Legislature(2003 - 2004)
03/27/2003 01:35 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE SENATE LABOR AND COMMERCE STANDING COMMITTEE March 27, 2003 1:35 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. 82 "An Act relating to the state alcoholic beverage tax for certain wine and other beverages." MOVED CSSB 82(L&C) OUT OF COMMITTEE CS FOR HOUSE BILL NO. 9(FIN) am "An Act relating to the registration of individuals who perform home inspections; relating to regulation of contractors; relating to registration fees for specialty contractors, home inspectors, and associate home inspectors; relating to home inspection requirements for residential loans purchased or approved by the Alaska Housing Finance Corporation; relating to civil actions by and against home inspectors and to civil actions arising from residential unit inspections; repealing a law that limits liability for damages based on a duty to inspect a residential unit to damages caused by gross negligence or intentional misconduct; and providing for an effective date." MOVED SCS CSHB 9(L&C) OUT OF COMMITTEE SENATE BILL NO. 151 "An Act relating to the regulation of natural gas pipelines under the Pipeline Act." HEARD AND HELD HOUSE BILL NO. 146 "An Act repealing the termination date of certain provisions that require the reporting of social security numbers and automated data matching with financial institutions for child support enforcement purposes; and providing for an effective date." HEARD AND HELD HOUSE BILL NO. 124 "An Act relating to commercial motor vehicle drivers and their employers and to railroad-highway grade crossings; and providing for an effective date." HEARD AND HELD CS FOR HOUSE BILL NO. 64(JUD) "An Act relating to court approval of the purchase of structured settlements." HEARD AND HELD PREVIOUS ACTION SB 82 - See Labor and Commerce minutes dated 3/13/03. HB 9 - See Labor and Commerce minutes dated 3/18/03. SB 151 - No previous action to record. HB 146 - No previous action to record. HB 124 - No previous action to record. HB 64 - No previous action to record. WITNESS REGISTER Mr. Doug Letch Staff to Senator Gary Stevens Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on SB 82. Mr. Chuck Harlamert Chief of Operations Tax Division Department of Revenue PO Box 110400 Juneau, AK 99811-0400 POSITION STATEMENT: Commented on SB 82. Ms. Heather Nobrega Staff to Representative Rokeberg Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on HB 9. Mr. Terry Duszynski PO Box 83149 Fairbanks AK 99708 POSITION STATEMENT: Opposed HB 9. Mr. Dave Owens Owens Inspection Service PO Box 3589 Palmer AK 99645 POSITION STATEMENT: Supported HB 9. Ms. Carol Perkins Active Inspections PO Box 871825 Wasilla AK 99687 POSITION STATEMENT: Opposed HB 9. Ms. Mary Jackson Staff to Senator Wagoner Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on SB 151 for the sponsor. Mr. Ben Schoffmann, Project Manager Alaska Business Unit, Domestic Production Marathon Oil Company P.O. Box 196168 Anchorage AK 99519-6168 POSITION STATEMENT: Supported SB 151. Mr. Anthony Scott Division of Oil and Gas Department of Natural Resources 400 Willoughby Ave. Juneau, AK 99801-1724 POSITION STATEMENT: Supported SB 151. Commissioner Jim Strandberg Regulatory Commission of Alaska (RCA) Department of Community & Economic Development PO Box 110800 Juneau, AK 99811-0800 POSITION STATEMENT: Supported SB 151. Mr. Todd Larkin Staff to Representative Jim Holm Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on HB 124. Representative Lesil McGuire Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Sponsor of HB 124. Ms. Karen Hemmings No address provided POSITION STATEMENT: Supported HB 124. Mr. Paul LaBolle Staff to Representative Foster Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on HB 64 for the sponsor. Mr. Albert Tamagni, Sr. Structured Financial Settlements of Anchorage Alaska Anchorage AK POSITION STATEMENT: Supported HB 64. Mr. Randy Dyer, Executive Vice President National Structured Settlement Trade Association No address provided POSITION STATEMENT: Supported HB 64. ACTION NARRATIVE TAPE 03-16, SIDE A SB 82-ALCOHOLIC BEVERAGE TAX FOR WINE & OTHERS CHAIR CON BUNDE called the Senate Labor and Commerce Standing Committee meeting to order at 1:35 p.m. Present were Senators Stevens, Davis and Chair Bunde. He announced SB 82 to be up for consideration. SENATOR STEVENS moved to adopt Amendment 1. CHAIR BUNDE objected for discussion purposes. MR. DOUG LETCH, staff to Senator Gary Stevens, explained he got together with representatives from the small wineries and the Department of Revenue to come up with new language that would reduce the amount of revenue lost to the state. That amendment is before members [Amendment 1]. It would delete the 3,000- gallon per year exemption and replace it with 100 gallons per month, which will insure that the state will receive tax revenue on every gallon sold over 100 gallons each month. The second part of the amendment would further protect the state by insuring that two or more taxpayers who have a relationship in a business would be taxed as a single taxpayer. That means a company cannot get an exemption for each one of its brands of wine. CHAIR BUNDE asked what the new fiscal note would look like. MR. LETCH said Amendment 1 needs to be adopted by the committee before a new fiscal note could be prepared but he understood it should severely reduce the amount of lost income to the state. MR. CHUCK HARLEMERT, Department of Revenue, estimated the tax impact on an ongoing basis would be between $18 and $20 thousand dollars per year. In the first year, it would be twice that amount, or about $37,000. CHAIR BUNDE announced there were no further questions. He removed his objection and Amendment 1 was adopted. SENATOR STEVENS moved to pass CSSB 82(L&C) and the attached fiscal note from committee with individual recommendations. There were no objections and it was so ordered. CSHB 9(FIN)am - HOME INSPECTORS/CONTRACTORS CHAIR BUNDE announced CSHB 9(FIN)am to be up for consideration. MS. HEATHER NOBREGA, staff to Representative Rokeberg, sponsor, said she would answer questions, but there were none. SENATOR DAVIS moved to adopt the Senate Labor and Commerce committee substitute to CSHB 9(FIN)am, version U. There were no objections and it was so ordered. SENATOR STEVENS moved to pass SCS CSHB 9(L&C) from committee with individual recommendations. SENATORS SEEKINS and FRENCH arrived at 1:44 p.m. CHAIR BUNDE announced that he had been notified that other people wanted to testify. MR. TERRY DUSZYNSKI, Fairbanks building inspector since 1978, said when this bill was introduced, it was about providing proper qualifications for home inspectors, insurance and continuing education. However, this bill seems to have gotten way out of control as far as what it's trying to accomplish. It is tying to dictate how an inspection is to be done it but doesn't provide everything that is necessary. On page 6, under existing homes, the provisions do not specify what code they refer to. Another concern is subsection (d) on page 6, which specifies that the inspection is valid for 180 days after the date the home inspector signs and dates the report. However, it doesn't keep home inspectors from being sued after six months. On page 10 the home inspector is held liable for two years on a new construction, yet the builder has only a one-year warranty on the house. He thought that was a little out of line. Page 18 contains a list of components of a residence that the inspector is liable for and includes built-in appliances, such as dishwashers and built-in ranges. He thought it goes too far in defining what inspectors are supposed to do. He said the language on page 20 is of most concern as it says that inspectors shall determine whether the construction conforms to relevant provisions of the construction codes of the municipality or of the state building code, as applicable, at each of the following stages of construction. There is no state building code for residential construction. The State of Alaska has adopted uniform building codes, but only for four-plexes and above. Now, home inspectors are going to be held liable for something that there is no state law to follow. All of the cities have different codes. Inspectors need to know what standards they will be held to when doing an inspection. MR. DAVE OWENS, Owens Inspection Service, said he has not supported the bill in the past, but he could if three amendments were adopted. One would be to consolidate and create an Alaska state residential building code and regulations for commercial building inspectors. He said this bill does not address the relationship between real estate agents and third-party inspectors. Liability is the biggest problem that most inspectors have. If this bill passes with this level of liability, a good percentage of the inspectors on the Alaska housing roster that perform new construction will go out of business. MS. CAROL PERKINS, Active Inspections, stated opposition to HB 9 and said the bill would open inspectors up to a lot of "lawyering." She pointed out the building department has a grievance process and the authority to adopt codes and make amendments so that the codes are adjustable to a local situation. MS. NOBREGA said the first concern is addressed on page 6, (b). She explained that the bill allows for a preinspection document, which talks about the expectations and what the home inspector will be doing, which can vary. This also applies to appliances. A home inspector might not look at appliances according to the preinspection document. She pointed out the 180-day validity of the report means that its accuracy is valid only for that period of time. She told members the provisions on page 10 for bringing a claim, one-year for an existing home and two-years for a new home, are from the statute of limitations of when a lawsuit can be brought. On page 20, the state building code language was inserted to cover the possible eventuality of getting one. MS. NOBREGA said Mr. Owens' concerns about liability are partially covered in a compromise. Because the bill repeals the AHFC provision, section 41, other provisions were inserted to limit inspectors' liability. One limits the length of the report's validity, another limits the one and two year period, and another limits who can sue them. Repealing section 41 does not open inspectors up to frivolous lawsuits. Now, a homeowner can only sue for gross negligence or intentional misconduct. Section 41 will allow a homeowner to sue for regular negligence and damage. The standard under that provision is very, very high. CHAIR BUNDE thanked her for her explanation and noted that a motion was pending. He asked for the roll to be called. SENATORS FRENCH, SEEKINS, STEVENS, DAVIS and BUNDE voted yea and SCS CSHB 9 (L&C) moved out of committee. SB 151-REGULATION OF NATURAL GAS PIPELINES CHAIR BUNDE announced SB 151 to be up for consideration. MS. MARY JACKSON, staff to Senator Wagoner, sponsor, said SB 151 is a housekeeping measure. In 2000, the legislature amended the Alaska Pipeline Act. One of the provisions of that legislation allowed for two classes of pipeline service: firm and interruptible. Those services applied to the North Slope gas pipeline because it was the only pipeline at that time. Since then, the Kenai Kachemak (KKPL) pipeline has come on line. The KKPL was initially intended to run from the southern end of the Kenai Peninsula back to Kenai as the oil reserves were in the south. The KKPL wrote to the Regulatory Commission of Alaska (RCA) requesting that it be allowed to offer both firm and interruptible services. The RCA replied that the 2000 legislation governing classes of service to pipelines was only specific to the North Slope. This bill deletes "North Slope" and adds a section that defines a natural gas pipeline facility and a natural gas pipeline carrier. MS. JACKSON told members the bill should contain an immediate effective date as the pipeline is under construction. She pointed out the Department of Natural Resources submitted a zero fiscal note, but included some concerns on page 2. [Senator Wagoner] disagrees with the assertion that this could potentially be used to impede pipeline access for non- affiliated producers and could hinder natural gas exploration. She told members that representatives of Marathon Oil were present to speak to that. She noted the function of the RCA is to insure fairness. MR. BEN SCHOFFMANN, Marathon Oil, said he is the project manager for the Kenai Kachemak Pipeline project known as KKPL. SB 151 would provide the RCA with a tool to offer two types of service to pipelines, firm and interruptible, that it currently applies to the North Slope gas line. FERC has used the same policy often in the Lower 48 over the past two decades by FERC. This bill would clarify that the RCA has the authority to grant other pipelines the authority to grant those two classes of service, otherwise known as contract carriage, to regulated gas pipelines elsewhere in the state. He explained that firm service is a commitment between the pipeline owner and its customers to provide a designated amount of throughput on a set daily basis. The shipper agrees to pay for that capacity whether or not it is utilized. It is a risk decision the shipper makes to reserve capacity. The shipper pays what is known as a reservation charge for that privilege. Interruptible service is offered on an as available basis. The pipeline would offer to transport volumes and the shipper would only have to pay for services actually used. The parties have no long-term commitment as to promised throughputs, deliveries or payments for gas that is not rendered for delivery. SB 151 is important to investors because when you put money on the line, it's good to know that people are actually going to be interested in using the pipeline capacity you're building. Offering firm transportation is a way for pipeline investors to make sure they will have customers and to understand what the level of interest is and how serious that interest is. With firm transportation, shippers are asked to commit in advance and make payments for capacity whether it's used or not. It sets a minimum standard for how large the pipeline must be. He stated. "Without that, it's a wild guess...It helps them reduce their risk and manage their expectations." MR. SCHOFFMANN said SB 151 is important for shippers because they want to be sure that they're going to be able to ship gas on that line. Shippers generally have two types of gas sales contracts and those are firm or interruptible. If a pipeline is then placed between a gas supplier and their end customer, like Enstar, Chugach Electric, industrial users and residents, but it doesn't have the capability to offer the same type of service, then it almost undermines the contractual relationship between a supplier and a customer. The supplier needs the ability not only to produce the gas with certainty, but also to ship that gas to the customer with certainty. This helps the shipper align its transportation services with its gas contracts. If it has firm gas contracts, it more than likely will want firm transportation services. CHAIR BUNDE asked if this bill would only allow the smaller gas pipeline the same flexibility that TAPS has currently. MR. SCHOFFMANN replied that current law deals with natural gas pipelines and the TAPS. CHAIR BUNDE asked him to address DNR's concern that the fiscal note might discourage gas development. MR. SCHOFFMANN replied that the situation with the fiscal note seems to imply that unaffiliated shippers would not be able to have certainty with which to conduct their operations, but he disputes that implication because the producers are given two options, one of firm service and the other to wait and see what the development is before they put money on the line. The RCA will be involved in insuring that this is a non-discriminatory process that is fairly transparent. This includes designating expansions of the line. SENATOR FRENCH asked if this legislation would be necessary if the KKPL was proposed as a common carrier pipeline. MR. SCHOFFMANN replied that the common carrier provisions are already in AS 42.06. This is a clarification to the common carrier provisions that allow two classes of service. Now, practically speaking, all common carriers offer interruptible service only, because if the pipelines get oversubscribed, everybody gets curtailed. SENATOR FRENCH said his sense is that this legislation would not be necessary if it just involved common carriers, but that wouldn't satisfy his business plans. MR. SCHOFFMANN agreed and said SB 151 is necessary as a function of the development of the gas transportation and deregulation process that's happened over the past couple of decades. Projects that define what has happened in the industry have not come up during that time frame. SENATOR SEEKINS asked if SB 151 will allow smaller independent producers to find carriers to get their products to market that might not exist under any other scenario unless they built their own pipelines. MR. SCHOFFMANN replied they believe SB 151 will be advantageous to all potential customers, small producers included, because they are not being asked to commit anything in advance over the long-term. However, they will see a pipeline with published and regulated tariffs and the fact that the pipeline is getting built and is getting closer to some of their operations provides a huge incentive to accelerate their plans or drill wells that they wouldn't have if they were 33 miles further away from that infrastructure. SENATOR SEEKINS said that this addresses an overall concern he has about how to encourage smaller independent businesses to get into the energy production business in Alaska. MR. ANTHONY SCOTT, Division of Oil and Gas, DNR, said the contract carriage provisions can reduce producer risk for a non- producer affiliated pipeline, which is the general case outside of Alaska. With a producer-affiliated pipeline, there is the potential for concern that during the open season, the pipeline could decide to either meet the needs of the producers, which he understands is not the case with KKPL, or monopolize capacity before an independent shipper has explored or discovered the gas. This legislation will affect not only KKPL, but future pipelines as well. SENATOR FRENCH asked if this proposed pipeline is going to be owned by an affiliated or non-affiliated pipeline company. MR. SCHOFFMANN responded that KKPL is a joint venture between Marathon and Unocal, who are also committed as shippers. They are an affiliated company. The issues that were raised really do fall under the purview of the RCA to make sure that a fair process is in place. If Marathon and Unocal find gas in other areas of the Kenai Peninsula where they have not yet explored, they would be in the same position as anyone else who has yet to make a commitment to the pipeline. The RCA has the authority to look at the tariffs to make sure they are balanced. SENATOR SEEKINS moved to adopt Amendment 1 to add an immediate effective date. There were no objections and it was so ordered. MR. STRANDBERG, RCA Commissioner, testified that this approach would be a new one in the regulation of pipelines. TAPE 03-16, SIDE B MR. STRANDBERG said he didn't know how SB 151 would affect preexisting firm transport contracts that can be negotiated under new language and whether the RCA would have the ability to require the parties to those contracts to renegotiate for a pro rata share reduction that would be required under the common carrier provision. SENATOR SEEKINS questioned why this would be considered a new approach if, in effect, SB 151 only removes "North Slope." MR. STRANDBERG replied currently, the RCA is just regulating two gas pipelines in the state. The North Slope pipeline hadn't been constructed yet. The two gas lines are regulated under the state's public utility statutes. He clarified, "We really have no gas pipelines that are regulated under AS 42.06 right now." SENATOR SEEKINS noted that it isn't a new approach in statute, since the statute already exists for North Slope gas. It's just that there isn't one in operation yet. MR. STRANDBERG said he is correct. CHAIR BUNDE asked Mr. Strandberg to submit a written response to the concern expressed by DNR in its fiscal note, and said he would distribute copies to the committee. He announced the committee would hold SB 151 until further notice. HB 146-CHILD SUPPORT/SOCIAL SECURITY NUMBERS CHAIR BUNDE announced HB 146 to be up for consideration. REPRESENTATIVE LESIL MCGUIRE, sponsor, said HB 146 stems from a federal act that went into place in 1996 called the Personal Responsibility and Work Opportunity Reconciliation Act of '96. The act's goal is simply to reduce dependence on welfare programs across the board. The federal act required numerous additional requirements for child support enforcement programs across the United States. One of those requirements was the reporting of social security numbers and matching it to automated data from financial institutions for the purpose of child support enforcement. REPRESENTATIVE MCGUIRE said while the welfare system was designed to provide the basics of food and shelter to children, sometimes a family was receiving welfare because a "deadbeat" mom or dad did not participate financially in their child's life. The Act recognized that new tools were needed to help state agencies crack down on "deadbeat" moms and dads. She cautioned if HB 146 is not enacted, the state would lose $75.6 million - $15.4 million for Alaska's Child Support Enforcement Division (CSED) and $60.2 million for Alaska's temporary assistance program. She explained the legislature adopted the law that is before them in 1997 and readopted it in 1998 with a sunset provision. HB 146 repeals the sunset provision that would go into effect on July 1 of this year. The state would continue on with the policy that has been in place since 1997. REPRESENTATIVE MCGUIRE described another part of the bill as further clarification of existing policy. The word "resident" on page 1, line 7, was removed so that any person applying for a commercial fishing license shall provide their social security number. She noted that would codify a policy that has been in effect since 1997. CHAIR BUNDE added that a few years ago deadbeats owed over $100,000 in child support arrears and the people were all fathers and most of them were fishermen. There being no further questions, he held the bill. HB 124-COMMERCIAL MOTOR VEHICLE DRIVERS/EMPLOYER CHAIR BUNDE announced HB 124 to be up for consideration. MR. TODD LARKIN, staff to Representative Jim Holm, said HB 124 is a housekeeping measure suggested by the Administration. It would cost the state $20 to $40 million in highway funds if it does not come into compliance with a federal code that says commercial drivers need to stop at railroad crossings. Although that's taught in CDL classes and is a federal requirement, it's never been the law in Alaska. He found that Alaska is already past its deadline for compliance, so the bill should be hurried along. He noted that HB 124 has an immediate effective date. MS. KAREN HEMMINGS stated support for HB 124 so that drivers can be in compliance with their CDL licensing program. MR. MATT LAVECK said he was available to answer questions. There being no further comments, CHAIR BUNDE set the bill aside. HB 64-PURCHASE OF STRUCTURED SETTLEMENTS CHAIR BUNDE announced HB 64 to be up for consideration. MR. PAUL LABOLLE, staff to Representative Foster, sponsor, said this bill sets up oversight for transfers of structured settlements, primarily for three reasons. He explained: One is consumer protection. Factoring companies have been purchasing structured settlements for as low as 20 cents on the dollar. A structured settlement by definition is tax-free. Once they have lump-summed it out, they now have to pay tax on their lump sum. So, whatever the discount hits them for, taxes hit them for it again. The second reason is for the good of the state. A lot of times a structured settlement is set up because it is determined that the payee isn't equipped to deal with a large lump sum and so they set him up so there will be a continuous flow of cash. Once they lump sum it out, they spend up all the money, they become a burden on the state. Also, for the good of the state, these structured settlements are often set up as non-transferable agreements, but since there is no oversight set up, the right hand doesn't know what the left hand is doing. So, they're happening illegally. Third, there is a federal tax law currently on the books [that] passed last year which imposes a 40 percent prohibitive tax on any transfer of structured settlements unless it has been approved by a qualified order, such as a state statute, state law or overview of an administrative body. CHAIR BUNDE asked if HB 64 would apply to the legislature and GARVEE bonds. He noted the bill has a zero fiscal note and questioned whether there would be a cost for the court reviews. MR. LABOLLE said he didn't know the ins and outs of the court system or why it submitted a zero fiscal note. SENATOR FRENCH asked how many structured settlements get arranged in Alaska each year. MR. LABOLLE replied that he wasn't sure. CHAIR BUNDE asked if he won the lottery and wanted an immediate payout, whether the court would have to decide if he was competent to do that. MR. LABOLLE said that the lottery isn't technically a structured settlement. MR. AL TAMAGNI, SR., Structured Financial Associates of Anchorage, Alaska, said the bill addresses who will pay the costs, which is the purchaser of the annuity contract upon court approval. He indicated that's why the bill has a zero fiscal note. MR. TAMAGNI explained that his business deals with cases of personal injury or wrongful death and workers' compensation where the people and the courts may have decided they would like to get periodic payments in lieu of a cash settlement. He noted: Annuities are purchased [indisc.] and provide some people with a lifetime income, either on a monthly basis or a lump sum basis or combinations with cost of living escalators. As a result of that, under Section 104 A(2) of the code [indisc.], all these future payments are exempt from gross income. And the payments are to provide and to maintain the people's style of living, provide medical expenses and also dependent expenses in a lot of cases. That's kind of what in general a structured settlement is. MR. RANDY DYER, Executive Vice President, National Structured Settlement Trade Association, supported Mr. Tamagni's comments but clarified that the bill before the committee was not intended to regulate a structured settlement; it was intended to regulate the factoring of them. Factoring companies arose in the mid-1990s for the purpose of buying streams of payments. He told members: There are companies that will buy mortgage payments, lottery payments, etc., but some of them ventured into buying structured settlements and we became very concerned because the people who receive such settlements are generally people who have catastrophic physical injuries and when represented by counsel in a claim decided the best way for them to take their money was in periodic payments so they would be assured of never outliving their funds. The factoring companies entered the scene and started buying these payments. We became concerned that a number of people might lose the security of their payments to these companies and end up falling back on the social safety net. He explained how it works: Assume you're getting $2,000 a month tax-free. A factoring company would approach you and say, 'Listen, we want to buy payments, but we only want to buy $500 of your $2,000.' After signing a 20-page contract, your $2,000 a month checks will be transferred to the factoring company in your name. In the contract you gave the factoring company the right to cash the $2,000 check, which it does. It keeps the $500 and sends you $1,500. He said this first transaction is probably the best deal it is going to get, because the factoring company knows if you're talking to it, you're talking to other factoring companies. So this best deal is 75 percent of the present value of the payments that you sell, which means you've suffered a discount rate of 25 percent. You used to receive your $2,000 on the first of the month, but now the factoring company receives it on that date, cashes it, takes $500 and sends the balance to you maybe on the second, the fifth or the eighth of the month. Each month it delays the payments, which puts economic pressure on you. You call and ask where your payment is and they give you some excuse. The pressure builds up until what you really need is to get paid another $500 a month. The factoring company has to sell you that payment, because the contract gives that factoring company the right of first refusal, plus the factoring company controls your check. Now that the factoring company essentially owns your check, it's only going to give you half of what it's worth. If there is a third deal, they might give you 25 percent of what it's worth and so on. You might realize the problem is that the factoring company owns your check so you contact the annuity company and tell it not to send the factoring company the check any more. Once the check goes back to you, you'll find that you're in breach of another portion of the 20-page contract and at that point the factoring company will go into court in its state, not in Alaska, and get an order against you that gives it the rights to all of the payments until their judgment is satisfied. MR. DYER said this bill is important because it will end that practice. A federal bill was passed that will put the hammer on these companies; it imposes a 40 percent excise tax on these transactions that falls on the factoring companies unless they can get a court order that allows them to do this. In some cases, it will be important for some people to sell a portion of their payments for good reasons and they shouldn't be denied the right to do that. He stated, "We want to make sure that it is done fairly." MR. DYER said this bill provides important up-front disclosures. For example, workers' compensation payments may not be sold and this bill provides for disclosures to other interested parties. A person who owed child support couldn't sell the child support payments. This legislation has been enacted in 35 states and a number of other states are considering it this year. It will probably be enacted by all states in the next two years. CHAIR BUNDE asked what a typical cash payment would be to purchase that portion of the check. MR. DYER replied assuming your payments were $500 for the next 10 years and your settlement had a value of $20,000, that first deal might pay $15,000. The next deal wouldn't be so generous and you wouldn't have any other place to go. SENATOR SEEKINS asked where the statute provides that the parties to this agreement pay to the court. MR. DYER said he believed it was in the statute, but couldn't find it. CHAIR BUNDE asked Mr. Dyer to work with the bill's sponsor and said the committee would bring it up again. There being no further business to come before the committee, CHAIR BUNDE adjourned the meeting at 2:50 p.m.