Legislature(1999 - 2000)

04/15/2000 02:50 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                SENATE LABOR AND COMMERCE COMMITTEE                                                                           
                          April 15, 2000                                                                                        
                             2:50 p.m.                                                                                          
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                              
Senator Jerry Mackie, Chairman                                                                                                  
Senator Tim Kelly, Vice Chairman                                                                                                
Senator Dave Donley                                                                                                             
Senator Loren Leman                                                                                                             
Senator Lyman Hoffman                                                                                                           
                                                                                                                              
MEMBERS ABSENT                                                                                                                
                                                                                                                              
All members present                                                                                                             
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
Confirmation Hearing on Governor's Appointees:                                                                                  
                                                                                                                              
Alaska Workers' Compensation Board -Harriet M. Lawlor                                                                           
Alaska State Board of Accountancy  -Lottie Fleeks and Dean W. Nelson                                                            
Alcoholic Beverage  Control Board -Robert Klein and  ToniLee Jackson                                                            
State Board  for Registration  for Architects,  Engineers,  and Land                                                            
Surveyors -Kathleen L. Gardner and Ernie Seimoneit                                                                              
Board of Barbers and Hairdressers - Darae Crews                                                                                 
Alaska Labor Relations  Agency -Richard D. Brickley and Robert Doyle                                                            
Board of Marine  Pilots - Captain  Michael Spence, Jeffrey  Thompson                                                            
  and Barbara Huff Tuckness                                                                                                     
Occupational Safety and Health Review Board - Timothy Sharp                                                                     
Personnel Board - Charles Borg                                                                                                  
Board of Certified Real Estate Appraisers - Eileen Bechtol                                                                      
Board of Veterinary Examiners - Dr. Jean Battig                                                                                 
Alaska Workers' Compensation Board - Harriet Lawlor                                                                             
                                                                                                                                
     CONFIRMATIONS ADVANCED                                                                                                     
                                                                                                                                
HOUSE BILL NO. 265                                                                                                              
"An  Act extending  the  termination  date  of the  Alaska  regional                                                            
economic assistance  program; and providing for an  effective date."                                                            
                                                                                                                                
     -MOVED HB 265 OUT OF COMMITTEE                                                                                             
                                                                                                                                
CS FOR HOUSE BILL NO. 310(L&C)                                                                                                  
"An Act relating to the Alaska Insurance Guaranty Association."                                                                 
                                                                                                                                
     -MOVED CSHB 310(L&C) OUT OF COMMITTEE                                                                                      
CS FOR HOUSE BILL NO. 398(JUD)                                                                                                  
"An Act relating  to the Alaska Life  and Health Insurance  Guaranty                                                            
Association."                                                                                                                   
                                                                                                                                
     -MOVED CSHB 398(JUD) OUT OF COMMITTEE                                                                                      
                                                                                                                                
CS FOR HOUSE BILL NO. 337(JUD)                                                                                                  
"An Act relating  to claims against permanent fund  dividends to pay                                                            
amounts owed  to the Department of  Labor and Workforce Development                                                             
under the Alaska Employment  Security Act and to fees for processing                                                            
certain claims  against permanent fund dividends;  and providing for                                                            
an effective date."                                                                                                             
                                                                                                                                
     -MOVED CSHB 337(JUD) OUT OF COMMITTEE                                                                                      
                                                                                                                                
CS FOR HOUSE BILL NO. 339(L&C)                                                                                                  
"An Act authorizing  the Alaska Commercial  Fishing and Agriculture                                                             
Bank  to  make  loans   relating  to  tourism  and  development   or                                                            
exploitation of natural resources."                                                                                             
                                                                                                                                
     -MOVED CSHB 339(L&C) OUT OF COMMITTEE                                                                                      
                                                                                                                                
SENATE CS FOR HOUSE BILL NO. 422(L&C)                                                                                           
"An Act  relating  to workers'  compensation  benefits for  injuries                                                            
resulting  from  consumption   of  alcohol  or  use  of  drugs;  and                                                            
providing for an effective date."                                                                                               
                                                                                                                                
     -MOVED SCSHB 422(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                              
PREVIOUS SENATE COMMITTEE ACTION                                                                                              
                                                                                                                              
HB 265 - No  previous action to record.                                                                                         
HB 310 - No  previous action to record.                                                                                         
HB 398 - No  previous action to record.                                                                                         
HB 337 - No  previous action to record.                                                                                         
HB 339 - No  previous action to record.                                                                                         
HB 422 - No  previous action to record.                                                                                         
                                                                                                                              
WITNESS REGISTER                                                                                                              
                                                                                                                              
Ms. Melanie Lesh                                                                                                                
Staff to Representative Austerman                                                                                               
Alaska State Capitol                                                                                                            
Juneau, AK 99811                                                                                                                
POSITION STATEMENT: Commented on HB 265.                                                                                        
                                                                                                                                
Ms. Janet Seitz                                                                                                                 
Staff to Representative Rokeberg                                                                                                
Alaska State Capitol                                                                                                            
Juneau, AK 99811                                                                                                                
POSITION STATEMENT: Commented on HB 310.                                                                                        
                                                                                                                                
Mr. Don Thomas, Counsel                                                                                                         
Alaska Insurance Guaranty Association                                                                                           
No address provided                                                                                                             
POSITION STATEMENT:  Commented on HB 310.                                                                                       
                                                                                                                                
Mr. John Manley                                                                                                                 
Staff to Representative Harris                                                                                                  
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Testified for the sponsor of HB 398.                                                                        
                                                                                                                                
Mr. Dwight Perkins                                                                                                              
Deputy Commissioner                                                                                                             
Department of Labor and Workforce Development                                                                                   
PO Box 21149                                                                                                                    
Juneau, AK  99802-1149                                                                                                          
POSITION STATEMENT:  Supports HB 337.                                                                                           
                                                                                                                                
Mr. Dale Anderson                                                                                                               
Staff to Representative Mulder                                                                                                  
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Testified for the sponsor of HB 339.                                                                       
                                                                                                                                
Mr. Ed Crane, President                                                                                                         
Alaska Commercial Fishing and Agriculture Bank                                                                                  
2550 Denali                                                                                                                     
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Supports HB 339.                                                                                           
                                                                                                                                
Representative Norm Rokeberg                                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Sponsor of HB 422.                                                                                         
                                                                                                                              
ACTION NARRATIVE                                                                                                              
                                                                                                                              
TAPE 00-15, SIDE A                                                                                                            
Number 001                                                                                                                      
                                                                                                                                
CHAIRMAN MACKIE called the Senate Labor and Commerce Committee                                                                  
meeting to order at 2:50 p.m. Present were Senators Leman, Hoffman                                                              
and Mackie.                                                                                                                     
                                                                                                                                
CHAIRMAN  MACKIE announced  that all  appointees  were available  to                                                            
testify  before  the Committee  on  the previous  Thursday  but  the                                                            
meeting was canceled.   He noted the following names  were forwarded                                                            
to the Committee for consideration.                                                                                             
                                                                                                                                
Alaska State Board of Accountancy  -Lottie Fleeks and Dean W. Nelson                                                            
                                                                                                                                
Alcoholic Beverage  Control Board -Robert Klein and  ToniLee Jackson                                                            
                                                                                                                                
State Board  for Registration  for Architects,  Engineers,  and Land                                                            
  Surveyors -Kathleen L. Gardner and Ernie Seimoneit                                                                            
                                                                                                                                
Board of Barbers and Hairdressers - Darae Crews                                                                                 
                                                                                                                                
Alaska Labor Relations  Agency -Richard D. Brickley and Robert Doyle                                                            
                                                                                                                                
Board of Marine  Pilots - Captain  Michael Spence, Jeffrey  Thompson                                                            
   and Barbara Huff Tuckness                                                                                                    
                                                                                                                                
Occupational Safety and Health Review Board - Timothy Sharp                                                                     
                                                                                                                                
Personnel Board - Charles Borg                                                                                                  
                                                                                                                                
Board of Certified Real Estate Appraisers - Eileen Bechtol                                                                      
                                                                                                                                
Board of Veterinary Examiners - Dr. Jean Battig                                                                                 
                                                                                                                                
Alaska Workers' Compensation Board - Harriet Lawlor                                                                             
                                                                                                                                
CHAIRMAN  MACKIE  asked  if any  member  wished  to comment  on  the                                                            
Governor's appointees.                                                                                                          
                                                                                                                                
There  being  no questions   or comments,  SENATOR  LEMAN  moved  to                                                            
forward the names of the  appointees to the Senate for consideration                                                            
during  a joint  session.    There being  no  objection,  it was  so                                                            
ordered.                                                                                                                        
                                                                                                                                
          HB 265-ALASKA REGIONAL ECONOMIC ASSIST. PROGRAM                                                                   
                                                                                                                                
MS. MELANIE LESH,  aide to Representative Alan Austerman,  explained                                                            
that  HB 265 will  extend  the sunset  date of  the Alaska  Regional                                                            
Development  Organizations (ARDORs)  to 2003.  To date, 13  regional                                                            
entities  have been  organized to  promote economic  development  in                                                            
Alaska and  a plan is underway to  add one more in Fairbanks.   This                                                            
program is funded with  an AIDEA dividend given to the Department of                                                            
Community  and Economic  Development (DCED)  through a reimbursable                                                             
services  agreement.  Of  the $650,000 total,  $620,000 is  directly                                                            
granted  to the 13  ARDORs.   DCED's budget  contains the  remaining                                                            
$30,000 for  administration;  half is used  for travel expenses  for                                                            
non-employee members for ARDOR travel.                                                                                          
                                                                                                                                
SENATOR LEMAN  moved to report HB  265 with its accompanying  fiscal                                                            
note from committee with  individual recommendations.  There were no                                                            
objections and it was so ordered.                                                                                               
                                                                                                                                
           HB 310-ALASKA INSURANCE GUARANTY ASSOCIATION                                                                     
                                                                                                                                
CHAIRMAN MACKIE announced HB 310 to be up for consideration.                                                                    
                                                                                                                                
MS. JANET  SEITZ, staff  to Representative  Rokeberg, sponsor  of HB
310, informed  committee members this legislation  was introduced at                                                            
the request  of the Alaska Insurance  Guaranty Association.   HB 310                                                            
provides a mechanism to  protect policy holders and claimants in the                                                            
event  that  a property  and  liability  insurer  licensed  to  sell                                                            
policies in Alaska becomes  insolvent.  It updates the Alaska Act to                                                            
bring  it into conformance  with  the 1996 National  Association  of                                                            
Insurance  Commissioners'  Post Assessment  Property  and  Liability                                                            
Insurance Guaranty Model Act.                                                                                                   
                                                                                                                                
SENATOR  LEMAN  asked if  Section  2 applies  to  fraternal  benefit                                                            
societies.                                                                                                                      
                                                                                                                                
MR. DON  THOMAS, Executive  Director of the  Alaska Life and  Health                                                            
Guaranty  Association,   said  it   does  not  apply  to   fraternal                                                            
organizations.                                                                                                                  
                                                                                                                                
SENATOR LEMAN  noted that  fraternal societies  are not included  in                                                            
the list of excluded organizations.                                                                                             
                                                                                                                                
MR. THOMAS replied he was  told they are not admitted members of the                                                            
Association.                                                                                                                    
                                                                                                                                
There being no  further questions or testimony, SENATOR  LEMAN moved                                                            
to report HB 310 from committee  with individual recommendations and                                                            
its accompanying  zero fiscal note.   There being no objection,  the                                                            
motion carried.                                                                                                                 
                                                                                                                                
          HB 398-LIFE AND HEALTH INSURANCE GUARANTY ASSN                                                                    
                                                                                                                                
CHAIRMAN MACKIE announced HB 398 to be up for consideration.                                                                    
                                                                                                                                
JOHN MANLEY,  staff to  Representative Harris,  prime sponsor  of HB
398, explained that HB  398 is very similar to HB 310 except that it                                                            
applies   to  the  Alaska   Life  and   Health  Insurance   Guaranty                                                            
Association  (ALHIGA).    It adopts  a  model  act produced  by  the                                                            
National Association  of Insurance Commissioners and  updates Alaska                                                            
statutes to make  them consistent and on par with  other states.  HB
398  will ensure  that  the  ALHIGA benefits  are  implemented  more                                                            
promptly,  efficiently, and  at a lower cost  to policy holders;  it                                                            
clarifies  ambiguous language  that could  promote lawsuits;  and it                                                            
provides added  benefits to policy holders by extending  it to other                                                            
people.   He  noted Mr.  George  and Mr.  Thomas were  available  to                                                            
answer questions.                                                                                                               
                                                                                                                                
SENATOR  LEMAN asked  if  HB 398  does not  apply  to the  fraternal                                                            
benefit societies because they do not belong to ALHIGA.                                                                         
                                                                                                                                
MR. MANLEY said that is correct.                                                                                                
                                                                                                                                
SENATOR LEMAN moved to  report HB 398 from committee with individual                                                            
recommendations and its  accompanying zero fiscal note.  There being                                                            
no objection, the motion carried.                                                                                               
                                                                                                                                
                                                                                                                                
         HB 337-AMTS OWED ON UNEMPLOYMENT TAX: CLM V. PFD                                                                   
                                                                                                                                
CHAIRMAN MACKIE announced HB 337 to be up for consideration.                                                                    
                                                                                                                                
DWIGHT PERKINS,  Deputy Commissioner of the Department  of Labor and                                                            
Workforce Development  (DOLWD), stated  support for HB 337  and made                                                            
the following comments.   HB 337 will speed the recovery of overpaid                                                            
unemployment  insurance benefits that  are indebted to the  State of                                                            
Alaska by attaching  permanent fund dividends after  due process has                                                            
been followed.   The  total debt  balance of overpaid  claims  as of                                                            
12/31/99 was more than  $9 million.  The two categories of fraud and                                                            
non-fraud   overpaid  unemployment   insurance  benefits   would  be                                                            
returned to the trust fund  when collected.  The penalty amount will                                                            
be deposited  directly into the general  fund.  With the  passage of                                                            
HB 337,  DOLWD estimates  it could return  over $1.5 million  to the                                                            
trust  fund and  over $750,000  to  the general  fund.   Every  year                                                            
thereafter,  DOLWD expects  to deposit $700,000  to $800,000  in the                                                            
trust  fund and  $400,000  to $500,000  in the  general  fund.   The                                                            
passage of this  legislation is good for the unemployment  insurance                                                            
trust  fund, it  is  good for  employers,  and it  is  good for  the                                                            
general fund.   It provides  another tool  to collect money  that is                                                            
lawfully owed to the State of Alaska.                                                                                           
                                                                                                                                
SENATOR  LEMAN asked  why  it took  DOLWD so  long  to suggest  this                                                            
change.  He noted this  bill could have been attached to legislation                                                            
pertaining to collections that passed last year.                                                                                
                                                                                                                                
DEPUTY COMMISSIONER  PERKINS replied that each year  DOLWD looks for                                                            
good housekeeping  legislation  that makes  sense and will  bring in                                                            
money to the State.                                                                                                             
                                                                                                                                
SENATOR LEMAN expressed support for HB 337.                                                                                     
                                                                                                                                
There being no  further testimony or questions, SENATOR  LEMAN moved                                                            
HB 337 from committee  with individual recommendations.   He thought                                                            
the fiscal note should  show a gain but he pointed out the bill will                                                            
be heard in  the Senate Finance Committee.   With no objection,  the                                                            
motion carried.                                                                                                                 
                                                                                                                                
Number 209                                                                                                                      
                                                                                                                                
           HB 339-CFAB LOANS FOR TOURISM & NAT RESOURCES                                                                    
                                                                                                                                
CHAIRMAN MACKIE announced HB 339 to be up for consideration.                                                                    
                                                                                                                                
MR. DALE  ANDERSON, staff  to Representative  Mulder, explained  the                                                            
measure expands the lending  authority of the Commercial Fishing and                                                            
Agriculture  Bank (CFAB)  to  two new areas:   tourism  and  natural                                                            
resource development.   Nearly 20  years ago the State appropriated                                                             
$32 million to  CFAB, which has been repaid. At this  point, CFAB is                                                            
operating  as a private  enterprise lending  institution in  Alaska.                                                            
HB  339   will  expand   and  strengthen   the   portfolio  of   the                                                            
organization.  He offered to answer questions.                                                                                  
                                                                                                                                
SENATOR  TIM KELLY  asked  what CFAB  knows about  natural  resource                                                            
extraction.                                                                                                                     
                                                                                                                                
MR. ANDERSON replied  CFAB representatives were available  to answer                                                            
that question.                                                                                                                  
                                                                                                                                
SENATOR  TIM  KELLY  asked  if  natural  resource  development  will                                                            
include oil and gas projects.                                                                                                   
                                                                                                                                
MR.  ANDERSON  said,  that  like  any private  lending  institution                                                             
getting involved  in a new area, CFAB may not have  the expertise in                                                            
that area at  this time but it could  hire a loan officer  with that                                                            
expertise.   He does not think it  is unusual for an institution  to                                                            
expand its scope of operations but it must be done with care.                                                                   
                                                                                                                                
SENATOR TIM  KELLY noted  CFAB will be competing  with banks  in the                                                            
private sector that make loans in these areas.                                                                                  
                                                                                                                                
MR. ANDERSON  said CFAB will be in  competition.  He explained  that                                                            
the only  tie CFAB  has to the State  at this  juncture is the  seed                                                            
money, which  was paid back in full.   CFAB employees are  not State                                                            
employees.   CFAB currently operates  in areas of Alaska  that other                                                            
banks do  not.  CFAB has  been involved  with the fishing  industry.                                                            
Many  people have  told Representative  Mulder  that HB  339 is  the                                                            
answer to their  needs in rural Alaska because of  the effective way                                                            
that CFAB has dealt with small businesses in those areas.                                                                       
                                                                                                                                
SENATOR  LEMAN asked  how CFAB  will secure  loans in  the areas  of                                                            
tourism and natural resource development.                                                                                       
                                                                                                                                
MR. ANDERSON  said the  only restriction  in the  bill is that  CFAB                                                            
cannot hold a limited entry  permit as collateral for a loan outside                                                            
of a fishing industry use.                                                                                                      
                                                                                                                                
SENATOR TIM  KELLY asked  if CFAB is subject  to the Alaska  Banking                                                            
Code.                                                                                                                           
                                                                                                                                
MR. ANDERSON said it is not.                                                                                                    
                                                                                                                                
SENATOR TIM KELLY asked if CFAB pays taxes.                                                                                     
                                                                                                                                
MR. ANDERSON  replied  CFAB pays income  tax to  both the State  and                                                            
the federal  government.   He added that CFAB  has given many  other                                                            
benefits  to the state  in the form  of donations  for the fight  to                                                            
keep the IRS's  hands off of limited  entry permits.  He  noted that                                                            
CFAB serves a niche that banks do not always extend into.                                                                       
                                                                                                                                
SENATOR LEMAN  asked if this bill  will dilute CFAB's commitment  to                                                            
the fishing industry in Alaska.                                                                                                 
                                                                                                                                
MR. ANDERSON said he believes  the bill will strengthen it by giving                                                            
CFAB an expanded portfolio.   Right now the borrowers are the owners                                                            
of CFAB.    The CFAB  board of  directors  is made  up of  fishermen                                                            
except for  one farmer.  They will  be monitoring the growth  of the                                                            
organization.   The House Labor and  Commerce Committee placed  loan                                                            
limits  in the bill  and the  House Finance  Committee tightened  it                                                            
further so that  borrowers must be residents, must  use the funds in                                                            
Alaska, and  must use the  funds directly  in the industry  they are                                                            
borrowing for.                                                                                                                  
                                                                                                                                
SENATOR  TIM KELLY  asked  if the  board of  directors,  made up  of                                                            
fishermen,  will be making  decisions on  tourism loans and  natural                                                            
resource loans.                                                                                                                 
                                                                                                                                
MR. ANDERSON replied the make-up of the board can be changed.                                                                   
                                                                                                                                
SENATOR  TIM KELLY  asked if  CFAB has  changed the  make-up of  the                                                            
board yet.                                                                                                                      
                                                                                                                                
MR. ANDERSON  said it has  not because right  now CFAB is a  fishing                                                            
bank.                                                                                                                           
                                                                                                                                
SENATOR  TIM KELLY  again asked  what fishermen  know about  tourism                                                            
loans and natural resource loans.                                                                                               
                                                                                                                                
SENATOR LEMAN noted, as  others get involved, they may be elected to                                                            
the board.                                                                                                                      
                                                                                                                                
Number 352                                                                                                                      
                                                                                                                                
SENATOR TIM  KELLY asked if a person  becomes a member by  getting a                                                            
loan.                                                                                                                           
                                                                                                                                
MR. ANDERSON said that is correct.                                                                                              
                                                                                                                                
CHAIRMAN  MACKIE  commented he  is somewhat  sympathetic  to  CFAB's                                                            
desire to expand  its portfolio and financial strength.   He asked a                                                            
CFAB representative to  respond to the fact that CFAB was created to                                                            
help Alaskan  fishermen purchase  permits and  boats at a time  when                                                            
many wealthier  people from out of state were buying  up permits and                                                            
boats.   He also asked  what kind  of a guarantee  CFAB can  give to                                                            
ensure that rural Alaskans  will be able to come to CFAB to get into                                                            
the fishing industry if this legislation passes.                                                                                
                                                                                                                              
MR. ED CRANE,  President and CEO of CFAB, replied  that CFAB's first                                                            
internal discussion  about this expansion  was in 1990 so  this idea                                                            
is  not  new.   Regarding   CFAB's  original  purpose  and  mission,                                                            
Chairman  Mackie is correct.   CFAB learned  how to do what  it does                                                            
the hard  way as it made  mistakes in its  early years.  Since  1985                                                            
however,  CFAB has  been  a contradiction  in  terms.   It has  been                                                            
relatively   conservative  when  financing   commercial   fishermen,                                                            
processors  and   agricultural  projects.    The  most  significant                                                             
practical  restraint  on  CFAB is  that  in order  to  maintain  its                                                            
current source of funding,  which is borrowed from the National Bank                                                            
of Cooperatives,  the majority  of CFAB loans  must be to  producers                                                            
that are fishermen.  Beyond  that, six of CFAB's seven directors are                                                            
commercial  fishermen.  The  orientation of  the bank is  commercial                                                            
fishing and CFAB does not  intend to change that.  CFAB sees now and                                                            
in the years ahead  a greater need for CFAB's services  in that area                                                            
simply  because so  many of  the people  who obtained  the  original                                                            
permits in 1975 are reaching the age of retirement.                                                                             
                                                                                                                                
MR. CRANE stated  that HB 339 was not introduced so  that CFAB could                                                            
find something  else to do.  The fact  is that CFAB's concentration                                                             
on commercial  fishing has  had some negative  impacts from  time to                                                            
time in terms  of cash flow and operations.   During 1997  and 1998,                                                            
when  Bristol Bay  had salmon  run failures,  CFAB  had a  difficult                                                            
time.  In  addition,  that  concentration  makes  lenders  extremely                                                            
nervous. Ten  years ago CFAB was one  of the largest borrowers  from                                                            
the Spokane  Bank for  Cooperatives  - CFAB was  important to  them.                                                            
Due to  mergers and consolidations,  CFAB  now represents only  .003                                                            
percent of  the loan volume  of the National  Bank of Cooperatives.                                                             
CFAB is the  only borrower of its  kind and that makes the  National                                                            
Bank very nervous.                                                                                                              
                                                                                                                                
MR. CRANE  repeated  that concentrating  in one  area is too  risky.                                                            
CFAB addressed natural  resource industries and tourism for a number                                                            
of reasons.   Both industries  are spread  throughout the State  and                                                            
exist  in rural  Alaska.    The smaller  operators,  from  a  credit                                                            
standpoint,  tend to look like the  fishermen that CFAB is  familiar                                                            
with.  Regarding  CFAB's knowledge  of  the  oil and  gas  industry,                                                            
CFAB's  current  knowledge  is very  limited  but the  expertise  is                                                            
available.  Beyond that,  CFAB is not looking to get a piece of BP's                                                            
business, but many support  activities will need financing.  CFAB is                                                            
thinking  about the  entrepreneurs  and  small businesses  that  are                                                            
part of the total infrastructure.                                                                                               
                                                                                                                                
MR.  CRANE  commented   that  State  agencies  like   AIDEA  or  the                                                            
Agricultural Revolving  Loan Fund have a board that functions as the                                                            
loan  making  body.   CFAB's  board does  not  do that;  instead  it                                                            
represents  the  owners,  the  stockholders,   and  the established                                                             
standards   and  they  approve   the  hiring   of  staff.     CFAB's                                                            
professional  staff make the loan  decisions.  The Board's  function                                                            
is to ensure that the staff conforms to basic credit standards.                                                                 
                                                                                                                                
CHAIRMAN MACKIE  asked if CFAB was  developed because the  fishermen                                                            
and farmers had difficulty getting commercial loans.                                                                            
                                                                                                                                
MR. CRANE said the amount  available for loans through CFAB is based                                                            
on CFAB's  capital, which  is presently just  under $20 million,  as                                                            
well as  the quality  of its loans.   Based on  CFAB's current  loan                                                            
agreements, it  could actually make 3½ times the loans  it currently                                                            
has  before it  would  run up  against  any  borrowing constraints.                                                             
CFAB's board  of directors  is totally committed  to expanding.   In                                                            
addition, CFAB  informed fishermen statewide about  HB 339 and asked                                                            
them to respond.   Of the 26 percent who responded,  82 percent were                                                            
in favor of pursuing HB  339.  These fishermen understand that it is                                                            
their capital  that is at  risk because if  CFAB fails, part  of the                                                            
$20 million will be lost.                                                                                                       
                                                                                                                                
CHAIRMAN  MACKIE asked if  the initial investment  in CFAB  has been                                                            
paid back to the State.                                                                                                         
                                                                                                                                
MR. CRANE replied  CFAB retired the last of that stock  in September                                                            
of 1998.                                                                                                                        
                                                                                                                                
CHAIRMAN  MACKIE asked  Mr.  Crane to  address the  Alaska  Banker's                                                            
Association  question regarding  why CFAB would  make a loan  that a                                                            
traditional  bank would reject and  how that will strengthen  CFAB's                                                            
financial portfolio.                                                                                                            
                                                                                                                                
MR. CRANE  stated it  is an oversimplification  on  the part  of the                                                            
Alaska Bankers' Association  to say that if a borrower cannot borrow                                                            
from them, it  is because the borrower is weak.  He  noted that most                                                            
of the  loans  that CFAB  makes today  to commercial  fishermen  are                                                            
loans that  commercial  banks are  not likely to  deal with,  simply                                                            
because of the  relatively small size or, from a credit  standpoint,                                                            
they  are   "messy."    CFAB  applicants   tend  to  be   relatively                                                            
unsophisticated   financially.     Commercial   banks  serve   their                                                            
stockholders  and do not have CFAB's  mission.  CFAB has  found that                                                            
in  communities   like  Sitka,  Petersburg,   and  Kodiak,   when  a                                                            
commercial  bank wants a  particular borrower,  CFAB cannot  compete                                                            
because it  does not have  the physical presence  nor does  it offer                                                            
the services that  commercial banks do.  He maintained  that he does                                                            
not  understand  the Alaska  Bankers'  Association's  concern  about                                                            
competition  because there  is nothing wrong  with competition.   On                                                            
the other hand, if CFAB  is making unsound loans, who would it being                                                            
competing with?   He said CFAB is certainly not going  to put anyone                                                            
out of business.                                                                                                                
                                                                                                                                
Number 502                                                                                                                      
                                                                                                                                
SENATOR  HOFFMAN   asked  if  the   Alaska  Bankers'  Association's                                                             
opposition was made known to the House.                                                                                         
                                                                                                                                
MR. CRANE replied it was from day one.                                                                                          
                                                                                                                                
CHAIRMAN MACKIE  said he just wanted to be sure that  CFAB's mission                                                            
is intact.                                                                                                                      
                                                                                                                                
SENATOR TIM  KELLY asked  why CFAB decided  to expand into  both the                                                            
tourism and natural resource  industries when it decided to increase                                                            
its risk factor.  He noted  that is a big bite for a small operation                                                            
with 13 employees.                                                                                                              
                                                                                                                                
MR. CRANE replied  that HB 339 is  broad in that respect.   CFAB has                                                            
no plans to make big splashes  but it is looking for diversification                                                            
and as much flexibility  as possible.  In addition,  he would prefer                                                            
to  make  the  changes   at  one  time  rather  than   approach  the                                                            
legislature  several times.   He stated  that he  suspects that  the                                                            
current players  will be gone before HB 339 has an  impact on CFAB's                                                            
portfolio.  He repeated  that CFAB is not thinking that by next year                                                            
it will have invested $15 million in these new industries.                                                                      
                                                                                                                                
SENATOR  TIM  KELLY  asked  if CFAB  is  regulated  by  the  Banking                                                            
Securities Act.                                                                                                                 
                                                                                                                                
MR.  CRANE  replied  CFAB  is audited  by  the  State,  through  the                                                            
Legislature and the Executive Branch.                                                                                           
                                                                                                                                
SENATOR TIM  KELLY asked  if CFAB is subject  to the Alaska  Banking                                                            
Code.                                                                                                                           
                                                                                                                                
MR. CRANE  said it  is not.  He  noted that  subject is misleading.                                                             
CFAB is not subject to  the Alaska Banking Code because 20 years ago                                                            
the Legislature  concluded it should be called a bank  rather than a                                                            
loan  company.   CFAB  does not  take deposits  or  establish  trust                                                            
accounts.  CFAB borrows  and lends money only.  CFAB is incorporated                                                            
under a specific statute.   He said he does not know what provisions                                                            
of  the Alaska  Banking  Code would  apply  to CFAB  anyway.  CFAB's                                                            
statute is fairly  comprehensive in terms of clarifying  what it can                                                            
and  should do.    Beyond that,  CFAB  is  required to  make  annual                                                            
reports to the  Legislature.  It must be audited by  public auditors                                                            
and  provide  the audit  to  the public,  the  Legislature  and  the                                                            
Executive Branch. The State  bank examiners report on CFAB each year                                                            
and that  report is distributed  to legislators.   In addition,  the                                                            
Legislature could  send its own auditor to audit CFAB's  books.  The                                                            
final point of regulation  is that CFAB is member owned.  It's board                                                            
of directors is elected by its members.                                                                                         
                                                                                                                                
CHAIRMAN  MACKIE stated the  issue is why  the Legislature  would be                                                            
unwilling to let CFAB expand  when it has met its obligations to the                                                            
State and its stockholders stand to lose.                                                                                       
                                                                                                                                
MR. CRANE  agreed and pointed  out if the  Legislature could  invest                                                            
$32  million  in  a  capital  project  that  would  create  economic                                                            
opportunities  and had no maintenance costs, and then  be paid back,                                                            
it would be a good investment.                                                                                                  
                                                                                                                                
SENATOR TIM  KELLY asked if the $32  million investment in  CFAB was                                                            
paid back in cash.                                                                                                              
                                                                                                                                
MR. CRANE  replied it was  paid back on  a discounted present  value                                                            
basis.   The actual amount  of cash paid between  1992 and  1998 was                                                            
$23 million.   The money was not due until July 20,  2000.  CFAB had                                                            
entered into an  agreement with the Department of  Revenue to pay in                                                            
installments  and the amount was indexed  to U.S. government  agency                                                            
obligations.   The idea behind  the arrangement  was that the  State                                                            
could invest  in that mix  of treasury obligations,  pay State  debt                                                            
down or  put that money  into higher-yielding  State loan funds  and                                                            
come out with the equivalent of $32 million.                                                                                    
                                                                                                                                
TAPE 00-15, SIDE B                                                                                                            
                                                                                                                              
There being  no further testimony,  SENATOR LEMAN moved HB  339 from                                                            
committee  with  individual  recommendations  and  its accompanying                                                             
fiscal note.  There being no objection, it was so ordered.                                                                      
                                                                                                                                
           HB 422-WORKERS' COMPENSATION: DRUGS & ALCOHOL                                                                    
                                                                                                                                
CHAIRMAN MACKIE announced the committee would consider HB 422.                                                                  
                                                                                                                                
REPRESENTATIVE  NORM ROKEBERG,  sponsor  of HB  422, explained  that                                                            
this measure  is a  simple bill  that changes  the standards  of the                                                            
workers'  compensation statutes  regarding  intoxication and  use of                                                            
drugs.  It changes the  standard from intoxication to consumption of                                                            
alcoholic  beverages and from  the use of  drugs to being under  the                                                            
influence  of drugs.  The  intent of HB 422  is to make people  more                                                            
responsible  for their actions  and allow  companies to establish  a                                                            
zero tolerance policy that  can be reflected in the determination of                                                            
the workers' compensation  board.  The current law as interpreted by                                                            
the  board  has resulted  in  payment  of benefits  even  though  in                                                            
certain instances  the workers  had been drinking  alcohol.   HB 422                                                            
gives employers  a better standard by which to evaluate  the ability                                                            
to deny benefits to workers.   In other words, a person who violates                                                            
a zero tolerance policy  will not receive benefits.  HB 422 does not                                                            
shift  the  burden  of  proof;  the  employer   must  still  have  a                                                            
preponderance  of the evidence and prove the proximate  cause of the                                                            
injury was alcohol or drug use.                                                                                                 
                                                                                                                                
SENATOR DONLEY  noted there can be more than one proximate  cause of                                                            
an incident  and adding consumption  as a  proximate cause  does not                                                            
seem  appropriate at  all if  the other  proximate  causes were  the                                                            
responsibility of the employer.                                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he agrees with Senator Donley if other                                                            
proximate causes exist.                                                                                                         
                                                                                                                                
SENATOR DONLEY said the  bill says if one of the proximate causes is                                                            
drinking  then  the  claim is  cut  off,  even if  there  are  other                                                            
proximate causes.                                                                                                               
                                                                                                                                
REPRESENTATIVE  ROKEBERG said that is correct.  If  the employee had                                                            
been  drinking and  the  drinking  was the  proximate  cause of  the                                                            
injury, the employee is cut off.                                                                                                
                                                                                                                                
SENATOR DONLEY repeated  if someone negligently backed up and dumped                                                            
a load of dirt on top of  the employee another proximate cause would                                                            
exist.                                                                                                                          
                                                                                                                                
REPRESENTATIVE ROKEBERG  replied the preponderance standard is there                                                            
for proximate cause.  The  employer would have to prove that alcohol                                                            
or drug use was the proximate cause of the injury.                                                                              
                                                                                                                                
SENATOR DONLEY  asked where the preponderance  standard is  located.                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG said it is in case law.                                                                                 
                                                                                                                                
SENATOR DONLEY stated this bill will change the statute.                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG maintained  that proximate  cause is  still                                                            
there.                                                                                                                          
                                                                                                                                
SENATOR DONLEY  indicated the preponderance  standard is  not in the                                                            
statute  and the  bill changes  the  standard from  intoxication  to                                                            
alcohol use.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG stated language  on page 2, line  9, reads,                                                            
"the  injury was  not proximately  caused  by," which  is where  the                                                            
proof  comes  in.   The only  change  is whether  the  employee  was                                                            
completely  intoxicated or  was using drugs.   The employee's  legal                                                            
rights are  protected if alcohol or  drug use was not the  proximate                                                            
cause in the injury.                                                                                                            
                                                                                                                                
SENATOR  DONLEY  said he  thinks  the  statute  makes sense  as  is.                                                            
Intoxication   is  a  different  standard  than  mere  consumption.                                                             
Intoxication as an element of the cause makes sense.                                                                            
                                                                                                                                
REPRESENTATIVE  ROKEBERG agreed that it lowers that  standard but it                                                            
does not change the proof requirements for proximate cause.                                                                     
                                                                                                                                
Number 449                                                                                                                      
                                                                                                                                
CHAIRMAN  MACKIE stated  the  bill says  consumption  or use  versus                                                            
intoxication or under the influence.                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG  said that is correct and clarified that the                                                            
proximate  cause standard  of  proof remains  so the  proof must  be                                                            
based on a preponderance  of evidence according to  the court rules.                                                            
                                                                                                                                
CHAIRMAN  MACKIE  asked  if,  under  current  statute,  the  injured                                                            
employee would  have to prove to the board that the  proximate cause                                                            
was not intoxication.                                                                                                           
                                                                                                                                
REPRESENTATIVE  ROKEBERG said the proximate cause  issue is separate                                                            
from the use issue.  He  gave the following example.  In the BB case                                                            
before the  Workers' Compensation  Board, an  employee on the  North                                                            
Slope went  through a guard gate.   Other people smelled  alcohol on                                                            
the employee's  breath.   The company has  a zero tolerance  policy.                                                            
The employee  was driving on a straight  road, swerved, flipped  the                                                            
truck and  injured himself.   A bottle of  whiskey was found  in the                                                            
truck.  He was  taken back to the camp and examined  by a doctor but                                                            
a blood alcohol  test was not taken for hours.  The  Board concluded                                                            
that the company  could not prove the employee was  intoxicated even                                                            
though the Board said in  its findings he had been drinking alcohol.                                                            
The Board determined the proximate cause was the truck flipping.                                                                
                                                                                                                                
CHAIRMAN  MACKIE noted  a  person cannot  be charged  with  drinking                                                            
while intoxicated  unless one can prove that person  was intoxicated                                                            
beyond the  legal limit.  He pointed  out that using Representative                                                             
Rokeberg's  example,  if an employee  had  one drink  and flipped  a                                                            
truck, the employee would  not be eligible for workers' compensation                                                            
benefits under HB 422.                                                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said  that is  where the  proximate  cause                                                            
comes in because  the employer would  have to prove that  the use of                                                            
alcohol was the proximate cause of the accident.                                                                                
                                                                                                                                
SENATOR DONLEY  noted that is what he finds objectionable  about the                                                            
bill.    He said  dominant  or  substantial  causes  are  easier  to                                                            
understand.   If liquor was the dominant  cause of the accident,  he                                                            
could understand  the denial of benefits  but that is why  he thinks                                                            
intoxication  is a better  standard.   HB 422 is  based on the  fact                                                            
that alcohol consumption  was in the chain of events.  Preponderance                                                            
is  an  evidentiary  standard,  not  a  cause standard,   therefore,                                                            
finding alcohol  use to be a proximate  cause by a preponderance  of                                                            
the  evidence  does  not  mean that  the  proximate  cause  was  the                                                            
dominant cause of the event.                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG  stated  a preponderance  of  the  evidence                                                            
standard is used by the Workers' Compensation Board.                                                                            
                                                                                                                                
CHAIRMAN  MACKIE  said for  someone  to be  entitled  to a  workers'                                                            
compensation  claim,  that  person  would  have  to  show  that  the                                                            
consumption  of alcoholic beverages  did not cause the injury  while                                                            
under current  law the person would have to prove  he or she was not                                                            
intoxicated.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG said that  is the distinction.   He pointed                                                            
out  if an  employee  had a  cocktail  with lunch  and  then had  an                                                            
accident  during work  hours, the  scope of duties  of the  employee                                                            
will  come into  play.  Number  1 would  be the  employer's  written                                                            
policy about consumption  of alcohol use.  According to Paul Grassi,                                                            
the Director of  the Workers' Compensation Division,  a company does                                                            
not have to controvert  the claim.   If an employee had a few drinks                                                            
after work but was called  back to work and informed the employer of                                                            
the  drinking,  any injury  that  occurred  would be  covered  under                                                            
workers' compensation.                                                                                                          
                                                                                                                                
SENATOR DONLEY  said if the employee was injured while  driving back                                                            
to work, that would be covered under tort law.                                                                                  
                                                                                                                                
CHAIRMAN  MACKIE  asked if  workers'  compensation  would cover  the                                                            
employer while driving back to work under current law.                                                                          
                                                                                                                                
REPRESENTATIVE  ROKEBERG said that  would depend on company  policy.                                                            
                                                                                                                                
SENATOR DONLEY  felt that  would apply if  the employee was  driving                                                            
from one work location  to another but not when driving from home to                                                            
work.                                                                                                                           
                                                                                                                                
CHAIRMAN  MACKIE commented  the bill does  not change the  proximate                                                            
cause provision  but it does change  the standard from intoxication                                                             
to consumption.                                                                                                                 
                                                                                                                                
SENATOR  DONLEY stated  if the bill  goes to a  looser standard,  it                                                            
should redefine whether it is the dominant cause.                                                                               
                                                                                                                                
CHAIRMAN  MACKIE asked  Representative  Rokeberg if  he agreed  with                                                            
Senator Donley.                                                                                                                 
                                                                                                                                
REPRESENTATIVE ROKEBERG was unsure.                                                                                             
                                                                                                                                
Number 436                                                                                                                      
                                                                                                                                
SENATOR  DONLEY noted  the Committee  has to think  about what  will                                                            
happen to the  employee if denied.   The employee has already  given                                                            
up his  or her rights  to the tort  system so  the employee  is only                                                            
covered under workers'  compensation.  He questioned if the employee                                                            
loses the workers'  compensation rights whether that  person will be                                                            
precluded from any recovery at all.                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG could not answer.                                                                                       
                                                                                                                                
SENATOR LEMAN recounted  a case in which a widow sued under tort law                                                            
after  her husband  was killed  on the job.   She  used that  system                                                            
because she knew that the  payment under workers' compensation would                                                            
be [inaudible].   He thought both systems were available  to people.                                                            
                                                                                                                                
REPRESENTATIVE   ROKEBERG   stated   the   issue  is   whether   the                                                            
Legislature, as  a matter of policy, wants to support  the employers                                                            
if they have a  zero tolerance policy or tell the  workers that they                                                            
will be covered  under workers' compensation  even if they  drink or                                                            
use drugs on the  job.  The current law requires intoxication  so an                                                            
employee can have  a few drinks but not be drunk,  which he believes                                                            
is lax.                                                                                                                         
                                                                                                                                
SENATOR  LEMAN said  he believes  the consumption  of any  alcoholic                                                            
beverages  increases  one's   chances  of  an  accident  or  injury,                                                            
especially when  operating equipment.   Therefore,  giving employers                                                            
the right to make that  decision, especially if they have equipment,                                                            
is the right  move.  He said he has  no problem with this  standard.                                                            
                                                                                                                                
CHAIRMAN MACKIE agreed.                                                                                                         
                                                                                                                                
REPRESENTATIVE  ROKEBERG  offered  to work  with Senator  Donley  to                                                            
prepare amendments to be heard in the Senate Rules Committee.                                                                   
                                                                                                                                
SENATOR DONLEY  noted he would prefer  to work on amendments  in the                                                            
Labor and  Commerce  Committee.  He  noted that  Alaska statute  may                                                            
already set out  that people should be discouraged  from drinking at                                                            
the workplace,  but if an employee had a drink and  that is only one                                                            
of the causes  of an accident, he questioned whether  it is the best                                                            
public policy  to cut them off entirely  so that their families  end                                                            
up on welfare with no way to pay the medical bills.                                                                             
                                                                                                                                
CHAIRMAN MACKIE  asked Senator Donley  if he thought he could  draft                                                            
an amendment to improve the bill.                                                                                               
                                                                                                                                
SENATOR DONLEY  said yes, and that  first he would like to  find out                                                            
how the proximate cause  interplays with dominant versus one factor.                                                            
He would also find out  what the remedy would be if this does occur.                                                            
                                                                                                                                
REPRESENTATIVE  ROKEBERG said this bill is about the  State's public                                                            
policy  toward backing  up employers  when employees  breach a  zero                                                            
tolerance policy.                                                                                                               
                                                                                                                                
CHAIRMAN MACKIE  asked Representative Rokeberg to  work with Senator                                                            
Donley and  noted he would  bring the bill  up again next week.   He                                                            
then adjourned the meeting at 3:02 p.m.                                                                                         

Document Name Date/Time Subjects