Legislature(2001 - 2002)

10/20/2001 10:00 AM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                SENATE LABOR & COMMERCE COMMITTEE                                                                             
                        October 20, 2001                                                                                        
                           10:15 a.m.                                                                                           
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Randy Phillips, Chair                                                                                                   
Senator Loren Leman                                                                                                             
Senator Bettye Davis                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Alan Austerman                                                                                                          
Senator John Torgerson                                                                                                          
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 189                                                                                                             
"An Act relating to motor vehicles; and providing for an                                                                        
effective date."                                                                                                                
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 132                                                                                                             
"An Act relating to minimum wages."                                                                                             
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 46                                                                                                              
"An Act relating to increasing the minimum hourly wage under the                                                                
Alaska Wage and Hour Act; and providing for an effective date."                                                                 
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
SB 189 - No previous action to record.                                                                                          
                                                                                                                                
SB 132 - See Labor and Commerce minutes dated 4/28/01.                                                                          
                                                                                                                                
SB 46 - No previous action to record.                                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Representative Andrew Halcro                                                                                                    
State Capitol Bldg.                                                                                                             
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Sponsor of HB 182, companion bill to SB 189.                                                              
                                                                                                                                
Ms. Rebecca Nance Gamez, Deputy Commissioner                                                                                    
Department of Labor and Workforce Development                                                                                   
Department of Labor & Workforce                                                                                                 
  Development                                                                                                                   
PO Box 21149                                                                                                                    
Juneau, AK 99802-1149                                                                                                           
POSITION STATEMENT:  Commented on SB 46.                                                                                      
                                                                                                                                
Mr. Darrell Peterson                                                                                                            
6937 Lowell Circle                                                                                                              
Anchorage AK 99502                                                                                                              
POSITION STATEMENT: Commented on SB 46 and SB 132.                                                                            
                                                                                                                                
Mr. Mano Frey, President                                                                                                        
AFL-CIO                                                                                                                         
2501 Commercial Dr.                                                                                                             
Anchorage AK 99501                                                                                                              
POSITION STATEMENT: Supported SB 46 and SB 132.                                                                               
                                                                                                                                
Ms. Karen Ruigino                                                                                                               
Alaska Hospitality Alliance                                                                                                     
Alaska Restaurant and Beverage Association                                                                                      
Alaska Hotel and Motel Association                                                                                              
Anchorage AK                                                                                                                    
POSITION STATEMENT:  Opposed SB 46 and SB 132.                                                                                
                                                                                                                                
Mr. Richard Benavides                                                                                                           
Staff to Senator Davis                                                                                                          
State Capitol Bldg.                                                                                                             
Juneau AK 99811                                                                                                                 
POSITION STATEMENT:  Commented on SB 132.                                                                                     
                                                                                                                                
Ms. Jan Jones, Director                                                                                                         
Housing Counseling                                                                                                              
Consumer Credit Counseling of Alaska                                                                                            
Anchorage AK                                                                                                                    
POSITION STATEMENT: Commented on predatory lending.                                                                           
                                                                                                                                
Mr. John Bitney, Legislative Liaison                                                                                            
Alaska Housing Corporation                                                                                                      
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supported Ms. Jones comments on predatory                                                                 
lending.                                                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 01-29, SIDE A                                                                                                            
Number 001                                                                                                                      
             SB 189-MOTOR VEHICLE SALES AND DEALERS                                                                         
                                                                                                                              
CHAIRMAN  RANDY  PHILLIPS  called  the  Senate  Labor  &  Commerce                                                            
Committee meeting  to order  at 10:15 a.m.  and announced  that SB
189  and   its  companion   bill,   HB  182,   would  be  up   for                                                              
consideration.                                                                                                                  
                                                                                                                                
REPRESENTATIVE  ANDREW HALCRO,  Chairman  of the  House Labor  and                                                              
Commerce Subcommittee  on HB 182,  explained that  basically there                                                              
are two  sides to the bill,  the Alaska Auto Dealers  Association,                                                              
which   is  the  mover   of  the   bill,  and   the  Alliance   of                                                              
Manufacturers, which  represents the  other party affected  by the                                                              
bill. Both sides  had been very good at working out  most of their                                                              
disagreements.  The  bill  has  been  changed  from  the  original                                                              
version  by  deleting the  costly  DMV  oversight and  some  other                                                              
bureaucratic  layers. The  original fiscal  note was $500  million                                                              
and that had been substantially reduced with the changes.                                                                       
                                                                                                                                
The Subcommittee is going to be looking  at incorporating consumer                                                              
protections to the  bill and they hope to have that  draft in time                                                              
for next  session. He  added that Ed  Sniffen, Department  of Law,                                                              
had helped  them get  through some  of the  issues, but  there are                                                              
five outstanding left.  They are: termination of  a dealership and                                                              
who takes over if the owner or managing  partner should pass away;                                                              
subsidiaries and how the bill affects  not only the manufacturers,                                                              
but  some of  their  subsidiaries  (Ford Motor  Credit);  warranty                                                              
where the  dealer feels that warranty  should be reimbursed  for a                                                              
different  level of service  than manufacturers  do; possible  DMV                                                              
loopholes;   and  consumer   protection   incidents  from   actual                                                              
occurrences.  He said  he was going  to have  a teleconference  on                                                              
November 8.                                                                                                                     
                                                                                                                                
SENATOR LEMAN asked if he was confident  that they would get those                                                              
issues resolved by November 8.                                                                                                  
                                                                                                                                
REPRESENTATIVE HALCRO said he was  optimistic, but there were some                                                              
substantial concerns.                                                                                                           
                                                                                                                                
SENATOR PHILLIPS said  he heard there were concerns  about RVs and                                                              
motorcycles.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HALCRO responded  that  the bill  just relates  to                                                              
automobile dealers. However, because  of an incident in Homer with                                                              
an RV,  they were considering  adding RVS.  "We want to  make sure                                                              
that  the state  and consumers  are  protected and  we think  this                                                              
bill, if we move it forward, is an appropriate vehicle for it."                                                                 
                                                                                                                                
CHAIRMAN  PHILLIPS asked  if  he  thought this  bill  was a  major                                                              
priority in the House.                                                                                                          
                                                                                                                                
REPRESENTATIVE  HALCRO  replied that  he  couldn't  count on  that                                                              
because  he hadn't spoken  to the  sponsor. Some  reports done  by                                                              
independent  consumer  groups feel  this  kind of  legislation  is                                                              
anti-consumer, because  they will end  up paying for any  cost for                                                              
monitoring.                                                                                                                     
                                                                                                                                
CHAIRMAN PHILLIPS asked  if anyone wanted to testify  on this bill                                                              
and no one came forward. He announced  that he would hold the bill                                                              
for further consideration.                                                                                                      
                                                                                                                                
                       SB 132-MINIMUM WAGE                                                                                  
               SB  46-INCREASE MINIMUM HOURLY WAGE                                                                          
                                                                                                                              
CHAIRMAN PHILLIPS  announced SB 132,  Senator Davis' bill,  and SB
46, the Governor's bill, to be up  for consideration. He said they                                                              
would take up the Governor's bill first.                                                                                        
                                                                                                                                
MS. REBECCA NANCE GAMEZ, Deputy Commissioner,  Department of Labor                                                              
and Work  Force Development, explained  that SB 46  would increase                                                              
the minimum wage  to $7.15 per hour over two years  and then would                                                              
tie the minimum wage to the consumer  price index of the Anchorage                                                              
area. She  said the Governor  would like  to move forward  on this                                                              
bill and  there was an initiative  petition that's similar  to it.                                                              
She understood that they had gathered the required signatures.                                                                  
                                                                                                                                
SENATOR  LEMAN asked  how many  Alaskan employees  who are  making                                                              
minimum wage this would apply to.                                                                                               
                                                                                                                                
MS.  GAMEZ   replied  that  in   terms  of  adult   and  temporary                                                              
assistance, there are about 300 and  it affects about two or three                                                              
percent of the adult working population.                                                                                        
                                                                                                                                
SENATOR LEMAN asked  if it dealt with employees  who are receiving                                                              
minimum  wage and  receive  other compensation  like  tips. He  is                                                              
concerned about  the distribution  of wages within  establishments                                                              
where this  bill might  be nothing more  than window  dressing and                                                              
actually doesn't help  the majority of the people  they are really                                                              
trying to help.                                                                                                                 
                                                                                                                                
MS. GAMEZ  answered that  there is no  tip credit included  in the                                                              
Governor's bill.  "Currently there is  no tip credit on  the books                                                              
in Alaska statute - tip credit meaning  that you could pay a lower                                                              
wage to tipped employees if they receive tip compensation…"                                                                     
                                                                                                                                
SENATOR  LEMAN asked  what it  was they  were trying  to do,  help                                                              
employees  in  their  total compensation  or  trying  to  identify                                                              
something   that's  called   wages  that   different  from   total                                                              
compensation.  He said  the legislature  is trying  to get  income                                                              
into people's pockets so they could spend it.                                                                                   
                                                                                                                                
MS. GAMEZ said  they were trying to raise the  overall standard of                                                              
living for  Alaskans, particularly for  those at the lower  end of                                                              
the economic scale.                                                                                                             
                                                                                                                                
SENATOR  LEMAN  said  he was  concerned  that,  "Somebody  serving                                                              
tables makes $25 per hour and somebody  washing dishes makes maybe                                                              
$8, which is more than minimum wage. This doesn't affect them."                                                                 
                                                                                                                                
MS. GAMEZ responded  that it wouldn't affect people  who make more                                                              
than the minimum wage.                                                                                                          
                                                                                                                                
SENATOR LEMAN said he thought the bill needed work.                                                                             
                                                                                                                                
SENATOR DAVIS  asked why they were  hearing this bill now  and she                                                              
thought there were a lot of people who would want to have input.                                                                
                                                                                                                                
CHAIRMAN  PHILLIPS explained  that  they are  just  getting up  to                                                              
speed  on  these  subjects.  His opinion  was  if  the  initiative                                                              
secures the 30,000  signatures, that the committee  has the choice                                                              
of not  even dealing with  it or letting  the initiative  seek its                                                              
own course.                                                                                                                     
                                                                                                                                
SENATOR DAVIS said she believed they  would have the signatures if                                                              
they didn't already have them. It  would go on the ballot and it's                                                              
up to  the legislature to  decide what they  are going to  do. She                                                              
said they had  this bill before them twice before  and there isn't                                                              
a subcommittee and no one is doing any work on it.                                                                              
                                                                                                                                
CHAIRMAN PHILLIPS  replied if the 30,000 signatures  are certified                                                              
by the Division of Elections, it's  his intent to start working on                                                              
this bill in  session and he was  pretty sure they would  have the                                                              
signatures. He thought it was better  for the legislature to write                                                              
something   than   to   have   an   initiative   with   unintended                                                              
consequences. It was  not his intention to appoint  a subcommittee                                                              
today, but he would later.                                                                                                      
                                                                                                                                
SENATOR  LEMAN said  they need  to  help employees  and he  wasn't                                                              
convinced  that  they  were.  He though  they  might  be  creating                                                              
disincentives. He didn't  want to be shifting money  from those at                                                              
the lower end to  those at the higher end unless  there's a reason                                                              
to it and he hadn't heard a good reason.                                                                                        
                                                                                                                                
SENATOR DAVIS responded:                                                                                                        
                                                                                                                                
     There  really  isn't  a  whole lot  to  shift  in  here,                                                                   
     because it's really not going  to give a person a living                                                                   
     wage.  It's just  going to  bring it  up; they're  still                                                                   
     going to be in poverty. I don't  know of anybody working                                                                   
     in restaurants  that's making  $25 and  $30 an hour.  If                                                                   
     they are, I'd like to meet a few of them.                                                                                  
                                                                                                                                
     Some of  them, maybe  with tips  they might make  pretty                                                                   
     good,  but the tips  aren't always  the same. You  can't                                                                   
     always depend  on the  tips. You need  to have at  least                                                                   
     enough to bring  home some food, pay your  utilities and                                                                   
     rent and things like that.                                                                                                 
                                                                                                                                
     The intention of  my bill and the Governor's  bill is to                                                                   
     bring minimum  wages up. We  know that ours is  too low.                                                                   
     We've  had it  tied  in with  the  federal  law and  the                                                                   
     federal rates have  not gone up… Should the  bill at the                                                                   
     federal level pass, ours will automatically go up.                                                                         
                                                                                                                                
CHAIRMAN PHILLIPS  said he thought  the legislature would  have to                                                              
deal with it.                                                                                                                   
                                                                                                                                
MR. DARRELL  PETERSON said he has  several concerns. One  was that                                                              
minimum wage  is not enough money  and is not high enough  in this                                                              
bill. He said:                                                                                                                  
                                                                                                                                
     I am  not concerned  one whit  about how  much I pay  my                                                                   
     waiter at a  restaurant in town. That is  a relationship                                                                   
     between  the person at  the restaurant  who is buying  a                                                                   
     meal and tipping his waiter  or waitress. As far as I am                                                                   
     concerned   the  hotel   and   restaurant  industry   is                                                                   
     violating  a sacred  contractual  agreement between  the                                                                   
     person  getting  the food  and  the person  waiting  the                                                                   
     tables. It's  an interesting philosophy, but  that's the                                                                   
     relationship. If  you don't want to tip them,  you don't                                                                   
     have to tip them.                                                                                                          
                                                                                                                                
He said  that 98 percent  of the people  getting minimum  wage are                                                              
people who work  at McDonalds and are teenagers and  haven't had a                                                              
raise in nine years. Those are the people he is talking about.                                                                  
                                                                                                                                
He  proposed  taking   the  average  of  Washington,   Oregon  and                                                              
California  salaries and add  50 cents  to whatever their  average                                                              
minimum wage would be.                                                                                                          
                                                                                                                                
     I have kids  in my classes who are telling  me that they                                                                   
     earn more in  California before they came here  to go to                                                                   
     work for less  money living in this state.  It's kind of                                                                   
     appalling.  It used  to  be the  other  way around.  The                                                                   
     easiest way  to take care  of the federal  questions and                                                                   
     all the rest is to average their  salaries, put a cap of                                                                   
     50 cents on  it more than that and that  would take care                                                                   
     of that problem.                                                                                                           
                                                                                                                                
MR. PETERSON  also said he would  like to see a provision  that no                                                              
one under  18 years  old would be  required to  join a union  or a                                                              
closed  shop and pay  initiation  fees or monthly  dues. They  are                                                              
minors and  not adults. Some corporations  in town require  14 and                                                              
15 year  olds to pay  $25 per month  in union dues  and initiation                                                              
fee. As an example, he said his daughter's  last pay check was $80                                                              
and her take home pay was $0. "She didn't get a dime."                                                                          
                                                                                                                                
He said:                                                                                                                        
                                                                                                                                
     It is not  right to take the lowest paid  people in this                                                                   
     sector, charge them the same  rates for belonging to the                                                                   
     union  and  initiation fees  and  they're not  even  18,                                                                   
     legal  adults.  These  contracts  are  imposed  on  them                                                                   
     without their  consent or anybody  else's. It  should be                                                                   
     the state's  obligation to protect  them as a  class and                                                                   
     pass  legislation that  says no union  can impose  those                                                                   
     fees  or dues on  them. Then  at 18,  they can join  the                                                                   
     union and pay their monthly dues.                                                                                          
                                                                                                                                
SENATOR LEMAN asked what kind of classes he taught.                                                                             
                                                                                                                                
MR. PETERSON replied that he teaches at East High School.                                                                       
                                                                                                                                
CHAIRMAN PHILLIPS and SENATOR DAVIS  both said they would like his                                                              
comments  in a  letter  so they  could address  them  in the  next                                                              
session.                                                                                                                        
                                                                                                                                
SENATOR  DAVIS said  she would  like further  information on  kids                                                              
having to pay union dues.                                                                                                       
                                                                                                                                
MR.  MANO  FREY,  President,  AFLCIO,   said  they  sponsored  the                                                              
initiative petition  with regard to  minimum wage. He said  it has                                                              
three main  points. First, it would  raise the minimum wage  up to                                                              
$7.15 an hour  from the current rate of $5.65;  secondly, it would                                                              
be indexed  to the cost  of living increases.  Through the  CPI it                                                              
would be  adjusted annually  to reflect that  increase so  that we                                                              
won't have to revisit this either  through the legislative process                                                              
nor through  the initiative  process  and it will  keep pace  with                                                              
inflation, which it hasn't done in any way shape or form.                                                                       
                                                                                                                                
The third provision  of the petition requires a  minimum spread of                                                              
$1.00 an hour  over the federal minimum instead of  the current 50                                                              
cents. So, if  Congress ever comes to grips with  raising the wage                                                              
for  all of  the United  States and  it was  a fair  amount of  an                                                              
increase that Alaska's spread would  be $1.00 instead of 50 cents.                                                              
He said that when Alaska was a territory,  it was 50 cents an hour                                                              
over the  federal minimum wage  and that's not  enough considering                                                              
the expense of living in this state.                                                                                            
                                                                                                                                
MR. FREY said:                                                                                                                  
                                                                                                                                
     We are very  satisfied with the signature  gathering and                                                                   
     we hope  to be successful unlike  two years ago  when we                                                                   
     fell  short  of gaining  the  required  signatures.  I'm                                                                   
     hopeful  that   won't  happen  again  even   though  the                                                                   
     threshold is higher because  of the voter turnout in the                                                                   
     last  general  election.  We feel  very  confident  that                                                                   
     we'll  be able  to  have those  petitions  and have  the                                                                   
     required number of valid signatures.                                                                                       
                                                                                                                                
SENATOR  DAVIS  said she  was  sure  that  they would  get  enough                                                              
signatures.  She said she  plans to  push her  bill as a  separate                                                              
bill  when  the   legislature  goes  back  into   session  because                                                              
regardless of what's going on.                                                                                                  
                                                                                                                                
MR. FREY  said he appreciated  that and  he hoped the  legislature                                                              
would take each of the three issues seriously.                                                                                  
                                                                                                                                
SENATOR LEMAN  said when  they did the  analysis on the  escalator                                                              
clause, the Michael Boskin study  of several years ago showed that                                                              
the CPI actually  overstated inflation by 1.1%  because of changes                                                              
in buying habits. He asked why the  CPI was used for the escalator                                                              
rather than something  that might be more technically  accurate as                                                              
a measure of the cost of increase.                                                                                              
                                                                                                                                
MR. FREY replied that in his years  of negotiations with contracts                                                              
of every kind, the CPI has been the  accepted standard within both                                                              
labor  and  management  as  a tool  even  though  methodology  has                                                              
changed. "It wouldn't matter to me  which gage was used as long as                                                              
it was fairly  reflective of the cost of living…CPI  is recognized                                                              
as  an  industry  standard  right   now,  for  lack  of  a  better                                                              
definition."                                                                                                                    
                                                                                                                                
SENATOR LEMAN  said that  he thought their  efforts at  working on                                                              
economic opportunities on the coastal  plain of ANWR would achieve                                                              
more for  workers doing than this  bill, which in  reality affects                                                              
very few people.                                                                                                                
                                                                                                                                
     There are more  important things we could  be doing with                                                                   
     the same  amount of effort…The  reality is that  we need                                                                   
     more  opportunities  in Alaska  for  more people  to  be                                                                   
     working  so that  this state  can  be more  than just  a                                                                   
     place for people to come and look at us.                                                                                   
                                                                                                                                
MR. FREY said  he appreciated his remarks and he  met with Senator                                                              
Stevens  in   Washington  D.C.   on  encouraging  the   Democratic                                                              
leadership in the Senate to allow an energy bill to be voted on.                                                                
                                                                                                                                
He  added  regarding  Mr.  Peterson's   remarks,  that  one  major                                                              
employer in this  state hires young people under  a union contract                                                              
and  it's   Carrs  grocery  stores,   but  he  didn't   think  the                                                              
legislature would want to get into  labor management negotiations.                                                              
                                                                                                                                
     You have  so many  other things you  have to deal  with.                                                                   
     Comments like Mr. Peterson made  are very fair. It's not                                                                   
     fair to  end up with a  $0 check. I couldn't  agree with                                                                   
     him more,  but I  think it's  more appropriate that  the                                                                   
     union  and management  of whatever  company it was  hear                                                                   
     those same  comments…If they recognize it and  deal with                                                                   
     it,   it's  more   appropriate   than  the   legislature                                                                   
     involving itself in labor and  management decisions like                                                                   
     that.                                                                                                                      
                                                                                                                                
CHAIRMAN PHILLIPS asked how many signatures he needed.                                                                          
                                                                                                                                
MR. FREY  replied a  few more than  28,000 signatures  were needed                                                              
and they  have at least  that many right  now. They are  trying to                                                              
get a margin.                                                                                                                   
                                                                                                                                
CHAIRMAN  PHILLIP  asked  what  his   feelings  would  be  if  the                                                              
legislature drafted  an exemption  for under 18  year olds  to pay                                                              
union dues in a minimum wage bill.                                                                                              
                                                                                                                                
MR. FREY  replied that  they have  many members  who are  under 18                                                              
years  old, kids  who work  with  their parents  for instance,  in                                                              
construction.  He   didn't  think  it  was  appropriate   for  the                                                              
legislature to do anything there.  He said there would be a lot of                                                              
resistance to the concept.                                                                                                      
                                                                                                                                
CHAIRMAN PHILLIPS  asked what  the unions would  do if they  get a                                                              
request from individual groups of  people to exempt their children                                                              
under 18.                                                                                                                       
                                                                                                                                
MR. FREY replied  that there wouldn't be just  a simple exemption.                                                              
The Laborers Union…                                                                                                             
                                                                                                                                
TAPE 01-29, SIDE B                                                                                                            
                                                                                                                              
MR.  FREY  said  they provide  flexibility  with  contractors  and                                                              
employers who  they deal  with with a  sense of fairness  to those                                                              
people who  may not be making a  construction wage and  may not be                                                              
working full  time. Every  union has a  concern about the  kind of                                                              
example Mr.  Peterson just  brought up. "If  they realize it  is a                                                              
problem, they will deal that."                                                                                                  
                                                                                                                                
CHAIRMAN PHILLIPS  said this  would probably come  up as  a public                                                              
policy  issue  if the  legislature  deals  with the  minimum  wage                                                              
issue.                                                                                                                          
                                                                                                                                
MS.  KAREN RUIGINO  (ph), Alaska  Hospitality  Alliance, said  she                                                              
represented  the Alaska  Restaurant and  Beverage Association  and                                                              
the Alaska  Hotel and Motel  Association. She opposed  any minimum                                                              
wage  increase,  but  preferred  that  the issue  go  through  the                                                              
legislative  process rather  than  the ballot  initiative  process                                                              
because  the general  public is  largely unaware  of the  negative                                                              
impacts of  minimum wage increases.  Their opposition is  based on                                                              
the following reasons:                                                                                                          
                                                                                                                                
     A minimum wage increase hurts  those employees that it's                                                                   
     intended  to help.  Someone earlier  said that the  main                                                                   
     goals is  to help the  employee. Every time  the minimum                                                                   
     wage increases,  the employers are faced with  having to                                                                   
     offset  the significant  increase to  their costs. I  am                                                                   
     speaking  specifically  on  the food  and  beverage  and                                                                   
     hotel side of the business.                                                                                                
                                                                                                                                
     In  the  restaurant  industry,  profit  margins  average                                                                   
     three to five percent, which  doesn't leave much room to                                                                   
     absorb  a  minimum  wage  increase.   So,  since  profit                                                                   
     margins are slim, employers  will reduce the benefits to                                                                   
     their  employees   such  as   vacation  pay  or   health                                                                   
     insurance or they reduce the  number of employees or cut                                                                   
     their hours. It's actually disabling the work force.                                                                       
                                                                                                                                
     We just  heard earlier that  98 percent of  minimum wage                                                                   
     earners  are teenagers or  tipped employees, so  there's                                                                   
     very few  people who are  actually earning minimum  wage                                                                   
     without either  gaining valuable work experience,  as is                                                                   
     the  case of  teenagers, or  they  are tipped  employees                                                                   
     whose  average with  tips includes  $12 -  $15 per  hour                                                                   
     when you include tips with their wage.                                                                                     
                                                                                                                                
     The  other  thing  about tipped  employees  is  that  it                                                                   
     already  includes  a  natural cost  of  living  indexing                                                                   
     because  as the cost  of living  increases, menu  prices                                                                   
     are rising  at a  higher rate than  the cost of  living.                                                                   
     So, this year  for example, menu prices are  rising at a                                                                   
     rate of 3.1 percent while inflation  is rising at a rate                                                                   
     of  2.7 percent.  So, as  restauranteurs increase  their                                                                   
     prices, tips are  based on the menu total  check, so the                                                                   
     tip goes up.  So, you have a natural CPI  indexing right                                                                   
     now. A very small percent are  primary wage earners in a                                                                   
     household and that's really  a misnomer that the general                                                                   
     public  thinks that  it's a divorced  mother with  three                                                                   
     children trying to earn a living.  It really isn't. It's                                                                   
     teenagers  earning valuable  work experience  and it  is                                                                   
     tipped employees  who are earning well over  the minimum                                                                   
     wage.                                                                                                                      
                                                                                                                                
     Federal  law recognizes  tips  as wages.  The  employees                                                                   
     that make  tips pay  federal income  tax on them.  We're                                                                   
     one of  only three states  that does not recognize  tips                                                                   
     as  wages.  We  believe  that   state  law  should  also                                                                   
     recognize  tips  as wages.  We  would be  interested  in                                                                   
     perhaps  something that  allowed for  a conditional  tip                                                                   
     credit where  if an employee  earned less than $8  or $9                                                                   
     with tips, that they would be  subject to a minimum wage                                                                   
     increase. If they  earned with tips over $8  or $9, then                                                                   
     their tips would be included  and the employer would not                                                                   
     need to be giving them a minimum  wage increase. So that                                                                   
     would mean that  those employees that are  just making a                                                                   
     few   dollars  in   tips  that  they   would  have   the                                                                   
     opportunity to get the minimum wage increase.                                                                              
                                                                                                                                
     Finally, we do believe that  if the state is going to be                                                                   
     putting  something forward  to help  the employees  that                                                                   
     are making minimum  wage, with the labor  market that we                                                                   
     have today,  we believe that  money should be  dedicated                                                                   
     toward  training  these  people  so  that  minimum  wage                                                                   
     becomes as largely as it is  now an entry level wage. So                                                                   
     these  employees   are  better  equipped  to   deal  and                                                                   
     contribute  to the  labor market  and grow  into a  more                                                                   
     challenging position.                                                                                                      
                                                                                                                                
SENATOR  LEMAN asked  if she  had done  any analysis  on what  the                                                              
impacts  would  be  on  either  the  governor's  proposal  or  the                                                              
initiative,  which is  comparable  in terms  of loss  of jobs  for                                                              
people at this minimum wage level.                                                                                              
                                                                                                                                
MS. RUIGINO  replied  that they didn't  have any  numbers for  the                                                              
state of Alaska, but there were national  numbers on the impact to                                                              
the hospitality industry  of minimum wage increases.  She said she                                                              
could get those numbers for the committee.                                                                                      
                                                                                                                                
SENATOR LEMAN said  he would appreciate that and  asked if she had                                                              
any idea  of what  percentage of  minimum wage  earners worked  in                                                              
those industries.                                                                                                               
                                                                                                                                
MS.  RUIGINO replied  that  they  hadn't been  able  to get  those                                                              
numbers from  the Department of Labor.  She heard earlier  that 98                                                              
percent of people  getting minimum wage are teenagers.  "From what                                                              
we  can gather,  the  other percent  are a  very  high percent  of                                                              
minimum  wage earners  are  tipped  employees. The  Department  of                                                              
Labor has  been unable to  furnish us  with information on  who or                                                              
how many  or what percent of  the workforce is actually  earning a                                                              
bare minimum  wage. Even  dishwashers and  bus people,  because of                                                              
the labor  shortage, are  being hired either  at minimum  wage and                                                              
escalated within weeks  or they are hired above  minimum wage well                                                              
over the 50 cents above minimum wage today.                                                                                     
                                                                                                                                
CHAIRMAN  PHILLIPS said  he assumed  that the  proponents of  this                                                              
legislation  would secure  their  signatures  and the  legislature                                                              
would be  faced with  one or  two decisions  as public policy.  He                                                              
asked them  to take  a good look  at this  initiative and  let the                                                              
committee know what their bottom lines are.                                                                                     
                                                                                                                                
MS. RUIGINO  said she could provide  that. She also said  that the                                                              
hospitality industry is looking at  a bigger picture or impacts to                                                              
the bottom line of business owners:                                                                                             
                                                                                                                                
     With minimum wage increases  proposed on the state level                                                                   
     and  the federal  level, unemployment  tax increases,  a                                                                   
     proposed  300   percent  liquor  excise   tax  increase;                                                                   
     there's proposed bed taxes and  every year we're looking                                                                   
     at in  the hotel industry,  there's a proposed  head tax                                                                   
     on  the   cruise  ship   industry  that  decreases   the                                                                   
     occupancy statewide,  decreasing funding from  the State                                                                   
     of Alaska  for tourism marketing and  terrorism impacts.                                                                   
     That is  the impact on  the hospitality industry  of the                                                                   
     events of  the last several  weeks. Next to  the airline                                                                   
     industry,  the hospitality  industry  has been  impacted                                                                   
     the most with recent acts of terrorism…                                                                                    
                                                                                                                                
She said  that the minimum  wage increase is  one small item  in a                                                              
large picture that is threatening to cripple the industry.                                                                      
                                                                                                                                
SENATOR  DAVIS  asked  her  to  elaborate   on  the  training  for                                                              
employees  that she mentioned  earlier.  From her standpoint,  she                                                              
thought  her industry  should do  on  the spot  training, but  she                                                              
didn't know what incentives the legislature  could provide to them                                                              
for incentives to  help them increase that. She  thought employers                                                              
should be doing that ongoing.                                                                                                   
                                                                                                                                
MS. RUIGINO said she understood in  the past that the unemployment                                                              
insurance fund is very large and  it has been suggested that money                                                              
from that  could go  toward a work  opportunity credit.  Employers                                                              
certainly understand  that they  need to be  providing on  the job                                                              
training and  also that less  experienced teenage  workers require                                                              
more on  the job training.  Some kind  of work opportunity  credit                                                              
would provide employers with resources  to invest more training in                                                              
workers.                                                                                                                        
                                                                                                                                
MR. RICHARD BENAVIDES,  Staff to Senator Davis, said  he wanted to                                                              
bring up  some new information. He  explained that in SB  132, the                                                              
minimum wage  would remain at 50  cents an hour above  any changes                                                              
to the federal  minimum wage, at  least for the remainder  of 2001                                                              
and then it  would increase to $6.40  an hour on January  1, 2002.                                                              
It would increase to $6.90 on January 3, 2003.                                                                                  
                                                                                                                                
He said if you  make $5.65 per hour for a 52 week  year, you would                                                              
make $10,848  or approximately  $7,000 under  the federal  poverty                                                              
level if you are a single parent  with two kids. This makes things                                                              
much more  difficult along  with the  cuts to  the food  stamp and                                                              
other assistance programs.                                                                                                      
                                                                                                                                
He  said that  people who  deliver  car parts,  for instance,  for                                                              
different  kinds of  warehouses, get  minimum wage  and don't  get                                                              
tipped.  Also, if  you're  working at  a  smaller restaurant,  you                                                              
don't get  the same kind  of tips you  get working at  the Captain                                                              
Cook  or some  other  place where  meals are  more.  He said  that                                                              
living on tips is a hit and miss kind of thing.                                                                                 
                                                                                                                                
In 1999  in the State of  Alaska, approximately 47,000  men, women                                                              
and  children were  earning  minimum wage  incomes.  "The bulk  of                                                              
those people making minimum wage were above the age of 20."                                                                     
                                                                                                                                
MR. BENAVIDES said there was the  argument that any increase would                                                              
hurt  entry level  workers,  but  there was  a  study  in 1998  at                                                              
Princeton  University  that  found   that  higher  wages  actually                                                              
resulted  in better  motivated  more  stable workers  with  higher                                                              
productivity  levels  and  lower  turnover  rates.  Another  study                                                              
looked at  how many people  lost their  jobs due to  having higher                                                              
costs  for employees,  but  they  found that  was  a very  minimum                                                              
impact. He said:                                                                                                                
                                                                                                                                
     It  depends on the  industry. Obviously,  if things  are                                                                   
     going well, it doesn't matter  if you're paying $5.65 or                                                                   
     $7.75, if  your restaurant is  doing well, you're  going                                                                   
     to need more  people to work there and you'll  pay them,                                                                   
     because  you're  making  more   money  anyway.  If  your                                                                   
     restaurant  is not  making money,  you're  going to  cut                                                                   
     back. It doesn't  matter what the wages are  that you're                                                                   
     giving those people…                                                                                                       
                                                                                                                                
SENATOR LEMAN said the numbers he  is reporting are different than                                                              
what Ms. Gamez and others reported.  He said there is an exemption                                                              
in  the   minimum  wage  law   for  certain  people   involved  in                                                              
agriculture. He asked  if he was including everyone  in the exempt                                                              
category as well.                                                                                                               
                                                                                                                                
MR.  BENAVIDES  deferred   to  Ms.  Gamez,  but   his  study  said                                                              
specifically  minimum  wage and  it  was  from the  Department  of                                                              
Labor.                                                                                                                          
                                                                                                                                
MS. GAMEZ said she would follow up  on that for the committee. She                                                              
also  needed to  get with  Ms. Ruigino  to  find out  who she  was                                                              
dealing with and get her the information she requested.                                                                         
                                                                                                                                
SENATOR LEMAN asked her to separate  her numbers into minimum wage                                                              
earners to  which the  law applies  and those  who may be  minimum                                                              
wage earners that the law doesn't  apply to, like a baby sitter or                                                              
whatever the exemptions allow for.                                                                                              
                                                                                                                                
MS.  GAMEZ  said she  would  work  on getting  everyone  the  same                                                              
information.  She  wanted also  to  talk  with Ms.  Ruigino  about                                                              
worker opportunity  tax credits that  exist primarily  for welfare                                                              
recipients  and unemployment  insurance training  that she  may be                                                              
able to take advantage of.                                                                                                      
                                                                                                                                
CHAIRMAN PHILLIPS  asked if  there was anyone  else who  wanted to                                                              
testify about  the minimum wage issue.  There was no  response and                                                              
he held the bill.                                                                                                               
                                                                                                                                
             SB 189-MOTOR VEHICLE SALES AND DEALERS                                                                         
                                                                                                                                
CHAIRMAN  PHILLIPS  announced  SB   189  to  be  back  before  the                                                              
committee. He asked  if there was anyone who wanted  to testify on                                                              
it and there was no response. He set the bill aside.                                                                            
                                                                                                                                
CHAIRMAN PHILLIPS  said that the mortgage bankers  were working on                                                              
draft legislation.  He declared a  perceived conflict  of interest                                                              
because he works for a major mortgage  company, although they have                                                              
nothing to do with this.                                                                                                        
                                                                                                                                
MS.  JAN  JONES, Director,  Housing  Counseling,  Consumer  Credit                                                              
Counseling  Service  of  Alaska,  said  she had  seen  a  distinct                                                              
increase over  the past  couple of years  in predatory  lending or                                                              
taking  advantage of  underserved populations  - senior  citizens,                                                              
people that  are not as sophisticated  a home buyer as  they might                                                              
be and  putting them into  loans that  are designed to  take their                                                              
equity and make them fail. She said:                                                                                            
                                                                                                                                
       There is a market in Alaska for sub prime lending,                                                                       
      which is loans offered to borrowers that may not have                                                                     
     the best credit  rating. There is a very  fine line when                                                                   
     it  becomes  sub  prime  lending  and  when  it  becomes                                                                   
     predatory lending.  I think we need to look  at the fees                                                                   
     they  are allowed  to put into  the loan  up front,  the                                                                   
     addition  of prepayment penalties  which are added  into                                                                   
     these  loans and  the requirement  or strong  suggestion                                                                   
     that these  loans be  refinanced again  in two years  or                                                                   
     the interest  rate is going  to go up, because  it's now                                                                   
     an  adjustable rate  mortgage  with a  minimum  interest                                                                   
     rate of 13. something.                                                                                                     
                                                                                                                                
     I did a  scenario on one yesterday and when  I mapped it                                                                   
     out as an A paper loan versus  a predatory lending loan,                                                                   
     the person  would have come  out of a $135,000  mortgage                                                                   
     with $7,000 of money on this  home equity loan. It would                                                                   
     have cost  them over  $19,000 to get  that. And  that is                                                                   
     what I'm  seeing and  I think there  is a definite  need                                                                   
     for two things to happen, education  to the consumer and                                                                   
     some kind  of beefing up of  the laws and  statutes that                                                                   
     we  already  have  in  place  to  allow  our  government                                                                   
     agencies to enforce the rules that we have.                                                                                
                                                                                                                                
     We  have  a  law  that  says  prepayment  penalties  are                                                                   
     against  the  law in  Alaska,  but  try to  enforce  it.                                                                   
     There's  no teeth. The  other thing I  think would  be a                                                                   
     very  good  idea is  to  license our  loan  originators.                                                                   
     There are people  out there and I was approached  by one                                                                   
     yesterday  and asked  to lie,  flat out  lie, that  this                                                                   
     client had  been paying us for  two years, when  in fact                                                                   
     they had  been paying us on  a debt management  plan for                                                                   
     18  months.   To  me,  that's  unethical   behavior  and                                                                   
     licensing would curb it.                                                                                                   
                                                                                                                                
     Licensing  the  individual   rather  than  the  mortgage                                                                   
     company  themselves would  allow us  better tracking  of                                                                   
     the person's  behavior, because I don't believe  that in                                                                   
     all  instances  it  is  the  company.  It  is  the  loan                                                                   
     originator.                                                                                                                
                                                                                                                                
CHAIRMAN PHILLIPS asked her to explain what a loan originator                                                                   
does.                                                                                                                           
                                                                                                                                
MS. JONES replied that she was not aware of all of the aspects of                                                               
that and hadn't been one herself.                                                                                               
                                                                                                                                
SENATOR DAVIS asked if they have to have a license to do that.                                                                  
                                                                                                                                
MS. JONES answered that they don't.                                                                                             
                                                                                                                                
CHAIRMAN  PHILLIPS said  he  was  aware of  the  problems she  was                                                              
talking about.                                                                                                                  
                                                                                                                                
MS. JONES said:                                                                                                                 
                                                                                                                                
     It is a very heart breaking  industry when that happens.                                                                   
     I am  looking at one senior  citizen right now  that had                                                                   
     her home on  the market to sell it, was  approached by a                                                                   
     mortgage broker in this town,  put into a home loan that                                                                   
     was more than  her monthly income, period,  and then was                                                                   
     charged  a $7,000  commission on top  to the  commission                                                                   
     that the  loan originator paid  to the mortgage  broker.                                                                   
     Now,  if she wasn't  set up  to fail,  I don't know  who                                                                   
     was.                                                                                                                       
                                                                                                                                
She said  they could  read about predatory  lending in  the August                                                              
issue of Alaska Journal of Commerce.                                                                                            
                                                                                                                                
SENATOR DAVIS  said she had read  about this problem in  the Lower                                                              
48, but she didn't  realize it was a problem up  here. She thought                                                              
they should definitely look into this issue.                                                                                    
                                                                                                                                
CHAIRMAN PHILLIPS said he needed  to get something from the Alaska                                                              
Mortgage Bankers Association so they could get going.                                                                           
                                                                                                                                
MS. JONES  said that  they were  approached last  week to  add the                                                              
FBI. She said the next meeting of  her committee was on November 8                                                              
and they will be having reports on education and legislation.                                                                   
                                                                                                                                
CHAIRMAN  PHILLIPS said  he wanted  to close the  loophole  of the                                                              
prepayment penalty as he is seeing  a lot of that creeping in now.                                                              
                                                                                                                                
MS. JONES agreed  saying she had seen six months  of interest as a                                                              
prepayment penalty minimum and it's  set up to be the first two to                                                              
three years  of that loan. "So, you  have to pay that  in addition                                                              
to the  exorbitant closing  costs that  go along  with it  and the                                                              
higher interest rate."                                                                                                          
                                                                                                                                
She  said they  were investigating  model  legislation from  Ohio,                                                              
South Carolina and California.                                                                                                  
                                                                                                                                
MR. JOHN BITNEY, Legislative Liaison,  Alaska Housing Corporation,                                                              
supported Ms.  Jones comments on  predatory lending. He  said they                                                              
ran into  these issues  a lot.  He emphasized  that the  committee                                                              
should look at disclosure requirements  and that sort of thing. In                                                              
other words,  when folks go into  sign a loan, that there  be some                                                              
understanding exactly  what all has gone into that  loan, what all                                                              
the  fees are  and  why. He  said  they are  not  involved in  any                                                              
predatory lending and are heavily  involved in homebuyer education                                                              
classes.                                                                                                                        
                                                                                                                                
MS. JONES also said that the predatory lenders refuse to pay                                                                    
taxes and insurance. So, as soon as the borrower gets a                                                                         
delinquent notice, they foreclose.                                                                                              
                                                                                                                                
CHAIRMAN PHILLIPS asked if there was any further testimony on any                                                               
of the issues and there was no response. He adjourned the meeting                                                               
at 11:45 p.m.                                                                                                                   

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