Legislature(2003 - 2004)

03/25/2003 01:32 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         March 25, 2003                                                                                         
                           1:32 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Con Bunde, Chair                                                                                                        
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Gary Stevens                                                                                                            
Senator Bettye Davis                                                                                                            
Senator Hollis French                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                              
SENATE BILL NO. 86                                                                                                              
"An Act relating to the rate of interest on delinquent taxes."                                                                  
     MOVED SB 86 OUT OF COMMITTEE                                                                                               
                                                                                                                                
SENATE BILL NO. 111                                                                                                             
"An  Act relating  to the  submission of  payroll information  by                                                               
contractors  and  subcontractors  performing  work  on  a  public                                                               
construction contract; and providing for an effective date."                                                                    
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 113                                                                                                             
"An  Act relating  to the  frequency of  examinations of  certain                                                               
persons licensed  to engage  in the business  of making  loans of                                                               
money,  credit,  goods,  or  things   in  action;  repealing  the                                                               
requirement for a state examination  and evaluation of the Alaska                                                               
Commercial  Fishing and  Agriculture Bank;  and providing  for an                                                               
effective date."                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 120                                                                                                             
"An Act  relating to the  state's sovereign immunity  for certain                                                               
actions  regarding injury,  illness, or  death of  state-employed                                                               
seamen and  to workers' compensation  coverage for  those seamen;                                                               
and providing for an effective date."                                                                                           
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
SB 86 - See Labor and Commerce minutes dated 3/18/03.                                                                           
SB 111 - No previous action to consider.                                                                                        
SB 113 - No previous action to consider.                                                                                        
SB 120 - No previous action to consider.                                                                                        
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                              
Mr. Darwin Peterson                                                                                                             
Staff to Senator Wilken                                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on SB 86.                                                                                       
                                                                                                                                
Mr. Ed Fisher, Deputy Commissioner                                                                                              
Department of Labor & Workforce                                                                                                 
  Development                                                                                                                   
PO Box 21149                                                                                                                    
Juneau, AK 99802-1149                                                                                                           
POSITION STATEMENT: Commented on SB 111.                                                                                      
                                                                                                                                
Ms. Hali Denton, Acting Director                                                                                                
Division of Labor Standards and Safety                                                                                          
Department of Labor & Workforce                                                                                                 
  Development                                                                                                                   
PO Box 21149                                                                                                                    
Juneau, AK 99802-1149                                                                                                           
POSITION STATEMENT: Commented on SB 111.                                                                                      
                                                                                                                                
Mr. Don Etheridge                                                                                                               
Alaska AFL-CIO                                                                                                                  
710 West 9th Street                                                                                                             
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT: Commented on SB 111.                                                                                      
                                                                                                                                
Mr. Scott Johannes, Private Contractor                                                                                          
Association of Builders and Contractors                                                                                         
No address provided                                                                                                             
POSITION STATEMENT: Opposed SB 111.                                                                                           
                                                                                                                                
Mr. Charles Wiegers                                                                                                             
Associated Builders and Contractors                                                                                             
32 Bonnir Ave.                                                                                                                  
Fairbanks AK                                                                                                                    
POSITION STATEMENT:  Opposed SB 111.                                                                                          
                                                                                                                                
Mr. Tim Rogers, Legislative Program Coordinator                                                                                 
Municipality of Anchorage                                                                                                       
PO Box 196650                                                                                                                   
Anchorage AK                                                                                                                    
POSITION STATEMENT: Opposed SB 111.                                                                                           
                                                                                                                                
Mr. Raymond Smith, Business Manager                                                                                             
International Union of Painters and Allied Trades (INPAT)                                                                       
650 W. International Airport Rd.                                                                                                
Anchorage AK 99518                                                                                                              
POSITION STATEMENT: Opposed SB 111.                                                                                           
                                                                                                                                
Mr. Scott Bridges                                                                                                               
Teamsters Local 959                                                                                                             
520 E. 34th                                                                                                                     
Anchorage AK 99503                                                                                                              
POSITION STATEMENT: Opposed SB 111.                                                                                           
                                                                                                                                
Mr. Joe Smith                                                                                                                   
Gastineau Contractors                                                                                                           
Juneau AK 99801                                                                                                                 
POSITION STATEMENT: Commented on SB 111.                                                                                      
                                                                                                                                
Mr. Thomas Boedeker                                                                                                             
City Manager                                                                                                                    
Soldotna AK                                                                                                                     
POSITION STATEMENT: Opposed SB 111.                                                                                           
                                                                                                                                
Mr. Mark Davis, Director                                                                                                        
Division of Banking, Securities and Corporations                                                                                
Department of Community & Economic Development                                                                                  
PO Box 110800                                                                                                                   
Juneau, AK 99811-0800                                                                                                           
POSITION STATEMENT: Supported SB 113.                                                                                         
                                                                                                                                
Ms. Susan Cox, Assistant Attorney General                                                                                       
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT: Commented on SB 120.                                                                                      
                                                                                                                                
Mr. Brad Thompson, Director                                                                                                     
Division of Risk Management                                                                                                     
Department of Administration                                                                                                    
PO Box 110200                                                                                                                   
Juneau, AK  99811-0200                                                                                                          
POSITION STATEMENT: Supported SB 120.                                                                                         
                                                                                                                                
Mr. Joe Geldhof                                                                                                                 
Marine Engineers Beneficial Association (MEBA)                                                                                  
District 1 Pacific Coast Division                                                                                               
Juneau AK 99801                                                                                                                 
POSITION STATEMENT: Commented on SB 120.                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
TAPE 03-14, SIDE A                                                                                                            
                                                                                                                                
              SB  86-INTEREST ON DELINQUENT TAXES                                                                           
                                                                                                                                
CHAIR CON  BUNDE called  the Senate  Labor and  Commerce Standing                                                             
Committee meeting  to order  at 1:32  p.m. Present  were Senators                                                               
Davis, Seekins, French and Chair Bunde.  He announced SB 86 to be                                                               
up  for consideration.  He  said the  Department  of Revenue  has                                                               
taken care of all of the  big delinquent tax cases. SB 86 strikes                                                               
a balance  between creating  a system that  is not  oppressive to                                                               
the small taxpayer but does not  leave any money on the table for                                                               
the big taxpayer.                                                                                                               
                                                                                                                                
MR. DARWIN  PETERSON, staff  to Senator Wilken,  said that  was a                                                               
fair statement.                                                                                                                 
                                                                                                                                
SENATOR  SEEKINS  moved  to  pass   SB  86  from  committee  with                                                               
individual   recommendations  and   the  attached   fiscal  note.                                                               
SENATORS  SEEKINS, FRENCH,  DAVIS AND  BUNDE voted  yea, and  the                                                               
motion carried.                                                                                                                 
                                                                                                                                
                                                                                                                                
        SB 111-PUBLIC CONSTRUCTION PROJECT REQUIREMENTS                                                                     
                                                                                                                              
CHAIR BUNDE announced SB 111 to be up for consideration.                                                                        
                                                                                                                                
SENATOR STEVENS arrived at 1:38 p.m.                                                                                            
                                                                                                                                
MR.  ED  FISHER, Deputy  Commissioner,  Department  of Labor  and                                                               
Workforce  Development  (DOLWD),  said  SB  111  is  designed  to                                                               
eliminate  the  requirement  that  contractors  on  public  works                                                               
projects submit  weekly certified  payrolls to the  Department of                                                               
Labor and Workforce Development. He continued:                                                                                  
                                                                                                                                
     In place of the  certified payroll, all the contractors                                                                    
     and subcontractors  will be required  to file  a notice                                                                    
     of intent  to perform public  work along with a  fee of                                                                    
     $100. The  notice would  be on a  form provided  by the                                                                    
     department  and include  identifying information  about                                                                    
     the  project and  the contractor  and a  statement that                                                                    
     the   contractor   fully   understands   his   or   her                                                                    
     responsibilities  to workers  under Title  36 and  will                                                                    
     comply with  those requirements.  The notice  of intent                                                                    
     would  inform the  department that  each contractor  is                                                                    
     aware of  the proper  prevailing rates  of pay.  At the                                                                    
     end of  its project,  each contractor  or subcontractor                                                                    
     would file  with the Department  of Labor  an affidavit                                                                    
     of  compliance on  a form  provided  by the  department                                                                    
     along  with  another  $100 fee.  That  affidavit  would                                                                    
     state  that the  contractor has  completed the  work of                                                                    
     the  project  and  complied with  the  requirements  of                                                                    
     Title  36 with  the  regard to  the  payment of  proper                                                                    
     prevailing   wages  and   resident's  preference.   The                                                                    
     affidavit  of compliance  would  provide an  instrument                                                                    
     for  closure on  projects  and a  sworn attestation  of                                                                    
     compliance with the act.                                                                                                   
                                                                                                                                
     The advantage  to contractors would be  that they would                                                                    
     no longer  have to  file the certified  weekly payrolls                                                                    
     with  the  department.  However, in  most  cases,  when                                                                    
     federal  money is  involved, certified  weekly payrolls                                                                    
     are already  being filed  with the  contracting agency.                                                                    
     This would  eliminate the duplication of  the filing of                                                                    
     those certified  payrolls. The payrolls would  still be                                                                    
     accessible  for  audit  purposes  in  the  event  of  a                                                                    
     complaint or  an investigation. The  contracting agency                                                                    
     would not  be required to audit  the payrolls, although                                                                    
     the  Department   of  Transportation/Public  Facilities                                                                    
     already  performs  certain  tasks  to  satisfy  federal                                                                    
     grants  on  most  of   its  projects.  Presently,  many                                                                    
     contracting  agencies do  not make  final payment  on a                                                                    
     project until  they have clearance from  the Department                                                                    
     of Labor. Under this plan, that  is the plan in SB 111,                                                                    
     the  department would  check its  files  for the  final                                                                    
     affidavits and  that would make the  process of issuing                                                                    
     a clearance  much more responsive. Final  payment could                                                                    
     be released  to the contractor sooner.  This bill would                                                                    
     enable  the  department to  put  its  resources in  the                                                                    
     field rather than in the office filing paperwork.                                                                          
                                                                                                                                
     The expectation  is that the  fees will generate  - and                                                                    
     the savings from eliminating  a clerical position would                                                                    
     generate annual revenue of $115 million.                                                                                   
                                                                                                                                
CHAIR BUNDE  said he was  confused about the  filing requirements                                                               
and  flexibility as  any Little  Davis Bacon  project requires  a                                                               
weekly payroll filing.                                                                                                          
                                                                                                                                
MR.  FISHER replied  that is  true  at present  because Title  36                                                               
requires  that   the  payroll  information  be   filed  with  the                                                               
Department of Labor.                                                                                                            
                                                                                                                                
CHAIR BUNDE asked if SB 111 removes that requirement.                                                                           
                                                                                                                                
MR. FISHER  replied contractors  would no  longer be  required to                                                               
file a certified  payroll with the department, but  they would be                                                               
required  to  file a  certified  payroll  with their  contracting                                                               
agency.                                                                                                                         
                                                                                                                                
CHAIR BUNDE asked if the department  has just been getting a copy                                                               
of  the  paperwork  contractors  were  filing  with  the  federal                                                               
agency.                                                                                                                         
                                                                                                                                
MR.  FISHER  replied  that  is correct  and  said  the  certified                                                               
payrolls  fill about  27 file  drawers every  year and  amount to                                                               
about 20,000 pieces of paper in a month.                                                                                        
                                                                                                                                
CHAIR BUNDE asked if a subcontractor  who finishes a project in a                                                               
day or two  would still have to  file and pay the  two $200 fees,                                                               
and  whether the  subcontractor would  get paid  before the  main                                                               
contractor filed his paperwork.                                                                                                 
                                                                                                                                
MR.  FISHER  replied  the  intention  of the  bill  is  that  the                                                               
subcontractor  would file  payroll  information. The  department,                                                               
upon  receiving  the affidavit  of  completion,  would check  its                                                               
files and  provide the proper  release so that  the subcontractor                                                               
could be paid.                                                                                                                  
                                                                                                                                
CHAIR BUNDE asked  if that would apply if  a subcontractor worked                                                               
one day or less.                                                                                                                
                                                                                                                                
MR. FISHER replied that is correct as presently written.                                                                        
                                                                                                                                
CHAIR BUNDE  asked how the  $100 fees equate  to the cost  of the                                                               
work that would be done.                                                                                                        
                                                                                                                                
MR. FISHER replied that the fee  was not designed in terms of the                                                               
cost. He stated, "It's a revenue generator."                                                                                    
                                                                                                                                
SENATOR SEEKINS pointed out the  fiscal note contains a breakdown                                                               
of  2300  projects  with  an  average  of  five  contractors  per                                                               
project. He  asked Mr. Fisher  if he  could tell how  large those                                                               
projects were.                                                                                                                  
                                                                                                                                
MR. FISHER said he couldn't,  but based on Southeast Alaska only,                                                               
about 15  percent of the projects  have a value of  about $5,000;                                                               
another 25 percent have a value of about $10,000 or less.                                                                       
                                                                                                                                
SENATOR SEEKINS  asked how long  it would take the  department to                                                               
do the certification so people could get their final payment.                                                                   
                                                                                                                                
MS.  HALI DENTON,  Acting Director,  Division of  Labor Standards                                                               
and Safety, said they don't have  a solid number for that because                                                               
it's  not something  the  department  has had  to  keep track  of                                                               
before. She noted, "It's intended to streamline the process...."                                                                
                                                                                                                                
She said  the division would  be releasing the  subcontractors as                                                               
they filed their affidavits so they  would not have to wait until                                                               
the entire project is completed.                                                                                                
                                                                                                                                
SENATOR SEEKINS asked  what percentage of a  contract is normally                                                               
held out for final payment.                                                                                                     
                                                                                                                                
MS. DENTON said she would get back to him with an answer.                                                                       
                                                                                                                                
SENATOR SEEKINS said  he was concerned that on  a small contract,                                                               
for  example  a  $5,000  contract,  the  whole  amount  would  be                                                               
withheld and none of the  contractors or subcontractors could get                                                               
paid until  the department  got to  that point.  He asked  if the                                                               
division has  envisioned the final  process and whether  it would                                                               
be based on  the affidavit or whether the division  would look at                                                               
other documents  to make sure  that people had complied  with the                                                               
many Davis Bacon requirements.                                                                                                  
                                                                                                                                
MS. DENTON replied  that the affidavit is intended to  be a sworn                                                               
document. The  division would look  at that if  problems surfaced                                                               
and it would be auditing  the payrolls. Absent any complaints, it                                                               
would just reference the affidavit.                                                                                             
                                                                                                                                
MR. DON ETHERIDGE, Alaska AFL-CIO,  said the AFL-CIO has concerns                                                               
with the bill  as drafted and wants to see  the certified payroll                                                               
requirement remain with  the department. The fees  should also be                                                               
earmarked for the  department so they can do  this project right.                                                               
The problem now is that  the department doesn't have enough staff                                                               
to follow up on complaints  about certified payrolls. The AFL-CIO                                                               
also wants  to see a graduated  fee instead of charging  the same                                                               
amount for a $5,000 contract or larger one.                                                                                     
                                                                                                                                
He  explained  that if  you're  trying  to track  down  certified                                                               
payrolls right  now on  the federal level,  you don't  know where                                                               
you're going  to find  them. It could  take forever.  His members                                                               
know when they  are being paid the wrong amount;  now they can go                                                               
to the department.                                                                                                              
                                                                                                                              
SENATOR  FRENCH asked  if the  certified payrolls  were going  to                                                               
stay with the  contracting agency, which might be  the Village of                                                               
Hoonah or some other small agency.                                                                                              
                                                                                                                                
MR.  ETHERIDGE  replied   that  is  correct.  It   could  be  any                                                               
department of  the state, municipalities,  etcetera, and  that is                                                               
why it would be so hard sometimes  to try and track them down. He                                                               
also  noted that  many times  contractors look  at the  certified                                                               
payrolls to make sure their competitors are staying above board.                                                                
                                                                                                                                
SENATOR FRENCH asked if certified  payrolls basically tell you if                                                               
the appropriate wage is being  paid to the appropriate individual                                                               
under the Little Davis Bacon Act.                                                                                               
                                                                                                                                
MR. ETHERIDGE replied yes.                                                                                                      
                                                                                                                                
CHAIR BUNDE asked a where  the federal certified payroll goes and                                                               
whether there is  a central repository where  people could access                                                               
that information.                                                                                                               
                                                                                                                                
MR.  SCOTT JOHANNES,  Association  of  Builders and  Contractors,                                                               
said he saw a  lot of problems with the bill.  One is the Village                                                               
of Hoonah.  Now the state  knows how  to review the  payrolls and                                                               
once this bill goes into  effect, hundreds of agencies across the                                                               
state, the village  of Hoonah being one, will  be responsible for                                                               
doing that  review. They don't have  anyone on staff to  do that.                                                               
This new  system will be less  efficient and the person  doing it                                                               
will be less qualified.                                                                                                         
                                                                                                                                
MR. JOHANNES second concern was  the fee. Basically, the state is                                                               
charging the contractor  the fee on projects  the contractors are                                                               
doing for the state, so the  state is charging itself and they're                                                               
asking  the  contractor to  pass  it  through. He  surmised,  "So                                                               
they're going to increase the cost to themselves."                                                                              
                                                                                                                                
SENATOR STEVENS  asked if it would  be of concern to  him to have                                                               
contractors investigated.                                                                                                       
                                                                                                                                
MR.   JOHANNES   replied   that    until   the   department   has                                                               
certifications for  everyone on the  project, it is not  going to                                                               
be   able  to   release  the   certification  verifying   that  a                                                               
subcontractor is  in compliance  so the  subcontractor can  get a                                                               
final payment.                                                                                                                  
                                                                                                                                
SENATOR STEVENS asked  if that would be any different  than it is                                                               
now.                                                                                                                            
                                                                                                                                
MR.  JOHANNES   replied  yes.  Currently,  department   staff  is                                                               
responsible for reviewing those and have the means to do it.                                                                    
                                                                                                                                
CHAIR BUNDE  asked if, under  the current  system, subcontractors                                                               
are required  to provide  the certified  payroll under  the Davis                                                               
Bacon Act and, if they don't,  the major contractor would be held                                                               
up from payment as well.                                                                                                        
                                                                                                                                
MR. JOHANNES replied that is correct.                                                                                           
                                                                                                                                
MR.  CHARLES WIEGERS,  Associated Builders  and Contractors,  was                                                               
opposed to SB  111 for many of the reasons  already expressed. He                                                               
said the  department is shifting  this effort to  the contracting                                                               
agencies and  some are capable  but some are  already overwhelmed                                                               
with   the  administration   of  contracts.   In  addition,   the                                                               
department is  asking to derive  revenues from this bill.  He was                                                               
skeptical  that  the  $115  million  the  department  intends  to                                                               
receive  from  the  fees  would  be  added  on  to  the  cost  of                                                               
construction [which the state would have to pay for].                                                                           
                                                                                                                                
Another concern he  expressed with is the clearance  of the final                                                               
contract. He  said if a  subcontractor doesn't file,  the general                                                               
contractor's  payment  could be  held  up  and the  subcontractor                                                               
might do it maliciously.                                                                                                        
                                                                                                                                
MR. WIEGERS said  another concern is that  it removes enforcement                                                               
from the  process because the  department will no  longer enforce                                                               
Title 36  wages. It  is going  to rely  on a  piece of  paper. He                                                               
added, "If  someone is dishonest  enough and  disingenuous enough                                                               
to pay  less than prevailing wages  on a project, I  wouldn't put                                                               
it past them to sign a certification saying that they did."                                                                     
                                                                                                                                
He said he  is aware of the large amount  of paperwork because as                                                               
a  contractor  he  dealt  with  it. He  suggested  moving  to  an                                                               
electronic submission to eliminate the huge volumes of paper.                                                                   
                                                                                                                                
MR. TIM ROGERS, Legislative  Program Coordinator, Municipality of                                                               
Anchorage,  said  he has  some  concerns  with the  bill.  First,                                                               
municipalities will become the record  keepers for the Department                                                               
of Labor  and they don't  have the expertise  to do that.  He was                                                               
also concerned  about the fees,  especially for  smaller projects                                                               
around $5,000.  Two hundred dollars  is a  significant percentage                                                               
increase  on  a  smaller  project.  He also  noted  there  is  no                                                               
provision for  emergency work and  his city  is faced with  a few                                                               
million dollars worth  of emergency work caused by  a wind storm.                                                               
There  is  no  provision  allowing  the  municipality  to  get  a                                                               
contractor   to  do   the  repair   work   immediately  and   the                                                               
municipality would  have to wait  for the department to  say it's                                                               
okay  to  put   a  contractor  on  the  job.   This  could  cause                                                               
significant  problems  for  the  municipalities  in  some  cases.                                                               
Municipalities  also  have to  get  the  department to  sign  off                                                               
before they  can issue final  payment. He explained they  do have                                                               
significant  retainage, especially  on the  larger projects,  and                                                               
are required by  state law to pay interest if  there is any delay                                                               
on the  payment. He concluded  by saying they wouldn't  object if                                                               
municipalities were exempted from this bill.                                                                                    
                                                                                                                                
SENATOR SEEKINS  asked if  municipalities are  currently required                                                               
to  make sure  their  contractors are  sending  in the  certified                                                               
payroll affidavits.                                                                                                             
                                                                                                                                
MR. ROGERS  replied that he  couldn't answer that, but  would get                                                               
the answer for him.                                                                                                             
                                                                                                                                
MR. RAYMOND  SMITH, Business Manager,  INPAT, opposed SB  111 for                                                               
the  same reasons  already  given. He  said,  "The Department  of                                                               
Labor needs to monitor certified payroll. That's their job."                                                                    
                                                                                                                                
He spoke of  one contract that included the  Loussac Library, the                                                               
East High School  Teen Career Center, and  Anaktuvuk Pass Housing                                                               
projects. He said if he reads  this bill correctly, he would have                                                               
to go to the Mat-Su Valley,  the school district, and to find out                                                               
who the  housing authority  is in Anaktuvuk  Pass to  monitor the                                                               
certified payrolls. He contended:                                                                                               
                                                                                                                                
     It's just  not feasible. We have  a clearinghouse here.                                                                    
     That's  where the  certified  payrolls  are turned  in.                                                                    
     That's where  interested parties  can go to  find them.                                                                    
     It only makes sense,  gentlemen, and we'd appreciate it                                                                    
     if  you would  take a  little more  care in  looking at                                                                    
     this bill. I don't think  it's right for the workers of                                                                    
     Alaska.                                                                                                                    
                                                                                                                                
SENATOR SEEKINS asked if INPAT monitors the payrolls now.                                                                       
                                                                                                                                
MR.  ROGERS   replied  it  monitors   certain  projects   -  some                                                               
contractors and sometimes their own contractors.                                                                                
                                                                                                                                
SENATOR SEEKINS asked for an estimate of the amount of time it                                                                  
took.                                                                                                                           
                                                                                                                                
MR. ROGERS replied that it takes about 20 percent of his                                                                        
organizer's time and about 7 percent of his own time.                                                                           
                                                                                                                                
CHAIR BUNDE asked Mr. Rogers if he was aware of any federal                                                                     
government clearinghouse and whether folks would have access to                                                                 
that information.                                                                                                               
                                                                                                                                
MR. ROGERS replied that the federal Department of Labor is and                                                                  
that one must write to Seattle to request copies of certified                                                                   
payroll.                                                                                                                        
                                                                                                                                
MR. SCOTT BRIDGES, Teamsters Local 959, told members:                                                                           
                                                                                                                                
     This bill  as drafted is disruptive  to workers because                                                                    
     it  seriously  dilutes  the practicability  to  enforce                                                                    
     rights that  are afforded  under this  body of  law. By                                                                    
     scattering  compliance with  Title  36  and other  wage                                                                    
     statutes,  workers are  placed in  further jeopardy  of                                                                    
     losing  earned  wages  to unscrupulous  contractors.  I                                                                    
     don't  know that  any of  us could  accurately estimate                                                                    
     the amount  of loss to  workers that exists  today with                                                                    
     the  staffing levels  that exist  at the  Department of                                                                    
     Labor.  At a  time when  economic pressures  attack the                                                                    
     worker at  home with greater influence  is greater than                                                                    
     any other  element of our  society, this  bill proposes                                                                    
     to add a little more pressure to that.                                                                                     
                                                                                                                                
     The  bill suggests  that it  would  eliminate a  double                                                                    
     recording requirement.  There are many  practical means                                                                    
     of  overcoming that  particular problem,  which is  not                                                                    
     quite  so monumental  to the  individual contractor  as                                                                    
     some  might have  us  believe.  Eliminating a  clerical                                                                    
     position  at the  Department of  Labor,  which is  also                                                                    
     suggested  by  those  who  proposed  this  legislation,                                                                    
     would   further    cripple   the    DOL's   enforcement                                                                    
     capability.  At this  time, after  I  have spoken  with                                                                    
     several   of   the   enforcement  officers   with   the                                                                    
     Department  of Labor,  they have  suggested to  me that                                                                    
     they  get  so  many  complaints  but  they're  able  to                                                                    
     enforce  only  those that  are  pretty  much slam  dunk                                                                    
     cases. They simply  do not have the time  in their work                                                                    
     week to handle the load that exists today.                                                                                 
                                                                                                                                
     In  our  state's  effort   to  stimulate  the  stagnant                                                                    
     economy,    we    need    to   be    looking    towards                                                                    
     entrepreneurialism as an  economic stimulus for greater                                                                    
     growth rather than regulations of  this type. With that                                                                    
     entrepreneurialism  we're going  to  get that  economic                                                                    
     growth and we'll have enhanced  revenues that the state                                                                    
     so drastically  needs. I appreciate  the time.  I think                                                                    
     that this bill  is one that in its  present form should                                                                    
     go  away  and  I   would  appreciate  this  committee's                                                                    
     assistance in taking a much harder look at this.                                                                           
                                                                                                                                
CHAIR BUNDE asked  how he proposes to pay for  the service so the                                                               
state can continue to provide the same level of service.                                                                        
                                                                                                                                
MR. BRIDGES  replied that eliminating  one clerical  position was                                                               
going to  be a drop in  the bucket in the  suggested $115 million                                                               
fiscal note. He suggested keeping the  "$100 in and $100 out" and                                                               
putting that money in the hands  of the workers so they can spend                                                               
it at  the businesses  in his community.  Whatever taxes  come in                                                               
from  those  construction  dollars   would  enhance  the  state's                                                               
revenues even under the current tax structure.                                                                                  
                                                                                                                                
SENATOR  SEEKINS noted  that Mr.  Wieger's  earlier reference  to                                                               
$115  million was  two decimal  places off.  The amount  is $1.15                                                               
million.                                                                                                                        
                                                                                                                                
MR. BRIDGES said  a clerical position would not  account for much                                                               
of that.                                                                                                                        
                                                                                                                                
MR. JOE SMITH,  part owner of Gastineau Contractors,  said he has                                                               
concerns about  shifting the recording of  certified payroll from                                                               
the  Department  of Labor  to  the  contracting entities.  For  a                                                               
company that bids on Davis Bacon  jobs, it's important to have an                                                               
agency monitoring  their competition. A contracting  agency might                                                               
be less inclined  to dedicate the resources needed to  do the job                                                               
as  its hands  are full  administering the  contract. They  don't                                                               
have the  expertise or  the motivation  to monitor  the certified                                                               
payroll, which would be especially true of small jobs.                                                                          
                                                                                                                                
MR. SMITH  explained that $2,000  is the lower limit  where Davis                                                               
Bacon kicks in so a $200 in  and out fee represents 10 percent of                                                               
a job that size. A sliding scale makes a lot more sense.                                                                        
                                                                                                                                
CHAIR BUNDE asked  if he believes this is a  valuable service and                                                               
if a sliding  fee scale was used, whether he  would be willing to                                                               
pay additional funds so the state could maintain the service.                                                                   
                                                                                                                                
MR. SMITH replied he would.                                                                                                     
                                                                                                                                
MR.  THOMAS  BOEDEKER,  City  Manager of  Soldotna,  said  he  is                                                               
chairman of  the Alaska  Municipal League  legislative committee.                                                               
He noted the statute requires  withheld money due a contractor to                                                               
accumulate at a 10.5 percent interest  if it's not paid within 30                                                               
days  of  billing.  Right  now  municipalities  are  not  earning                                                               
anything near 10.5 percent on  their investments. This bill would                                                               
not let  him make a final  payment to a contractor  that might be                                                               
due because  of a  subcontractor or any  number of  other issues.                                                               
Under this bill,  a municipality would be required by  law to pay                                                               
10.5  percent interest  while  it waited  for  the Department  of                                                               
Labor to resolve a dispute.                                                                                                     
                                                                                                                                
TAPE 03-14, SIDE B                                                                                                            
                                                                                                                              
MR.  BOEDEKER  also  had concerns  with  the  dispute  resolution                                                               
process itself,  and asked  what kind  of disputes  would trigger                                                               
the  process.  He said  right  now  the department  enforces  the                                                               
prevailing wage  law. There  are a  number of  interpretations of                                                               
what work is  covered or not covered and  the municipalities have                                                               
neither  the jurisdiction  nor  the expertise  to  deal with  the                                                               
interpretations the  department has  made. He found  it difficult                                                               
to believe  that filing  copies with  the municipality  only will                                                               
allow the department  to make its determinations.  A burden would                                                               
be placed  on the  municipality "to  do all  the leg  work" every                                                               
time an issue arises.                                                                                                           
                                                                                                                                
He also expressed  concern about how long  the municipality would                                                               
be required to  keep the records. Contractors  keep records while                                                               
they are active and don't organize  them to be researched after a                                                               
job  is closed.  He concluded  that an  amendment is  needed that                                                               
says if  a municipality is  withholding funds while  awaiting the                                                               
department's  certification,  it  is  not  subject  to  retainage                                                               
interest.                                                                                                                       
                                                                                                                                
CHAIR BUNDE asked Mr. Fisher to look at the following issues:                                                                   
                                                                                                                                
   · Electronic submission of the information                                                                                   
   · A graduated fee                                                                                                            
   · The interest concerns on retained payments                                                                                 
   · Emergency provisions                                                                                                       
   · The state's need to generate revenue                                                                                       
   · The percentage of private versus state contracts                                                                           
                                                                                                                                
He asked  Mr. Fisher  to provide the  committee with  feedback on                                                               
those issues.                                                                                                                   
                                                                                                                                
SENATOR STEVENS also asked Mr. Fisher  to look into the impact of                                                               
exempting municipalities.                                                                                                       
                                                                                                                                
CHAIR BUNDE said  he also wants to know how  one would access the                                                               
federal repository's information if this bill becomes law.                                                                      
                                                                                                                                
SENATOR SEEKINS  said he would  like to  know if any  other state                                                               
requirements have to  be met in addition to  the certification of                                                               
payroll  before  payout   is  made  and  how   many  reports  the                                                               
department  currently receives  on  certified  payrolls. He  also                                                               
wanted to know  what the volume of  the paper flow is  and, as it                                                               
comes in, whether  the reports are filed with  or without review.                                                               
He  further asked  if the  affidavit  includes the  same type  of                                                               
report  that is  filed  weekly  or whether  it  just states  that                                                               
prevailing wages were paid.                                                                                                     
                                                                                                                                
SENATOR DAVIS asked  if there are one or two  filings between the                                                               
department and the contracting agency.                                                                                          
                                                                                                                                
MR. FISHER said based on the  bill, the expectation would be that                                                               
the contractor  would file a  notice of intent to  proceed, which                                                               
would be  accompanied by a  $100 fee.  When the project  for that                                                               
particular contractor  was complete,  that contractor  would file                                                               
an affidavit  saying that  he/she had paid  proper wages  and the                                                               
contractor's portion  of the  contract was  complete, accompanied                                                               
by a $100 fee.                                                                                                                  
                                                                                                                                
SENATOR DAVIS noted a clerk's  position costing about $30-$40,000                                                               
would  be eliminated.  She asked  where  the other  money in  the                                                               
fiscal note would come from.                                                                                                    
                                                                                                                                
MR. FISHER  replied that the  revenue generation would  come from                                                               
the filing  fees. The  cost savings  of $40  to $50,000  are from                                                               
eliminating the position.                                                                                                       
                                                                                                                                
SENATOR DAVIS  asked whether the  bill is  based on the  model of                                                               
the Little Bacon Davis Act.                                                                                                     
                                                                                                                                
MR.  FISHER  responded  that he  just  recalled  they  eliminated                                                               
$67,000  from the  budget for  the clerical  position. He  didn't                                                               
have an answer to how the act came into being.                                                                                  
                                                                                                                                
SENATOR DAVIS said  the reason she brought that up  is because SB                                                               
111  might  be eliminating  something  that  is required  by  the                                                               
federal government.                                                                                                             
                                                                                                                                
MR. FISHER replied that he is  unaware of a requirement but would                                                               
ask the question and get a response.                                                                                            
                                                                                                                                
CHAIR  BUNDE  held   the  bill  and  said  he   would  share  the                                                               
information with the committee when it came back.                                                                               
                                                                                                                                
         SB 113-FINANCIAL INSTITUTION EXAMINATIONS/CFAB                                                                     
                                                                                                                              
CHAIR BUNDE announced SB 113 to be up for consideration.                                                                        
                                                                                                                                
MR.   MARK   DAVIS,   Director   of   Banking,   Securities   and                                                               
Corporations, said SB 113 makes two  changes; the first is to the                                                               
banking code, Title 6, which  governs small loan companies (loans                                                               
of $25,000 or less). Right now,  Title 6 requires that small loan                                                               
companies  be  examined  every  year; the  rest  of  the  banking                                                               
industry is on an 18-month  examination schedule. SB 113 proposes                                                               
[changing Title 6  companies] to an 18-month  schedule also. That                                                               
does not  mean a small  loan company  would not be  examined more                                                               
frequently if  examiners felt  it should be  for some  reason. It                                                               
would allow the division to eliminate a banking position.                                                                       
                                                                                                                                
The  second  change  is  to  Title 44,  which  deals  with  state                                                               
government.  The  Alaska   Commercial  Fishing  Agriculture  Bank                                                               
(CFAB)  falls under  Title 44.  SB  113 proposes  to drop  CFAB's                                                               
required  annual  qualitative  examination by  the  division.  By                                                               
statute,  CFAB  must  provide the  legislature  with  an  audited                                                               
financial statement  performed by  outside auditors and  that has                                                               
always been  done and is still  being done. He feels  the outside                                                               
audit report  is sufficient to let  the members of CFAB  know the                                                               
financial condition  of CFAB  or whether their  loans are  in bad                                                               
condition.                                                                                                                      
                                                                                                                                
CFAB was  created in  1980 and  experienced some  difficulties in                                                               
1985.  The banking  examiners were  used in  1985 to  examine the                                                               
bank and  then about two  years later the legislature  passed the                                                               
current statute.  He explained  that the  banking section  of the                                                               
division does not make money. It  requires more funds to run than                                                               
it generates  in fees.  Dropping that  requirement would  save an                                                               
examiner's position and the time could  be used to focus on other                                                               
state banks, which he views  as the department's primary mission.                                                               
CFAB no longer has state funds;  it once had $32 million in state                                                               
funds but paid those back early in  1998. CFAB is not open to the                                                               
public,  except for  some  very small  loans and  one  must be  a                                                               
member to borrow money.                                                                                                         
                                                                                                                                
CHAIR BUNDE asked if it is  fair to say that the CFAB examination                                                               
isn't really  so much a  consumer protection  effort as it  is an                                                               
effort to give it the state's imprint of quality.                                                                               
                                                                                                                                
MR. DAVIS  said he thought that  was the intent when  the statute                                                               
was passed  as CFAB  had some financial  difficulties in  the 80s                                                               
that it  worked through. It  is not a  regular bank and  the bank                                                               
examiners' function  is to look  at state charter banks  and make                                                               
sure they are sound.                                                                                                            
                                                                                                                                
CHAIR BUNDE  asked if it is  fair to say that  the external audit                                                               
that  CFAB goes  through every  year is  comprehensive and  would                                                               
provide members  with needed information to  make judgments about                                                               
the quality of CFAB.                                                                                                            
                                                                                                                                
MR. DAVIS  replied the portion  of the  CFAB statute in  Title 44                                                               
requires that  outside auditors provide financial  statements - a                                                               
full  audit.  By  statute,  the   financial  statements  must  be                                                               
provided to the legislature. The  division is also proposing that                                                               
legislative  audit functions  be removed  but remain  in statute.                                                               
That means if any problem  should arise, the legislature has full                                                               
subpoena power and  could use the banking examiners  if it wanted                                                               
to. An  acceptable accounting  principle statement  would contain                                                               
much of  the same  information and  non-performing loan  or asset                                                               
information would show up.                                                                                                      
                                                                                                                                
SENATOR  STEVENS  said  he  wanted   a  definition  of  what  the                                                               
qualitative examination actually entailed  and asked who reviewed                                                               
the  CFAB audit  if  not the  division. He  noted,  "It would  be                                                               
wasted time spent with me giving me an audit."                                                                                  
                                                                                                                                
MR. DAVIS  replied that by  statute, CFAB is required  to provide                                                               
the legislature and the governor's  office with an outside audit,                                                               
which  is unique.  When it's  sent to  the governor's  office, he                                                               
assumed it would be sent to his division as it has been before.                                                                 
                                                                                                                                
He understood that it goes  to the Division of Legislative Budget                                                               
and Audit when it's sent to the legislature.                                                                                    
                                                                                                                                
SENATOR STEVENS  asked to  know more  about the  qualitative exam                                                               
and how much it cost.                                                                                                           
                                                                                                                                
MR. DAVIS responded  that is language used in the  statute and he                                                               
doesn't  know what  it  means.  It doesn't  appear  in any  other                                                               
banking statute. The examination last  year took 10 days and cost                                                               
$6,300; in FY03,  it's going to cost the  division about $635,000                                                               
to do bank  exams. The division will accept $276,000  in fees and                                                               
therefore  lose about  $359,000. The  division is  trying not  to                                                               
lose so much money.                                                                                                             
                                                                                                                                
To  reduce  costs, the  last  administration  decided not  to  go                                                               
through  every loan,  but when  examining an  FDIC state  charter                                                               
bank, the division goes through every loan.                                                                                     
                                                                                                                                
SENATOR SEEKINS  said it seems  to him  like the audits  that are                                                               
currently done  are not a  consumer protection feature,  but more                                                               
of a membership assurance project.                                                                                              
                                                                                                                                
MR. DAVIS replied that's how CFAB views it.                                                                                     
                                                                                                                                
CHAIR BUNDE  said SB 113  will not balance the  division's budget                                                               
and asked  Mr. Davis if  he would  entertain the notion  that the                                                               
cost of doing  the examinations should be borne by  the people he                                                               
examines on a break-even basis.                                                                                                 
                                                                                                                                
MR. DAVIS replied that would be a  goal, but he needed to work on                                                               
it.  Overall the  division makes  a fair  profit; the  Securities                                                               
section makes a  greater profit. It puts $10 to  $12 million into                                                               
the  general  fund  and  provides a  good  service;  the  Banking                                                               
section loses $359,000.                                                                                                         
                                                                                                                                
SENATOR FRENCH asked if the  division would save about $6,000 per                                                               
year by eliminating the examination.                                                                                            
                                                                                                                                
MR. DAVIS said yes and that  right now an examiner spends 10 days                                                               
at CFAB and that time could  be spent somewhere else with another                                                               
entity. He said  they are working at Bidcos  [ph], the relatively                                                               
new  private financial  groups  of  which there  are  two in  the                                                               
state. They inject money into the economy.                                                                                      
                                                                                                                                
SENATOR  FRENCH  asked  if  the   division  won't  gain  a  whole                                                               
examiner's position for the entire  year, but instead will get 10                                                               
days worth of work out of a person on another project.                                                                          
                                                                                                                                
MR. DAVIS  said that is right  and to put it  in perspective, the                                                               
state bank,  which is  much larger,  will take  the same  time as                                                               
CFAB. He would  rather spend the time on the  state bank and have                                                               
the examiners available to shift  to the securities section, as a                                                               
lot of new securities brokers  have opened for business in Alaska                                                               
within the last couple of years.                                                                                                
                                                                                                                                
CHAIR BUNDE asked if the division anticipates saving $126,000.                                                                  
                                                                                                                                
MR. DAVIS replied yes and said  that bank examiners are paid well                                                               
and are highly skilled.                                                                                                         
                                                                                                                                
SENATOR   SEEKINS  said   the   bill   changes  the   examination                                                               
requirement  to once  every 18  months instead  of once  every 12                                                               
months.  He asked  Mr. Davis  if he  anticipates any  unnecessary                                                               
risk in small loans.                                                                                                            
                                                                                                                                
MR.  DAVIS answered  that right  now there  are eight  licensees,                                                               
seven are owned  by Wells Fargo. At the present  time, given that                                                               
ownership  structure, he  didn't think  there would  be any  risk                                                               
from changing  to 18 months.  He emphasized that if  the division                                                               
needs to  examine someone  more frequently,  like a  new licensee                                                               
that is having difficulty, it would do so.                                                                                      
                                                                                                                                
CHAIR BUNDE thanked participants for  their comments and said the                                                               
committee would bring SB 113 up again next week.                                                                                
                                                                                                                                
             SB 120-CLAIMS BY STATE-EMPLOYED SEAMEN                                                                         
                                                                                                                              
CHAIR BUNDE announced SB 120 to be up for consideration.                                                                        
                                                                                                                                
MS. SUSAN COX, Assistant Attorney  General, explained that SB 120                                                               
would have  the state limit  its waiver of sovereign  immunity as                                                               
it  pertains to  injury  claims brought  by  state employees  who                                                               
happen   to  be   seamen  and   instead   provide  for   worker's                                                               
compensation coverage  for those state employees.  The Governor's                                                               
transmittal letter  indicates that the  intent of the bill  is to                                                               
provide   state   employees   who  are   seamen   with   worker's                                                               
compensation coverage,  similar to all other  state employees. To                                                               
do  that, the  statute by  which the  legislature has  waived the                                                               
state's  sovereign   immunity,  thereby  opening  itself   up  to                                                               
litigation in  tort claims, personal injury  claims, and maritime                                                               
personal injury claims, must be amended.                                                                                        
                                                                                                                                
MS. COX explained that amending  AS 09.52.050 is an approach that                                                               
was  identified in  a  1963 Attorney  General's  opinion and  was                                                               
referenced in  an Alaska Supreme  Court decision on a  case known                                                               
as the  State of  Alaska Department of  Public Safety  vs. Robert                                                               
Brown in  1990. At that  time, the  [court] held that  the Alaska                                                               
Workers'  Compensation  Act  could  not  be  applied  to  be  the                                                               
exclusive  remedy  of  state employees,  because  the  state  had                                                               
waived  its  immunity  without  limitation  for  personal  injury                                                               
actions. If the state wanted to  withdraw its consent to suit and                                                               
apply  worker's  compensation  to  its state  employees  who  are                                                               
seamen, it could do so in a bill like this.                                                                                     
                                                                                                                                
She  explained  from 1983-1991  most  state  employed seamen  who                                                               
worked  aboard  our  state   ferries  had  collective  bargaining                                                               
agreements that  provided for  workers' compensation  benefits in                                                               
lieu  of the  Jones Act  and other  maritime remedies.  For eight                                                               
years those  employees enjoyed workers' compensation  coverage in                                                               
lieu of  litigation. In  1991, a  different Alaska  Supreme Court                                                               
decision,  another (Dale)  Brown decision,  said that  collective                                                               
bargaining   agreements  providing   for  workers'   compensation                                                               
instead  of the  Jones Act  were void  and therefore  couldn't be                                                               
negotiated as a matter of union contract.                                                                                       
                                                                                                                                
MS.  COX said  the purpose  of this  bill is  to bring  the state                                                               
employees  who are  seamen under  workers' compensation  and take                                                               
the state  out of the  realm of  maritime remedies and  Jones Act                                                               
coverage. The  Department of  Law expects  it to  ultimately save                                                               
the  state  money.  The  effective  date is  July  2003,  but  if                                                               
enacted, it  would apply  only to  injuries or  illness occurring                                                               
after that  date. So, anyone  who was  injured in the  last three                                                               
years,  because of  the three-year  statute of  limitations under                                                               
the Jones Act,  would still be able to bring  suit under the laws                                                               
that exist now.                                                                                                                 
                                                                                                                                
MS. COX expects a legal challenge  if this law is passed. She has                                                               
looked at legal  arguments pertaining to those.  The Robert Brown                                                               
decision  from the  Alaska  Supreme Court  and  other cases  from                                                               
several  jurisdictions point  in this  same direction.  She added                                                               
that decisions by  the U.S. Supreme Court in the  last five years                                                               
have made it clear  that if a state does not  consent to be sued,                                                               
the Congress cannot impose liability upon the state.                                                                            
                                                                                                                                
2:57 p.m.                                                                                                                       
                                                                                                                                
CHAIR BUNDE asked  what the volume of claims is,  how it compares                                                               
with workers'  compensation and what  the state's net  gain would                                                               
be.                                                                                                                             
                                                                                                                                
MS. COX replied that at this  point in time the Department of Law                                                               
handles  the  litigation  with ferry  employees.  The  department                                                               
expects to  see a  continuation of some  cases for  injuries that                                                               
occurred in  the last  three years.  Starting with  the effective                                                               
date of  this law,  new injuries  and illnesses  would go  to the                                                               
workers'  compensation  system.  The state  is  self-insured  and                                                               
workers'  compensation  is  obviously   a  no-fault  remedy.  The                                                               
department would expect to see,  by and large, automatic coverage                                                               
of  workers' compensation  matters and  an eventual  reduction in                                                               
the  amount of  litigation the  Department of  Law would  have to                                                               
handle.                                                                                                                         
                                                                                                                                
CHAIR BUNDE  asked about the  volume of claims the  department is                                                               
dealing  with. He  also  asked  if all  employees  of the  Alaska                                                               
Marine Highway  System are seamen  and whether they have  to meet                                                               
other criteria under this legislation.                                                                                          
                                                                                                                                
MS.  COX replied  that for  all intents  and purposes,  those who                                                               
work  aboard the  vessels are  seamen and  are covered  under the                                                               
maritime remedies  that she referred  to. Office  workers onshore                                                               
are  not necessarily  seamen. The  department deals  with a  much                                                               
higher volume of  claims with respect to the  maritime workers in                                                               
the ferry system than other state agencies.                                                                                     
                                                                                                                                
SENATOR  STEVENS asked  about  the Dale  Brown  decision and  the                                                               
basis for voiding the contract.                                                                                                 
                                                                                                                                
MS. COX answered  in the Dale Brown decision,  the Alaska Supreme                                                               
Court decided  as a matter  of labor  law, that unions  could not                                                               
bargain away their individual  members' rights, pre-injury, under                                                               
the federal law.                                                                                                                
                                                                                                                                
SENATOR FRENCH asked if this  would put all state employees under                                                               
the same workers' compensation scheme.                                                                                          
                                                                                                                                
MS. COX replied that is the plan.                                                                                               
                                                                                                                                
SENATOR  SEEKINS asked  if she  had seen  the letter  from Beard,                                                               
Stacy, Trueb and Jacobsen.                                                                                                      
                                                                                                                                
MS. COX replied that she saw it in the hall.                                                                                    
                                                                                                                                
SENATOR SEEKINS  asked for her  opinion based on the  theories of                                                               
law that were set forth in it.                                                                                                  
                                                                                                                                
MS. COX  said she  would be happy  to do that  and noted  she has                                                               
already  evaluated some  of the  theories because  she frequently                                                               
deals with  that firm in  her cases.  Mr. Trueb has  expressed an                                                               
interest  in a  uniform  approach to  maritime  remedies for  all                                                               
seamen. The  Governor disagrees and  she disagrees with  a number                                                               
of the points Mr. Trueb raised in his letter.                                                                                   
                                                                                                                                
SENATOR SEEKINS said  he was particularly interested  in a couple                                                               
of representations  in the letter  about the jurisdiction  of all                                                               
state courts in regard to injuries.                                                                                             
                                                                                                                                
MR. BRAD  THOMPSON, Director, Division  of Risk  Management, said                                                               
this division  acts as  the self-insurer  and handles  the claims                                                               
filed by  state employees.  He noted he  provided members  with a                                                               
chart  that compares  maritime  claims to  those  of other  state                                                               
employees. The  frequency of claims  in 100 full  time equivalent                                                               
positions (FTE)  for all state  employees is  8 per 100  FTE. The                                                               
Departments  of Corrections,  Transportation, Public  Safety, and                                                               
Administration have 10 per 100  FTE. The average cost of maritime                                                               
workers' claims  is $197,000 per  100 claims compared  to $64,000                                                               
for workers' compensation claims.                                                                                               
                                                                                                                                
CHAIR  BUNDE said  he frequently  hears that  commercial fishing,                                                               
logging and aviation are very high  risk jobs and asked if he had                                                               
information  on  how  the  Alaska   Marine  Highway  System  jobs                                                               
compare.                                                                                                                        
                                                                                                                                
MR. THOMPSON  replied that he  thought the  Worker's Compensation                                                               
division would have  a rate per 100 FTE on  its annual report; he                                                               
estimated it was about 10.                                                                                                      
                                                                                                                                
CHAIR BUNDE asked if the expanded  number of claims is due to the                                                               
fact that working  on ferries is inherently  dangerous or because                                                               
ferry workers are more inclined to present a claim.                                                                             
                                                                                                                                
MR.  THOMPSON replied  that the  remedy is  different. Wages  are                                                               
paid to  the end of the  voyage and that is  perhaps an incentive                                                               
for frequency  of claim.  Workers' compensation  only compensates                                                               
for a  time loss  greater than  three days.  He pointed  out that                                                               
within the Robert  Brown decision, the court  clearly stated that                                                               
if the state desires to limit  its tort liability to the Workers'                                                               
compensation Act,  it may  do so by  legislative enactment  of an                                                               
exception to the  waiver of sovereign immunity, which  is what SB                                                               
120 is proposing.                                                                                                               
                                                                                                                                
SENATOR SEEKINS  asked what  is so dangerous  about working  on a                                                               
ferry and noted the claim rate is very high.                                                                                    
                                                                                                                                
MR. THOMPSON agreed the rate of claims is high.                                                                                 
                                                                                                                                
MR. JOE  GELDHOF, Marine  Engineers Beneficial  Association, said                                                               
his organization  represents the  marine engineers on  the Alaska                                                               
Marine Highway  System and licensed engineers  on Alaska tankers.                                                               
SB 120 only  relates to state workers who are  seamen and a small                                                               
number of people  in the Departments of Fish and  Game and Public                                                               
Safety. He said this problem has  been around for years and he is                                                               
not convinced it is really good to go at this time.                                                                             
                                                                                                                                
TAPE 03-15, SIDE A                                                                                                            
                                                                                                                              
MR. GELDHOF  noted that the  marine engineers and  other maritime                                                               
unions have worked  with the state administration  and with Susan                                                               
Cox, who has a lot of  historical knowledge, in the past. He said                                                               
significant legal problems  within the bill need  to be addressed                                                               
before  it moves  out of  committee.  He explained  in one  Brown                                                               
case, the  court struck down  provisions based on a  challenge to                                                               
contractual language brought by  an individual mariner. The other                                                               
Brown  case,  which  preceded  that   one  by  about  two  years,                                                               
addressed sovereign immunity  and how to fix the  problem, but it                                                               
was based  on an attorney  general's opinion issued in  1963 when                                                               
Lyndon Johnson was  in the first year of his  presidency. He said                                                               
that opinion is  fairly dated and suggested  the current attorney                                                               
general update it.                                                                                                              
                                                                                                                                
MR.  GELDHOF  said  one  theory is  that  sovereign  immunity  is                                                               
imbedded  in  the  Alaska  Constitution so  it  would  require  a                                                               
constitutional  amendment  rather  than a  statutory  change.  He                                                               
thought  it would  be wise  to  get an  opinion from  legislative                                                               
counsel and  to then refer  the bill to the  Judiciary Committee.                                                               
He  noted  the  bill  also  needs a  fiscal  note  regarding  the                                                               
administration of workers' compensation.                                                                                        
                                                                                                                                
He added  that real  differences account for  what appears  to be                                                               
substantially  more claims  coming  from  marine activities.  For                                                               
example,  cooking  during   an  8-hour  shift  in   a  prison  is                                                               
fundamentally  different than  on a  ship when  the weather  gets                                                               
rough. He maintained:                                                                                                           
                                                                                                                                
     If you  take the  Tustumena out  to Dutch  Harbor, it's                                                                    
     probably  not a  stationary  deck and  it's long  days.                                                                    
     People are  often sleep  deprived.... There  really are                                                                    
     genuine  differences   in  the  maritime   trades  from                                                                    
     landlubbers like me.                                                                                                       
                                                                                                                                
CHAIR BUNDE asked Ms. Cox to  provide a fiscal note and said that                                                               
interesting legal  points were raised,  but the  Senate President                                                               
would decide whether to refer  SB 120 to the Judiciary Committee.                                                               
With  no  further  business  to come  before  the  committee,  he                                                               
adjourned the meeting at 3:15 p.m.                                                                                              
                                                                                                                                
SENATE L&C COMMITTEE         -23-                  March 25, 2003                                                               

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