Legislature(2003 - 2004)
05/06/2003 01:35 PM Senate L&C
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
May 6, 2003
1:35 p.m.
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Ralph Seekins, Vice Chair
Senator Gary Stevens
Senator Bettye Davis
Senator Hollis French
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 102
"An Act increasing the amount of revenue received by the state
from charitable gaming activities; and providing for an
effective date."
MOVED CSSB 102(L&C) OUT OF COMMITTEE
SENATE BILL NO. 192
"An Act relating to teachers and training programs in the
Department of Labor and Workforce Development, to the placement
in the exempt service of certified teachers employed by the
Department of Labor and Workforce Development, to their
eligibility to participate in the Teachers' Retirement System of
Alaska, and to the functions of the Alaska Workforce Investment
Board regarding the Kotzebue Technical Center and the Alaska
Vocational Technical Center; and providing for an effective
date."
MOVED CSSB 192(L&C) OUT OF COMMITTEE
SENATE BILL NO. 210
"An Act regarding the computation of overtime compensation by
employers before June 2, 1999; and providing for an effective
date."
MOVED SB 210 OUT OF COMMITTEE
SENATE BILL NO. 154
"An Act relating to a student loan repayment program for nurses,
and amending the duties of the Board of Nursing that relate to
this program; and providing for an effective date."
MOVED SB 154 OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 51(HES)
"An Act requiring pharmacists to include generic drug
information on containers in which brand-name prescription drug
orders are dispensed."
MOVED CSHB 51(HES) OUT OF COMMITTEE
SENATE BILL NO. 32
"An Act relating to insurance for and work on certain motor
vehicle repairs; and providing for an effective date."
HEARD AND HELD
PREVIOUS ACTION
SB 102 - See Labor and Commerce minutes dated 3/13/03, 4/24/03
and 4/29/03.
SB 192 - No previous action to consider.
SB 210 - No previous action to consider.
SB 154 - See HESS minutes dated 4/9/03.
HB 51 - See HESS minutes dated 4/7/03.
SB 32 - No previous action to record.
WITNESS REGISTER
Commissioner Greg O'Claray
Department of Labor & Workforce
Development
PO Box 21149
Juneau, AK 99802-1149
POSITION STATEMENT: Commented on SB 192 and supported SCR 210.
Mr. Fred Esposito, Director
Alaska Vocational Technical Education Center (AVTEC)
Seward AK
POSITION STATEMENT: Supported SB 192.
Mr. Dave DeRuwe, Vice President
Alaska Vocational Technical Education Center (AVTEC)
Teacher's Association
PO Box 62
Seward AK 99664
POSITION STATEMENT: Supported SB 192.
Mr. John Alcantra, Director
Government Relations
National Education Association of Alaska
114 Second Street
Juneau AK 99801
POSITION STATEMENT: Supported SB 192.
Ms. Jane Alberts
Staff to Senator Bunde
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 210.
Mr. John Shively, Vice President
Government and Community Relations
Holland American Line
POSITION STATEMENT: Supported SB 210.
Mr. Don Etheridge
AFL-CIO
710 West 9th Street
Juneau AK 99801
POSITION STATEMENT: Supported SB 210.
Ms. Cathy Giessel
Alaska Nurse Practitioners Association
12701 Ridgewood
Anchorage AK 99516
POSITION STATEMENT: Supported SB 154.
Ms. Camille Soleil, Executive Director
Alaska Nurses Association
2207 E. Tudor Rd.
Anchorage AK 99507
POSITION STATEMENT: Supported SB 154.
Ms. Laraine Derr
Alaska State Hospital & Nursing Home Assn.
426 Main St.
Juneau, AK 99801
POSITION STATEMENT: Supported SB 154.
Ms. Diane Barrans, Executive Director
Postsecondary Education Commission
Department of Education &
Early Development
th
801 W 10 St.
Juneau, AK 99801-1894
POSITION STATEMENT: Supported SB 210.
Ms. Rhonda Richtsmeier, Deputy Chief
Public Health Nursing
Department of Health &
Social Services
PO Box 110601
Juneau, AK 99801-0601
POSITION STATEMENT: Supported SB 210.
Representative Paul Seaton
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Sponsor of HB 51.
Ms. Annette Skibinski
Staff to Senator Cowdery
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 32 for the sponsor, Senator
Cowdery.
Ms. Sandy Bass Cors, Executive Director
Coalition for Auto Repairing Quality (CARE)
No address provided
POSITION STATEMENT: Opposed SB 32.
Mr. Jack Gillis
Executive Director, Certified Auto Parts Association (CAPA)
Director, Public Affairs, Consumer Federation of America
No address provided
POSITION STATEMENT: Opposed SB 32.
Ms. Eileen A. Sottile, Director
Keystone Government Relations
Co-chair, ABPA Government Affairs Committee
9970 N.W. 89th Court
Medley FL 33178
POSITION STATEMENT: Opposed SB 32.
Mr. Ken Miller
No address provided
POSITION STATEMENT: Supported SB 32.
Mr. John Conley
Service Auto Parts
3806 Tongass Ave.
Ketchikan AK
POSITION STATEMENT: Opposed SB 32.
Mr. George Gilbert
Ford Motor Company
No address provided
POSITION STATEMENT: Supported SB 32.
Mr. Kyle Krug
Toyota
Juneau AK
POSITION STATEMENT: Supported SB 32.
Mr. Jim Kiley
Alliance of Automobile Manufacturers
No address provided
POSITION STATEMENT: Supported SB 32.
Mr. Bill Holden
General Motors
Detroit MI
POSITION STATEMENT: Commented SB 32.
ACTION NARRATIVE
TAPE 03-29, SIDE A
SB 102-CHARITABLE GAMING REVENUE/TAXES
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 1:35 p.m. Present were SENATORS
STEVENS, DAVIS, SEEKINS and FRENCH. The Chair announced SB 102
to be up for consideration.
SENATOR SEEKINS moved to adopt CSSB 102(L&C), Version Q.
CHAIR BUNDE explained the committee substitute (CS) would allow
for a 15% tax on the ideal net, remove the bond for distributors
and remove the prohibition of municipalities having a sales tax
on pulltabs. There were no objections to its adoption and it was
so ordered.
SENATOR FRENCH asked if the payout [to the winners] would be
impacted.
CHAIR BUNDE replied it will not have any impact on the payout
amount.
SENATOR SEEKINS moved to pass CSSB 102(L&C) from committee with
individual recommendations and attached fiscal notes. SENATORS
STEVENS, SEEKINS and BUNDE voted yea; SENATORS DAVIS and FRENCH
voted nay; and CSSB 102(L&C) passed from committee.
SENATOR SEEKINS announced that he was looking forward to putting
the comprehensive package together for consideration in the next
calendar year.
SENATOR FRENCH said that his "no" vote is based on the idea that
he doesn't feel like he has a good enough grip on this subject
to make a good decision on it until next year.
SENATOR SEEKINS said that he was looking for a 1% increase in
the state's portion of the take as an interim move.
CHAIR BUNDE said he would be happy to appoint Senator Davis to
the subcommittee [along with Senators Seekins and French].
SB 192-DOLWD TEACHERS AND TRAINING PROGRAMS
CHAIR BUNDE announced SB 192 to be up for consideration.
SENATOR GARY STEVENS, sponsor of SB 192, said that the Governor
proposed to transfer the Alaska Vocational Tech Center (AVTEC)
from the Department of Education to the Department of Labor and
Workforce Development (DOLWD) for the purpose of giving the
Department of Labor the authority to employ teachers and allow
them to remain members of the Teacher's Retirement System (TRS)
rather than having to be transferred to the Public Employees
Retirement System (PERS). It would also allow future teachers to
become TRS members. If this bill does not pass, the current
teachers at AVTEC would be transferred into the PERS system and
out of the TRS system. That wouldn't be fair to employees who
were originally hired with the understanding they would be in
TRS. It would also have a negative impact on AVTEC when it
recruits new teachers. It is advantageous to be able to offer
TRS retirement as an incentive to get teachers into any
educational institution. Also, SB 192 would clarify that AVTEC
and Kotzebue Technical Center will continue to be under the
oversight, planning and coordination responsibilities of the
Alaska Workforce Investment Board (AWIB) through the Department
of Labor and Workforce Development.
SENATOR STEVENS moved to adopt the CS to SB 192(L&C), Version D,
as the working document. There were no objections and it was so
ordered.
CHAIR BUNDE clarified that the teachers who have transferred
from one department to another would have the same job
assignments.
SENATOR STEVENS agreed and said the bill has a zero fiscal note.
SENATOR SEEKINS said he was wondering about the board's
structure.
COMMISSIONER GREG O'CLARAY, Department of Labor and Workforce
Development, said the legislature wanted to see vocational
training strengthened in Alaska and that's what this bill will
do by moving AVTEC from one department to another. It freezes
the teachers' benefit structure in place, which must be done by
July 1. The Governor believes there are too many boards that
aren't being efficient in terms of delivering federal training
dollars to employers who are training personnel. The department
is very supportive of this bill.
CHAIR BUNDE said it would be nice to know if SB 192 will have a
negative fiscal note.
COMMISSIONER O'CLARAY said DOLWD would save over $300,000.
SENATOR FRENCH asked why this legislation is necessary and what
would prevent him from hiring a teacher who is currently covered
by TRS to work in the Department of Labor.
COMMISSIONER O'CLARAY replied that nothing would prevent DOLWD
from hiring the teachers, but as state employees they would fall
under PERS because of the way the statute is structured.
MR. FRED ESPOSITO, Director of AVTEC, testified that many
professionals at the institute are mid-career and have invested
a lot of service into the TRS system and should be held
harmless. The TRS system is an added benefit that AVTEC can use
to recruit instructional staff.
SENATOR STEVENS asked him to comment on the negative results for
teachers if SB 192 doesn't pass by the end of the session.
MR. ESPOSITO confirmed [the results will be negative].
MR. DAVE DERUWE, Vice President, AVTEC Teacher's Association,
supported SB 192. The Association realizes this change was an
unintended consequence of the move to the Department of Labor.
Most of the teachers have put in long years working under the
TRS system and are not interested in changing to the PERS
system.
MR. JOHN ALCANTRA, Government Relations Director, National
Education Association of Alaska, supported SB 192 for the
reasons mentioned.
SENATOR SEEKINS moved to pass CSSB 192(L&C), Version D, from
committee with the promised fiscal note from the Department of
Labor with individual recommendations.
SENATORS DAVIS, FRENCH, SEEKINS, STEVENS and BUNDE voted yea and
CSSB 192(L&C) passed from committee.
SB 210-WAGE AND HOUR OVERTIME COMPUTATION
CHAIR BUNDE announced SB 210 to be up for consideration.
MS. JANE ALBERTS, committee aide to the Senate Labor and
Commerce Committee, said SB 210 closes a loophole in statute
regarding the payment of overtime wages. She explained:
In 1999, the legislature passed a law to correct an
erroneous court interpretation of a statute that
authorized the pyramiding of overtime hours, which is
the payment of overtime wages both daily and weekly
for the same hour of work.
In 1999, at the last minute on the floor the
retroactive date in that bill was taken out, which
left a loophole for the years 1997 to 1999, thereby
leaving employers vulnerable to pyramiding lawsuits.
The bill made clear the future claims would be
forwarded, but it did not address the two lawsuits
filed in 1997 that are still active cases at this
time.
In those cases, the employers computed the overtime in
accordance with the Alaska Department of Labor
methodology. The purpose of this bill is to close this
loophole, [and to] make clear the interpretation on
computing overtime wages under Alaska's Wage and Hour
Act that prohibits the use of pyramiding in overtime
pay....
COMMISSIONER GREG O'CLARAY, Department of Labor and Workforce
Development, said in his 38 years of representing laborers he
had never seen an interpretation of the Wage and Hour Act like
this particular court's interpretation. He told members:
Under the Alaska State law, if you work more than
eight hours in a day or 40 hours in a week, you are
entitled to overtime and time and a half times the
basic straight time rate. If a worker worked 10 hours
on Monday and then a series of four-eights, he got two
hours of overtime for his two extra hours on Monday
and then nothing further for the week, but this
particular court interpreted that to mean he got paid
for overtime again, because he worked 42 hours in a
week - unheard of anywhere in the country that I can
see. This particular bill will correct that problem.
It will also wipe out the continuing liability of
those two companies. The Department of Labor supports
the bill, supports the concept of cleaning up this
particular misinterpretation of the law....
MR. JOHN SHIVELY, Vice President, Government and Community
Relations, Holland America Line, said a lawsuit against Holland
America [filed by an employee] prompted this legislation. The
case started in a superior court, went to district court, and
then back to a superior court, which ruled the employee was
entitled to double accounting of his overtime, or pyramiding.
Holland America paid the claim because it was only $21, but the
plaintiff appealed and it went to the Supreme Court, which
remanded it and allowed a class action suit. So, Holland America
is potentially faced with millions of dollars in liability if
Judge Weeks' decision is found to be correct. A counter decision
by Judge Collins found the Wage and Hour Law interpretation to
be exactly as Commissioner O'Claray said it should be.
MR. SHIVELY said this legislation is retroactive. It puts the
finishing touch on a piece of legislation that passed in 1999
that had a retroactive provision that was taken out at the last
minute. He thought this is a reasonable bill; legal research had
been done on the issue of retroactivity and that is within the
purview of the legislature. No constitutional right is being
violated and there has been no final judicial decision.
CHAIR BUNDE informed members that he also asked Legislative
Legal and Research Services counsel to provide an opinion, which
says that retroactivity is constitutional.
SENATOR FRENCH asked if it is true that there was no decision
made on the pyramiding aspect of Judge Weeks' ruling.
MR. SHIVELY replied that is correct.
SENATOR FRENCH asked if any other state has ruled that
pyramiding is the way to calculate overtime.
MR. SHIVELY answered that he had not done that kind of research,
but the commissioner had indicated that he was unaware of it
anywhere.
MR. DON ETHERIDGE, AFL-CIO, supported SB 210. The AFL-CIO worked
in 1999 to create the current statute and believes that the
commissioner's interpretation is correct.
SENATOR SEEKINS moved to pass SB 210, Version A, from committee
with individual recommendations and attached zero fiscal note.
SENATORS FRENCH, DAVIS, STEVENS, SEEKINS and BUNDE voted yea;
and SB 210 moved from committee.
2:03 - 2:04 - at ease
SB 154-NURSE EDUC LOAN REPAYMENT PROGRAM
CHAIR BUNDE announced SB 154 to be up for consideration.
SENATOR FRENCH, sponsor, told members:
SB 154 addresses one big issue, which is the shortage
of nurses in the State of Alaska. According to the
Alaska Community Health and Emergency Management
Services, about 30 communities in Alaska are
designated as federal health professional shortage
areas. Another study by the Alaska Colleagues in
Caring showed a vacancy rate for RNs across the state
of 11.5% in 2002 and in other parts of the state as a
20.8% vacancy rate. The rate of turnovers in RNs in
Alaska is 24% and probably most interestingly, in the
year 2001, about 18% of RNs working in Alaska were
non-residents, i.e. traveling nurses and about 52% of
the RNs were over 45 years old.
The need for nurses is going to double by the year
2010. We've got about 4,500 nurses employed in the
state right now; the number is going to go to 8,500.
In the face of that growing problem, we looked at ways
to increase the number of nurses in the state so that
our citizens would have adequate health care should
they need it. We mulled over a bunch of different
possibilities and arrived at this one after
discussions with a variety of interested groups. The
idea is to pay money each year to nurses employed in
the state in qualifying positions and correct
qualifying education, to pay them up to 20% of their
student loan or $2,000, whichever is less. The idea is
to string those payments out over a period of five
years so as to keep folks who come here who may see
this as an incentive to move to the state, who come
here and take up jobs and get them to spend a long
enough time here so that they'll grow to love it like
most of the rest of us have and keep them here when
their five-year period is up.
The idea is, frankly, workforce development and to use
a little bit of government stimulus to increase the
number of nurses working here in the state. The
University of Alaska has recently gotten money to
double the size of its nursing program. Nevertheless,
that program is going to graduate, even once it's
fully up and running, about 220 nurses a year, which
is nowhere near the number the state needs to maintain
an adequate nursing population....
SENATOR STEVENS asked if the goal is to attract people from
other states.
SENATOR FRENCH answered that is correct and, according to the
Department of Labor and Workforce Development, the nursing
shortage is nationwide. Alaska must compete for RNs or educate
its own nurses to keep up with demand caused by an aging society
and the aging of RNs.
SENATOR STEVENS asked what percentage is traveling nurses.
SENATOR FRENCH replied 17.7% of the RNs working in Alaska are
non-residents.
MS. CATHY GIESSEL, Alaska Nurse Practitioners Association, said
that Senator French did a great job of portraying the problem
and that they support SB 154. She asked the committee to
remember that when there aren't enough nurses to fill the jobs,
less qualified personnel fill them and in many cases those
employees give medications. She said she gets recruiting calls
from the Lower 48 and noted, "I believe this bill would be a
wonderful recruitment device."
MS. GIESSEL said that Florida, South Dakota and Virginia have
loan repayment program offers for nurses.
CHAIR BUNDE noted that in two years this bill, if passed, would
cost the state about $3 million and, in five years, would cost
over $5 million.
MS. CAMILLE SOLEIL, Executive Director, Alaska Nurses
Association, agreed with previous testimonies and supported SB
154. She really likes the discretion given to the Board of
Nursing that allows it to target the funds toward the areas of
need and set up appropriate criteria. It doesn't guarantee the
right to the loan forgiveness. The average graduating nurse is
looking at $20,000 to $40,000 in student loans that need to be
repaid. Nurses like to retire between the ages of 55 and 60,
especially out of acute care where they are needed the most.
CHAIR BUNDE noted the discretionary part of any potential state
subsidy soon disappears in the public's mind. When the longevity
bonus first passed, it was said in the record that in 15 or 20
years, if the state can't afford it, it can just cut it out.
MS. LARAINE DERR, President, Alaska State Hospital and Nursing
Home Association, said she has talked to the legislature in
previous years about the impending nursing shortage crisis. She
is in the process of doing a survey and has results from seven
of 17 hospitals. Last year they spent $16 million on traveling
nurses. That money doesn't necessarily stay in the state. She
said the University is doubling the number of nurses it
graduates by 2006 and industry is donating more than $2.3
million over the next three years, however there is a problem in
finding the faculty, as there is a shortage there as well.
SENATOR STEVENS said the loans would repay not only Alaska
student loans, but out-of-state loans as well.
MS. DERR replied that is correct.
SENATOR FRENCH said he contemplated setting the forgiveness
provision up for Alaska residents who, for example, went outside
to school and came back, but that wouldn't supply enough nurses
to fill the vacancies.
CHAIR BUNDE asked how he defines a resident.
SENATOR FRENCH replied that tying eligibility to the Permanent
Fund is a possibility. He added that the size of the loan could
be lowered to reduce the impact to the state.
SENATOR SEEKINS asked how the University plans to double the
output of nurses with a zero budget increase.
SENATOR FRENCH replied that the University got more money this
year [for that program].
SENATOR SEEKINS said that issue is before the Finance Committee
and cannot be counted on.
TAPE 03-29, SIDE B
SENATOR SEEKINS asked if the money to be provided to the
University program is matching money or what.
MS. DERR replied that the University is going to match the $2.3
million. She explained that the University of Utah has been
providing distance delivered nursing education here and through
the process of getting more nurses, she realized that Alaska was
paying money to Utah to educate our students. That is why they
came up with the money and the University matched it. Utah has
agreed that it will no longer be providing nursing education in
the state when the University of Alaska takes it over.
CHAIR BUNDE said he wished the university would use some of the
$5 million they use on intercollegiate athletics for nursing.
SENATOR STEVENS said he likes this bill because it is similar to
one that he has been working on about forgiveness of teachers'
loans. He said all the money in the fund is subject to
appropriation by the legislature each year.
MS. DIANE BARRANS, Executive Director, Alaska Postsecondary
Education Commission (ACPE), supported SB 154. The Commission
would administer the benefits as they are paid out to
individuals who qualify under the criteria set by the Board of
Nursing. Also, she suggested the legislature might look toward
the Alaska Student Loan Corporation dividend for the funding,
although the fiscal note calls for an appropriation from the
general fund each year.
CHAIR BUNDE asked what the fiscal note would be for the bill
that Senator Stevens is working on.
MS. BARRANS replied that those costs are somewhat comparable to
this bill.
CHAIR BUNDE asked if she worked with the Legislature a few years
ago when the Washington, Alaska, Montana, Idaho Medical
Education Program (WAMI), that subsidizes doctors, was
restructured so those students had to repay some of their
subsidy if they didn't come back to Alaska and work.
MS. BARRANS replied that she did.
CHAIR BUNDE asked her how effective that has been in bringing
students back to Alaska to practice.
MS. BARRANS replied at this point none of those students have
reached the point in their careers yet where they would be
returning to the state. She the suggested, to prevent putting
the legislature in a position of being morally obligated to
forgive loans, that ACPE solicit for participants, identify the
amount of debt that would be repaid as a benefit, and reserve at
the time they begin their service in Alaska the amount that
would be paid to them. That way, they would not be saying to
those participants the state can pay for their first year but
not their second year, etc. In the years when no funding is
available, they would shut off enrollment so no one would be
enrolled for benefits that were, at best, speculative. Numbers
would be revisited on an annual basis.
CHAIR BUNDE said some places have provided substantial bonuses
to attract people to come to work in an area of shortage, but
after acquiring the bonuses they moved elsewhere. He asked if a
nurse had to work here for five years, whether he or she would
be free to move after that.
MS. BARRANS said that is correct.
CHAIR BUNDE asked if this bill would reimburse any originator.
MS. BARRANS replied any commercial lender.
CHAIR BUNDE asked how limiting this bill to only borrowers of
Alaska loans would impact the fiscal note.
MS. BARRANS guessed that it would potentially cut the fiscal
note in half.
MS. RHONDA RICHTSMEIER, Deputy Chief, Public Health Nursing,
agreed with the nursing shortage estimates: in 2000, 30 states
had significant nursing shortages and in 2020, 46 states are
anticipated to have shortages. She said the reasons are multi-
pronged. There is an aging population with more chronic disease
and 71 percent of nurses in Alaska are 41 to 71 years of age; 25
percent of those are going to retire in the next 5 to 10 years.
MS. RICHTSMEIER said fewer students are graduating from nursing
schools. It is difficult to get people interested in nursing
because a lot of alternative careers offer higher salaries. In
addition, there aren't enough nursing instructors. Since 1995,
there has been a 31% reduction in the number of students
graduating from colleges of nursing. She believes there needs to
be a multi-pronged approach to this multi-pronged problem. They
need to address salary to bring new people into the profession
and keep them in the profession.
SENATOR DAVIS asked her to comment on the cost of training
nurses instate and out-of-state.
MS. RICHTSMEIER responded that she could only speak recently for
instate and that UAA's four-year program costs around $20,000
just for tuition and books.
SENATOR SEEKINS asked if the administration supports the bill as
well.
MS. RICHTSMEIER said she understood that to be the case.
SENATOR DAVIS moved to pass SB 154 from committee with
individual recommendations and the attached fiscal note.
SENATORS FRENCH, STEVENS and DAVIS vote yea; SENATORS SEEKINS
and BUNDE voted nay; and SB 154 passed from committee.
HB 51-LABELING OF PRESCRIBED DRUGS
CHAIR BUNDE announced HB 51 to be up for consideration.
REPRESENTATIVE PAUL SEATON, sponsor, said HB 51 is a health and
safety bill that requires the generic drug name be placed on all
brand name prescription labels. There have been a lot of cases
of senior citizens overdosing because they get one prescription
filled with only the generic name and another labeled with the
name brand, thus ending up with two bottles of the same
medication from the same doctor that both say take three times a
day. He noted members' packets contain many letters of support.
CHAIR BUNDE asked what financial impact would this have on
pharmacies.
REPRESENTATIVE SEATON answered that there would be minimal
impacts as most pharmacies have software that is capable of
doing the labeling. It would take realigning the fields on the
computer. The bill specifies that the names be in the same area.
CHAIR BUNDE asked how citizens could educate themselves about
the generic name and use it for comparison purposes. He asked if
the pharmacists would point it out to the customer.
REPRESENTATIVE SEATON said that right now a consumer has no way
of knowing the difference between two bottles. He presumed that
pharmacists would do that. He thought the naming would be pretty
obvious. The Alaska Pharmaceutical Corporation does not oppose
this bill.
SENATOR FRENCH asked if other states were adopting laws like
this one.
REPRESENTATIVE SEATON answered yes and said it was recommended
by the FDA.
SENATOR STEVENS moved to pass CSHB 51(HES) from committee with
individual recommendations and zero fiscal note. SENATORS
STEVENS, DAVIS, FRENCH, SEEKINS and BUNDE voted yea; and CSHB
51(HES) moved from committee.
SB 32-INSURANCE FOR MOTOR VEHICLE REPAIRS
CHAIR BUNDE announced SB 32 to be up for consideration. He
announced an at-ease from 2:47 to 2:53 p.m.
MS. ANNETTE SKIBINSKI, staff to Senator Cowdery, sponsor, said
SB 32 deals with two different types of automobile repair parts,
original and aftermarket. Senator Cowdery believes that
consumers are often unaware of the crash or collision parts that
are being used to repair their vehicles. He believes that
customers have a reasonable expectation to have their vehicles
repaired after an accident to the same condition they were when
they purchased them and they should have a choice on whether
original parts or other parts that are certified or not
certified are used. The insurance that car owners rely on to
cover the parts should not dictate what they can or can't have.
MR. KEN MILLER, owner of an auto body shop in Anchorage,
provided two Ford fenders that look almost identical, but were
very different in quality; one was certified and the other was
aftermarket and obviously was not as strong.
MS. SANDY BASS CORS, Coalition for Auto Repairing Quality,
representing NAPA, Car Quest, Chets, Jiffy Lube and Midas,
opposed SB 32. She explained that aftermarket parts are
manufactured by the same companies that manufacturer car dealer
parts. The only difference is the price and the better
aftermarket warranty. Aftermarket parts cost up to 50% less than
the car dealer parts and most come with lifetime or long-term
warranties, which car dealer parts do not. The description in SB
32 that an aftermarket part must meet the equivalent or better
standard is based on the wrong premise.
She did not think that any car part manufacturer would purposely
manufacture inferior aftermarket parts. SB 32 is also in
violation of the Magnus-Moss Warranty Act, a federal law that
prohibits a warranty from being tied to repairs. Motorists are
intimidated when they read that using aftermarket parts can
invalidate the remainder of their vehicle's warranty.
MS. CORS said that SB 32 is also dangerously close to
interfering with first amendment rights by stating an insurer
may not require directly or indirectly that a shop install
aftermarket parts. A few years ago, the state of Montana lost a
court case on constitutional grounds because of first amendment
rights based on what an insurer could recommend and on
interference with interstate commerce laws. By mandating that
motorists must give consent only for the use of aftermarket
parts, but not the use of car dealer parts, SB 32 discriminates
against certain Alaska industries and intimidates motorists by
planting doubt in their minds about the high quality of
aftermarket parts. Aftermarket shops do business in low and
fixed income neighborhoods because people depend on them for the
high quality and the lower pricing. After a warranty has expired
on a part, the aftermarket gets 80% of repeat business because
of the high quality.
MS. CORS said that car dealers and manufacturers have had a long
history of trying to dismantle the aftermarket part industry and
restrict the use of those parts. They do not believe this issue
is about the quality of parts, but about car dealers and
manufacturers getting a higher profit margin through
legislation. Car dealer parts cost up to 50% more, so this will
be at the expense of the working people. A recent GAO study
concluded that there were so few problems with aftermarket parts
that no further action was necessary.
MS. CORS said that Ms. Skibinski mentioned that when a car is in
a crash, it should be restored to its pre-crash value. MS. CORS
believes that a car cannot be restored to its pre-crash value or
condition by virtue of having been in a crash. People buying a
used car request information on whether a car has been in a
crash, not whether it has aftermarket parts.
MR. JACK GILLIS, Executive Director, CAPA, and Director, Public
Affairs, Consumer Federation of America, the nation's largest
consumer advocacy organization, said he is also the author of
The Car Book, a consumer guide to buying cars. NAPA is a non-
profit organization, which certifies the quality of parts used
for auto body repair. He pointed out:
First of all, this bill protects the car company parts
monopoly. Alaskans need more, not less choices. They
need less expensive, not more expensive car parts.
Alaskans need their cars fixed by insurance companies
after accidents, not totaled by them because they cost
too much to repair. This bill would encourage
competition rather than protect car company parts
monopolies....
SENATOR COWDERY asked him if he felt it is reasonable for a
customer to expect that his or her car should be repaired to its
pre-crash condition, not the condition when it was purchased -
and carry all the same warranties.
MR. GILLIS agreed 100%.
MS. EILEEN SOTTILE, Director, Keystone Government Relations,
said she also represented the Automotive Body Parts Association
(ABPA). Both oppose SB 32, because they feel that written
consent is discriminatory and would take money out of the
pockets of their employees and place it into the car companies'
pockets. The warranties for aftermarket parts are actually
better than car companies' warranties. In terms of safety, the
Institute for Highway Safety has conducted a crash test of a
Toyota Camry hood, which demonstrated clearly that the
aftermarket hood performed the same way as the car company hood.
Keystone, the largest distributor of aftermarket parts in the
country, has never recorded an injury caused by the use of its
parts and the National Highway Traffic and Safety Administration
has reported consistently that cosmetic non-structural
automotive parts have no safety ramifications.
In terms of quality, the Collision Industry Conference has
tested the quality of their parts against car company parts over
the past years and has found that in some cases, the aftermarket
parts score better in terms of fit and accessibility and in
other cases they tie. The parts manufacturers they use are the
same as those used by the car companies.
MS. SOTTILE said their concerns about competition are great,
because the car companies already have 79% of market share and
the aftermarket share is 15%; the salvage industry has 6%. She
said if car company parts are solely used to repair a vehicle, a
$22,000 1999-Toyota Camry can cost $101,000. She compared the
cost of a Camry rear bumper from the car company at $159 to
Keystone's price of $61.75; a Tacoma grill would be $220 and a
Keystone grill would cost $91.45. She said the car company
fender that was in the committee room cost $192.10 and the
Keystone fender cost $94.00. A Ford Taurus headlight assembly
cost $176.80 and the Keystone price was $94.47.
She said making a consumer consent to using an aftermarket part
and not a car company part gives the consumer the impression
that not only are the parts possibly inferior, but unsafe as
well. Eighty-seven percent of the time, if an insurance company
is paying the bill for the repair, customers will most likely
not choose the aftermarket part because they are not paying for
the repairs. She stated, "This bill is highly discriminatory and
it will deliver a monopoly right to the feet of the car
companies."
MR. MILLER said he provided the fenders in the committee room so
that members could see for themselves that there is quite a bit
of difference between the two. He didn't think they would want
the aftermarket parts on their trucks. It is about 4.5 ounces
lighter, has no rust prevention, and the spot welds were not
even touching and would pop right off.
TAPE 03-30, SIDE A
MR. MILLER said his main concern is the sheet metal fenders,
doors, bumpers and that type of thing - and how they relate to
safety.
SENATOR COWDERY asked him if he is a car dealer.
MR. MILLER replied that he is an independent and doesn't
represent anyone but himself.
MR. JOHN CONLEY, Service Auto Parts, said he is a NAPA auto
parts dealer. He also served nine years on the Borough Assembly
of Ketchikan and a couple terms as vice-mayor. He spoke against
SB 32. He said legislation like SB 32 is being introduced all
across the nation right now and, as an auto parts person who
incorporated in the State of Alaska in 1966, he feels
threatened. SB 32 defines what aftermarket means in section (a)
and that concerns him. It says:
In this section, an aftermarket crash part means a
motor vehicle replacement part that is not supplied or
manufactured at the direction of the original
equipment manufacturer and that is generally installed
as a result of a crash or a collision.
He said that includes a lot of things: screws, belts, light
bulbs, etc. Many of the parts that his firm sells meet or exceed
the original equipment manufacturer specifications and he offers
a better warranty than the original.
He said Section 1 troubles him, as well, and he provided the
committee with a copy of the Magnus Moss Warranty Act. He asked
the sponsor to work with him and others on different language to
protect consumers and businesses.
He added if this bill passes and he went to the Chevy
dealership, which doesn't have a body shop, and said he only
wanted OEM parts, the vehicle could not be legally repaired in
Alaska because some functions that happen at the plant are not
duplicated in the field, such as painting of the vehicle. Body
shops do not use the same process or materials. This bill would
require a person to go to a metropolitan area to have a car
repaired.
MR. CONLEY said he had copies of similar legislation enacted in
other states that the committee could use to improve the bill.
CHAIR BUNDE asked if it is true that the same company
manufactures dealer parts and aftermarket parts and, if so,
whether "less expensive" parts are made.
MR. CONLEY replied that is a big issue with a lot of different
components. He said he doesn't sell sheet metal, but sells
chassis and brake parts. Dana Automotive, one of the largest REM
suppliers in the world, manufactures his chassis components. A
company called Brake Parts, Inc., which many REMs use,
manufactures the brake components. He commented:
A whole lot of what we sell is made for REMs and we're
very proud of our quality. To make the statement that
all parts are of equal quality at REM, I would have to
be honest and say that's not true.
SENATOR STEVENS said he wanted to learn more about Mr. Conley's
statement that consumers would have to take a car to a
metropolitan area for repairs.
MR. CONLEY said he would get together with him afterwards.
MR. GEORGE GILBERT, Ford Motor Company, clarified that they are
talking about exterior crash parts like fenders and hoods, not
about shocks or filters. This bill is about giving the consumer
a choice. The reason for this type of legislation is that in
most cases, the consumer doesn't have a choice when insurance
companies pay the bill. This is what led to the national class
action lawsuit against State Farm Insurance who was using these
parts and not informing the consumer that the parts were
different than the OE parts.
MR. KYLE KRUG said he came mainly to answer questions, but also
wanted to ask if Jim Kiley with the Alliance of Automobile
Manufacturers could provide testimony.
MR. JIM KILEY, Alliance of Automobile Manufacturers, said that
SB 32 contains many concepts that benefit consumers and promote
a fair playing field. Consumers should be informed about the
repair options available to them. However, he pointed out that
AS 25.45.95(a) contains language the Alliance cannot support. It
would require consumer consent to a certain time period, three
years. The Alliance believes the consumer should have the right
to consent to using the parts for the life of the vehicle. He
thanked Senator Cowdery for his actions and said the Alliance
would work with the committee to craft legislation that protects
consumers and provides them with choices.
MR. BILL HOLDEN said:
The reason all the studies are around on aftermarket
parts not being of equal quality to the OEM is why
they are around to begin with. Also, they have
degenerated because of consumers complaining about the
use of these parts. So, they may comment at certain
times or lead people to believe that what is being
said or the studies are exactly what's being proved.
The bottom line is that since the early '80s when
these parts came on the market, they were looked at as
a way for the insurance companies to save costs in
repairing vehicles. In the late '80s, the six major
insurance companies formed [indisc.], which is then a
company that would start telling people that the part
that was being put on their car were not aftermarket;
they were being certified parts that were being put on
the car...
When you buy a Fram oil filter, the Fram oil filter is
engineered and designed by people at Fram. They spend
time, they spend money, they go through the
engineering process, they don't do a copy of the DAC
filter. So, there's some credibility to some of the
aftermarket car parts we're talking about.
When I've talked to aftermarket parts people, and the
testimony you've heard, you never hear things like
reengineering and stuff; it's reverse engineering that
you hear. That does not pass the test of quality and
durability and some of the things that go in to the
OEM parts.
The last part I want to touch on is there is no OEM
manufacturer, and I'm talking to the Ford people, the
Toyota and the Honda people on a daily basis. None of
us know a single manufacturer that makes a fender or a
hood and then turns around and sells it as anything
other than OEM. That's just not true....
MR. HOLDEN said that no one makes a hood and then has the money
to go make another dye and make the same hood. He stated, "The
dye is too expensive."
MR. HOLDEN explained:
They'll make a certain number of hoods for production
and off the same line at almost the same time, they're
producing hoods that are then going to be used for
their parts operation. That's what General Motors does
and, as far as I know, that is what other
manufacturers do.
He also noted when people talk about the price of one hood
versus the other, General Motors competes with the other big
companies and the best way to lose a customer is to go to the
dealership, get the car repaired and have the guy at the
dealership tell you:
The hood is $200, but if you bought the aftermarket,
it's $25. That aggravates consumers. Consumers don't
want to be taken and for the most part when things
like that happen, people tend not to buy your brand.
CHAIR BUNDE said the committee needs to be more educated about
this topic and held the bill for further work.
CHAIR BUNDE adjourned the meeting at 3:35 p.m.
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