                
                                                                               
     - HEARD AND HELD                                                          
                                                                               
SENATE BILL NO. 158                                                            
"An Act relating to motor vehicle liability insurance covering a               
person who has had the person's driver's license revoked."                     
                                                                               
     - HEARD AND HELD                                                          
                                                                               
PREVIOUS SENATE COMMITTEE ACTION                                               
                                                                               
SB 254 - See Labor and Commerce minutes dated 1/29/98.                         
                                                                               
SB 158 - No previous action to consider.                                       
                                                                               
WITNESS REGISTER                                                               
                                                                               
Mr. Mike Pauley, Aide                                                          
Senator Loren Leman                                                            
State Capitol Bldg.                                                            
Juneau, AK 99811-1182                                                          
POSITION STATEMENT: Commented on SB 254 for sponsor.                           
                                                                               
Ms. Nancy Jones, Director                                                      
Permanent Fund Division                                                        
Department of Revenue                                                          
P.O. Box 110460                                                                
Juneau, AK 99811-0460                                                          
POSITION STATEMENT: Commented on SB 254.                                       
                                                                               
Mr. Joe Ambrose, Staff                                                         
Senator Robin Taylor                                                           
State Capitol Bldg.                                                            
Juneau, AK 99811-1182                                                          
POSITION STATEMENT: Staff to sponsor of SB 158.                                
                                                                               
Ms. Juanita Hensley, Chief                                                     
Driver Services                                                                
Division of Motor Vehicles                                                     
Department of Administration                                                   
5700 Tudor Rd.                                                                 
Anchorage, AK 99504-1266                                                       
POSITION STATEMENT: Supported SB 158.                                          
                                                                               
Ms. Sarah McNare Grove                                                         
Insurance Analyst                                                              
Division of Insurance                                                          
Department of Commerce and Economic Development                                
P.O. Box 110805                                                                
Juneau, AK 99811-0805                                                          
POSITION STATEMENT: Supported SB 158.                                          
                                                                               
Mr. John George                                                                
National Association of Independent Insurers                                   
3328 Fritz Cove Rd.                                                            
Juneau, AK 99801                                                               
POSITION STATEMENT: Opposed SB 158.                                            
                                                                               
ACTION NARRATIVE                                                               
                                                                               
TAPE 98-4, SIDE A                                                              
                                                                               
Number 001                                                                     
                                                                               
                                                                               
             SB 254 - LEVY ON PERMANENT FUND DIVIDEND                          
                                                                               
                                                                               
CHAIRMAN LEMAN called the Senate Labor and Commerce Committee                  
meeting to order at 1:40 p.m. and announced SB 254 to be up for                
consideration.                                                                 
                                                                               
MR. MIKE PAULEY, Aide to Senator Leman, explained proposed changes             
to SB 254, version E, which he said were simply technical.                     
Department of Law thought that existing language might have a                  
potential conflict with the $1,400 liquid assets exemption in Title            
9, Chapter 38.  Once a Permanent Fund check is actually sent to                
someone and has been deposited into their checking account and                 
commingled with other funds, it becomes hard to distinguish what is            
Permanent Fund Dividend money vs. what comes from your pay check,              
etc.                                                                           
                                                                               
Also, as a practical matter with the private sector such as banks              
and credit unions who do garnish Permanent Fund Dividend checks,               
99.9 percent of the things are done prior to the person receiving              
the check.  So it's kind of a redundant provision of the law.  The             
final issue where there is some ambiguity is in the word, "after" -            
meaning a check could be garnished after payment is made to the                
individual.  The word "after" is not defined and the issue has been            
raised that theoretically you could collect 16 years worth of                  
dividend checks going back to 1982 which would amount to an                    
enormous amount of money and there seems to be a general consensus             
that that wasn't the original intent.                                          
                                                                               
The second change on page 2, lines 3 - 5 was made because the                  
Alaska Commission on Post Secondary Education, when they garnish a             
student loan check, is not technically speaking taking a legal                 
action.  They handle it simply as an administrative matter.                    
There's no court order involved or anything like that.  This change            
removes the words, "legal action" which removes the implication                
that only through legal action could you garnish a Permanent Fund              
check and that's not the intent of the bill.                                   
                                                                               
SENATOR KELLY asked how this works in reality if they don't have to            
have a legal action to garnish a check. He asked if anyone else,               
like a landlord or a finance company, had to go through some legal             
procedure.                                                                     
                                                                               
MR. PAULEY answered yes, and this change does not exclude those                
procedures.  He referred the committee to page 1, line 7 that says,            
"may be taken through levy, execution, garnishment, attachment, or             
any other remedy for the collection of debt."                                  
                                                                               
Number 108                                                                     
                                                                               
SENATOR MILLER asked why a person would bother to fill out the                 
Permanent Dividend form, if he knew the whole thing was going to be            
garnished.                                                                     
                                                                               
MR. PAULEY responded he thought  because it's an annual thing, the             
debtor doesn't necessarily know whether you're going to put in the             
request for garnishment any more than the person wanting to garnish            
knows for sure whether you are going to apply.  Also, the majority             
of people who are interested in this legislation have told him they            
want it to be 100 percent.  There is about a 20 percent minority               
who don't want it.  The reason people want it at 100 percent is                
because that's what State agencies get to collect.                             
                                                                               
SENATOR KELLY asked if any of those people had agreed to lower                 
their interest rates because collecting is a risk of doing business            
and now they come to the State where the risk of collecting goes to            
zero if they get 100 percent of a dividend check.  We are a free               
collection agency for these people.                                            
                                                                               
Number 172                                                                     
                                                                               
MR. PAULEY said the issue of interest rates has not come up.                   
                                                                               
SENATOR KELLY asked if there was any compensation to the Division              
for all their efforts.                                                         
                                                                               
MS. NANCY JONES, Director Permanent Fund Division, responded that              
they charge an administrative fee of $2 to levy upon a dividend                
check.                                                                         
                                                                               
SENATOR KELLY asked if $2 was in statute or regulation.                        
                                                                               
MS. JONES said AS43.23.071 gives them the authority to collect                 
fees. The fee is in regulation.                                                
                                                                               
SENATOR MILLER asked why it was only $2.                                       
                                                                               
MS. JONES explained that another statute in Chapter 9 limits the               
amount any State agency can charge.  The $2 fee is what has been               
charged for a long time.  Normally they collect $150,000 - $185,000            
per year.  If a person has six creditors asking for a levy, that's             
$12 for her division - regardless of their priority.                           
                                                                               
She explained that every attachment has to go through some legal               
proceedings in order for it to be declared a legal debt with a                 
judgement issued against a person.  Her concern is if they take out            
the legal action wording, a person might think that they don't have            
to go through any legal process to attach the dividend.  It would              
cause confusion about what actually has to be done.                            
                                                                               
SENATOR LEMAN noted that there are other places in law that                    
describe what actions you have to take to collect on debts.                    
                                                                               
MS. JONES agreed.                                                              
                                                                               
SENATOR KELLY asked if she expected an increase in garnishments                
with passage of this law.                                                      
                                                                               
MS. JONES answered no.  Referring to the chart comparing 1996 and              
1997 garnishments she explained they are not changing any                      
priorities for being paid first; they are just removing the 55                 
percent exemption that the other writs and certified services are              
held against.  She noted that the Division lost fees when the IRS              
made a mistake for one year and didn't attach dividend checks.                 
                                                                               
SENATOR KELLY asked if the summary of voluntary and involuntary                
attachments shows that they have to attach more Permanent Fund                 
Dividend checks every year.                                                    
                                                                               
MS. JONES agreed.                                                              
                                                                               
SENATOR KELLY noted that there were 18,000 claims in 1997 for other            
writs and certified services.  He thought there would be more                  
claims.                                                                        
                                                                               
MS. JONES said she thought that's because the other agencies are               
coming on line, like the Department of Health and Social Services              
and traffic fines.  She agreed more and more people are in a debt              
status and they are getting more writs totally.                                
                                                                               
SENATOR KELLY noted that there were 26,000 unpaid claims and asked             
why.                                                                           
                                                                               
MS. JONES explained if a person is not eligible for a dividend or              
they ran out of money from paying someone with a higher priority,              
they are an unpaid claim.                                                      
                                                                               
SENATOR KELLY asked how many dividend checks were given out in                 
1997.                                                                          
                                                                               
MS. JONES answered 553,800.                                                    
                                                                               
SENATOR KELLY said he was trying to figure out what percentage of              
dividend checks get attached.                                                  
                                                                               
MS. JONES said somewhere between 17 or 18 percent.                             
                                                                               
Number 345                                                                     
                                                                               
SENATOR KELLY said he was concerned at 100 percent people would                
just stop filling out the form and it be counterproductive.  Also,             
if the State is serving as a collection agency for private                     
businesses, he thought there should be a larger collection fee.  He            
asked if the fee came from the individual's portion.                           
                                                                               
MS. JONES answered yes.                                                        
                                                                               
SENATOR KELLY reiterated that he thought the collection fee should             
be more.                                                                       
                                                                               
Number 445                                                                     
                                                                               
SENATOR KELLY asked if there was a statistic for the number of                 
people who are Alaska residents who didn't fill out dividends every            
year.                                                                          
                                                                               
MS. JONES responded that there was no accurate measurement because             
they have no way of knowing if a person doesn't file.  She said                
that Child Support has concerns about people not filing, but their             
collections are pretty high.  She asked if he wanted to change the             
fee across the board because right now they charge every agency and            
the private individuals.                                                       
                                                                               
SENATOR KELLY thought that maybe the fee should be a percentage of             
the check.                                                                     
                                                                               
SENATOR MACKIE said he was concerned that this change would hurt               
collections for the Division of Child Support.                                 
                                                                               
SENATOR KELLY said he had a conceptual amendment to change 100                 
percent to 70 percent which would leave a person enough incentive              
to fill out an application and then add a five percent garnishment             
fee.  He did not want to overwhelm private people with a huge                  
collection fee, but he didn't think it was unreasonable to raise               
the collection fee for people who would at best get 45 percent                 
under existing law.                                                            
                                                                               
SENATOR MACKIE said he thought they should charge the IRS five                 
percent also.                                                                  
                                                                               
SENATOR KELLY agreed, but he didn't see the advantage in raising               
the fee for Child Support unless it would make the bookkeeping                 
easier.                                                                        
                                                                               
Number 500                                                                     
                                                                               
MS. JONES said that right now the fee is born by the applicant and             
asked if they want to take the fee out of the 30 percent going to              
the applicant or should it be taken out of the 70 percent that goes            
to the person filing the claim.                                                
                                                                               
SENATOR KELLY said the fee should come off the top and everything              
else is prorated.                                                              
                                                                               
MR. VINCENT USERA, Assistant Attorney General, said the reason                 
Child Support collections are going up is because more and more in             
the divorce process there is a contractual obligation to apply for             
the PFD.  He thought more and more providers of services are going             
to put those into their contractual agreements in the future.                  
Although the worry about people not applying is valid, more and                
more when someone takes out a loan, for instance, they are going to            
have to sign an agreement that they have to apply for the PFD                  
whether or not they would get it.                                              
                                                                               
Number 535                                                                     
                                                                               
SENATOR KELLY moved to adopt the CS to SB 254. There were no                   
objections and it was so ordered.                                              
                                                                               
SENATOR MACKIE said he preferred to make it the same percentage                
across the board, but not reduce it for child support.                         
                                                                               
SENATOR KELLY moved the conceptual amendment of 70 percent for the             
private debtors and a five percent garnishment fee on everything.              
                                                                               
CHAIRMAN LEMAN said he understood that to mean that five percent               
was the maximum that could be garnished no matter how many debtors             
there were.                                                                    
                                                                               
SENATOR KELLY said that was a great deal better than $2 per claim.             
                                                                               
SENATOR MACKIE asked if this applied to Child Support.                         
                                                                               
SENATOR KELLY replied that any application that has a garnishment              
against it will take five percent of the top.                                  
                                                                               
CHAIRMAN LEMAN called an at-ease for five minutes.  He then asked              
for a roll call vote.  SENATORS MILLER, MACKIE and KELLY voted yes;            
CHAIRMAN LEMAN voted no and the motion carried.                                
                                                                               
TAPE 98-4, SIDE B                                                              
                                                                               
CHAIRMAN LEMAN said they would set CSSB 254am aside until the                  
committee could see the final version.                                         
                                                                               
          SB 158 - INSURANCE CHANGES FOR DR. LIC REVOC.                        
                                                                               
CHAIRMAN LEMAN announced SB 158 to be up for consideration.                    
                                                                               
MR. JOE AMBROSE, Aide to Senator Taylor, sponsor, said they have a             
proposed committee substitute.  He explained that the original bill            
applied to all the violations that are subject to the "use it and              
lose it" law; the committee substitute applies only to a "minor                
consuming."  In other words they have narrowed the scope of the                
legislation.                                                                   
                                                                               
SENATOR MACKIE moved to adopt CSSB 158 version H.  There were no               
objections and it was so ordered.                                              
                                                                               
MR. AMBROSE said because the law results in the suspension or                  
revocation of a minor's drivers license, insurance rates for both              
the minor and his parents increase if coverage is offered at all.              
SB 158 is intended to correct the situation by prohibiting an                  
insurer from exercising its right to cancel a policy or raise rates            
based solely on a license suspension for a minor consuming.                    
                                                                               
MS. JUANITA HENSLEY, Chief, Driver Services, testified when this               
bill was passed three years ago the legislature did not want to                
penalize these individuals with SR 22, high risk insurance.  The               
use it or lose it law was intended to be remedial, not punitive.               
Since it did not involve a motor vehicle, SR 22 should not be                  
required.  The legislature agreed and that was put in Title 28.                
Since then it has been found that insurance companies have been                
charging surcharges to families who have minors whose licenses are             
revoked under the use it/lose it law.  She has had several                     
complaints.  In some cases the insurance industry is requiring                 
clients to either exclude the minor from the policy and cancel the             
driver's license until the 18th birthday or to pay increased the               
premiums so the family can't afford insurance any more.  This is               
not the intent of the legislation.                                             
                                                                               
MS. SARAH MCNARE GROVE, Insurance Analyst, Division of Insurance,              
said they support SB 158 because they have also received complaints            
from parents who say their insurance rates have gone up because                
their kids have had their license revoked for an administrative                
reason.                                                                        
                                                                               
MR. JOHN GEORGE, National Association of Independent Insurers, said            
that an underage driver, even though he is not drinking, is using              
bad judgement by drinking at all.  The fact that they drink while              
not driving might just mean that they haven't been caught drinking             
and driving.  Their basic opposition with the bill is that                     
insurance companies are very competitive and some companies may                
choose this as a rating criteria and this is a competitive                     
difference.  All companies resist what they may and may not use by             
the legislature.  All rates have to be approveD by the Division of             
Insurance and in the rating plan you list the things that will be              
penalized and they will be approved or disapproved.  The fact that             
the Division of Insurance supports the bill implies to him that if             
they make a filing and used  an administrative revocation for the              
reason for increasing or denying coverage, the Division would deny             
that.                                                                          
                                                                               
CHAIRMAN LEMAN asked if there was a substantial cost to the                    
insurance company for the reinstatement of an administrative                   
revocation of a license that this bill would prevent the collection            
of.                                                                            
                                                                               
MR. GEORGE replied that he didn't think there would be a great                 
cost.  It is interesting, though, if a license is under suspension,            
there is no reason that the individual should be included under the            
insurance policy because they would be driving without a license.              
He thought the real concern would be when they got their license               
back.                                                                          
                                                                               
CHAIRMAN LEMAN asked if these revocations are only from the minor              
consuming or the minor in the presence of other minors consuming.              
                                                                               
Number 495                                                                     
                                                                               
MS. HENSLEY said it could relate to minors who are at a party, but             
who aren't consuming, but because they are within an arms-reach of             
alcohol they can be charged; and their license will be revoked.                
                                                                               
MR. GEORGE asked if they were talking of ages up to 18.                        
                                                                               
MS. HENSLEY replied up through 21.                                             
                                                                               
SENATOR MACKIE said he voted for the legislation being discussed               
and it was designed to serve as a deterrent for minors to consume;             
and not designed as a way to increase insurance rates.  This is the            
issue.                                                                         
                                                                               
MR. GEORGE said he didn't have an opinion, but he didn't disagree              
necessarily.                                                                   
                                                                               
Number 462                                                                     
                                                                               
SENATOR MILLER said he didn't see a great administrative cost to an            
insurance company to add or subtract an individual's name from an              
existing policy, because 99.9 percent of these are going to be on              
parent's policies vs. and individual child's policy.                           
                                                                               
CHAIRMAN LEMAN said he wanted to hold this bill and take it up at              
the next meeting.                                                              
                                                                               
CHAIRMAN LEMAN adjourned the meeting at 2:45 p.m.                              

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