Legislature(2007 - 2008)BELTZ 211

03/27/2008 01:30 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 286 PHARMACY BENEFITS MANAGERS TELECONFERENCED
Heard & Held
+ HB 357 CLAIMS AGAINST REAL ESTATE LICENSEES TELECONFERENCED
Heard & Held
+ HB 413 EXTENDING THE REAL ESTATE COMMISSION TELECONFERENCED
Heard & Held
Bills Previously Heard/Scheduled
+= SB 113 NURSING MOTHERS IN WORKPLACE TELECONFERENCED
Heard & Held
+= SB 118 PLASTIC BAG FEE; ESTABLISH LITTER FUND TELECONFERENCED
Scheduled But Not Heard
= SJR 18 CHILD PRODUCT SAFETY
Moved SJR 18 Out of Committee
= HB 289 EMPLOYMENT TAX EXEMPTION: SPILL RESPONSE
Moved CSHB 289(FSH) Out of Committee
= SB 305 RECORKING WINE SERVED WITH A MEAL
Moved SB 305 Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         March 27, 2008                                                                                         
                           1:38 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Johnny Ellis, Chair                                                                                                     
Senator Bettye Davis                                                                                                            
Senator Con Bunde                                                                                                               
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Gary Stevens, Vice Chair                                                                                                
Senator Lyman Hoffman                                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 113                                                                                                             
"An  Act  relating to  break  times  for  employees who  nurse  a                                                               
child."                                                                                                                         
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 118                                                                                                             
"An  Act   establishing  a  fee   for  disposable   plastic  bags                                                               
distributed by retail  sellers of goods or  services to consumers                                                               
to  carry away  or  protect goods;  and  establishing the  Alaska                                                               
litter and marine debris reduction and recycling fund."                                                                         
     SCHEDULED BUT NOT HEARD                                                                                                    
                                                                                                                                
SENATE BILL NO. 305                                                                                                             
"An  Act relating  to recorking,  sealing, or  packaging of  wine                                                               
served with a  meal and removal of recorked,  sealed, or packaged                                                               
wine from licensed premises."                                                                                                   
     MOVED SB 305 OUT OF COMMITTEE                                                                                              
                                                                                                                                
CS FOR HOUSE BILL NO. 289(FSH)                                                                                                  
"An  Act exempting  employers from  paying  unemployment tax  for                                                               
temporary  services provided  by fishing  vessel crewmembers  and                                                               
related to emergency oil spill  training and response activities;                                                               
and providing for an effective date."                                                                                           
     MOVED CSHB 289(FSH) OUT OF COMMITTEE                                                                                       
                                                                                                                                
SENATE JOINT RESOLUTION NO. 18                                                                                                  
Requesting  the President  of  the United  States  to direct  the                                                               
United  States Consumer  Product  Safety Commission  to test  the                                                               
materials used  in children's toys and  other children's products                                                               
for toxicity and to make the results publicly available.                                                                        
     MOVED SJR 18 OUT OF COMMITTEE                                                                                              
                                                                                                                                
SENATE BILL NO. 286                                                                                                             
"An Act relating to creation  and regulation of pharmacy benefits                                                               
managers,  and authorizing  the  board of  pharmacy to  cooperate                                                               
with the  division of insurance  in regulating  pharmacy benefits                                                               
managers."                                                                                                                      
     HEARD AND HELD                                                                                                             
                                                                                                                                
CS FOR HOUSE BILL NO. 357(L&C)                                                                                                  
"An Act requiring errors and  omissions insurance for real estate                                                               
licensees;  renaming the  real  estate surety  fund  as the  real                                                               
estate recovery  fund and relating  to that fund,  and redefining                                                               
the procedures  and criteria used  by the Real  Estate Commission                                                               
to  make an  award from  the fund  to a  person suffering  a loss                                                               
caused by certain misconduct of  real estate licensees; requiring                                                               
a real  estate licensee to maintain  an office in the  state; and                                                               
providing for an effective date."                                                                                               
     HEARD AND HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 413                                                                                                              
"An  Act  extending the  termination  date  for the  Real  Estate                                                               
Commission; and providing for an effective date."                                                                               
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                              
BILL: SB 113                                                                                                                  
SHORT TITLE: NURSING MOTHERS IN WORKPLACE                                                                                       
SPONSOR(s): SENATOR(s) ELLIS                                                                                                    
                                                                                                                                
03/12/07       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/12/07       (S)       L&C, HES                                                                                               
02/28/08       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
02/28/08       (S)       Heard & Held                                                                                           
02/28/08       (S)       MINUTE(L&C)                                                                                            
03/27/08       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
                                                                                                                              
BILL: SB 305                                                                                                                  
SHORT TITLE: RECORKING WINE SERVED WITH A MEAL                                                                                  
SPONSOR(s): LABOR & COMMERCE                                                                                                    
                                                                                                                                
03/21/08       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/21/08       (S)       L&C                                                                                                    
03/25/08       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/25/08       (S)       Scheduled But Not Heard                                                                                
                                                                                                                              
BILL: HB 289                                                                                                                  
SHORT TITLE: EMPLOYMENT TAX EXEMPTION: SPILL RESPONSE                                                                           
SPONSOR(s): REPRESENTATIVE(s) HARRIS, SEATON                                                                                    
                                                                                                                                
01/04/08       (H)       PREFILE RELEASED 1/4/08                                                                                

01/15/08 (H) READ THE FIRST TIME - REFERRALS

01/15/08 (H) FSH, L&C

01/23/08 (H) FSH AT 8:30 AM BARNES 124

01/23/08 (H) Heard & Held

01/23/08 (H) MINUTE(FSH)

01/28/08 (H) FSH AT 8:30 AM BARNES 124

01/28/08 (H) Moved CSHB 289(FSH) Out of Committee

01/28/08 (H) MINUTE(FSH)

01/30/08 (H) FSH RPT CS(FSH) NT 4DP

01/30/08 (H) DP: HOLMES, EDGMON, JOHANSEN, SEATON 02/13/08 (H) L&C AT 3:00 PM CAPITOL 17 02/13/08 (H) Moved CSHB 289(FSH) Out of Committee 02/13/08 (H) MINUTE(L&C) 02/15/08 (H) L&C RPT CS(FSH) NT 4DP 2NR 02/15/08 (H) DP: GARDNER, LEDOUX, BUCH, GATTO 02/15/08 (H) NR: NEUMAN, OLSON 03/13/08 (H) TRANSMITTED TO (S) 03/13/08 (H) VERSION: CSHB 289(FSH) 03/14/08 (S) READ THE FIRST TIME - REFERRALS 03/14/08 (S) L&C, FIN 03/25/08 (S) L&C AT 1:30 PM BELTZ 211 03/25/08 (S) Heard & Held 03/25/08 (S) MINUTE(L&C) BILL: SJR 18 SHORT TITLE: CHILD PRODUCT SAFETY SPONSOR(s): SENATOR(s) WIELECHOWSKI 02/19/08 (S) READ THE FIRST TIME - REFERRALS 02/19/08 (S) HES, L&C 03/14/08 (S) HES AT 1:30 PM BUTROVICH 205 03/14/08 (S) Heard & Held 03/14/08 (S) MINUTE(HES) 03/19/08 (S) HES AT 1:45 PM BUTROVICH 205 03/19/08 (S) Moved SJR 18 Out of Committee 03/19/08 (S) MINUTE(HES) 03/21/08 (S) HES RPT 5DP 03/21/08 (S) DP: DAVIS, ELTON, THOMAS, COWDERY, DYSON 03/25/08 (S) L&C AT 1:30 PM BELTZ 211 03/25/08 (S) Heard & Held 03/25/08 (S) MINUTE(L&C) BILL: SB 286 SHORT TITLE: PHARMACY BENEFITS MANAGERS SPONSOR(s): SENATOR(s) ELTON 02/19/08 (S) READ THE FIRST TIME - REFERRALS 02/19/08 (S) L&C, FIN 03/27/08 (S) L&C AT 1:30 PM BELTZ 211 BILL: HB 357 SHORT TITLE: CLAIMS AGAINST REAL ESTATE LICENSEES SPONSOR(s): LABOR & COMMERCE BY REQUEST 02/06/08 (H) READ THE FIRST TIME - REFERRALS 02/06/08 (H) L&C, FIN 02/11/08 (H) L&C AT 3:00 PM CAPITOL 17 02/11/08 (H) Heard & Held 02/11/08 (H) MINUTE(L&C) 02/22/08 (H) L&C AT 3:00 PM CAPITOL 17 02/22/08 (H) -- MEETING CANCELED -- 03/03/08 (H) L&C AT 3:00 PM CAPITOL 17 03/03/08 (H) Moved CSHB 357(L&C) Out of Committee 03/03/08 (H) MINUTE(L&C) 03/04/08 (H) L&C RPT CS(L&C) 3DP 2NR 2AM 03/04/08 (H) DP: GATTO, RAMRAS, OLSON 03/04/08 (H) NR: BUCH, NEUMAN 03/04/08 (H) AM: GARDNER, LEDOUX 03/11/08 (H) FIN AT 1:30 PM HOUSE FINANCE 519 03/11/08 (H) Scheduled But Not Heard 03/12/08 (H) FIN RPT CS(L&C) 5DP 3NR 03/12/08 (H) DP: HAWKER, CRAWFORD, THOMAS, MEYER, CHENAULT 03/12/08 (H) NR: NELSON, KELLY, STOLTZE 03/12/08 (H) FIN AT 8:30 AM HOUSE FINANCE 519 03/12/08 (H) Scheduled But Not Heard 03/12/08 (H) FIN AT 1:30 PM HOUSE FINANCE 519 03/12/08 (H) Moved Out of Committee 03/12/08 (H) MINUTE(FIN) 03/26/08 (H) TRANSMITTED TO (S) 03/26/08 (H) VERSION: CSHB 357(L&C) 03/27/08 (S) L&C AT 1:30 PM BELTZ 211 BILL: HB 413 SHORT TITLE: EXTENDING THE REAL ESTATE COMMISSION SPONSOR(s): LABOR & COMMERCE 02/20/08 (H) READ THE FIRST TIME - REFERRALS 02/20/08 (H) L&C, FIN 02/25/08 (H) L&C AT 3:00 PM CAPITOL 17 02/25/08 (H) Moved Out of Committee 02/25/08 (H) MINUTE(L&C) 02/27/08 (H) L&C RPT 5DP 02/27/08 (H) DP: GARDNER, BUCH, NEUMAN, LEDOUX, OLSON 03/03/08 (H) FIN AT 1:30 PM HOUSE FINANCE 519 03/03/08 (H) Moved Out of Committee 03/03/08 (H) MINUTE(FIN) 03/04/08 (H) FIN RPT 3DP 6NR 03/04/08 (H) DP: CRAWFORD, NELSON, MEYER 03/04/08 (H) NR: HAWKER, STOLTZE, JOULE, THOMAS, KELLY, CHENAULT 03/10/08 (H) TRANSMITTED TO (S) 03/10/08 (H) VERSION: HB 413 03/12/08 (S) READ THE FIRST TIME - REFERRALS 03/12/08 (S) L&C, FIN 03/27/08 (S) L&C AT 1:30 PM BELTZ 211 WITNESS REGISTER PATRICK CUNNINGHAM Staff to Senator Ellis Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on CSSB 113(L&C) for the sponsor. REPRESENTATIVE PAUL SEATON Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Sponsor of HB 289. DANA OWEN Staff to the Senate Labor and Commerce Committee Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on SB 305. KATHERINE PUSTAY Staff to Senator Wielechowski Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Sponsor of SJR 18. BARRY CHRISTIANSON, Co-chair Legislative Committee Alaska Pharmacy Association Ketchikan, AK POSITION STATEMENT: Supported SB 286. REGINA BENJAMIN, Senior Director Public Policy National Community Pharmacists Association Alexandria, VA POSITION STATEMENT: Supported SB 286. ELEANOR WOLFE Staff for Representative Kurt Olson Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Commented on HB 357 and HB 413 for the sponsor. DAVE FEEKIN Alaska Association of Realtors Kenai, AK POSITION STATEMENT: Supported HB 357. PAT DAVIDSON, Auditor Division of Legislative Audit Alaska State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Supported HB 413. ACTION NARRATIVE CHAIR JOHNNY ELLIS called the Senate Labor and Commerce Standing Committee meeting to order at 1:38:52 PM. Present at the call to order were Senators Bunde, Davis, Ellis. 1:41:00 PM at ease 1:41:29 PM SB 113-NURSING MOTHERS IN WORKPLACE 1:41:29 PM CHAIR ELLIS announced SB 113 to be up for consideration. He noted a proposed CS. PATRICK CUNNINGHAM, staff to Senator Ellis, sponsor of SB 113, explained CSSB 113(L&C) 25-LS0435\E, and that changes were made to better clarify the intent of the bill in response to question raised in the first hearing. One was on page 1, line 10, (b) that says an employer shall provide a private and sanitary room or other location in close proximity to the work area. The word "secure" was deleted to provide more flexibility to the employer to provide the room without enduring any additional cost. A new section was added on line 13 (c) that states nothing in this section requires an employer to allow a child in the work place at times other than break times. This addresses Senator Stevens's concern that employers might be required to provide day care services. MR. CUNNINGHAM went on to say that section (e) was deleted because the language "undue hardship" was no longer necessary. The overriding emphasis is to provide reasonable accommodation to the nursing mother. SENATOR BUNDE asked how "reasonable" would be defined in relation to "undue hardship". MR. CUNNINGHAM answered that could be addressed in regulation. CHAIR ELLIS set SB 113 aside for further work. CSHB 289(FSH)-EMPLOYMENT TAX EXEMPTION: SPILL RESPONSE 1:46:39 PM CHAIR ELLIS announced CSHB 289(FSH) to be up for consideration. REPRESENTATIVE SEATON, sponsor of HB 289, said this measure deals with exempts fishing vessel owners and crew who participate from having to pay unemployment taxes while they are performing oil spill response duties. 1:47:40 PM SENATOR BUNDE moved to report CSHB 289(FSH) from committee with individual recommendations and attached fiscal notes. There were no objections and it was so ordered. SB 305-RECORKING WINE SERVED WITH A MEAL 1:48:25 PM CHAIR ELLIS announced SB 305 to be up for consideration. DANA OWEN, staff to the Senate Labor and Commerce Committee, explained SB 305 allows patrons at a restaurant who order a bottle of wine to take that bottle with them as they leave if they haven't finished it. The bill is supported by the industry with the idea that people will more likely purchase a bottle of wine rather than a glass. It is also supported by folks who believe it will create a positive incentive for people to not drink too much at the table because they order an expensive wine and might feel compelled to finish it. Thirty-four other states have recorking laws. SENATOR BUNDE asked if industry is comfortable with resealing. MR. OWEN answered yes. SENATOR BUNDE asked if they had heard from restaurants and bars. MR. OWEN replied that he has received verbal support from them. CHAIR ELLIS recapped this issue had been before the legislature for some time. 1:51:05 PM SENATOR BUNDE moved to report SB 305 from committee with individual recommendations. There were no objections and it was so ordered. SJR 18-CHILD PRODUCT SAFETY 1:51:56 PM KATHERINE PUSTAY, staff to Senator Wielechowski, sponsor of SJR 18, recapped that this measure calls on the United States Consumer Products Safety Commission or CSBC to test materials used in children's products and toys for hazardous chemicals like lead. She said while the CSBC tests for choking and aspiration issues, currently no government agency is tasked to do this chemical testing. Twenty-nine other states have passed similar resolutions. 1:53:29 PM SENATOR BUNDE moved to report SJR 18 from committee with individual recommendations. There were no objections and it was so ordered. SB 286-PHARMACY BENEFITS MANAGERS 1:54:38 PM CHAIR ELLIS announced SB 286 to be up for consideration. SENATOR ELTON, sponsor of SB 286, said he hoped to begin and refine a dialogue. This bill is based on model legislation that has been done elsewhere and they already know of a few alignment issues need to occur between this bill and the existing structure. He said pharmacy benefit managers (PBM) are groups of businesses that people contract with to manager pharmacy and prescription drug insurance plans. These plan managers include the State of Alaska, the federal government and union groups. He said that PBMs are largely unregulated. The purpose of this bill is to provide transparency into their business model. SENATOR ELTON related that PBMs negotiate with drug manufacturers and pharmacies on behalf of health insurance plans, but those negotiations and arrangements aren't transparent. The danger is that PBMs receive financial remuneration from drug manufacturers and because those transactions aren't transparent, they don't pass any information to the contractor - information like allocation and recommendations on what drugs should be used. It doesn't allow the contractor, the state for instance, to know what kind of other profits the PBM is getting based on the contract it has with the state. He said another major concern is how PBMs might increase their profit margins. For instance, in many cases PBMs also have mail order drug stores and it's to their benefit to try and shift business from a pharmacy that may be located down the street that has a relationship with both the doctor and the person who is getting the drugs to the mail order firms. 1:58:36 PM SENATOR ELTON said the bill allows the Board of Pharmacy to regulate the terms of an agreement and lets the Division of Insurance access the PBM's books and records that are pertinent to the contract they have with the person providing the drug benefit. This gets back to the issue of alignment, and he didn't know if what worked in other states would work in Alaska. They need to discuss whether or not they want the Board of Pharmacy to get into this kind of business; it might be more appropriate for the Division of Insurance to fill this role. 1:59:25 PM He said 20 other states' attorney generals have sued PBMs to try and get the information; eight states plus the District of Columbia have adopted a similar transparency bill. He clarified that when he is talking about transparency, he is not talking about the state or any other contractor posting this information. He is talking about transparency between the contractor and the PMB itself. This information is proprietary and is not shared with the public. SENATOR ELTON said another important provision does not allow "extrapolation audits" by PBMs. He explained that PBMs or their agents can now go to a local pharmacy and audit its books, and if they find an error, even a keystroke error - and that may be a $25 error one way or the other - an extrapolation audit allows the PBM to charge for the prescription of the one drug. If the pharmacy has done 150 or 1,500 other prescriptions for this drug, the extrapolation audit allows the PBM to charge the pharmacy for an error on each transactions a single $25 or $50 error can cost a pharmacy $75,000 to $80,000. So this bill doesn't allow extrapolated audits; but it doesn't disallow audits. 2:03:00 PM SENATOR BUNDE asked if this bill in any way prohibited online purchases. SENATOR ELTON replied nothing in this bill prohibits people from shopping on line. He tried to convey that some PBMs have a business imperative to try and to create a situation in which they make it easier for people to buy their drugs through their subsidiary online, and because of that they might not have a business incentive to try to keep their local pharmacy going. He meant to suggest that there is no way the contractor could know something has happened without being able to pull back the veil that PBMs now have. 2:05:33 PM BARRY CHRISTIANSON, Co-chair, Legislative Committee, Alaska Pharmacy Association, said he is a practicing community pharmacist in Ketchikan and supported SB 286. It will help insure that Alaska patients, employers and pharmacists are being fairly treated by an industry that manages the processing of prescription drug benefits. The PBM industry started out simply acting as a conduit for claims processing between pharmacies and insurance companies. However, this simple model has ballooned into a myriad of other services that has made this industry a very profitable middle man in managed health care. The Association believes this profitability has come at the expense of patient care and has not lowered overall drug costs. It has been estimated that it takes 25-30 percent of pharmacy staff time every day to try to navigate the maze of "pharmacy benefit manager audits." This time is usually spent on the phone talking to a claims representative in another state or country. Yet for all of their efforts, their members every day bear the brunt of public comment about higher drug costs. They believe the transparency called for in SB 286 will help insure the manufacturer rebates negotiated by the PBMs will flow back to the plans' sponsor or employer. They also believe that the authorized substitution sections of the bill will help ensure that patients know they are receiving the most cost effective medication as approved by their prescriber. Far too often they see instances of drug substitutions being made by PBM-owned mail order pharmacies. While these substitutions are legal, they are not communicated to the patient. This can result in the patient continuing to take the original prescribed medication along with a substitute medication simply because they sound or look alike. An example is blood pressure drugs called Ramipril and Lisinopril. Lastly, he said SB 286 does not pad the pockets of Alaska pharmacies, but it sets up pricing guidelines based on national standards and time limits for pharmacy audits and payments. 2:09:00 PM MR. CHRISTIANSON said most Alaska pharmacists don't believe legislation is needed for every health care ill; since they are a heavily regulated profession. However, now is the time to consider regulating the PBM industry because it has had too many instances of unfair business practices. 2:09:37 PM REGINA BENJAMIN, Senior Director, Public Policy, National Community Pharmacists Association, Alexandria, VA, said some of her members are in Alaska and they support SB 286. She said her concern is that PBMs are the only entities that are involved in a variety of functions that impact the delivery and the cost of prescription drug benefits to the consumer, but they are largely unregulated. She said the most stringent regulation to date was found in a law passed in Maine. The PBMs were successful in tying that law up in court for several years, but it succeeded at every level of court action. Pharmacy Care Management Association (PCMA) is the trade association for the PBMs that challenged the law. The law finally became effective in June 2006. Now PCMA is also suing District of Columbia for a similar law. MS. BENJAMIN stated that now they have regulation by litigation and settlement. There have been two large settlements, one by 22 states attorneys general against Medco in 2004 and last month by PBS Caremark with 28 states and the District of Columbia. These settlements with consent orders involved substitutions and lack of transparency which this bill tries to regulate in Alaska. She said that 15 states over the last 3 or 4 years have passed some kind of legislation that has some minimal oversight of PBMs and states continue to look at the industry and debate whether it should be regulated. Some of the supporters of legislation are the National Legislative Association on Prescription Drug Prices, a group of bi-partisan legislators, Consumers Union, AARP, National Mental Health Association and in some cases the Medical Societies. She said this industry has a large impact on the cost of health care in this country, and with transparency employers will save money because they will realize mail order is not as cheap as they think it is based on the limited information they are given. 2:14:05 PM MS. BENJAMIN said SB 286 provides consumer protection especially in the area of substitution, which is a major problem. She explained the reason PBMs substitute medication is because they get a higher rebate on one drug than they do on another and they don't consider the medical ramifications for the person taking the drug. CHAIR ELLIS thanked her for her testimony and closed the public hearing saying he would hold the bill for further work. CSHB 357(L&C)-CLAIMS AGAINST REAL ESTATE LICENSEES 2:15:51 PM ELEANOR WOLFE, staff for Representative Kurt Olson, sponsor of HB 357, said the sponsor introduced this bill on behalf of the Alaska Association of Realtors that felt it was necessary due to difficulties with the Surety Fund to provide that all real estate agents have errors and omissions (E&O) insurance. She explained that most large brokerages already provide E&O insurance, but about 40 percent of the agents in Alaska don't. This measure would have the department seeking a group policy with a minimum $100,000 coverage that all members could belong to at a reasonable rate. This would allow most of the complaints that go to the surety fund to be handled through insurance rather than have all of the complaints go through the surety fund that has a maximum of $15,000. A good number of complaints against real estate transactions exceed that. MS. WOLFE stated that the surety fund would be renamed the recovery fund and it would cover actions of deceit and breach of trust. She said one insurance company handles the existing 13 states that have this provision and it is willing to make an offer once the parameters are laid out by the department. She believes agents could be covered for less than $200 year. CHAIR ELLIS asked if she has had assurance that an insurance entity is out there that will write insurance in Alaska. MS. WOLFE replied yes. 2:17:38 PM DAVE FEEKIN, Alaska Association of Realtors, Kenai, said that HB 357 is a joint effort by the Alaska Association of Realtors, the Division of Occupational Licensing, the Division of Insurance and the Department of Law. It accomplishes two things. The surety fund expands the claim coverage by imposing mandatory E&O insurance. MR. FEEKIN explained that the surety fund was started in 1974 and covers reimbursement for fraud, misrepresentation, deceit and conversion of trust. By statute the fund balance has to be $250,000-$500,000. That money comes from the licensees at the amount of $30 per license period, every two years. A few years ago the fund balance was at or above the $500,000, but more recently it has been bouncing around below the $250,000 mark. Two reasons the funds balance is dropping is because there are a high number of frivolous claims brought against licenses that cost the fund to hold the hearings even though they are meritless. The second is a reduction in the number of licensees, and that moves with the market. He said the number of licensees doubled from 2000-2005 and the number of transactions peaked at 2006 in Alaska and 2005 in the Lower 48. The U.S. as a whole has seen a 33 percent drop in real estate transactions, but Alaska has had a drop of 11 percent from 2006 to 2007; this year it continues the same decline. MR. FEEKIN said it's important to understand how small this problem really is in light of the size of the market. In 2006, 15 claims were filed against the surety fund and none of them were successful in obtaining a claim. In 2007, 13 claims were filed with two getting paid. MLS statistics for Southcentral Alaska plus Kodiak indicated an average of 9,119 real estate transactions per year for each of those two years, a lot of successful transactions. The value of those transactions was $2 billion per year. Imposing mandatory E&O insurance is supported overwhelmingly by the industry, because it is a very affordable cost at $200 or less. Colorado, Idaho, Iowa, Kentucky, Louisiana, Mississippi, Nebraska, New Mexico, North Dakota, Rhode Island, South Dakota, Tennessee and Wyoming are the states involved. Rice and Associates considers Alaska to be very similar to Wyoming as far as the number of licensees. It is considered less of a risk because we don't have the very high second home values that Wyoming has. He knew of no opposition. The state has never purchased a group policy for licensees before so the mechanism had to be worked out. CHAIR ELLIS thanked him for his comments and said HB 357 would be held. HB 413-EXTENDING THE REAL ESTATE COMMISSION 2:24:10 PM CHAIR ELLIS announced HB 413 to be up for consideration. ELEANOR WOLFE, staff to Representative Kurt Olson, sponsor of HB 413, explained this was requested by the Department of Commerce, Community & Economic Development and Legislative Budget and Audit Committee. No one had introduced a bill to extend the Real Estate Commission and the Legislative Auditor advised to extend it to 2016. 2:25:11 PM PAT DAVIDSON, Division Of Legislative Audit, said her review indicated that the commission was operating in a satisfactory manner and she recommended a 2016 termination date. She also recommended to the Office of the Governor that they verify the qualifications of board members before presenting them to the legislature for confirmation. One of the recent appointments to the board did not have the necessary years of professional experience. CHAIR ELLIS asked if that recommendation was well received advice. MS. DAVIDSON replied the Governor's Office concurred with the recommendation and said they would improve their procedures to ensure that professional requirements were met for any of their nominees. CHAIR ELLIS thanked her for her help and closed the public hearing saying the bill would be held. There being no further business to come before the committee, he adjourned the meeting at 2:27:36 PM.

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