02/17/2004 01:34 PM Senate L&C
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ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 17, 2004
1:34 p.m.
TAPE(S) 04-11
MEMBERS PRESENT
Senator Con Bunde, Chair
Senator Ralph Seekins, Vice Chair
Senator Gary Stevens
Senator Hollis French
MEMBERS ABSENT
Senator Bettye Davis
COMMITTEE CALENDAR
SENATE BILL NO. 242
"An Act relating to gaming."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 286
"An Act relating to direct marketing fisheries businesses, to
the fisheries business tax, and to liability for payment of
taxes and assessments on the sale or transfer of fishery
resources; and providing for an effective date."
MOVED CSSB 286(L&C) OUT OF COMMITTEE
SENATE BILL NO. 276
"An Act relating to the Alaska Insurance Guaranty Association;
relating to the powers of the Alaska Industrial Development and
Export Authority concerning the association; and providing for
an effective date."
MOVED CSSB 276(L&C) OUT OF COMMITTEE
SENATE BILL NO. 299
"An Act relating to a charge for a bad check."
MOVED SB 299 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB 286
SHORT TITLE: DIRECT MARKETING FISHERIES BUSINESS
SPONSOR(s): SENATOR(s) STEDMAN BY REQUEST OF SALMON INDUSTRY
TASK FORCE
01/30/04 (S) READ THE FIRST TIME - REFERRALS
01/30/04 (S) L&C FIN
02/12/04 (S) L&C AT 1:30 PM BELTZ 211
02/12/04 (S) Heard & Held
02/12/04 (S) MINUTE(L&C)
02/17/04 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 276
SHORT TITLE: ALASKA INSURANCE GUARANTY ASSOCIATION
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/23/04 (S) READ THE FIRST TIME - REFERRALS
01/23/04 (S) L&C, FIN
02/03/04 (S) L&C AT 1:30 PM BELTZ 211
02/03/04 (S) Heard & Held
02/03/04 (S) MINUTE(L&C)
02/10/04 (S) L&C AT 1:30 PM BELTZ 211
02/10/04 (S) Heard & Held
02/10/04 (S) MINUTE(L&C)
02/17/04 (S) L&C AT 1:30 PM BELTZ 211
BILL: SB 299
SHORT TITLE: BAD CHECK CHARGE
SPONSOR(s): LABOR & COMMERCE
02/06/04 (S) READ THE FIRST TIME - REFERRALS
02/06/04 (S) L&C, FIN
02/17/04 (S) L&C AT 1:30 PM BELTZ 211
WITNESS REGISTER
Mr. Ian Fisk
Staff to Senator Bert Stedman
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 286 for the sponsor.
Mr. Bruce Schactler, President
United Salmon Association (USA)
PO Box 762
Kodiak AK 99615
POSITION STATEMENT: Supports SB 286.
Mr. Kenny Oshbacker
USA member
Kodiak AK
POSITION STATEMENT: Supports SB 286.
Ms. Linda Hall, Director
Division of Insurance
Department of Community & Economic Development
PO Box 110800
Juneau, AK 99811-0800
POSITION STATEMENT: Supports SB 276.
Mr. Scott King
Cornerstone Credit Services
Anchorage AK
POSITION STATEMENT: Supports SB 299.
Mr. Ernest Madsen, Director
Williams Express
Anchorage AK
POSITION STATEMENT: Supports SB 299.
Mr. David Gardner, Vice President
Member and Employee Services
Golden Valley Electric Association
Fairbanks AK
POSITION STATEMENT: Supports SB 299.
Ms. Pam LaBolle, President
Alaska State Chamber of Commerce
217 Second Street
Juneau, Alaska 99801
POSITION STATEMENT: Supports SB 299.
Ms. Thyes Shaub
National Federation of Independent Businesses (NFIB)
217 Second St., Apt. 206
Juneau AK 99801
POSITION STATEMENT: Supports SB 299.
ACTION NARRATIVE
TAPE 04-11, SIDE A
SB 286-DIRECT MARKETING FISHERIES BUSINESS
CHAIR CON BUNDE called the Senate Labor and Commerce Standing
Committee meeting to order at 1:34 p.m. Present were Senators
Gary Stevens, Ralph Seekins, Hollis French and Con Bunde.
Senator Bettye Davis was excused. The first order of business to
come before the committee was CSSB 286(L&C).
MR. IAN FISK, Staff to Senator Bert Stedman, sponsor, offered to
answer questions.
CHAIR BUNDE noted that a question from Jim Smith about shrimp
processing had been addressed and was no longer a problem.
MR. BRUCE SCHACTLER, President, United Salmon Association (USA),
supported SB 286. He said, "Everybody is all finally on the same
sheet of music and it's taken a long time."
MR. KENNY OSHBACKER, USA member from Kodiak, said he is a direct
marketer in the Lower 48 and supported SB 286.
SENATOR SEEKINS moved to pass CSSB 286(L&C) from committee with
individual recommendations and attached fiscal note. Senators
Stevens, French, Seekins and Bunde voted yea and CSSB 286(L&C)
moved from committee.
SB 276-ALASKA INSURANCE GUARANTY ASSOCIATION
CHAIR CON BUNDE announced SB 276 to be up for consideration and
recapped that a CS had been discussed at the last meeting. An
additional amendment had been proposed that would complete the
changes in the CS.
SENATOR RALPH SEEKINS moved to adopt CSSB 276(L&C), version \H,
as the working document.
CHAIR BUNDE explained that the CS was requested by the
Department of Community and Economic Development (DCED) and
reinserts (on page 4, line 24) its ability to seek loans from
Alaska Industrial Development and Export Authority (AIDEA)
should the guaranty fund need to be filled, again, temporarily.
SENATOR HOLLIS FRENCH maintained his objection to the adoption
of the CS for the reasons he already stated at the last meeting
[2/10/04].
CHAIR BUNDE asked for the roll to be taken. Senators Seekins,
Stevens and Bunde voted yea; Senator French voted nay and CSSB
276(L&C), version \H, was adopted.
SENATOR SEEKINS moved to adopt amendment 1, version\H.1.
23-GS2105\H.1
Bullock
1/13/05
A M E N D M E N T
OFFERED IN THE SENATE BY SENATOR BUNDE
TO: CSSB 276(L&C), Draft Version "H"
Page 5, following line 30:
Insert a new bill section to read:
"* Sec. 4. AS 44.88.080 is amended by adding a new paragraph
to read:
(27) to guarantee loans made to the Alaska
Insurance Guaranty Association (AS 21.80.040), with these
guarantees limited to loans necessary to make the
association financially able to meet cash flow needs up to
a maximum outstanding principal balance at any time of
$30,000,000."
Renumber the following bill section accordingly.
MS. LINDA HALL, Director, Division of Insurance, Department of
Community & Economic Development (DCED) explained that the
amendment adds the second piece of the AIDEA loan guarantee by
taking language from the Alaska Insurance Guarantee Association
(AIGA) statutes and puts it in with the AIDEA statutes, enabling
it to provide the guarantee that is spoken to in the CS.
CHAIR BUNDE announced that amendment 1 was adopted without
objection.
SENATOR FRENCH surmised that the bill now goes from being a
series of assessments on the industry to what is essentially a
funding mechanism through the earnings reserve of the Permanent
Fund.
MS. HALL responded that was her understanding, as well.
SENATOR FRENCH asked if simply going from a 2 percent to a 4
percent assessment would be beneficial to the guaranty fund.
MS. HALL agreed that the assessment increase mechanism would be
simpler, but objections to the resulting increased financial
obligations had been raised.
SENATOR FRENCH noted that he heard objections to the assessment
increase from the self-insured groups that had never paid into
the fund and couldn't ever get a financial benefit from it, an
obviously defensible position.
MS. HALL agreed with Senator French that the majority of
objections she heard also came from self-insureds and joint
insurance arrangements. She admitted that increased costs are
probably distasteful for the employer community and
policyholders at large, although she hadn't received a
significant number of complaints from them.
SENATOR FRENCH noted that the original bill also had a 2 percent
increase on other lines of insurance, but he hadn't heard many
objections from that group. He asked if she had any input from
them.
MS. HALL replied that she hadn't received a specific phone call,
but had heard a couple of general complaints regarding that
particular provision.
SENATOR FRENCH concluded saying he appreciated the work she had
put into creating SB 276. "If there were compromises to be made,
it would have been in that final self-insured group, the group
that would derive no benefit from paying into the Workers Comp
fund, but that's behind us...."
SENATOR SEEKINS asked if self-insureds could argue that they
didn't receive any benefit and weren't involved in the
bankruptcy of the companies and therefore shouldn't be held
responsible with an additional assessment.
MS. HALL replied that that argument could be raised, but it was
an oversimplification to think that Fremont's [Insurance
Company] insolvency was caused only by reduced premiums. She
sees the issue as a public policy call and pointed out that
other states have had to decide how to deal with insolvent
insurers, as well. The Fremont situation is an extreme case and
Alaska does not have the ability to fund the claims under
current statutes.
SENATOR SEEKINS said:
I understand that. I just think that some of those
same people who weren't involved in those companies
[and] are in the fallout that came have exactly the
same argument as those people who are self insured who
have no input ever into the fund....
CHAIR BUNDE refrained:
I think my intent is to put a little reverse spin on
that and say we're all potential beneficiaries so we
perhaps all should be part of the solution.... Just
for the record, I have heard Pam LaBolle testifying
that Alaska's businesses are under a good deal of
pressure and an additional assessment would be
difficult for them to absorb - that there would be
some negative consequences to businesses in Alaska
having faced in the recent past an increase in
assessment, so...
SENATOR SEEKINS noted that an assessment on employers eventually
trickles down to being an assessment on employees. "It goes
right to the pocketbooks of the people who are doing the work
every day."
CHAIR BUNDE quipped, "Again, oversimplifying, I'm just cutting
out the middle man."
CHAIR BUNDE closed public testimony on SB 276.
SENATOR SEEKINS moved to pass CSSB 276(L&C), version \H, from
committee with individual recommendations, attached fiscal note
and letter of intent.
SENATOR FRENCH objected saying he understands the point the
chairman is trying to make, but it seems like the committee is
adopting a course that will lead to non-passage of the bill,
which is ultimately a bad idea. It discredits the work that Ms.
Hall did in creating a feasible funding mechanism for covering
the shortfall and raises the stakes on this issue to the point
where many people will feel uncomfortable voting for it because
of the fact that it goes to the earnings reserve of the
Permanent Fund. It makes the argument for enshrining the
dividend in the constitution stronger, because the funding
mechanism in SB 276 will be characterized by many as a raid on
the Permanent Fund.
CHAIR BUNDE defended his philosophical stand on policy saying:
Just for the record, to point out that we are not
broaching new ground here. The earnings of the
Permanent Fund, and we definitely need to point out
there is a big difference between the corpus and the
earnings, you understand. The earnings are currently
used on several levels. They are used to fund the
application process at some $5 million; they're used
for the hold harmless for tens of millions of dollars
for people who would lose their welfare when they get
their dividend; they're used, of course, for inflation
proofing; and, of course, used for the dividend. So,
the Legislature currently has the power and does
indeed appropriate monies from the earnings. If the
worst-case scenario that you ascribe to occurs, well
there's always a possibility of funding it out of the
general fund.
SENATOR SEEKINS said, having been on the Board of Trustees of
the Permanent Fund and understanding that the Legislature spent
$35 million last year for a hold harmless [agreement], public
safety and other issues, he could equate the Permanent Fund to
his family checkbook and would, therefore, not choose to
inflation proof his savings account, if his kids were starving
to death.
When I take a look at the challenge we are facing on
some of the issues - fully funding education - I
support that; the PERS and TRS downfall - I think we
need to address that; these kinds of situations that
were uncontrollable by the state, unforeseeable - I
think these are areas where if it came down to it, I
don't think it's competition for the dividend. I don't
think that the competition is for the dividend at all
when I look at we might be spending as much as $575
million this next year to inflation proof a savings
account when we can't educate our children. So, to me,
I understand the funds are available for different
things and in inflation proofing, we're actually
inflation proofing appreciating assets, which normally
is not done. So, the wisdom of the Legislature, I
think has to take a look at a portion of this and it
does not jeopardize the dividend. I'm concerned that
some members now who have supported
constitutionalizing the dividend are concerned that
this might speed the process.
SENATOR FRENCH refuted his argument saying:
The Permanent Fund is not your family checkbook. It's
the checkbook of the people of the State of Alaska, if
you will, and they have been pretty adamant about the
methods in which they prefer to see it spent and I
don't think this is one of them.
CHAIR BUNDE asked for the roll to be called. Senators Seekins,
Stevens and Bunde voted yea; Senator French voted nay; and CSSB
276(L&C), version H, passed from committee.
SB 299-BAD CHECK CHARGE
CHAIR CON BUNDE announced SB 299 to be up for consideration and
that this issue was brought to his attention by the public. He
explained that currently a fee of $25 can be charged to a person
for writing a bad check. The original enabling legislation said
the fee is for the costs incurred in processing the bad check
and doing whatever had to be done to recoup on it. Some people
have said that the $25 fee needs to be accounted for. A whole
separate accounting system would need to be created - a
challenge for a great many businesses.
CHAIR BUNDE suggested clarifying the statute by saying that
separate accounting is not needed and that there is a cost for
writing bad checks and the cost should be borne by the people
who write them.
MR. SCOTT KING, Cornerstone Credit Services, Anchorage,
supported SB 299. He said:
The reason we feel the legislation is necessary is
because of a recent Superior Court decision in
Fairbanks that would require a significant change in
the way we do business in collecting bad checks. The
decision, which copies, I think, I provided to
everyone, would require that businesses document and
account for all the costs incurred when we go to
collect a bad check. The cost incurred could be up to
a maximum of $25. Historically, this statute has been
interpreted as allowing the maximum fee to be simply a
$25 fee to be collected upon and help repay for the
costs incurred in taking a bad check as a business or
a merchant. Those costs typically include bank fees to
the merchant. When the merchant deposits the check,
there's a fee associated with that - personnel costs
and making phone calls, letters, accounting
documentation, fees to pay collection agencies, such
as myself, to collect on these bad checks. The effect
of the decision would further require businesses to
keep track of each expense incurred prior to them
mailing out their notices. They would have to keep a
line item incurring of costs until they reach the $25,
which will be extremely cumbersome and somewhat
impractical.
SB 299 will make two simple changes to AS 09.68.115.
And the first, and I believe the most important,
change is to remove the language of 'for costs
incurred' and the check fee and make it simply a check
penalty or fee. The second is to raise the $25 to $30,
bringing it more in line with other states as they
have moved along.... The cost of business has
obviously gone up in the last 18 years. To increase
this to $30 is something we thought was reasonable,
but not too much. Some states are as high as $40 and
charging interest on the checks from the date the
check is written, which might be a little excessive.
MR. KING said Cornerstone represents over 2,000 businesses
throughout Alaska and is very supportive of this bill.
CHAIR BUNDE noted that he had approximately 15 additional
letters of support.
MR. KING said he thought more letters would be forthcoming as
businesses become aware of the legislation.
CHAIR BUNDE asked who would collect the $30 fee.
MR. KING replied that the merchant is the entitled entity.
Cornerstone collects on behalf of the merchant and is
compensated by them.
SENATOR STEVENS asked Mr. King to estimate a range of costs that
a company has to go through in a collection process.
MR. KING replied that the range of costs is dependent on the
effort that is used to collect on the check. Certain immediate
costs can be assumed for noticing and bank fees that range from
$2 or $3 to $25, depending on the bank, to the merchant who
accepted the check in return for goods and had it bounced out of
his account. Any mailing or phone calls would create personnel
time. Expenses can get way beyond $30 very quickly. Thirty
dollars is a reasonable fee for what a merchant has already
suffered from not receiving compensation for goods delivered.
The problem is, if the merchant or his representative has to
calculate costs on each check, as soon as the calculation is
done, more than $25 or $30 worth of value has already added up
in personnel costs. That is why he is suggesting setting a
standard fee so the merchant isn't harmed.
SENATOR FRENCH asked for the spectrum between people who write a
bad check by mistake and make good on the check the next day
(low end) to people who just steal other people's checkbooks and
write bad checks and have no intention of paying the debt (high
end).
MR. KING said his experience indicates that 10 to 15 percent of
bad checks will be collected with one notice or phone call; 30
to 40 percent of the checks will be paid with a reasonable
amount of effort - multiple phone calls, letters etc.; and a
high percentage of checks are never collected.
SENATOR FRENCH asked if the middle percentage would settle
within 30 days.
MR. KING replied that typically payment takes up to 90 days.
SENATOR FRENCH asked at what point does the collector cut his
losses.
MR. KING replied that he doesn't stop until the statute of
limitations runs out.
MR. ERNEST MADSEN, Director, Williams Express Stores, supported
SB 299. His businesses receive several thousand checks per day
and most of them are good, but collecting on the ones that are
bad is really difficult. He also thought the fee for bad check
writing should go up to $30.
CHAIR BUNDE asked how much bad checks cost his company.
MR. MADSEN replied that he didn't have an exact amount, but
right off the bat, the commodity that was sold is lost as well
as the amount that is spent on collections. He also pointed out
that there is a cost for in-store devices to screen for people
who write bad checks.
CHAIR BUNDE asked if he had an average purchase amount for his
stores.
MR. MADSEN replied that the average check is around $20 to $25.
MR. DAVID GARDNER, Vice President, Member and Employee Services,
Golden Valley Electric Association, supported SB 299. The
Association does not feel its members should have to shoulder
the burden of collecting bad checks written by the very few.
CHAIR BUNDE asked him if he had a monthly value for bad checks.
MR. GARDNER replied that the Association has a bad debt ratio of
about .05 percent, but he didn't know what percentage was bad
checks as opposed to default on payment. They quit keeping track
of expenses once the $25 threshold is reached.
MS. PAM LABOLLE, President, Alaska State Chamber of Commerce,
supported SB 299. She related how recently the State Chamber
received a bad check for about $100 and worked with the bank to
monitor the account daily for a month until the check was paid.
TAPE 04-11, SIDE B
MS. LABOLLE concluded that calculating costs for recovering on
bad checks is a burden on businesses and that is why the Chamber
supports the bill.
MS. THYES SHAUB, National Federation of Independent Businesses
(NFIB), supported SB 299. She added that because of bed check
writing, some businesses have decided not to accept checks, but
to only accept cash or VISA cards. This is inconvenient for
customers and detrimental to consumers who don't have credit
cards. Ease of collecting on bad checks is a factor in whether
businesses continue to accept them as a form of payment.
SENATOR FRENCH said he thinks SB 299 is a good bill, but he is a
little concerned about raising the fee from $25 to $30. His
reasoning is that 26 states charge $25 or less currently and
eliminating the accounting frees the collection agencies to know
they are going to get the $25 every single time. Keeping the fee
at $25 would avoid "price creep" and be fair. He moved to change
the fee back to $25.
SENATOR STEVENS maintained that the potential loss to the
merchant can be far beyond the $30 and he sees no reason to
change that.
SENATOR SEEKINS commented that if someone accidentally wrote a
bad check, it just takes a phone call to get some kind of
resolution; but he doesn't have that much sympathy for someone
who writes bad checks deliberately.
CHAIR BUNDE asked for the roll to be called. Senators Stevens,
Seekins and Chair Bunde voted nay; Senator French voted yea; and
amendment 1 failed to be adopted.
SENATOR STEVENS moved to pass SB 299 from committee with the
attached fiscal note and individual recommendations. Senators
Seekins, Stevens, French and Chair Bunde voted yea; and SB 299
moved from committee. There being no further business to come
before the committee, he adjourned the meeting at 2:30 p.m.
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