Legislature(2005 - 2006)BELTZ 211

04/07/2005 01:30 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved SB 145 Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
Including But Not Limited to:
Heard & Held
Moved CSSB 131(L&C) Out of Committee
Moved CSSB 139(L&C) Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         April 7, 2005                                                                                          
                           1:35 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Con Bunde, Chair                                                                                                        
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Ben Stevens                                                                                                             
Senator Johnny Ellis                                                                                                            
Senator Bettye Davis                                                                                                            
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 139                                                                                                             
"An  Act  relating  to  termination   and  oversight  of  boards,                                                               
commissions, and agency programs;  extending the termination date                                                               
of the Board of Marital and  Family Therapy; and providing for an                                                               
effective date."                                                                                                                
     MOVED CSSB 139(L&C) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 131                                                                                                             
"An Act  amending the Alaska Wage  and Hour Act as  it relates to                                                               
the  employment of  a person  acting in  a supervisory  capacity;                                                               
providing  definitions for  persons  employed in  administrative,                                                               
executive, and  professional capacities,  for persons  working in                                                               
the capacity of  an outside salesman, and for  persons working in                                                               
the  capacity of  a salesman  employed on  a straight  commission                                                               
     MOVED CSSB 131(L&C) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 108                                                                                                             
"An  Act  relating  to the  regulation  of  insurance,  insurance                                                               
licensing,  surplus   lines,  insurer  deposits,   motor  vehicle                                                               
service  contracts,  guaranteed automobile  protection  products,                                                               
health  discount plans,  third-party administrators,  self-funded                                                               
multiple   employer   welfare   arrangements,   and   self-funded                                                               
governmental plans; and providing for an effective date."                                                                       
     HEARD AND HELD                                                                                                             
SENATE BILL NO. 145                                                                                                             
"An  Act  authorizing   the  making  of  loans   for  upgrade  of                                                               
commercial fishing tender vessels and gear."                                                                                    
     MOVED SB 145 OUT OF COMMITTEE                                                                                              
CS FOR HOUSE BILL NO. 81(L&C)                                                                                                   
"An  Act establishing  an administrative  fine and  procedure for                                                               
construction  contractors  in certain  circumstances;  increasing                                                               
the amount of a civil penalty  for persons acting in the capacity                                                               
of contractors  or home inspectors;  modifying the elements  of a                                                               
crime   involving   contractor   registration   and   residential                                                               
contractors; modifying  the exemptions  from regulation  under AS                                                               
08.18 for contractors; and  exempting the administrative hearings                                                               
for imposing  an administrative fine on  construction contractors                                                               
from  the  hearings conducted  by  the  office of  administrative                                                               
hearings in the Department of Administration."                                                                                  
     HEARD AND HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB 139                                                                                                                  
SHORT TITLE: EXTENSIONS OF OCCUPATIONAL BDS/AGENCIES                                                                            
SPONSOR(s): RULES BY REQUEST OF LEG BUDGET & AUDIT                                                                              
03/09/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/09/05       (S)       L&C, FIN                                                                                               
03/31/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/31/05       (S)       Scheduled But Not Heard                                                                                
04/05/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
04/05/05       (S)       Heard & Held                                                                                           
04/05/05       (S)       MINUTE(L&C)                                                                                            
04/07/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: SB 131                                                                                                                  
SHORT TITLE: WAGE & HOUR ACT: EXEC/PROF/ADMIN/SALES                                                                             
SPONSOR(s): LABOR & COMMERCE                                                                                                    
03/04/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/04/05       (S)       L&C, FIN                                                                                               
03/17/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/17/05       (S)       Heard & Held                                                                                           
03/17/05       (S)       MINUTE(L&C)                                                                                            
04/07/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: SB 108                                                                                                                  
SHORT TITLE: INSURANCE                                                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/14/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/14/05       (S)       L&C, FIN                                                                                               
03/31/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/31/05       (S)       Heard & Held                                                                                           
03/31/05       (S)       MINUTE(L&C)                                                                                            
04/07/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: SB 145                                                                                                                  
SHORT TITLE: LOANS FOR COMMERCIAL FISHING TENDERS                                                                               
SPONSOR(s): SENATOR(s) STEDMAN                                                                                                  
03/16/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/16/05       (S)       L&C, FIN                                                                                               
04/07/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
BILL: HB  81                                                                                                                  
SHORT TITLE: CONTRACTOR LICENSE ENFORCEMENT                                                                                     
SPONSOR(s): REPRESENTATIVE(s) ANDERSON                                                                                          
01/19/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/19/05       (H)       L&C, JUD, FIN                                                                                          
01/21/05       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
01/21/05       (H)       Heard & Held                                                                                           
01/21/05       (H)       MINUTE(L&C)                                                                                            
01/26/05       (H)       L&C AT 3:15 PM CAPITOL 17                                                                              
01/26/05       (H)       Moved CSHB 81(L&C) Out of Committee                                                                    
01/26/05       (H)       MINUTE(L&C)                                                                                            
02/02/05       (H)       L&C RPT CS(L&C) NT  5DP 1NR                                                                            
02/02/05       (H)       DP: LYNN, KOTT, LEDOUX, GUTTENBERG,                                                                    
02/02/05       (H)       NR: ROKEBERG                                                                                           
02/09/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
02/09/05       (H)       Moved CSHB 81(L&C) Out of Committee                                                                    
02/09/05       (H)       MINUTE(JUD)                                                                                            
02/11/05       (H)       JUD RPT CS(L&C) NT  3DP 3NR                                                                            
02/11/05       (H)       DP: GRUENBERG, KOTT, ANDERSON;                                                                         
02/11/05       (H)       NR: DAHLSTROM, COGHILL, MCGUIRE                                                                        
03/02/05       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/02/05       (H)       Heard & Held                                                                                           
03/02/05       (H)       MINUTE(FIN)                                                                                            
03/07/05       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/07/05       (H)       Moved CSHB 81(L&C) Out of Committee                                                                    
03/07/05       (H)       MINUTE(FIN)                                                                                            
03/09/05       (H)       FIN RPT CS(L&C) NT 3DP 6NR                                                                             
03/09/05       (H)       DP: HAWKER, FOSTER, MEYER;                                                                             
03/09/05       (H)       NR: MOSES, JOULE, STOLTZE, CROFT,                                                                      
                        KELLY, CHENAULT                                                                                         
03/16/05       (H)       TRANSMITTED TO (S)                                                                                     
03/16/05       (H)       VERSION: CSHB 81(L&C)                                                                                  
03/18/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/18/05       (S)       L&C, JUD                                                                                               
04/07/05       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
WITNESS REGISTER                                                                                                              
TOM MAHER, Staff                                                                                                                
Senator Therriault                                                                                                              
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on SB 139 for sponsor.                                                                          
BARBARA GABIER,                                                                                                                 
Division of Occupational Licensing                                                                                              
Department of Commerce, Community & Economic Development                                                                        
PO Box 110800                                                                                                                   
Juneau, AK 99811-0800                                                                                                           
POSITION STATEMENT: Supported CSSB 139(L&C).                                                                                  
JOHN SEDOR                                                                                                                      
Anchorage Society for Human Resource Management                                                                                 
Society for Human Resource Management, Alaska State Council                                                                     
Anchorage AK                                                                                                                    
POSITION STATEMENT: Explained CSSB 131(L&C).                                                                                  
LINDA HALL, Director,                                                                                                           
Division of Insurance                                                                                                           
Department of Commerce, Community & Economic Development (DCCED)                                                                
PO Box 110800                                                                                                                   
Juneau, AK 99811-0800                                                                                                           
POSITION STATEMENT: Commented on SB 108.                                                                                      
JEFFREY HART, Shop Steward                                                                                                      
Public Employees Local 71 and                                                                                                   
Department of Transportation &                                                                                                  
  Public Facilities Employee                                                                                                    
Juneau, AK  99801-7898                                                                                                          
POSITION STATEMENT: Opposed Sections 28 and 29 in SB 108.                                                                     
CHRIS PACE                                                                                                                      
Juneau AK                                                                                                                       
POSITION STATEMENT: Opposed Sections 28 and 29 in SB 108.                                                                     
FRANK PUSCHAK                                                                                                                   
Anchorage AK                                                                                                                    
POSITION STATEMENT: Opposed SB 108.                                                                                           
COLLEEN SAVOIE, Consultant                                                                                                      
Marsh USA                                                                                                                       
Public Employees Local 71                                                                                                       
Anchorage AK                                                                                                                    
POSITION STATEMENT: Opposed SB 108.                                                                                           
MARY STOLL, Counsel                                                                                                             
Public Employees Local 71 Trust                                                                                                 
ASEA Local 52 Trust                                                                                                             
Seattle WA                                                                                                                      
POSITION STATEMENT: Opposed SB 108.                                                                                           
TIM BARRY                                                                                                                       
Staff to Senator Stedman                                                                                                        
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Presented SB 145 for the sponsor.                                                                         
GREG WINEGAR, Director                                                                                                          
Division of Investments                                                                                                         
Department of Commerce, Community & Economic Development                                                                        
PO Box 110800                                                                                                                   
Juneau, AK 99811-0800                                                                                                           
POSITION STATEMENT: Supported SB 145.                                                                                         
JERRY MCCUNE, President                                                                                                         
Cordova Fishermen United                                                                                                        
Juneau AK                                                                                                                       
POSITION STATEMENT: Supported SB 145.                                                                                         
REPRESENTATIVE TOM ANDERSON                                                                                                     
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Sponsor of HB 81.                                                                                         
GREY MITCHELL, Director                                                                                                         
Division of Labor Standards and Safety                                                                                          
Department of Labor & Workforce                                                                                                 
PO Box 21149                                                                                                                    
Juneau, AK 99802-1149                                                                                                           
POSITION STATEMENT:  Supported CSHB 81(L&C).                                                                                  
MIKE PRAX                                                                                                                       
North Pole AK                                                                                                                   
POSITION STATEMENT: Opposed HB 81.                                                                                            
PATRICK DALTON                                                                                                                  
Delta Junction AK                                                                                                               
POSITION STATEMENT:  Opposed HB 81.                                                                                           
TERRY DUSZYNSKI                                                                                                                 
Building Inspector                                                                                                              
Fairbanks AK                                                                                                                    
POSITION STATEMENT:  Supported HB 81.                                                                                         
MARY GIRVAN                                                                                                                     
Delta Junction AK                                                                                                               
POSITION STATEMENT: Asked question regarding HB 81.                                                                           
NANCY DOBBERPUHL                                                                                                                
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Opposed HB 81.                                                                                            
JIM CALLAHAN                                                                                                                    
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Opposed HB 81.                                                                                            
NELS CHURCH                                                                                                                     
Fairbanks AK                                                                                                                    
POSITION STATEMENT:  Waived his time to testify on HB 81.                                                                     
RANDY DOLL                                                                                                                      
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Supported HB 81.                                                                                          
SUE ELLISON                                                                                                                     
ABC Inc.                                                                                                                        
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Supported HB 81 with an amendment.                                                                        
JEFF ALLING                                                                                                                     
Alcan Builders                                                                                                                  
North Pole AK                                                                                                                   
POSITION STATEMENT: Opposed HB 81.                                                                                            
ROGER BURGGRAFF                                                                                                                 
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Opposed HB 81.                                                                                            
TODD LARKIN                                                                                                                     
North Pole AK                                                                                                                   
POSITION STATEMENT: Opposed HB 81.                                                                                            
SETH CHURCH                                                                                                                     
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Supported amending Section 12 of CSHB                                                                     
MIKE MUSICK                                                                                                                     
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Supported HB 81.                                                                                          
JACK HEBERT                                                                                                                     
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Supported HB 81.                                                                                          
LISA PEGER                                                                                                                      
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Opposed HB 81.                                                                                            
RANDY GRIFFIN                                                                                                                   
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Opposed HB 81.                                                                                            
ALAN WILSON, Co-chair                                                                                                           
Legislative Committee                                                                                                           
Alaska Homebuilding Association                                                                                                 
Juneau AK                                                                                                                       
POSITION STATEMENT: Supported HB 81.                                                                                          
ACTION NARRATIVE                                                                                                              
CHAIR CON BUNDE called the Senate Labor and Commerce Standing                                                                 
Committee meeting to order at 1:35:06 PM. All members were                                                                    
         SB 139-EXTENSIONS OF OCCUPATIONAL BDS/AGENCIES                                                                     
CHAIR CON BUNDE announced SB 139 to be up for consideration and                                                                 
that it provides the ramp down mechanism should a board be                                                                      
discontinued and increases sunset dates.                                                                                        
TOM MAHER, staff to Senator Therriault, stated that the sponsor                                                                 
supported the proposed amendments.                                                                                              
SENATOR RALPH SEEKINS moved to adopt CSSB 139(L&C), version I.                                                                  
CHAIR  BUNDE explained  that  the changes  were  proposed by  the                                                               
administration and objected  so he could explain  them. The first                                                               
change  transferred  the  board's   statutory  authority  to  the                                                               
department  and the  second change  added a  new section  (4). He                                                               
withdrew  his  objection  and  CSSB   139(L&C),  version  I,  was                                                               
BARBARA  GABIER, Division  of  Occupational Licensing,  supported                                                               
the CS.                                                                                                                         
SENATOR  SEEKINS moved  to report  CSSB  139(L&C) from  committee                                                               
with  individual   recommendations  and  attached   fiscal  note.                                                               
Senators  Ben  Stevens, Ellis,  Davis,  Seekins  and Chair  Bunde                                                               
voted yea; and CSSB 139(L&C) moved from committee.                                                                              
         SB 131-WAGE & HOUR ACT: EXEC/PROF/ADMIN/SALES                                                                      
CHAIR CON BUNDE announced SB 131 to be up for consideration.                                                                    
SENATOR SEEKINS moved to adopt CSSB 131(L&C), version F.                                                                        
SENATOR ELLIS objected for an explanation.                                                                                      
JOHN  SEDOR, Anchorage  Society  for  Human Resource  Management,                                                               
said he also  represented the Alaska State  Council and explained                                                               
the CS  to the committee. He  said that Section 1  adds "computer                                                               
systems analyst, computer programmer,  software engineer or other                                                               
similarly   skilled   workers",   which  references   a   federal                                                               
regulation  saying that  computer systems  workers can  be exempt                                                               
either   under  the   executive  exemption,   the  administrative                                                               
exemption or,  specific to computer  systems workers,  the hourly                                                               
exemption where they  are paid over $27.63 an hour  for a 40-hour                                                               
workweek and making over $1,000 for the week.                                                                                   
He said  that Section  2 requires that  all exemptions  must meet                                                               
the  two   times  minimum  wage   test.  Also,   various  federal                                                               
definitions  had  been  clarified.    He  said  that  adding  the                                                               
definition of  highly compensated employees (paid  over $100,000)                                                               
was  suggested, but  was not  included  since it  was already  in                                                               
federal regulations.                                                                                                            
Section 3 deleted the supervisory  capacity, which does not exist                                                               
under the  federal system as  an exemption. Section  5 references                                                               
the  Fair Labor  Standards Act,  which is  consistent with  other                                                               
provisions of  current statute that  encourage the  department to                                                               
look at federal regulations in determining its own regulations.                                                                 
1:43:49 PM                                                                                                                    
CHAIR  BUNDE noted  there  were  no questions  at  this time  and                                                               
pointed  out  that it  was  his  intent  to change  the  two-year                                                               
timeframe  for establishing  a claim  to six  months. He  offered                                                               
that as conceptual Amendment 1.                                                                                                 
1:44:37 PM                                                                                                                    
SENATOR SEEKINS  supported having  six-months for  claims, either                                                               
choate or inchoate,  instead of the standard  two-year statute of                                                               
limitations  saying, "I  probably would  have been  a little  bit                                                               
CHAIR BUNDE  said he  just wanted  to have  a reasonable  time in                                                               
which to establish a claim.                                                                                                     
1:45:54 PM                                                                                                                    
SENTOR  ELLIS asked  if  he meant  six months  from  the date  of                                                               
CHAIR BUNDE  answered no, six  months from the effective  date of                                                               
the bill.                                                                                                                       
SENATOR  SEEKINS  asked if  he  meant  six  months to  bring  the                                                               
lawsuit or to bring the lawsuit to its final adjudication.                                                                      
CHAIR BUNDE replied, "Bring the lawsuit."                                                                                       
SENATOR ELLIS  asked if  there would be  any effective  notice to                                                               
the people affected by this bill.                                                                                               
CHAIR BUNDE  responded that was  a good question, but  he thought                                                               
labor organizations would make sure their members knew about it.                                                                
SENATOR  ELLIS pointed  out that  wouldn't cover  all the  people                                                               
they are talking about.                                                                                                         
CHAIR  BUNDE replied  that he  could make  the same  argument for                                                               
people who should know now they have two years.                                                                                 
1:48:17 PM                                                                                                                    
SENATOR ELLIS asked who requested the bill.                                                                                     
CHAIR BUNDE  replied that the  request came from  business owners                                                               
and others.                                                                                                                     
SENATOR ELLIS said he supported  the legislation overall, but the                                                               
conceptual amendment needed more thought.                                                                                       
CHAIR BUNDE withdrew conceptual Amendment 1.                                                                                    
SENATOR ELLIS  moved to  pass CSSB  131(L&C) from  committee with                                                               
individual recommendations.  Senators Davis, Ellis,  Ben Stevens,                                                               
Seekins and Chair  Bunde voted yea; and CSSB  131(L&C) moved from                                                               
                        SB 108-INSURANCE                                                                                    
CHAIR CON BUNDE  announced SB 108 to be up  for consideration. He                                                               
stated  that he  was waiting  for a  CS to  be delivered,  but he                                                               
would like to hear the bill anyhow.                                                                                             
LINDA  HALL,  Director,  Division  of  Insurance,  Department  of                                                               
Commerce,  Community &  Economic  Development  (DCCED), said  she                                                               
wanted  to comment  on Sections  28  and 29,  union health  trust                                                               
language, in  more detail.  She explained  that she  brought this                                                               
issue  before  the  Legislature for  deliberation  and  a  policy                                                               
decision. She related  how she tried to clarify  a provision that                                                               
already exists in statute that says:                                                                                            
     Except as  otherwise provided in  this title,  a person                                                                    
     that provides coverage for the  cost of medical care...                                                                    
     is subject to  this title unless the  person shows that                                                                    
     they are  subject to a  jurisdiction of  another agency                                                                    
     of  this  state  or  the federal  government  with  the                                                                    
     appropriate certificate, license  or document issued by                                                                    
     the   other  governmental   agency   that  permits   or                                                                    
     qualifies the  person to  provide coverage  for medical                                                                    
This language  requires entities  providing medical care  to have                                                               
oversight someplace and  if they don't, they would  have it under                                                               
Title 21. In  March of last year  one of the unions  asked her if                                                               
her  division  regulated  it.  To formulate  a  reply,  she  sent                                                               
letters to the five union  health trusts asking for documentation                                                               
of who regulates them.                                                                                                          
MS. HALL  said she  received responses, which  have taken  a long                                                               
time  to  go  through  and more  information  was  needed  still.                                                               
Approximately  19,000   state  employees'  health   benefits  are                                                               
provided by  union health trusts  and she wanted  the Legislature                                                               
to have  some discussion  and make  a policy  call as  to whether                                                               
some  standards should  be set  to  insure the  viability of  the                                                               
trusts. She hadn't had any  specific contact with people from the                                                               
health trusts,  but had some  contact from union members.  One of                                                               
the issues  she thought  was important to  deal with  was bonding                                                               
limits because  those are exceedingly  high, but she  really felt                                                               
strongly about getting financial  statements that show the assets                                                               
and liabilities of  the health trusts stating,  "Frankly, I think                                                               
most of them have that and if they don't they should."                                                                          
She  said  there have  been  allegations  that no  actuary  would                                                               
certify  various  things,  but  in fact,  that  is  exactly  what                                                               
actuaries  do. She  went to  the  point of  getting an  actuarial                                                               
opinion  to make  sure she  understood what  an actuary  does and                                                               
noted that she has two of them on her staff.                                                                                    
     They  do look  at the  contribution rate,  which is  an                                                                    
     equivalent of  premium. It's not the  contribution rate                                                                    
     by the Legislature to the  fund; it is the contribution                                                                    
     that is the  total money necessary to  fund the benefit                                                                    
     plan. It  will be  a combination  of the  monies funded                                                                    
     through  the  GF,  through the  budget,  and  what  the                                                                    
     employees  are   charged  in  addition  to   the  money                                                                    
     provided by  the state.  And it  also would  include an                                                                    
     actuarial analysis of the adequacy  of reserves to make                                                                    
     sure  there   is  adequate  money  set   aside  to  pay                                                                    
     benefits, both current and  future liabilities. I think                                                                    
     those  are critical  pieces. We  talked about  solvency                                                                    
     regulation  of  a  number  of   entities  and  I  think                                                                    
     entities entrusted with the welfare  of the benefits of                                                                    
     their members  provided through their  state employment                                                                    
     should  have a  similar kind  of protection.  Those are                                                                    
     the lists in the bill of the minimum standards.                                                                            
     There  are  some  additional standards  that  generally                                                                    
     relate to the  kinds of things we require  - an outside                                                                    
     appeals  process.  The  complaints   that  come  to  my                                                                    
     division, some  valid, some not, as  are all complaints                                                                    
     that we get. There is  an appeal process, but it's very                                                                    
     formalized   in   the   current  practice,   which   is                                                                    
     arbitration   or   the   court  system.   That's   very                                                                    
     intimidating  to many  people.  I've had  people in  my                                                                    
     office  in tears  because they  are intimidated  by the                                                                    
     process  and I've  tried  to help  them  even though  I                                                                    
     don't have any regulatory authority....                                                                                    
     I  am  willing  to  look  at things  that  seem  to  be                                                                    
     onerous.  I've  heard  estimates and  I  think  they're                                                                    
     probably fairly accurate that it  would cost $40,000 to                                                                    
     $50,000 for  an actuarial opinion.  When I look  at the                                                                    
     millions  of  dollars  that are  in  those  trusts,  it                                                                    
     doesn't seem to  me to be a huge amount  to pay. And as                                                                    
     I said, it's  my understanding that most  of the trusts                                                                    
     do  this  anyway,  but  I think  it's  again  a  policy                                                                    
     decision of  the Legislature to  decide whether  or not                                                                    
     you   think  those   standards   should  be   statutory                                                                    
     standards or not.                                                                                                          
1:58:44 PM                                                                                                                    
CHAIR BUNDE said  she mentioned that state  employees are covered                                                               
by  union health  plans  and  asked if  any  private people  were                                                               
covered by those plans.                                                                                                         
MS. HALL  replied that is one  of the questions she  has asked of                                                               
the union health trust.                                                                                                         
     In trying  to determine the  exact kind of  entity they                                                                    
     are - we  have some that apparently  have a combination                                                                    
     of other entities' coverage  within the state employees                                                                    
     pieces - and  I can't answer that yet,  until I receive                                                                    
     the information that I've  requested from those groups.                                                                    
     The  intent  of  the  bill is  not  as  was  originally                                                                    
     interpreted   to   cover    some   of   the   political                                                                    
     subdivisions  -  municipalities,   school  districts  -                                                                    
     those  types  of  entities  at   all.  They  are  in  a                                                                    
     different category...  It doesn't cover -  I think it's                                                                    
     probably not  an accurate term, but  private unions, so                                                                    
     to  speak  - Teamsters  -  the  Teamsters health  trust                                                                    
     would not come under this.  Those are entities that are                                                                    
     all  regulated  under  the ERISA  [Employee  Retirement                                                                    
     Income  Security Act  of 1974]  self-insured plans  and                                                                    
     probably  60 percent  of  Alaskans  covered by  private                                                                    
     insurance  are  actually  covered under  some  type  of                                                                    
     self-insured plan  that is actually governed  by ERISA.                                                                    
     These  governmental plans  fall  outside  of the  ERISA                                                                    
2:00:24 PM                                                                                                                    
JEFFREY HART, Department of  Transportation and Public Facilities                                                               
(DOTPF), said  he began  paying dues  as a  member of  the Public                                                               
Employees Local  71 30-years ago and  has been serving as  a shop                                                               
steward  for  the  past  14  years. At  first,  he  favored  some                                                               
additional review  over Local 71's  trust fund,  especially after                                                               
the recent  under-funding of the  state PERS and TRS  systems and                                                               
listening  to debates  as  to why  our  nation's social  security                                                               
system is  in disarray. It  would seem that  additional oversight                                                               
would give  comfort to those  who don't deal  with it on  a daily                                                               
basis.  However, he  changed his  support of  Sections 28  and 29                                                               
because they would add extra  costs and tasks to state government                                                               
employees who already  have a heavy workload.  In addition, those                                                               
sections are  unnecessary because  their health plan  is adequate                                                               
to meet participant's needs and it could be improved if needed.                                                                 
2:03:52 PM                                                                                                                    
CHRIS PACE said  he is a trustee with the  Alaska State Employees                                                               
Association (ASEA) health  plan, but he is testifying  on his own                                                               
behalf. He wanted  to clarify a few points.  ASEA's recent Ditman                                                               
opinion  poll  indicates that  75  percent  of the  members  were                                                               
satisfied  with their  current coverage.  Additionally, it  found                                                               
that  52  percent were  not  interested  in additional  well-baby                                                               
coverage. The  plan has about  200,000 claims per year  and about                                                               
40  or  .002  percent  of  them get  appealed  to  the  Board  of                                                               
Trustees. The  appeal procedure is  similar to what  is described                                                               
in the PERS  discussion except after the Board  of Trustees hears                                                               
an  appeal,  it  would  go  to arbitration  rather  than  to  the                                                               
Superior Court.                                                                                                                 
The board shares the same plan  as the appellant and they have to                                                               
be  adjudicated consistently  and  fairly across  the board.  The                                                               
trustees  have the  statutory authority  to make  changes in  the                                                               
benefit plan. The  ASEA plan was taken verbatim  from the state's                                                               
PERS  plan with  minor modifications  to tailor  the deductibles,                                                               
co-pays and out-of-pocket limits to the needs of the group.                                                                     
2:07:15 PM                                                                                                                    
MR.  PACE emphasized  that one  of  the major  factors ASEA  been                                                               
confronted  with is  controlling  dramatically increasing  health                                                               
care costs.  So it contracted  with a  PPO hospital and  joined a                                                               
health  care coalition  with other  labor unions,  municipalities                                                               
and  private employers.  Some members  were  unhappy about  being                                                               
steered to an Anchorage PPO hospital.                                                                                           
The state website  estimates that nationally up to  15 percent of                                                               
spouses  and  dependents  may  not,  in  fact,  be  eligible  for                                                               
benefits; ASEA members  were concerned with that as  well as with                                                               
building reserves.  Currently, ASEA's plan has  reserves equal to                                                               
about  four months  of  past claims  experienced  in addition  to                                                               
other amounts  for incurred, but  not reported, claims.  The plan                                                               
in SB  108 discusses  about two  and a half  months for  the same                                                               
purpose. A  union plan has  to be more conservative  with reserve                                                               
levels, because  it doesn't have  the same financial  resources a                                                               
state plan has.  ASEA carries stop-loss reinsurance  in the event                                                               
of  catastrophic claims  and both  plans  use consultants  rather                                                               
than actuaries to  forecast trends. ASEA has  an annual financial                                                               
audit performed by  an independent CPA and he  emphasized that it                                                               
has a  letter of agreement with  the State of Alaska  allowing it                                                               
to separate from the state's  plan. On request, ASEA provides the                                                               
annual audit and actuarial reports  to the Division of Retirement                                                               
and Benefits  that performs  the oversight.  ASEA is  the largest                                                               
union in the state and the trust is large.                                                                                      
2:10:10 PM                                                                                                                    
MR. PACE said he believes that  SB 108 is attempting to create an                                                               
oversight  function  that  is  already  being  performed  by  the                                                               
Division of Retirement and  Benefits. ASEA's administrative costs                                                               
are kept at about 3 percent  and the state's are about 5 percent.                                                               
If this bill  becomes law, that adds to  the administrative costs                                                               
and any added  costs would have to  be passed on and  come out of                                                               
paychecks. He summarized:                                                                                                       
     To me that's the unfortunate  thing about this bill. It                                                                    
     will  only result,  I  think, in  moving  money out  of                                                                    
     employee's   paychecks   and   into  the   pockets   of                                                                    
     actuaries,  bond  brokers  and  accountants.  It's  not                                                                    
     going to  do anything  to improve the  actual benefits;                                                                    
     it  won't  change  the appeals;  it  won't  change  the                                                                    
     reality  that  we've  got  to   go  to  PPOs  and  cost                                                                    
     containment.  It's going to  add just a redundant level                                                                    
     of   state  regulatory   oversight   to  the   existing                                                                    
MR.  PACE said  he  liked the  consumer  protection section  that                                                               
restricts  the  late-night  ads for  discount  health  insurance.                                                               
Those  ads really  confuse some  of his  members who  are already                                                               
upset about money  being taken out of their  paychecks for health                                                               
benefits. They  keep telling the  board they  want to go  over to                                                               
the discount companies and don't  understand how risky that would                                                               
CHAIR BUNDE thanked  him for his testimony and  announced that he                                                               
would take teleconference testimony.                                                                                            
2:12:40 PM                                                                                                                    
FRANK PUSCHAK of Anchorage said he  had been a state employee for                                                               
21  years and  he is  a  trustee of  one of  the affected  health                                                               
trusts,   but  he   is  speaking   in   his  personal   capacity.                                                               
Professionally, he had been a  bank examiner for 28 years, having                                                               
examined trust departments and trust companies. He opposed                                                                      
Sections 28 and 29 of SB 108 saying:                                                                                            
     Our  trust  is  a   legal  entity  accountable  to  the                                                                    
     Superior Court  of Alaska. The trustees  are elected by                                                                    
     the  members.  Under the  terms  of  our health  trust,                                                                    
     Section 5,  the minimum  standard they must  appeal to,                                                                    
     are that  the trustees are required  to discharge their                                                                    
     duties and  administer the trust fund  assets solely in                                                                    
     the  interest  of  participating  employees  and  their                                                                    
     beneficiaries   and  for   the  exclusive   purpose  of                                                                    
     providing  benefits  to   participating  employees  and                                                                    
     beneficiaries and to defray  rereadable expenses of the                                                                    
     benefit  plan. They  are required  to  carry out  their                                                                    
     duties  with   the  care,   skill,  and   prudence  and                                                                    
     diligence under  the circumstances then  prevailing for                                                                    
     a  person acting  in like  capacity  and familiar  with                                                                    
     such matters.  This is called  the prudent man,  but it                                                                    
     is not  the prudent man  standard to the person  on the                                                                    
     street;  it is  the prudent  man standard  of a  person                                                                    
     with fiduciary experience.                                                                                                 
     Our plan  is subject to  a number of  federal statutes,                                                                    
     which I enumerated in the  last committee meeting and I                                                                    
     included on  my testimony  that I submitted  earlier by                                                                    
     email. So, I won't redo that.                                                                                              
     There  have been  138,084  medical,  dental and  vision                                                                    
     claims  submitted since  July 1  of the  current fiscal                                                                    
     year.  Of  that  number,  there  have  been  47  claims                                                                    
     submitted to the  Board of Trustees for  an appeal. The                                                                    
     appeal   process    is   done   by    our   third-party                                                                    
     administrator,  then  the  Board of  Trustees  and  the                                                                    
     arbitration,  which  is  binding. Now,  if  that's  not                                                                    
     enough,  since we're  subject  to  Superior Court,  the                                                                    
     Superior Court can then  override the arbitrator. While                                                                    
     I agree  that arbitration  can be expensive,  our trust                                                                    
     provides the  cost to be  shared between the  trust and                                                                    
     the  appellant.  But,  again,   it's  in  my  fiduciary                                                                    
     responsibility  - we  just can't  have everybody  going                                                                    
     off  and putting  things  into  arbitration, because  I                                                                    
     have an  obligation to reduce  the cost. And so  we had                                                                    
     to go  to something. If  there is another way  that can                                                                    
     provide  the independent  third-party  at lesser  cost,                                                                    
     I'm open  to it, but,  in fact,  our plan is  even more                                                                    
     accountable than  the state select benefit  plan. Under                                                                    
     that plan,  the commissioner  of Administration  is the                                                                    
     sole arbitrator and nobody can override that.                                                                              
     Again,  with respect  to  the  fiduciary standard,  I'm                                                                    
     really  not  aware  of  what   the  state  follows  for                                                                    
     fiduciary  standards.  Again,   we  have  followed  the                                                                    
     language outlined  in ERISA, which is  what governs the                                                                    
     non-governmental  plans.   I  have  enclosed   with  my                                                                    
     previous email  a copy of  our health plan  compared to                                                                    
     the state's like  benefit plan and you are  able to see                                                                    
     that  there  are  some   slightly  better  benefits  at                                                                    
     definitely lower cost.                                                                                                     
     Our trust  was formed because  the state wanted  to get                                                                    
     rid  of the  expense  and effort  of administering  it.                                                                    
     Under  Article   19.03  of  our  contract,   our  union                                                                    
     relieved  the  state  of  any  and  all  obligation  to                                                                    
     provide health insurance benefits.  This bill would add                                                                    
     additional work to the state  and expense and certainly                                                                    
     add  additional expense  and work  to our  health trust                                                                    
     for things that are already  being done at better cost.                                                                    
     We already have  consultants who advise us  and help us                                                                    
     formulating policies, plans,  rates, and everything. An                                                                    
     independent  CPA  firm  audits our  records  and  those                                                                    
     records are  made public. We  follow the ERISA  code in                                                                    
     providing everything  to our  members that  is required                                                                    
     under ERISA even though they  are not obliged to follow                                                                    
     it. There's  an old saying,  "If it ain't  broke, don't                                                                    
     fix it."  However, I do  agree with the  corollary that                                                                    
     says,  'If it  ain't broke,  it can  be improved.'  and                                                                    
     that's what I'm  willing to do and I'm open  to any and                                                                    
     all suggestions from my members.                                                                                           
     I  have been  a regulator  for  28 years  and when  the                                                                    
     bankers complain to me  about having over-regulation, I                                                                    
     would say, 'Well, Dirty Harry  did stick his .44 at you                                                                    
     and said, 'Make  my day.' However, there is  a point at                                                                    
     which  regulation has  become  onerous  in the  banking                                                                    
     industry  and   this  is  another  example   of  it.  I                                                                    
     encourage you  to consider  all the  other parts  of SB                                                                    
     108 in dealing with insurance,  because there are a lot                                                                    
     of  scams and  other things  going out  to the  public.                                                                    
     But, in  the case of  our governmental trust,  they are                                                                    
     being    administered   properly.    The   fiduciaries,                                                                    
     themselves,  when  they  run for  election  must  first                                                                    
     certify  that  they  meet all  the  requirements  of  a                                                                    
     fiduciary  under  ERISA with  respect  to  any kind  of                                                                    
     criminal    violations,   convictions    or   whatever.                                                                    
     Furthermore,  they must  also attest  to the  fact that                                                                    
     they  understand  what  they  are  going  to  do  as  a                                                                    
     fiduciary and  that position requires a  high degree of                                                                    
     understanding  of  employee  benefit  plans,  fiduciary                                                                    
     standards  and  investment  policy. So,  again,  if  it                                                                    
     ain't broke,  don't fix it  and I encourage you  to let                                                                    
     us go  about doing our  business as best we  can, which                                                                    
     is pretty good.                                                                                                            
2:18:36 PM                                                                                                                    
COLLEEN SAVOIE, Consultant for Marsh  USA representing the Public                                                               
Employees  Local 71,  said she  wanted to  highlight a  couple of                                                               
items that  had been discussed  previously. The first one  is the                                                               
need for  financial oversight  of these  plans that  already have                                                               
published annual  audits. This  bill would  have an  actuary that                                                               
certifies to the  financial condition of the  plan, but actuaries                                                               
are unwilling to "insure" financial solvency of any plan.                                                                       
2:19:49 PM                                                                                                                    
Another issue of  concern was the claims  oversight because there                                                               
is  already a  mechanism  by which  appeals  are resolved.  These                                                               
trusts have a  medical review, a review by the  Board of Trustees                                                               
and finally,  arbitration. It's important to  understand that the                                                               
process needs to  be formal so that the trust  can make sure that                                                               
all  participants are  treated equally  and fairly.  Finally, she                                                               
pointed out again that the  trustees are trained fiduciaries with                                                               
ultimate responsibility to the participants  of these trust funds                                                               
and they have the right to bring suit in Superior Court.                                                                        
2:21:06 PM                                                                                                                    
MARY STOLL  said she  is trust counsel  to both  Public Employees                                                               
Local 71 Trust  and the ASEA Local 52 Trust  and that trusts have                                                               
a very small incidence of appeals  in comparison to the number of                                                               
claims that are actually paid every year.                                                                                       
She also heard Ms. Hall  reference self-funded plans that are not                                                               
regulated by ERISA  because they are governmental  plans that are                                                               
exempt under  its definitions  and pointed  out that  ERISA plans                                                               
are reviewed by the both the  federal court and the Department of                                                               
Labor. Both  of her  plans follow  ERISA as  a guideline  and she                                                               
     There  are  specifically  two  requirements  that  they                                                                    
     cannot  follow because  there are  Department of  Labor                                                                    
     regulations  that  are  specific ERISA  plans,  one  of                                                                    
     which would be the  appeals process wherein arbitration                                                                    
     cannot be  binding. You have  to bring suit  in federal                                                                    
     court if you have a complaint.                                                                                             
     The second issue would be  the requirement of filing an                                                                    
     annual report  called a Form  5500 with the  IRS, which                                                                    
     government plans  are exempted  from. If the  intent is                                                                    
     to cover  self-funded plans that  are not  regulated by                                                                    
     ERISA,  the municipalities,  school  districts are  not                                                                    
     regulated  by  ERISA  and  I can't  find  a  reason  to                                                                    
     distinguish  between  those   self-funded  groups  from                                                                    
     these state union groups that are self-funded.                                                                             
     I'm aware  of no  self-funded governmental plan  in the                                                                    
     State of  Alaska, which  has failed  financially. Their                                                                    
     concerns about  this in-depth actuarial  reporting seem                                                                    
     to be unwarranted given the  fact that they are already                                                                    
     providing  actuary  reports  to the  state,  that  post                                                                    
     their   financial  statements.   That  information   is                                                                    
     available  to  the state  and  they  are not  suffering                                                                    
     financial at this point. They  are well-run trusts with                                                                    
     well-trained and  diligent fiduciaries who  are relying                                                                    
     on  the  advice  of  advisors  who  carry  professional                                                                    
     diligence insurance,  malpractice insurance,  et cetera                                                                    
     and  are reviewed  at  least every  other  year by  the                                                                    
     trust for  whether they're providing the  services they                                                                    
     are hired to provide.                                                                                                      
     I agree with  Mr. Puschak that this is  not a situation                                                                    
     where  it's broken;  it really  does  not need  fixing.                                                                    
     It's  adding financial  burden to  the trust,  which is                                                                    
     unwarranted.  They  already  provide  equal  or  better                                                                    
     coverage than the state plan  is providing. By imposing                                                                    
     the  Division of  Insurance into  the processes  of the                                                                    
     Board of  Trustees, I think  it would enable  them from                                                                    
     providing a  plan best suits their  participants. These                                                                    
     plans  don't go  blithely about  their plan  decisions;                                                                    
     they  conduct  independent  and scientific  surveys  to                                                                    
     determine  what their  participants  want  and I  think                                                                    
     you've  heard  testimony  that they  respond  to  those                                                                    
     requests  and desires  by their  participants and  they                                                                    
     fit  it  into  the   limited  budgets  that  they  have                                                                    
     available to provide an excellent health plan.                                                                             
     Speaking  to the  appeals process,  and again,  I think                                                                    
     Ms.  Hall's testimony  confirmed  what  we had  already                                                                    
     suspected  - that  the concerns  are raised  by a  very                                                                    
     small  percentage  of  participants stemming  from  the                                                                    
     Anchorage  area PPO  arrangement and  from the  appeals                                                                    
     process.  I can't  find anything  in this  Senate bill,                                                                    
     which  would  redress  either   of  those  two  issues.                                                                    
     There's  no  language in  the  bill  that would  change                                                                    
     either the  PPO or the  appeals process. The  bill just                                                                    
     adds  expense and  unnecessary oversight  and reporting                                                                    
     Ms. Hall  also referenced  two other groups,  which are                                                                    
     non-State  of  Alaska  employees participating  in  the                                                                    
     trust. That  is not the  case for ASEA Local  52 Trust,                                                                    
     but  it is  the  case for  Public  Employees Local  71.                                                                    
     Public Employees  71 has the Municipality  of Anchorage                                                                    
     employees  who  are  represented by  PE  71,  Anchorage                                                                    
     School District employees who are  represented by PE 71                                                                    
     and  the Haines  Borough and  City of  Haines employees                                                                    
     who are  represented. Those  groups would  be adversely                                                                    
     impacted by this decision, whereas  they aren't even in                                                                    
     the target of the  proposed legislation, which I think,                                                                    
     would  be unfair.  We also  have  responded, both  last                                                                    
     April and last March respectively  for each trust, to a                                                                    
     very in-depth  request for information by  the Division                                                                    
     of  Insurance.   We  complied  with  the   request  and                                                                    
     provided in-depth  information about the  operations of                                                                    
     the  trust, how  they  do comply  voluntarily with  the                                                                    
     ERISA standards,  training, provided  trust agreements,                                                                    
     letters  of  agreement,  plan booklets,  discussed  the                                                                    
     fact  that the  annual  audits at  least  for ASEA  are                                                                    
     posted  on their  website. The  information is  readily                                                                    
     available.  So, I'm  at a  little  bit of  a loss  that                                                                    
     there is  a question as  to how these funds  operate at                                                                    
     this juncture.                                                                                                             
     But,  just in  summary, there  are numerous  hopelessly                                                                    
     ambiguous sections  in this bill,  which would  make it                                                                    
     virtually impossible  to comply with any  certitude. In                                                                    
     addition,  the  bill  requires  verifications,  as  Ms.                                                                    
     Savoie  had  pointed  out,  from  actuaries,  which  an                                                                    
     actuary  could not  undertake  without  becoming a  co-                                                                    
     fiduciary  over the  trust and  I  think that's  highly                                                                    
     unlikely at  any cost that  an actuary  would undertake                                                                    
     that  position.  So,  based  upon  these  concerns  and                                                                    
     representations, it's  my hope that you  as a committee                                                                    
     will  delete the  bill of  Sections 28  and 29  and I'm                                                                    
     happy to take any questions you may have.                                                                                  
2:28:20 PM                                                                                                                    
CHAIR BUNDE  commented that current  the PERS and TRS  system was                                                               
referenced earlier and  he hoped everyone's goal was  not to cast                                                               
any aspersion  on the  people who  manage those  funds currently,                                                               
but to make sure the state  doesn't end up with a deficit problem                                                               
like those  funds have. He asked  if some level of  bonding would                                                               
be appropriate.                                                                                                                 
MS. STOLL replied that currently the  ASEA trust has a $4 million                                                               
bond in place  and didn't see having 10 percent  of annual claims                                                               
as being necessary.  She said that all year long  these boards go                                                               
through the  process of  evaluating their  reserves and  that the                                                               
people who  manage the trusts  are extremely  sophisticated being                                                               
trained   through  the   International  Foundation   of  Employee                                                               
Benefits. The funds are managed very reasonably.                                                                                
MS.  STOLL  said  that  she   wasn't  aware  of  any  self-funded                                                               
governmental  plan  in  Alaska,  which  has  failed  financially.                                                               
"These  funds are  both  doing  extremely well  and  to coin  Mr.                                                               
Puschak's statement, "It's not broken, it doesn't need fixing."                                                                 
CHAIR  BUNDE  announced that  there  were  no further  people  to                                                               
testify and set the bill aside to work on a CS.                                                                                 
          SB 145-LOANS FOR COMMERCIAL FISHING TENDERS                                                                       
CHAIR CON BUNDE announced SB 145 to be up for consideration.                                                                    
TIM  BARRY, staff  to Senator  Stedman, sponsor,  said that  this                                                               
legislation was requested  by a number of fishing  tenders in the                                                               
state. It makes  a small change in the  Alaska Commercial Fishing                                                               
Loan Act to  allow Alaskan owners of fish tenders  to be eligible                                                               
for loans to  improve the quality of seafood  products. Under the                                                               
current law,  the Division  of Investments  in the  Department of                                                               
Commerce, Community  & Economic  Development (DCCED)  offers low-                                                               
interest  loans  to  fishing  permit  holders  to  upgrade  their                                                               
equipment  in  order to  improve  the  quality of  their  seafood                                                               
product.  Fishing tenders  who buy  fish on  the fishing  grounds                                                               
from  fishermen and  transport the  product to  processing plants                                                               
are an  important part of  the seafood handling  process, however                                                               
they are not  defined currently as fishermen  and are, therefore,                                                               
not eligible  for the improvement  loans. SB 145 is  supported by                                                               
the  Alaska Independent  Tendermen's  Association, the  Southeast                                                               
Alaska  Fishermen's  Alliance   and  Cordova  District  Fishermen                                                               
CHAIR BUNDE asked what exactly upgrading equipment means.                                                                       
MR. BARRY  replied that purchase of  vessels is not part  of this                                                               
program, but  it would  cover a  refrigerated seawater  hold, for                                                               
2:35:28 PM                                                                                                                    
GREG  WINEGAR, Director,  Division of  Investments, supported  SB                                                               
145 saying it  was consistent with state and  industry efforts to                                                               
improve quality  of seafood products. The  division already gives                                                               
these loans to commercial fishing  harvesters and the program has                                                               
been self-supporting  for many  years. SB  145 would  not require                                                               
appropriations or additional staff.                                                                                             
2:36:49 PM                                                                                                                    
JERRY MCCUNE,  President, Cordova Fishermen United,  supported SB                                                               
145 saying it's important to have tenders with good equipment.                                                                  
2:37:37 PM                                                                                                                    
CHAIR BUNDE asked if anyone is opposed to this bill.                                                                            
MR. MCCUNE answered no.                                                                                                         
2:38:38 PM                                                                                                                    
SENATOR  BEN STEVENS  moved to  pass SB  145 from  committee with                                                               
individual  recommendations and  attached  fiscal note.  Senators                                                               
Davis, Ellis,  Ben Stevens,  Seekins and  Chair Bunde  voted yea;                                                               
and SB 145 moved from committee.                                                                                                
          CSHB  81(L&C)-CONTRACTOR LICENSE ENFORCEMENT                                                                      
CHAIR   CON  BUNDE   announced  CSHB   81(L&C)  to   be  up   for                                                               
2:41:18 PM                                                                                                                    
REPRESENTATIVE  TOM ANDERSON,  sponsor, explained  that HB  81 is                                                               
intended to help enforce Alaska's  current laws that were changed                                                               
last  session  regarding  construction contractor  licensing  and                                                               
registration. Section  2 gives  the Department  of Law  (DOL) and                                                               
the  Division of  Occupational Licensing  the authority  to issue                                                               
administrative  fines for  violations. Currently,  violations are                                                               
prosecuted by the district attorney  through the court system and                                                               
many times cases  never go to trial because  they are prioritized                                                               
below other cases  like rape and murder. His  intent with Section                                                               
2  was  to  streamline  enforcement  efforts  and  to  help  make                                                               
government more efficient by not  clogging up the judicial system                                                               
with cases that  are relatively minor compared to  other cases it                                                               
has to handle.                                                                                                                  
The bill  doesn't change any  of the laws affecting  handymen who                                                               
can work  on construction  projects less  than $5,000  and allows                                                               
them  work  on  projects  worth  more  than  $5,000  with  proper                                                               
licensure. It  also allows owner-builders to  construct a single-                                                               
family duplex,  triplex, four-plex  or commercial  building every                                                               
two  years. Current  law  states  one year.  This  change was  in                                                               
response to testimony from a  private home inspector who observed                                                               
people  abusing the  current exemption  by  building units  every                                                               
year for each  member of their family and then  selling the units                                                               
without being a general contractor.                                                                                             
REPRESENTATIVE  ANDERSON related  that  he  has heard  complaints                                                               
from   several   individuals   about   the   two-year   occupancy                                                               
requirements in  the owner-builder  exemption and he  thought the                                                               
committee could  make an amendment  in that regard. He  said this                                                               
bill is strongly supported by several building associations.                                                                    
2:43:28 PM                                                                                                                    
CHAIR  BUNDE asked  if his  experience  is that  a handyman  very                                                               
quickly reaches the $5,000 limit.                                                                                               
REPRESENTATIVE ANDERSON  replied that  he didn't set  that limit;                                                               
it is in current statute and not enforced.                                                                                      
2:45:11 PM                                                                                                                    
SENATOR SEEKINS asked  if the $5,000 limit was for  labor only or                                                               
labor and materials.                                                                                                            
REPRESENTATIVE  ANDERSON  replied that  he  didn't  know, but  he                                                               
thought it was an individual's portion of the contract.                                                                         
SENATOR  SEEKINS asked  if he  has  a $20,000  contract and  five                                                               
people  did  $4,000   worth,  would  they  be   exempt  from  the                                                               
limitation or is it the job itself.                                                                                             
REPRESENTATIVE ANDERSON answered by reading:                                                                                    
     This exemption does not apply  when the work is divided                                                                    
     into  contracts of  amounts less  than  $5,000 for  the                                                                    
     purpose  of evasion  of  the law.  For  work priced  at                                                                    
     $2,500  or more,  some  public  liability and  property                                                                    
     damage insurance is required.                                                                                              
2:46:37 PM                                                                                                                    
SENATOR SEEKINS  said he thought  that section was  confusing and                                                               
asked how a  person would be assessed a penalty  and who would do                                                               
it.  He  said, "I  have  a  natural  aversion to  having  hearing                                                               
officers who are employees of  the department that's bringing the                                                               
REPRESENTATIVE ANDERSON responded that was  a fair concern and he                                                               
added  that the  Administrative Regulation  Review Committee  had                                                               
considered   Senator   Therriault's   central   panel   in   this                                                               
legislative cycle and explained:                                                                                                
     I  think,  though, that  if  we  were  to do  that,  it                                                                    
     obviously adds  a fiscal impact to  the legislation and                                                                    
     we've been really proud that  there hasn't been such. I                                                                    
     think  Greg can  add to  that,  but that's  one of  the                                                                    
     rationales why we didn't just throw it in that panel.                                                                      
2:48:00 PM                                                                                                                    
GREY MITCHELL, Director, Division  of Labor Standards and Safety,                                                               
Department  of Labor  and Workforce  Development (DOLWD),  agreed                                                               
with trying  to avoid a  fiscal note. If  the hearings go  to the                                                               
Office of Administrative  Hearings, it would need  a fiscal note.                                                               
His  division already  has hearing  officers who  are trained  in                                                               
fair hearing  procedures. They work  in a different  section from                                                               
enforcement staff, so there is  some separation. He would not let                                                               
a hearing officer  who has any previous knowledge of  a case hear                                                               
that particular case.                                                                                                           
2:49:15 PM                                                                                                                    
SENATOR SEEKINS  explained that he  was concerned that  all those                                                               
people were getting their paychecks from the same department.                                                                   
CHAIR BUNDE  said he had a  list of people who  wanted to testify                                                               
on this  issue and if their  concerns had been met  with previous                                                               
testimony, he asked them to indicate their agreement.                                                                           
2:51:21 PM                                                                                                                    
MIKE PRAX,  North Pole contractor  representing himself,  said he                                                               
opposed HB  81. The sponsor claims  that it closes a  loophole in                                                               
current  law  and  that  loop   is  "a  bunch  of  onerous  state                                                               
regulations  that are  creating a  noose that  is strangling  out                                                               
society."  He pointed  out that  the department  already has  the                                                               
power  to issue  a  citation on  probable cause  -  a fairly  low                                                               
     This bill  gives them  the authority  to levy  a $1,000                                                                    
     fine  on a  citizen based  on probable  cause and  then                                                                    
     leaves    the   citizen    to   face    a   complicated                                                                    
     administrative procedure. And if  he doesn't fill in an                                                                    
     application  and   write  down  his  reasons   for  the                                                                    
     application  for  review  ahead  of time  in  a  timely                                                                    
     fashion,  he  is even  denied  judicial  review of  the                                                                    
He urged the committee to hold the bill.                                                                                        
PATRICK  DALTON,   Delta  Junction,  opposed  HB   81  that  puts                                                               
enforcement  teeth into  a poor  law. Many  homeowners have  been                                                               
victims  of slothful  craftsmanship, but  the other  side of  the                                                               
equation  is  that a  lot  of  good independent  craftsmen  can't                                                               
afford  expensive licensing  and bonding.  They find  it hard  to                                                               
survive during the long winter  slump and when spring arrives and                                                               
the building season starts, they face  a grim choice - ignore the                                                               
regulations  and work  without a  contractor's license  or simply                                                               
starve. He  also pointed out  that without these  people working,                                                               
there would be an acute shortage of small homebuilders.                                                                         
2:56:09 PM                                                                                                                    
TERRY DUSZYNSKI,  Fairbanks building inspector, supported  HB 81.                                                               
He works with a lot of  owner-builders and thought they should be                                                               
able to continue  to build small homes. He has  also dealt with a                                                               
number  of people  who are  building  homes for  sale who  really                                                               
don't  know what  they  are  doing and  need  the education  that                                                               
licensure provides.                                                                                                             
2:57:52 PM                                                                                                                    
MARY GIRVAN,  Delta Junction,  wanted to  know what  the original                                                               
legislation is that established the $5,000 limit.                                                                               
CHAIR BUNDE replied that it was established last year in HB 542.                                                                
2:58:46 PM                                                                                                                    
NANCY DOBBERPUHL, Fairbanks, said  that the people from Fairbanks                                                               
and  Delta Junction  have expressed  a lot  of her  concerns. She                                                               
spoke  for  herself,  her children,  her  grandchildren  and  any                                                               
Alaskans who  are tired of  senseless regulations. She  should be                                                               
able to hire who she wants and pay  them a fair wage for work she                                                               
will be able to see if it's good  or not. She thought HB 81 was a                                                               
bad bill.                                                                                                                       
3:01:01 PM                                                                                                                    
JIM  CALLAHAN,  Fairbanks,  said  he is  a  "handyman"  and  just                                                               
realized the upper limit was  lowered from $10,000 to $5,000 last                                                               
year.  He  also  wants  honest business  practices  and  consumer                                                               
protection,  but at  the end  of the  day the  difference between                                                               
$5,000 and $10,000 is that contractors  will get more of the pie.                                                               
He related  a story of a  licensed person who did  shoddy work to                                                               
support his  position that licensing  doesn't necessarily  mean a                                                               
person does good work.                                                                                                          
3:03:28 PM                                                                                                                    
NELS CHURCH waived his time.                                                                                                    
3:04:01 PM                                                                                                                    
RANDY DOLL,  Fairbanks, supported  HB 81 and  wanted to  see even                                                               
steeper fines.                                                                                                                  
3:04:26 PM                                                                                                                    
SUE ELLISON,  ABC Incorporated, Fairbanks,  supported HB  81. ABC                                                               
is  a general  contractor licensed  for residential  endorsement.                                                               
She said  HB 81 removed  a cumbersome and  time-consuming process                                                               
out of  criminal into civil  court. She recommended  removing the                                                               
occupancy limitation because it puts  undue stress on some people                                                               
and doesn't accomplish anything.                                                                                                
3:05:33 PM                                                                                                                    
JEFF ALLING,  North Pole,  said he owns  Alcan Builders  and does                                                               
heavy commercial construction and that  he is coming at this from                                                               
a whole different  angle. It's been his dream to  retire in seven                                                               
or nine  years and shortly after  that he wants to  perhaps build                                                               
one rental unit  per year or build  a house for one  of his kids.                                                               
It could  be argued under  Section 5 (12)  that his child  is the                                                               
owner-builder, but  that wouldn't be  the case. It could  also be                                                               
construed that  he is acting  as a contractor, which  he wouldn't                                                               
be if  he were retired. Also,  he would be allowed  to build only                                                               
one rental unit  every two years and he would  have to promise to                                                               
occupy it  or show undue hardship  for not occupying it.  He came                                                               
to Alaska  from Connecticut for  independence and freedom  and he                                                               
would like to be able to exercise his ambition when he retires.                                                                 
3:07:34 PM                                                                                                                    
CHAIR  BUNDE said  that  the sponsor  had  indicated interest  in                                                               
amending  that issue  and would  be back  with a  CS at  a future                                                               
3:08:05 PM                                                                                                                    
ROGER BURGGRAFF, Fairbanks,  said the public was  unaware of this                                                               
bill and  he opposed  it anyhow  as being  obnoxious, un-American                                                               
and un-Alaskan.  It would  put the handyman  out of  business. He                                                               
suggested raising the  limit requiring a license  back to $10,000                                                               
or more.                                                                                                                        
3:11:12 PM                                                                                                                    
TODD LARKIN,  North Pole, said HB  81 would hurt consumers  if it                                                               
were  not amended.  He charges  $30 per  hour for  his labor  and                                                               
works for two categories of  people - contractors and every other                                                               
kind of customer  from homeowners to real estate  agents. When he                                                               
is serving  the homeowners  and real estate  agents, his  time is                                                               
broken up  into service visits,  which means he cannot  get eight                                                               
billable hours without working 10 or  12 hours. When he works for                                                               
contractors on a  temporary basis, he is able  to string together                                                               
40  hours per  week or  more for  one to  three weeks  at a  time                                                               
without interruption.  This, in effect, subsidizes  his rates for                                                               
the other customers  and allows him to keep rates  at the current                                                               
level. If  the committee doesn't  correct HB  81 he will  have to                                                               
raise his rates to achieve the  same income. He noted that he had                                                               
offered the committee a conceptual amendment in writing.                                                                        
3:14:05 PM                                                                                                                    
SETH CHURCH,  Fairbanks, said  HB 81 needed  an amendment  to the                                                               
occupancy provision  in Section 12.  If he currently had  a house                                                               
under  construction, he  couldn't  sell it  without  a notice  of                                                               
completion or  undue hardship. It  lets the government  decide if                                                               
he can sell his house.                                                                                                          
3:16:32 PM                                                                                                                    
MIKE  MUSICK,  Fairbanks,  said  he  is  a  licensed  and  bonded                                                               
homebuilder and supported HB 81.                                                                                                
3:19:01 PM                                                                                                                    
JACK HEBERT,  Fairbanks, said he  is a homebuilder  and supported                                                               
HB 81. He  hated to see the old  days go as he has  always been a                                                               
small builder,  but he  didn't feel that  this bill  changes that                                                               
much. He  supported it because it  sends out a message  that they                                                               
all have to start playing by the same rules.                                                                                    
3:21:24 PM                                                                                                                    
LISA PEGER,  Fairbanks, said she  is an apartment owner  and that                                                               
rentals  always  need  repairs  and  this  would  actually  drive                                                               
handymen away.  No one will take  small jobs and it  would end up                                                               
hurting the small business people.                                                                                              
3:22:41 PM                                                                                                                    
RANDY  GRIFFIN,   Fairbanks,  opposed   HB  81,   especially  the                                                               
occupancy requirement  in Section 12.  He has lived in  his house                                                               
for years, but  it isn't finished and he wondered  if he would be                                                               
able  to sell  it. He  also suggested  that maybe  handymen could                                                               
hand their  customer a  notice saying they  aren't bonded  so the                                                               
customer knows that upfront.                                                                                                    
3:24:59 PM                                                                                                                    
ALAN  WILSON,  Co-chair,   Legislative  Committee,  Alaska  State                                                               
Homebuilding Association, noted that  this bill was introduced at                                                               
his request.  Basically, he  thought most  issues would  be taken                                                               
care  of with  the amendment  that was  going to  be offered.  It                                                               
makes it  easier for enforcement  to cite individuals  similar to                                                               
parking or speeding  tickets. It would simplify what  is going on                                                               
now  and  will  level  the  playing  field  in  the  construction                                                               
industry. He  informed the committee  that California has  a $500                                                               
limit; Oregon and  Washington both require all  individuals to be                                                               
3:28:21 PM                                                                                                                    
CHAIR  BUNDE thanked  everyone for  being courteous  and said  he                                                               
would  hold the  bill for  further  work. He  then adjourned  the                                                               
meeting at 3:28:53 PM.                                                                                                        

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